Sharing Value
The rich past and uncertain
future of 7(i) and 7(j) revenue
By Elwood Brehmer
Carter Damaska | Alaska Business

brief but powerful provision of the Alaska Native Claims Settlement Act (ANCSA) has led to the dispersal of billions of dollars across the state for the betterment of Alaska Native communities, but uncertainty regarding future revenue has led some to question the long-term viability of the program.

It starts at the fundamental level of the land and what it provides.

ANCSA, the landmark legislation passed by Congress in 1971 that called for the establishment of the 12 operating Alaska Native regional corporations and more than 200 village corporations, also mandated that Alaska Native corporations (ANCs) could collectively select roughly 44 million acres of land. Those lands have been selected and mostly conveyed over decades to serve as an economic engine for the ANCs and their shareholders. Revenue generated from the use and careful development of ANC lands across Alaska—whether for tourism, mining, oil and gas, or timber operations—not only improves a corporation’s bottom line but supports an array of shareholder benefits rarely found anywhere else in the business world.

“It is more than the money you see; it’s the cultural aspect of making sure that we are taking care of one another.”
Kim Reitmeier, President
ANCSA Regional Association
ANC leaders say the situation speaks to the unique bond the corporations have with their shareholders. ANC shares cannot be bought or sold, and everything the corporations do is intended to be for the social, cultural, and economic benefit of their shareholders. That’s where the deeply rooted Alaska Native cultural value of sharing the harvest comes in, according to ANCSA Regional Association President Kim Reitmeier.

Section 7(i) of ANCSA directs the regional corporations to share most of the income they receive from resource projects on their lands with all the other regional corporations. It simply stated that “70 percent of all revenues received by each Regional Corporation from the timber resources and subsurface estate patented to it pursuant to this Act shall be divided annually among all twelve Regional Corporations” when it was passed in 1971.

“It is more than the money you see; it’s the cultural aspect of making sure that we are taking care of one another,” Reitmeier says.

More recent amendments have clarified the legislation, such as specifying that it is net income that is shared, notes Nathan McCowan, who is president and CEO of St. George Tanaq Corporation and chair of the Alaska Native Village Corporation Association.

“Congress wanted to ensure that all Alaska Natives had something approaching a fair and equitable distribution of benefits coming from our natural resources,” McCowan says. “Congress recognized that there were going to be regions rich in resources and there were going to be other regions that were not.”

Section 7(j) of ANCSA further assures that the resource wealth helps with local needs by instructing the regional corporations to share 50 percent of their annual 7(i) distribution with the village corporations in their regions.

Other ANC leaders have described it as similar to how subsistence harvests are shared within Alaska Native communities.

Hyper-Local Needs
Since the first ANC resource income was shared decades ago, more than $2.5 billion has been distributed through the closely tied 7(i) and 7(j) programs, according to an economic analysis by McKinley Research Group.

Reitmeier notes that annual 7(i) distribution totals have varied widely year to year, given they are subject to sometimes volatile commodity markets, whether for timber from Southeast, oil off the North Slope, or minerals across the state. According to the economic analysis, 7(i) revenues have exceeded $230 million in some recent years, but often the annual pool has been $50 million or less over the life of the program.

At the regional level, ANCs put shared funds toward a wide range of causes; ANCSA does not limit how it is invested or spent. Some ANCs opt to fund shareholder distributions, but there are numerous other ways it is utilized, Reitmeier emphasizes.

“It goes beyond the dividends; it goes to the culture camps, to scholarships, to language revitalization, and contributions to nonprofits. All twelve regional corporations provide elder dividends, potlatch and burial assistance, along with other services,” she says. “And 7(j) is an integral part of the ability for village corporations to provide greater services to their shareholders and communities.”

“Congress wanted to ensure that all Alaska Natives had something approaching a fair and equitable distribution of benefits coming from our natural resources… Congress recognized that there were going to be regions rich in resources and there were going to be other regions that were not.”
Nathan McCowan, Chair, Alaska Native Village Corporation Association
Most village corporations are small entities, which McCowan describes as “fractions of the regional corporations” that employ thousands of people nationwide through their subsidiaries. While 7(i) funds are a bonus for regional corporations, most village corporations depend on 7(j) revenue to subsidize or directly fund their basic operations.

“The most common things that [village corporations] are doing is running the bulk fuel operation or whatever the local critical infrastructure is in the village with those 7(j) monies,” he says.

ANCSA was designed for village corporations to own the lands in their vicinity and help support the hyper-local needs of the community, according to McCowan, while the regional corporations hold the subsurface rights to village corporation lands as well as the rights to minerals beneath their own property holdings.

For more than thirty years, the Red Dog mine on NANA Regional Corporation lands in Northwest Alaska has been a primary source of 7(i) revenue sharing, particularly since oil production has declined over decades from leases controlled or jointly held by Arctic Slope Regional Corporation.

Red Dog, the world’s largest zinc mine, is operated by Teck Resources, and NANA receives royalty payments for the zinc and other minerals extracted from the mine under an operating agreement with Teck.

According to the Alaska Industrial Development and Export Authority—the state development bank that owns the 52-mile road and port utilized by Teck—royalty payments from Red Dog have averaged more than $130 million annually, and most of that is distributed through 7(i) and 7(j).

Unlike the lion’s share of revenue from resources extracted from state or federal lands and waters—Prudhoe Bay oil, for example—shared ANC resource revenue stays in the Alaska economy. The McKinley Research report estimates that $100 million in 7(i) distributions generates $150 million in economic activity spread across the state, thanks to a multiplier effect.

The Looming Void
The long-term challenge, however, is that Red Dog is reaching maturity. Opened in 1989, Teck has said the deposits on NANA lands will be exhausted around 2032. Teck has two large prospects nearby to extend the life of the mine, but they are on state land that will not fund the 7(i) program.

Some state and ANC leaders have pointed to the Donlin Gold project in Western Alaska as the long-term solution because Calista Corporation holds the subsurface rights to the deposit. Donlin Gold’s parent companies are in the advanced resource evaluation stage but still years away from production. Whether it will be generating revenue before 2032, no one can say for sure.

Calista officials also do not know how much shared revenue would likely come from Donlin over the mine’s 27-year projected life because of the inherent uncertainties of future price and production. Still, Calista expects it could “have a profound impact on the 7(i)/7(j) program.”

While there are still uncertainties regarding those specifics, Calista officials said they don’t know what other large-scale project would fill the looming 7(i) void if Donlin ultimately stalls.

“What is certain is that if another project (other than Donlin) is developed, it must be on ANCSA land for corporations to receive 7(i)/7(j) revenue. These are our lands, and our environment and subsistence way of life comes first,” Calista said in a written statement. “We hope that Alaskans understand this real opportunity that Donlin offers to Alaska Native regional and village corporations in the Y-K region and throughout Alaska to provide income and funding for rural education and other basic services and benefits that we now enjoy thanks to Red Dog mine.”

Whatever the amount of cash available for resource revenue sharing, the 7(i)/7(j) mechanism remains solid in ANCSA’s second half-century.

“I think the long-term outlook is good,” Reitmeier says. “Recognizing this is an ever-changing world that we live in, if we continue to be guided by our traditional values and guided by our respect for the land, I think we still have incredible opportunities for our Alaska Native people.”

Both Reitmeier and McCowan believe that, as a resource development state with a good environmental track record, Alaska will see new 7(i) and 7(j) projects; it is just a matter of when. They also agree that the Native value of sharing the bounty that the lands provide will always be a part of Alaska.

Elwood Brehmer is a longtime reporter and writer in Alaska.