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Operators of Alaska’s Red Dog Mine sue Northwest Arctic Borough over new tax

By Alexis Fernandez 1:41 PM January 15, 2016
ANCHORAGE –

Alaska’s only Arctic mine claims a new tax from the Northwest Arctic Borough (NAB) could put its operation out of business.

Teck Alaska, which operates the Red Dog Mine, has filed a legal complaint in Alaska’s Superior Court over what it says is a severe tax hike.

For more than two decades, Red Dog Mine and NAB have held a partnership through a cooperative agreement known as Payment in Lieu of Taxes. NAB receives 70 to 80 percent of its general fund through PILT. Red Dog Mine, one of the world’s largest zinc producers, is the only taxpayer in the Northwest Arctic Borough.

To date, about $140 million has been paid to the community for schools and government services, according to Wayne Hall, a spokesperson with Teck Alaska.

“Up until recently, it’s been very good. We’ve worked very cooperatively to come to a negotiated agreement that allows benefits for not only the region, but helps support the mine as well,” Hall said in an interview with KTVA.

Hall says it has been trying to negotiate with the borough for the past six months with no success.

“They’ve refused to tell us why they feel that they need this extra increase and why they think it is fair and reasonable,” said Hall.

Borough Mayor Clement Richards said they “tried in good faith” to negotiate with Teck, but that they are now done trying to negotiate.

Located 106 miles of the Arctic Circle, the mine employs 750 people in the Borough, totaling about $75 million in wages, according to Hall.

The borough says an increase in the amount of money they receive from the mine is long overdue; they claim to need funding for schools, ambulances and other services.

“Times change. The needs of our people have increased. I believe the severance tax is the appropriate step we need to take,” said Richards.

Hall says a new severance tax by NAB starting in 2016 could triple the mine’s average annual payments by $40 million. For the past five years, Red Dog has paid an average of $11.6 million every year to the borough.

“This is going to make the mine less competitive, and it’s going to increase uncertainties around the longevity of the mine and jobs, and economic opportunities in the area,” said Hall.

The borough claims the tax would make a relatively small dent in the mine’s profits.

“I don’t think it would basically affect the operations of Teck by any means,” said Richards.

The severance tax is a tax assessed on the extraction of the ore being mined from the ground.

The complaint requests an injunction of the severance tax and requires NAB to meet with Teck to resolve the matter.

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