Chuitna could be boon for borough: Coal mine developers still have environmental challenges to address

Posted: Friday, February 18, 2011

Despite the controversies that pervade any discussion of PacRim's proposed Chuitna coal mine, the economic benefits of the project -- hypothetically ranging from job creation to increased tax revenue to lowered borough property taxes -- continue to be trumpeted by many.

"We were told there would be 80 years' worth of jobs," Kenai Peninsula Borough Mayor Dave Carey said of the potential coal mine, slated for construction near Beluga and Tyonek across Cook Inlet.

And those jobs, Carey maintains, will likely be filled by locals. When the borough leased the land on which the coal mine would be built, one of the lease conditions stipulated that the disembarkation point for employees be the City of Kenai, as opposed to Anchorage or some other town. This means that anyone not living in Kenai has to pay their way to get there before the company formally assumes responsibility and starts to pick up their tab.

"We felt that would greatly increase the chances people would live in the borough as compared to living in Anchorage," Carey said. "That was a significant part of the reason the assembly of the '80s supported this, because it absolutely would increase jobs for people who live here."

The borough has been collecting money on the aforementioned lease since 1987, and between then and 2009, it has raked in nearly $1.5 million. Now that PacRim has finally exercised their option to lease, they are effectively paying rent, explained Marcus Mueller, the borough's land management officer.

Money received from the option and rent goes into the land trust fund, which is an account separate from the general fund that takes in all land-based revenues. When land gets sold or rented, the revenue generated goes into this pot of money. When the borough purchases land, money comes out.

"For example, it doesn't get used to fund education," Mueller said of the usage constraints of the land trust fund. "But it does go to buy property for, say. the new Seward middle school."

So even before its development, the Chuitna mine project has accumulated revenue for the borough. And Carey hopes that if it comes to fruition, the mine operation will generate even more. This would namely be accomplished through the borough imposing an excise tax, which is a type of sales tax, on the coal coming out of the mine.

"We certainly have discussed putting a type of excise tax on coal so that the borough would receive significantly more income," Carey said, although he acknowledged he doesn't know at what rate the potential tax would be set.

Excise taxes are imposed on companies and activities; for example, most tourism businesses pay an excise tax. And since excise taxes fall under the umbrella of sales taxes, and all sales taxes collected by the borough are legally obligated to go toward education, the coal would be effectively funding the school system.

Following the possible domino effects of this excise tax even further, this new source of revenue could lower property taxes, according to Carey, as a substantial chunk of property taxes are currently funneled into schools.

"If this went forward and if there was an excise tax in place, it could very much change the use of property taxes for education," Carey explained. "It could hypothetically allow us to lower the property tax because we wouldn't have to use property taxes for education."

A delicate balance needs to be struck between high and low for the excise tax: high enough to garner a relatively significant amount for the borough, but low enough to facilitate PacRim's ability to hire long-term employees and buy food and other supplies from the Kenai area.

For now, these theoretical booms to the local economy remain figments of the borough's imagination. PacRim is waiting for an environmental impact statement to be completed, and only when that is done can the various permits it has applied for be approved and issued.

Another obstacle to the project's realization is the Lands Unsuitable for Mining Petition, which was submitted in January of 2010 by the Chuitna Citizens Coalition and Cook Inletkeeper. Those groups seeks to protect the Cook Inlet and its surrounding communities from the environmental damage associated with strip-mining, and their petition particularly focuses on the destruction of a salmon spawning stream.

A public hearing presided over by the Department of Natural Resources regarding the petition took place in Kenai in January, and another will soon be held in Tyonek. Once the Tyonek hearing is complete, the DNR will have 60 days to decide whether to accept, partially accept, or deny the petition.

Dan Graham, PacRim's Chuitna project manager, believes that the two goals -- mining and fishing -- are not mutually exclusive.

"It's always been characterized as an either/or: You have to choose either the mining or the fish. You can't have both," Graham said. "We personally believe that we can have both. We aren't going to decimate a fish population. That would be irresponsible."

Graham estimates that if the permitting process and the environmental impact statement go smoothly, construction could begin as early as late 2012.

"We fully anticipate that happening," he said of the projected date for breaking ground. "The one thing you never can anticipate is legal challenges, which can always delay things. There's lots of different loops involved and all of them can stretch things out."

Depending on when the permits are issued, Graham expects the entire construction process to take between 18 and 26 months to complete.

Karen Garcia can be reached at

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