State authority heads to court over Skagway dock fees

Posted: Thursday, November 04, 2010

The Alaska Industrial Development and Export Authority, the state development corporation, is about to tangle in court with the owner of a dock in Skagway used by AIDEA's prime customer for the Skagway Ore Terminal, which is owned by the authority.

Pacific and Arctic Railway and Navigation Co., owner of the historic White Pass railroad and dock facilities in Skagway, is attempting to hike fees tenfold for ore ships tying up at the dock.

The company has not imposed similar increases in fees on cruise ships, which use the dock during summer, AIDEA says.

The increase poses a serious threat to AIDEA's hopes to expand use of the ore terminal as an outlet for ore produced in mines in Yukon Territory, according to Ted Leonard, the authority's executive director.

If costs climb too high for ore ships calling on Skagway, the Yukon mines can shift to other ports, such as in British Columbia, Leonard said.

"Skagway Ore Terminal is a vital source of economic activity for the community and surrounding region," Leonard said. "AIDEA has been and remains very involved in on-going efforts to expand the terminal's customer base. We are concerned that an increase in fees could impact Skagway's ability to be competitive."

Discussions are under way to resolve the dispute, but litigation is possible, AIDEA's deputy director for development, Jim Hemsath, told the authority's board Oct. 20.

The dispute has been brewing for some time, and started when Pacific and Arctic Railway and Navigation, or PARN, sent invoices for dockage and wharfage charges to AIDEA's customer, Capstone Mining Corp./Minto Explorations Ltd., Hemsath told the board.

The dockage charge, the fee charged for a ship pulling up and tying to a dock, had been expected, Hemsath said. But the wharfage charge, which a dock owner levies when a shipper moves cargo or people across a dock, was unexpected.

The mining company protested and asked PARN for mediation, and paid the wharfage charge with the money to be held in escrow.

AIDEA got involved because the dispute affected the customer for its ore terminal, which has facilities built on land leased at the port and with a ship-loading unit that sits on the dock itself.

In the mediation PARN, backed off from imposing the wharfage charge because the ore does not technically move on the dock - it is moved by a conveyor unit from a concentrate storage building on shore to the ship-loader, which sits on the dock, and then to the ship that is tied up.

However, to offset the loss of the wharfage fee, PARN jacked up the dockage fee, Hemsath told the board.

The issue is serious because the authority has been working to build business for the ore terminal. Capstone Mining Corp./Minto Explorations uses only 40 percent of the capacity of the terminal.

About 12 ore ships per year call on Skagway to load ore. Skagway bustles with cruise ships and tourists in the summer, but the ore-shipping operation is important in helping the community through the slow winter months.

Capstone Mining Corp./Minto Explorations ships ore to Skagway by truck on the Klondike Highway from mines in Yukon.

The terminal has had a history of on-and-off use, generally tracking the ups and downs of the mining industry in the Yukon.

It was originally built in 1968 so the mines would have an economical way to ship ore by sea, but operations were closed in 1983 when metals prices dropped and the Yukon mines suspended production. Operations resumed in 1986 when prices recovered.

In 1990 AIDEA purchased the terminal as a move to add financial strength to the operation and help Skagway, but in 1993 Curragh Resources, the customer at the terminal, ceased production at its Faro Mine in Yukon.

In 2003 AIDEA demolished the old concentrate storage building because advanced corrosion had created safety problems. In January 2007 AIDEA signed a contract with the current customers, led by Sherwood Copper, and constructed a new concentrate storage building. Ore shipping resumed in October 2007, and has continued.

Through acquisitions and mergers, Sherwood Copper became a part of the current customer group, Capstone Mining Corp./Minto Explorations.

Facilities owned by AIDEA at Skagway include the 100,000-square-foot concentrate storage building with a materials-handling enclosed conveyor that reaches out to a ship-loader built on the dock. The loader can handle 900 tons per hour.

AIDEA also owns a nearby tank farm with four 30,000-gallon and two 10,000-gallon fuel storage tanks.

The dock accommodates vessels in the 35,000 deadweight-ton class. Water depth at the berth is about 42.5 feet.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.



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