Submarine cable considered for mine

Companies to study possible connection across inlet for power source

Posted: Thursday, December 23, 2004

Northern Dynasty Minerals has lined up Homer Electric Association as its main power producer for the Pebble Mine project being planned near Lake Iliamna.

Officials from both companies said this week they have agreed to a transmission study to determine the feasibility of hooking the mine site to the rail belt electric grid. If it proves feasible, Northern Dynasty plans to receive power from the rail belt, said Bruce Jenkins, director of corporate affairs for the company.

He also said HEA will be identified in the larger project feasibility study as the mine operation's power producer. That larger study, targeted for completion next year, will be used to kick off the permitting processes and begin negotiations with potential financers, said Jenkins.

Jenkins said Tuesday the company is drafting a memorandum of understanding with HEA. The agreement comes after Northern Dynasty received a handful of proposals for studying power alternatives for the mining operation.

"In the last month, we have been reviewing those proposals," Jenkins said. "We've selected Homer Electric Association as our lead power provider."

Assessments of the proposed mine indicate potential for at least six decades of high-volume metal production by way of open-pit mining methods. Northern Dynasty estimates the mine could produce an estimated annual average of 256 million pounds of copper, 365,000 ounces of gold and 8 million pounds of molybdenum during the first 10 years. Those numbers are based on low-production estimates.

A proposal to link the mine to rail belt power by a submarine cable through Cook Inlet will be considered in the transmission study. Northern Dynasty's larger study also will list alternatives, such as an overland line running south from the Chugach Electric Association-owned Beluga Power Plant, near Tyonek. But the company prefers the submarine-cable concept at this point, Jenkins said.

"We're primarily interested in a submarine cable that would take the transmission line from the Kenai Peninsula underneath Cook Inlet," he said.

The cable would tie the Alaska Peninsula into the Kenai Peninsula section of the rail belt electric grid, which distributes power to six utilities between Fairbanks and the Kenai Peninsula. The rail belt electric grid currently contains enough extra electricity to power the mine in its first phase of operation.

The selection means HEA will join with Northern Dy-nasty to immediately study the feasibility of running an underwater power cable across the inlet. Northern Dynasty's decision is good news for the peninsula, said Rick Eckert, HEA's manager of finance. The Kenai area recently was shocked by news that Agrium nitrogen plant in Nikiski intends to close by the end of next year.

"Our hope is that this could produce an economy for the peninsula for the next three decades," Eckert said.

The Kenai Peninsula Borough, along with the cities of Homer and Kenai and area chambers of commerce, has been talking to the company for months about investment possibilities on the peninsula, where infrastructure exists and natural resources are plentiful.

Northern Dynasty announced last month it is considering using Homer's deep water dock as a staging area for construction of the $1 billion to $1.5 billion mine.

Bill Popp, an oil and gas liaison for the borough, said both that news and the recent announcement from HEA show the talks have been paying off.

"Both of those are pieces of the dialogue the borough developed with Northern Dynasty earlier this year," Popp said.

While HEA intends to be the power provider to the mine, it is too early to predict whether the submarine-cable concept will prove economically feasible, Eckert said.

The Northern Dynasty-HEA study will focus on two models. The first will base estimates on a 100,000-metric-ton production level at the mine, which would require an estimated 100 megawatts of power per day. According to Jenkins, that much power currently is available on the rail belt.

The second model, representing the mine's full capacity, supposes a 200,000-metric-ton production level, which would require an estimated 200 megawatts of power per day. One of the purposes of the study will be to help determine whether energy producers need to increase production in the 200-megawatt scenario, Jenkins said.

Eckert said 200 megawatts is a huge amount of electricity, three times the customer demand of 65 megawatts currently placed on HEA's entire service area, and more than twice the historic peak energy demand of 93 megawatts. It also is one-third of the combined energy demand - 600 megawatts during the winter months - on the entire rail belt service.

Increased energy production levels could require finding new fuel sources or generation locations, Eckert said. He estimates the transmission study will be completed by the end of March.

Tying the mine to the rail belt would provide other users with a number of benefits, Eckert said. A large and consistent power user would allow the entire grid to run more efficiently, he said. Homes, which use much more power at night than during the day, require energy providers to produce energy inefficiently.

The transmission study is one leg of an effort to complete a larger feasibility study on the Pebble Mine project, Jenkins said. The study will cover all of the geological, design, environmental and financial aspects of the project, he said.

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