March 20, 2007 in Business

Planned Alaska mine faces setback

By The Spokesman-Review

After 16 years of permitting battles, Coeur d’Alene Mines Corp. had hoped to open the $238 million Kensington gold mine in Alaska later this year.

But the mine – located about 45 air miles north of Juneau – hit another legal setback late last week, when a federal appeals court indicated that it will overturn a permit for the mine’s tailings facility.

Environmental groups have “argued persuasively” that allowing the Kensington Mine to dump crushed waste rock into a natural lake on the Tongass National Forest would violate the Clean Water Act, according to a statement issued by the 9th U.S. Circuit Court of Appeals.

Pumping 210,000 gallons of slurry daily into Lower Slate Lake over the mine’s projected 10-year life would kill the fish and nearly all other aquatic life in the lake by smothering them, the court said. In addition, the toxicity of the tailings could have lasting effects on the lake, negating efforts to restock the lake with fish after the mine closes, according to the court.

Though not a formal ruling, the statement outlines the court’s intent regarding environmentalists’ challenge to Kensington’s tailings permit. Alaska-based conservation groups hailed the court’s statement as a major victory.

“Since the Clean Water Act was passed, hard-rock gold mines could not put their tailings into lake, streams or rivers,” said Russell Heath, executive director of the Southeast Alaska Conservation Council. Those federal regulations were weakened several years ago, allowing tailings to be classified as “fill” and dumped into lakes and streams, he said.

The Kensington Mine’s tailings permit was a test of the new regulations, Heath said. If built as permitted, it would have “reversed a generation of regulatory law,” he said. “It absolutely had nationwide implications.”

Coeur d’Alene Mines’ CEO Dennis Wheeler said in a statement that the company will wait for the court’s official ruling before deciding whether to appeal. He also expressed surprise and disappointment.

“We followed the rules and we got the permit” in 2005, said Scott Lamb, Coeur d’Alene Mines’ spokesman. In the past, company officials have said the tailings are similar to the rocks found naturally in the 23-acre lake, and that Lower Slate Lake could be successfully rehabilitated after the Kensington Mine closes. However, Wheeler said he’s willing to talk to environmental groups about possible solutions.

Four hundred people are currently working on the mine’s construction. Kensington contains approximately 1.35 million ounces of gold, worth nearly $880 million at current gold prices of $650 per ounce. Coeur d’Alene Mines’ stock closed at $3.95 Monday, down 17 cents per share in active trading.

Kensington is projected to operate for at least a decade, employing 225 workers at wages averaging $67,000 annually. Under agreements with tribal corporations, a significant number of the workers would be Alaska Natives.

But the Kensington Mine has been controversial since it was first proposed in the 1980s. The mine is located near Berners Bay, a rich marine ecosystem. A prolific run of eulachon – a smelt – draws hundreds of bald eagles, endangered stellar sea lions and humpback whales to the bay each spring.

“We do not contest (Coeur d’Alene Mines’) legal right to have a mine up there,” Heath said. “But we will watch very carefully that it doesn’t threaten water quality or the resources in Berners Bay.”

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