Pebble Mine’s Canadian Owner Rebuffs U.S. Financial Queries

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By Stephen Lee

The federal government has been trying—and apparently failing—to get financial information from the owner of a huge proposed gold and copper mine in Alaska, according to documents reviewed by Bloomberg Environment.

A private contractor working for the Army Corps of Engineers is seeking cost estimates on the Pebble Mine to evaluate whether adjustments to the mine plan are economically feasible.

The Clean Water Act requires the Corps to identify the “least environmentally damaging practicable alternative” before issuing a dredge and fill permit, and an environmental group says the company should provide the financial data.

But Northern Dynasty Minerals Ltd., the Canadian company based in Vancouver that owns the mine, said in a written response to a Sept. 5 request for information that it couldn’t give cost estimates to the contractor for the mine’s exploration, permitting, development, and construction.

Doing so could cause the company to run afoul of a Canadian disclosure rule that cracks down on fraudulent or misleading statements, Northern Dynasty said.

The disclosure rule, known as National Instrument 43-101, Standards of Disclosure for Mineral Projects, broadly requires that mining companies use experienced engineers or geoscientists to vouch for any company reports. It requires companies to file careful reports identifying a project’s risks and uncertainties.

Pebble Mine’s supporters say it would bring economic growth to the Bristol Bay region, while opponents argue it would endanger the world’s largest wild salmon fishery and human health. Questions about its owner’s financial health have lingered since an investor walked away from the project in May.

The Corps recently said it is on target to finish a draft environmental impact statement of the Pebble Mine by January. The Corps didn’t respond to Bloomberg Environment’s requests for comment.

Considering Options

The cost estimates were requested by Los Angeles-based engineering company AECOM, which the Corps hired in February to prepare an environmental impact statement for the mine.

In its request for information, AECOM said it wanted the dollar figures so it could consider other ways of building the mine’s various components—possibly including a pipeline, a ferry, a port, a power plant, dams, and bridges—in the least environmentally damaging way, while still letting the company extract minerals.

The Corps also has a history of asking for and receiving financial information about mine plan alternatives.

For example, its 2015 draft EIS for the Donlin gold mine, also in Alaska, lists more than 120 project alternatives considered prior to the draft EIS stage. Those options were eliminated from detailed analysis because the Corps determined that they weren’t feasible.

Northern Dynasty: It’s Complicated

Northern Dynasty spokesman Sean Magee said the matter raises “complex securities law issues that aren’t amenable to simple answers.”

Like any publicly traded company, Northern Dynasty “is subject to restrictions on what technical information (including any economic analysis) it can put into the public domain about its project,” Magee wrote in an email to Bloomberg Environment.

But an environmental group said the Corps needed the information.

“This is Northern Dynasty’s shell game: to cover up its failure to provide the most basic information essential to federal review,” Joel Reynolds, Western director and a senior attorney at the Natural Resources Defense Council, told Bloomberg Environment.

‘Moving Full Steam Ahead’

The request for information seems to cut against the Corps’ past statements that the company’s finances aren’t a required part of a complete application.

Northern Dynasty had just C$14.8 million ($11.5 million) in cash on hand as of June 30, according to the company’s most recent financial statement. In June, Doug Allen, vice president of corporate communications at Northern Dynasty, said the mine’s permitting would cost $150 million.

“Until such time that the applicant withdraws their application or they cannot provide information we require for our analysis, we will continue to develop the environmental impact statement,” Shane McCoy, program manager with the Corps’ Alaska district, told reporters June 21. “Until then, it’s really not the Corps’ issue with regards to the financing of the project or the Pebble Limited Partnership.” Northern Dynasty is the owner of the partnership.

More recently, McCoy told reporters in late September that the Corps is “moving full steam ahead” and is on target to deliver a draft EIS in January.

Finances and Impacts

Northern Dynasty’s refusal to provide the information comes at a time when its cash has dwindled, according to its latest financial statement, and it continues its search for a new investor. Previous financial lifeline First Quantum Minerals Ltd. walked away from the project in late May.

Financial data can be important in assessing a project’s environmental impacts, Robert Glicksman, an environmental law professor at George Washington University.

“Suppose the agency says, ‘Well, we don’t think there are going to be any significant effects, or not serious ones, because the company has committed to taking these mitigation actions to reduce the impact,’” Glicksman told Bloomberg Environment. “If it turns out the company is financially incapable of carrying out those commitments, then it seems to me the agency is making unrealistic assessments.”

Out of Date Report?

In July, Northern Dynasty responded to a request from the Corps and AECOM for information about the mine’s costs by pointing to a February 2011 report by Wardrop Engineering Inc.

But five months earlier, Northern Dynasty had written that the Wardrop report’s findings were “considered by Northern Dynasty to be out of date such that it can no longer be relied upon.”

In his email, Magee explained that prior technical information “may, over time, cease to be current for purposes of these securities law rules.”

That didn’t satisfy NRDC’s Reynolds.

“Northern Dynasty claims it’s pursuing a smaller mine plan, but refuses to submit a supporting economic analysis, even when the Army Corps has asked,” he said. “Rather than fake it and be at risk of securities fraud, Northern Dynasty has referred the federal agency to a 2011 economic analysis tied to the full mine build-out, claiming it’s still valid.”

For now, Northern Dynasty “currently anticipates that after it has a complete understanding of, and is able to properly assess, all of the proposed alternatives the U.S. Army Corps will consider over the course of the EIS, an updated economic analysis will be undertaken and we will be in a position to publish that analysis,” Magee wrote.

In April, the company offered a revised mine plan that’s roughly half the size of the original plan. The new design leaves a lighter touch on the environment, the company has said.

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