The government affairs and services committee discussed on Nov. 6 the creation of an ordinance that would address broader impacts of resource development, along with a severance tax on extractive industries.
Committee member Heather Lende cited a section of the City and Borough of Juneau’s ordinance that requires the municipality, in consultation with a mine operator, to conduct a socioeconomic impact assessment that measures beneficial and adverse impacts to services, infrastructure, economy, environment, fiscal and other impacts. The information is used to estimate the extent of a mine’s impacts and how they can be mitigated, and the assessment must be completed before the borough makes a recommendation on a mining application permit within the municipality’s boundaries.
“The intent of this article is to regulate areas of local concern, reserving to the City and Borough all regulatory powers not preempted by state or federal law,” Juneau’s ordinance states. “The department may require a permit to be obtained or a notice given for federally approved activities on federal lands, including un-patented mining claims, so long as the purpose of the review process is not to deny use or expressly prohibit mining, but rather the purpose of the review is to impose conditions for the protection of the environment, health, safety and general welfare of the City and Borough.”
“I think that’s our responsibility as an assembly, to figure some of these things out: the transportation issues, the social impacts, the cultural impacts, the economic impacts,” Lende told committee member Brenda Josephson.
Josephson said she’s open to discussing such an ordinance, but that she’s opposed to any similar ordinance that addresses timber.
The University of Alaska is in contract negotiations with a foreign buyer to harvest 150 million board feet of timber on 13,000 acres of its land in the borough. Those negotiations have been delayed and aren’t expected to resolve until next year.
Josephson said the borough assembly has taken an adversarial relationship with the university that could negatively impact a potential timber industry. “We’re in a position, unfortunately, that we’ve created an adversarial situation with the best hope of a timber industry at this point in time,” Josephson said. “We’re not in a position where we’ve got an effective relationship.”
Severance taxes are a form of excise tax that taxes the severing of natural resources from the place where they’re located.
The Kodiak Island Borough levies a severance tax on mining, logging and fishing, but exempts the tax if the annual gross production value is lower than $5,000. Those taxes yielded the borough $1.8 million in fiscal year 2018, the bulk of which came from fishing. The City and Borough of Yakutat levies a severance tax of $5 per thousand board feet of harvested timber. If the university’s foreign buyer harvests the estimated 150 million board feet of timber on its holdings, the Haines Borough would receive roughly $750,000 in tax revenue if it levied a severance tax the same as Yakutat. Yakutat also levies a 4 percent tax on the gross production value of minerals and 15 cents per ton of rock, sand and gravel.
The Denali Borough has a severance tax on limestone, coal and gravel. The Denali Borough received about $51,000 in fiscal year 2017 from those tax revenues. The Aleutians East Borough also has a severance tax on metal ore and coal mining, gravel, and fishing.
A representative from the university who attended the meeting telephonically said it would welcome such a socioeconomic analysis, and if the timber project goes forward what impact it would have.
“It doesn’t serve a project well if it negatively impacts a community because the community is what will support the project, through both a labor force (and) through the economic support of the businesses that are in the community etc.,” she said.