The U.S. Environmental Protection Agency (EPA)’s decision to remove proposed restrictions on mining operations in Alaska’s Bristol Bay is being called a “massive de-risking event” for Northern Dynasty Minerals’ (TSX: NDM; NYSE-AM: NAK) Pebble project. The move could also improve the Vancouver-based company’s chances of finding a partner to build the mine, which the company describes as the “most significant underdeveloped copper and gold resource in the world.”
In late July, the EPA removed a proposal started by the Obama administration in 2014 under Section 404(c) of the Clean Water Act that effectively stalled the Pebble project. The proposed limitations were never legally finalized. The decision doesn’t guarantee the U.S. government will issue a permit for the Pebble project, but removes a major barrier and overhang on the company.
In an interview with The Northern Miner, Northern Dynasty president and CEO Ron Thiessen described it as “a big psychological bonus for us in the marketplace.”
He said the move could make it easier for Northern Dynasty to secure an investment partner for the project. “We’re likely not to do it on our own,” Thiessen said, adding that his company specializes in discovering and permitting mines, and bringing on developers. “It’s a different skill set to build a mine … and another skill set to operate a mine.”
In the July 30 release, Northern Dynasty called the EPA move “one of a series of important milestones” to help get the mine approved. Thiessen said the announcement means the Environmental Impact Statement (EIS) and permitting process for the Pebble project, currently led by the U.S. Army Corps of Engineers, may advance “without the cloud of uncertainty created by EPA’s unprecedented, pre-emptive regulatory action.”
In the interview, Thiessen said the Trump administration is simply following the “proper permitting process, while the Obama administration was trying to usurp [it],” based on “an environmental agenda.”
The controversy has largely been around the protection of Bristol Bay, home to the world’s largest salmon run. Project opponents such as the United Tribes of Bristol Bay (UTBB), a consortium of 15 tribal governments, have called Pebble a “toxic project” that would “destroy the world’s last great sockeye salmon fishery for the project of a foreign mining company.” In the meantime, project proponents considered the Obama-era restrictions to be an unfair veto of the mining project based on outdated assumptions about the mine design and its risks. Northern Dynasty said Pebble is located on state land in southwest Alaska designated for mineral exploration and development, and that the Obama-era EPA sought to veto the Pebble project before it could be proposed, or an EIS permitting process undertaken.
The EPA said it would now focus on the permit review process for the Pebble project. The decision “restores the proper process for 404(c) determinations, eliminating a pre-emptive veto of a hypothetical mine, and focusing EPA’s environmental review on an actual project before the agency,” EPA general counsel Matthew Leopold said in a July 30 release.
In a July 30 note, Cantor Fitzgerald analyst Mike Kozak described the EPA move as a “massive de-risking event for Northern Dynasty, over five years in the making,” adding that the project “finally receives a fair shake.” Added Kozak: “The importance of this cannot be understated. Northern Dynasty, and the Pebble project, will now finally be granted access to an objective, science-based permitting evaluation by the EPA under federal law.” Kozak also said the draft EIS “can and should receive all necessary federal permits required to build and ultimately operate the mine.”
TD Securities analyst Craig Hutchison said in a July 31 note that the EPA decision removes “the risk associated with a potential pre-emptive veto by the EPA.” However, he added that “we continue to highlight the risks associated with financing Pebble in the absence of a long-term financing solution or partnership.”
In an Aug. 9 release, alongside its announcement of a US$10-billion, bought-deal financing, Northern Dynasty said it is in discussions with potential partners “to secure long-term funding to finalize permitting and initiate project development.” The financing was upsized from US$8 million the day before and will be used to advance the field program by its wholly owned U.S. subsidiary Pebble Limited Partnership in Alaska, “and other work necessary to support timely completion of the EIS permitting process for the Pebble project.”
Northern Dynasty expects the Army Corps will finalize the Pebble EIS in early 2020, and issue a record of decision by mid-2020. If permits are granted, construction could begin in 2022, and take four years before commercial production would start. The company said it expects to create 2,000 direct jobs during the mine construction phase and 2,000 direct and indirect Alaska jobs while the mine operates.
Opponents of the Pebble project aren’t backing down, despite the recent EPA decision.
“I see it as a bump in the road,” Bristol Bay Economic Development Corp. (BBEDC) CEO Norm Van Vactor said in an interview. He said opponents are actively discussing next steps, including possible legal action.
“The public process has been violated,” he said, citing a lack of transparency as one issue.
“It’s the wrong project in the wrong place,” Van Vactor said. “The risks far outweigh the possible returns.”
In a release, three organizations against the project — the UTBB, the BBEDC and Bristol Bay Native Association (BBNA) — said the decision comes after the EPA recently cited flaws in Pebble’s environmental review, in particular around the fisheries resources. “The fact that the EPA would withdraw protections for Bristol Bay after the very same agency stated that the proposed Pebble mine could devastate our region makes no sense,” BBNACEO Ralph Andersen stated in a release. “This is unacceptable, and a clear example of politics taking priority over science at the federal level. The people of Bristol Bay deserve more from the federal government.”