The Northwest Arctic Borough’s largest private employer and source of revenue is suing the borough over a recent hike in taxes. Teck Alaska, the operator of Red Dog Mine, filed the legal complaint last Friday, noting the tax increase could put jobs and economic activity in the region at risk.
Red Dog is the world’s second largest producer of zinc, situated 80 miles north of Kotzebue and 50 miles inland from the Chukchi Sea.
Teck has been the mine’s operator since it opened in 1989, and Wayne Hall, the mine’s Manager of Community and Public Relations, said it’s been profitable, not just for the mine but for the borough as well.
“It’s truly an Alaskan success story,” Hall explained. “The mine has created enormous benefit for the region, including hundreds of millions in funding for schools and other services, as well over 700 well-paying jobs.”
The hundreds of millions that have helped fund schools and other services for the borough have come from what’s called a Payment in Lieu of Taxes, or PILT agreement. Teck has negotiated a PILT agreement with the Northwest Arctic Borough for the past 25 years.
“However, this year,” Hall explained, “the borough has abandoned that collaborative process and instead levied what’s referred to as a severance tax, which effectively triples Red Dog’s annual tax payments.”
The last time a new PILT was negotiated was five years ago, when the borough doubled it, resulting in an average annual payment from Teck of $11.5 million. The new severance tax could nearly triple that, putting Teck on the line for an estimated $30-40 million each year. Hall said that could put the mine and the borough in jeopardy.
“The fact is this tax increase will make Red Dog less competitive and create uncertainty around the longevity of the mine,” Hall warned, “potentially affecting the jobs and the economic opportunity it creates.”
According to the mine’s website, Red Dog has historically provided the Northwest Arctic Borough with up to 80 percent of its revenue. It also directly employs over 600 people onsite, with an annual payroll of $75 million.
Along with direct impacts, Hall also warned that the tax hike could have a ripple effect in the region.
Hall used the example of the air carrier services that bring in employees from all 11 communities in the region, on at least three flights each week.
Those air carrier services, along with other mine-related services, create more than 100 additional jobs for the region. So with so much at stake for the both the mine and the borough, why the sudden surge in taxes imposed by the borough?
“We don’t know,” Hall said, “and we actually asked why, and they refused to tell us.”
Calls to the Northwest Arctic Borough mayor’s office were not returned as of Monday afternoon, though the borough’s regional corporation was willing to comment.
NANA owns the land the mine operates on, and many of its shareholders work at Red Dog. Liz Cravalho is NANA’s director of community and government affairs, and she says what they’re most concerned about are their shareholders, including their jobs, their dividends, and future exploration in the region.
Cravalho says NANA is working to bring both parties to the table to renegotiate a payment agreement, something Hall would like to see as well.
“We’ve really initiated this legal complaint very reluctantly,” Hall explained. He said it wasn’t something Teck wanted to do.
“Unfortunately, by refusing to engage in good faith negotiations to achieve a reasonable payment agreement, the borough has left us with few options,” Hall said, “and our goal of this action is to get the borough to come to the table and work with us to negotiate a new and reasonable payment agreement.”
Through the legal complaint, Teck is seeking an injunction of the severance tax and meeting with the Northwest Arctic Borough.