Tuesday, November 18, 2008

Shively: Pebble project may not work

By Naomi Klouda
Homer Tribune

Pebble Partnership’s chief executive said Thursday the concept of the proposed Pebble Mine is not a sure go; that in the end, it might not pencil out as possible.

“It is possible this project will not prove economically or otherwise feasible,” John Shively told Catherine Knott’s class at the Kachemak Bay Campus of Kenai Peninsula College.

Shively had opened to a question-answer session after making a brief PowerPoint presentation. For the next two hours, students asked questions for their culture and ecology class.

“We invited John Shively because we are looking at the Pebble Mine process as a case study,” Knott said.

The idea is to study the impact of environmental change on human society. With that in mind, the class is studying the Pebble project from a number of angles and a host of speakers.

Any number of factors could doom Pebble Mine’s prospects, Shively said. World economics could cause the major investors, Angelo American and Northern Dynasty, to find obstacles to financing the project. Or exorbitant transportation and energy costs at a time when the world commodities market sees a sharp downturn in the price of gold could prove stumbling points.

“All of these projects have to survive economic hurdles. This one is subject to an extensive economic review. In the short run, it might not work, but in 10 to 15 or 50 years, it might be more economically possible,” he said.

The trans-Alaska oil pipeline, at the time of its construction in the mid-1970s, cost $8 billion. In today’s inflated environment, compare that to the projected $6 billion to build Pebble Mine. That estimation has soared from $3.5 billion when Shively accepted the position with the Pebble Partnership in April.

“The cost of everything has gone up: the costs of steel, the costs of equipment, the cost of energy to run the equipment. It all adds to the costs,” Shively said.

Shively pointed to his 40 years in Alaska, working for the NANA Regional Corp., overseeing contracts starting up the Red Dog Mine, and his work as chief of staff and commissioner of the Department of Natural Resources with the Bill Sheffield and Tony Knowles administrations.

Shively was drilled on a number of environmental questions. Bringing the former head of the Division of Habitat, Ken Taylor, on staff is a recruitment that Shively pointed out with pride because Taylor has perhaps more knowledge of the Bristol Bay watershed than other experts, he said.

“And after 40 years in Alaska, I don’t want to be the one they point to and say I messed up Bristol Bay,” he said.

“Environmental interest will cause us to do the best we can do. We have to be able to protect the fishery, and if we can’t prove that to ourselves, then we shouldn’t do it,” he added.

In the meantime, there is much to figure out ahead of time. The biggest opportunity and the biggest challenge is power generation.

Given the timeline for starting the permitting process in late 2009 or early 2010, which involves gaining approval for 67 types of permits from 11 federal and state agencies, and a projected four years of construction, Pebble won’t be mined until 2020, Shively said. Alternative energy sources becoming available likely will offer new options in the coming years.

“In the meantime, we have to have some idea of where we will get our energy to understand what our project will cost,“ he said.

The mine could start on liquefied natural gas, then consider new methods, such as geothermal, wind or combinations of those down the road.

The mine will require as many megawatts as it takes to power Anchorage, with its 300,000 population. That’s about 600 megawatts, even though the dozen villages around Pebble have a combined population of about 1,800 people. It will not be diesel fuel, Shively said, which is costly and would need to come in high volume.

From the start, Shively thought the best path would be to invite Native groups in the region to become involved in what energy is ultimately decided as a power source for the mine, he said.

“It makes sense to provide lasting, low-cost energy benefits to the people of the region,” he said

The summer’s feasibility study releases are online at: www.pebblepartnership.com.