September 27, 2013 • Vol. XXXVI, No. 17

Racing for Pets

After the kids run to raise money for local animal rescue group Paws and Claws, kids spent time with Sparky, who went home with a family that met him at the event on September 14. For more photos, see page 4 of our print edition.

Photo by Donna Griffard

Municipal Election Forum

Eagle Industrial Minerals Corp., AIDEA at odds over ore terminal user agreement
Eaton looking at options, AIDEA defends scheduled repayment plan


After receiving an unsatisfactory Skagway Ore Terminal user agreement from the Alaska Development and Export Authority, Chuck Eaton of Eagle Industrial Minerals, Corp. says he no longer has a port.
Eaton spoke to the Skagway Borough Assembly and the Skagway Port Commission in a joint meeting on Wednesday to inform them of the situation between his company and AIDEA.
Eagle will be extracting magnetite, which is a form of iron ore, from old Whitehorse Copper Mine tailings and shipping it to Southeast Asia.
Though the company is fully permitted to start production in Whitehorse, Eaton said the only piece of the project missing is a port.
Eagle has been preparing to use the Port of Skagway for shipment since the mining company was in its planning stages, however recent interactions with AIDEA have Eaton questioning what his next move will be.
“Our plan all along was to use the AIDEA terminal at the port,” Eaton said, adding that in order to do so the terminal’s roof would need to be expanded another 250 feet to accommodate Eagle’s magnetite.
Eaton said the construction estimate is about $7.5 million, but he thinks it would probably cost about $6.5 million. Eagle would borrow the expansion funding from AIDEA and partially repay it back over the term of the company’s use, which is about six years. After Eagle was done using the facilities, another mining company would be able to use the area Eagle occupied and could incur repayment fees for the expansion.
“We have been discussing with AIDEA that program for the last couple years, and AIDEA actually approved that program in July 2013,” he said.
A few weeks after the board meeting Eagle received a user agreement from AIDEA with terms that Eaton said were “way unsatisfactory.”
In the months leading up to the board meeting, Eaton said, he was hearing from an AIDEA representative that the authority understood his project was short term and was working on a way that Eagle wouldn’t need to pay for 100 percent of the construction costs. Because the expanded facility would have a lifespan of about 50 years, it seemed unreasonable for Eagle’s six-year operation to pay the full construction amount.
But Eaton said the first draft of the user agreement reflected that Eagle must pay for the entire construction cost and the company is required to pay all of it back in the first four years of operations.
Eaton said the 6-year repayment plan was scheduled so years five and six were paid for during the first two years of Eagle’s use of the terminal.
“That means in year one you’re paying two years’ worth of debt service, and in year two you’re paying two years’ worth of debt service, and in year three and four you are paying one year of debt service for each of those years,” he said, adding that the effective stream of interest the company would be paying on the borrowed funds is more than 15 percent. “In our opinion those are commercially unreasonable terms.”
On top of the repayment terms, Eaton said facility conditions - specifically the ship loader - are in question.
Though the 2012 Moffat & Nichol survey ordered by the municipality was mostly referencing the condition of the Ore Dock itself, Eaton said he saw language in the report referring to the ship loader that was a concern for a perspective user of the facility.
The report mentions extensive corrosion and calls into question the capacity and useful life of the ship loader.
“We need to use [the ship loader] 600 hours a year because we’re going to be pushing 400,000-450,000 tons of ore per year though the port,” he said.
As a result of repayment plan and a questionable ship loader, Eaton said, his partner, Strategic Minerals, has pulled out of the deal.
“I cannot do this project by myself, so at the moment, because of the terms and conditions AIDEA has presented to us, our project is dead,” he said.
Eaton said AIDEA has lost track of its role to promote economic development and is now focusing on risk mitigation.
Because of this, Eaton said Eagle “went political” and wrote a letter to Alaska Governor Sean Parnell, Yukon Premier Darrell Pasloski and Skagway Mayor Stan Selmer to explain the situation and tell them that Eagle believes AIDEA is “impeding economic development.” Eaton also accused AIDEA of not being miner friendly later in the meeting.
Just in case Eagle and AIDEA cannot come to an agreement soon, Eaton has been looking for other options within the municipality.
One of the options Eaton mentioned would be to buy a mobile ship loader and construct an ore shed on uplands that will be created as part of the Gateway Project. Eaton said a ship loader that moves could potentially save Eagle a lot of time, as terminal operators wouldn’t have to wait for the ship to move while loading the magnetite at the port.
Another option would be to store the magnetite other places around Skagway, such as the White Pass & Yukon Route railway yard or on Alaska Marine Lines property, and have conveyor belts move the ore to the ship loader.
Eaton also mentioned that storing his ore in locations north of town and installing a conveyor belt would drastically reduce on ore truck traffic on the streets of Skagway.
Eaton told municipal officials that he thinks having AIDEA bought out of the ore terminal might alleviate his predicament and the predicaments of the municipality and potential terminal users.
“Most ports in the US and Canada are owned by either private companies or local governments,” he said, naming AML, White Pass and Hamilton Construction as entities that might be interested.
Eaton also suggested the municipality might want to consider taking the terminal from AIDEA.
“You’re currently the landowner, so it would be a natural fit,” he said. “It would give you total control over the planning and development of that facility.”
Port Commissioner John Tronrud said he agrees with Eaton about the municipality trying to acquire the facility.
“I personally like the idea of asking AIDEA to bow out gracefully,” he said. “I think the municipality’s goal should be ruling its own facility and in charge of its own destiny.”
Port Commission ex-officio representative Tom Cochran said the prospect of the municipality buying the terminal from AIDEA isn’t a new concept and was first brought up in 2008 or 2009.
AIDEA Deputy Director of Project Development and Asset Management Jim Hemsath attended the meeting via teleconference.
Hemsath said Eaton was “playing a little bit lose with the facts” during the meeting and said the loan repayment schedule was a seven-year plan that required six payments.
“It wasn’t $2 million [per year for the first two years],” he said. “We were asking him to put two years of payment in a reserve account where it’s going to earn interest, and that basically was to protect Chuck from himself. The fact of the matter is all metals analysis except for Chuck’s show the cost of iron ore dropping off.”
The probability of Eaton’s project being uneconomic at the end of four years is extremely high, he said.
Hemsath said he and AIDEA Executive Director Ted Leonard took “tremendous umbrage” to Eaton’s accusation of AIDEA not being miner friendly.
“We’ve been working with mining companies for 30 years,” he said. “We continue to work with Selwyn, Capstone, Western Copper, Tulsequah Chief.”
Hemsath said AIDEA is in contact with mines that have 20-30 year lifespans, and that Eagle has a lifespan of about 4-5 years. He also added that Eaton has said he would like to move all of his tailings out in three years if he has the ability.
Unfortunately, Hemsath said, AIDEA doesn’t really have any future mining company prospects that would come in immediately after Eagle to help with the cost of the shed build out. And because there are only 10 years left in AIDEA’s waterfront lease, the authority hasn’t been advertising for new tenants.
Hemsath said the authority has been talking to Eaton for years and has told him that AIDEA must be paid back according to statute. Because there are no mining company prospects to move into Eaton’s facility after Eagle, Eaton must incur the total build out cost himself.
Hemsath also added that terminal users Capstone Mining Corp. and MSI have been doing as-needed maintenance work on the ship loader. Though there is corrosion on the ship loader, he said it just recently received a clean bill of health.
“If this continues to be a concern we are also looking at bringing in the original manufacturer to look at the ship loader and give us what their estimate of life is,” he said, adding that it was completely refurbished in 2007.
Hemsath said if AIDEA needs to replace the ship loader, it will.
Eaton said Eagle would be going to AIDEA with a counter proposal user agreement next week in an attempt to reopen the lines of communication with the authority.
“If we can get AIDEA to kind of refocus on economic development and back off of some of these onerous conditions, we’re just going to be as happy as we can be to work with AIDEA and make this thing work.”
In a press release sent out the same day as the meeting, AIDEA announced that it would be renewing a lease for Skagway Ore Terminal tenant Capstone Mining Corporation.
The release said that Capstone continues to develop its Minto mine in the Yukon, and the new lease extends to March 2023.
“We are very pleased to extend this lease with Capstone Mining. The company is an excellent tenant, partner and corporate citizen,” said AIDEA Executive Director Ted Leonard in the release. “This is another sign that our partnership with industry and the community of Skagway continues to produce positive results.”
Capstone was the first tenant in the refurbished Skagway Ore Terminal terminal and began shipping in 2007.

Preliminary West Creek hydroelectricity feasibility to start this fall, results would be available in January 2016


The Skagway Borough Assembly voted 5-1 on September 19 to hire Chad Gubala Consulting, Inc. to perform a $20,000 West Creek Hydroelectric preliminary assessment, which will involve hydrology data collection through 2015.
Earlier in the day, the Skagway Finance Committee approved the spending of $20,000 of the $59,000 in the FY 2014 budget marked for a West Creek hydro study. The total amount of Gubala’s study would be $120,000 and would take place over the course of about three years.
The municipality has tried six times to get funding from the Alaska Energy Authority for the hydro study, but has not received anything from the AEA thus far. But during a meeting with Governor Sean Parnell on August 27, Parnell told Selmer there would be funding available, and that he would talk to AEA’s Gene Terriault to determine where it would come from.
“Between now and, I hope, the next budget cycle, the governor’s office will see that we get an additional $150,000 for some of the feasibility work,” Selmer said.
Assemblyman Gary Hanson said he doesn’t know if there is enough community support for him to back a West Creek hydro feasibility study.
“My concern is that we might be putting $150,000 into a project that doesn’t have the support of the community,” Hanson said. “There’s so many unanswered questions about this that I’m hesitant to support it.”
“In terms of best options, this is it,” he said of hydropower. “This is better than LNG. Yukon Energy has had to plan ahead on the power front and realizes there are some beautiful options when it comes to hydroelectricity from West Creek.”
Assemblyman Paul Reichert said the assembly has talked about future energy projects such as using a West Creek hydro project to sell power to the Yukon for mining, and the municipality receiving power from the Yukon to power cruise ships.
“I don’t think hiring Dr. Gubala to do this study is committing us to any of those projects,” he said.
Reichert said the assembly has funded the proposed study year after year, and when the municipality held a town hall, there was a very high percentage of people who were strongly in favor of looking at the feasibility of West Creek.
Because Reichert said he is a lover of outdoor recreation, he said he might be against a hydro project in West Creek if it ever did come to fruition, but he said he wants to know what the feasibility of the project would be.
Assemblyman Mike Korsmo said he agreed with Reichert about maybe not wanting a hydro project in West Creek down the road, but he also agrees with moving forward with the study.
It is a benefit to the community, Korsmo said, to figure out a way to plug cruise ships in so they don’t have to burn fuel while in port.
“If you were looking out on the days there is no wind, you saw the haze that engulfs the valley,” he said. “Not that I’m saying West Creek is the answer, but we’ve agreed for several years to go ahead and look at the feasibility of this.”
Hanson said he is not a fan of the haze either, but he said he thinks there is a potential in the coming years for the industry to switch to LNG powered generation and propulsion.
“I’m a little bit leery about basing a multi-million dollar project on that aspect of it when there might be other answers,” he said.
Hanson also suggested Gubala look into tidal generation, which is akin to an underwater wind farm and used in places in Europe with high tidal ranges.
On August 29, the Whitehorse Star reported that Yukon Energy wants to start construction of a new LNG generating plant and storage facility near the Whitehorse Rapids Dam in May.
The natural gas would come from Shell Canada’s LNG facility near Calgary.
The electrical company filled out an application for the project with the Yukon Environmental and Socio-economic Assessment Board and plans to have the two generators powered by natural gas operating in the fall of 2014.
When he was here almost a year ago for a West Creek informational meeting, Yukon Energy Vice President Michael Brandt said the electrical company would still be interested in buying hydropower from Skagway if a West Creek project is created even if they had an LNG source.
“In terms of best options, this is it,” he said of hydropower. “This is better than LNG. Yukon Energy has had to plan ahead on the power front and realizes there are some beautiful options when it comes to hydroelectricity from West Creek.”
Because of the increased innovation of technology and the increased amount of electrical usage, Assemblyman Steven Burnham Jr. said he thinks it would be irresponsible of the municipality to not look into every renewable energy resource it can.
“That would include hydro at West Creek. It would include tidal energies that may be possible,” Burnham said. “I would support feasibilities on any of those things within reason just simply due to the increase in fuel costs. Twenty years from now we’re going to have more and more need for electricity, and if we don’t stay ahead of it we’re going to lose out.”
Selmer and Borough Manager George Edes authorized Gubala to put the stream gauges in West Creek earlier this month, and Gubala will be using the Taiya Inlet Watershed Council as his local contact for retrieving data.
In his letter to Edes, Gubala wrote that the study would begin immediately after the assembly approved it in order to acquire the maximum duration of data for the catchment.
The assembly voted 5-1 to approve the study, with Hanson voting no.

Elementary students climb on, dangle from and jump off of a jungle gym structure above recycled tire mulch at the Skagway School playground. After renovations and a debate over using the mulch, the playground was ready for kids to use earlier this month. Katie Emmets

Kids and teachers happy about new Skagway School playground


After much debate, the Skagway School Board made a decision about the use of rubber mulch and applied it to the playground at Skagway School – and the students love it.
The solution selected was to use pea gravel to cover the majority of the playground and to use rubber mulch around impact zones, where students could be up to 9 feet above the ground on the equipment.
The use of the recycled tire mulch, however, was a contentious issue.
One concern about using the mulch was that the kids would mix it with the pea gravel, rendering the new solution useless. In response to this, Skagway School Superintendent Josh Coughran put new rules in place, one being that the kids are not allowed to dig in or throw around the rubber pieces.
After they are done playing on the playground, the kids do a “shake down,” where they get all of the tire mulch out of their hair and off of their clothes. They also empty their shoes so none of the mulch gets off of the playground.
Another concern was potential health risks associated with recycled rubber tire mulch, an issue brought up by kindergarten and first grade teacher Denise Caposey.
“I testified before the Skagway Borough Assembly twice this past June and stated that I was opposed to the use of this material after I saw Mollie Walsh Park,” Caposey said.
But she said she thinks using the tire mulch sparingly is an effort to limit the exposure and possible absorption of the toxic chemicals that could exist in the recycled tire pieces.
Caposey said her students are thrilled with the new playground, and that they love the big structure with all its bells and whistles.
“The partial use of the rubber mulch is as good, if not better, than our previous solution,” said Coughran. “The kids are ecstatic about the playground; they think it’s the ‘bestest thing in the world’.”
Coughran said he walked up to a second grader on the playground and asked him if he liked the new playground. The kid responded with a “no,” and several seconds later replied, “I love the playground.”
“I definitely see the value in the compromise,” said Coughran of the tire mulch and pea gravel layout. “Those guys did a fantastic job and worked really hard.”
Municipal parks employees installed the new playground equipment and surfaces under the direction of Gregg Kollasch.

Skagway sees benefit of Attorney General ruling that changes how Southeast Alaska port businesses are promoted onboard cruise ships


Complaints from both business owners and visitors in Southeast Alaska have been reduced after an Attorney General ruling earlier this year halted ship marketing programs from misleading tourists about locally owned businesses.
According to a State of Alaska Department of Law press release, the State of Alaska reached a settlement with Onboard Media Inc., Royal Media Promotions, Inc. and Panoff Publishing Company on February 4 regarding marketing programs conducted onboard cruise ships that visit Alaska ports.
The state agreed to a $200,000 settlement with the three marketing companies. Settlement terms also include the companies making clear to passengers that retail stores pay advertising fees and sales commissions as part of the onboard promotion.
According to the release, the three Florida-based promotion companies are no longer allowed to speak bad about or give misleading information about local businesses that do not participate in the port lectures.
According to the Associated Press, Alaska is the first cruise ship destination to crack down on port lecturers.
Assistant State Attorney General Ed Sniffin, who handles consumer protection issues, was quoted in an Associated Press article as saying local businesses were upset over the misleading information given by onboard media groups and cruise passengers were complaining that they were being ripped off.
“’Hey, I bought this diamond at the shop, and they told me that it was a two-karat something, and I paid $20,000 for it. When I got home and had it appraised, it was really only worth $5,000.’ You know, some of those kinds of things,” Sniffin told the AP.
Skagway Tourism Director Buckwheat Donahue said complaints about businesses from tourists have gone down about 65 percent since the ruling.
“People used to ask if they should believe everything they heard on the ship and if the places that weren’t included in the port lecture series sold quality stuff,” Donahue said. “The number of consumer complaints has gone down significantly this year.”
The ruling, which came in February, was especially taken to heart by Charlie Ball, president of Princess Tours.
Donahue said Ball contacted marketing companies on all ships owned by Princess Cruises and met with representatives from Ketchikan, Juneau and Skagway in order to figure out the best way to go about correcting the Port Lecture Series.
Though ships still promote businesses that pay to be involved in the Port Lecture Series, Donahue said there is more honesty involved in the process, adding that lecturers are required to tell passengers that the businesses being promoted paid to be a part of the series. They also are no longer allowed to bash or say untrue things about businesses that are not involved in the programs.
“Personally, I think the onboard marketing programs used to cast shadows on Skagway as a destination with deceptive advertising practices,” he said. “The programs suggested there was a lack of integrity in all other stores that weren’t being promoted on the ship.”
But, Donahue said, that has changed since the Attorney General’s investigation and Charlie Ball’s change in marketing on Princess Cruises ships. Donahue also mentioned how much he appreciated Ball’s cooperation with making sure his ships were not misrepresenting Skagway stores.
Skagway Mayor Stan Selmer said he is pleased with changes that came with the ruling.
“There were a lot of issues with the way marketing on the ships was before,” Selmer said. “It was hurting local businesses, and there were a lot of complaints from the consumers.”
About a year ago, Selmer, along with former Juneau Mayor Bruce Botelho and Ketchikan Mayor Lew Williams, signed a letter addressed Attorney General Michael Geraghty asking him to investigate the practices and integrity of the Port Lecture Series.

State of Alaska to release long-awaited Juneau Access supplemental EIS


The Alaska Department of Transportation and Public Facilities announced on August 29 that it would release findings of a Juneau Access supplemental environmental impact survey for a public comment process.
The public hearings are set for a 30-day period, which would include the Christmas holiday.
Following ideas of building a road from Juneau to Katzehin with a shuttle ferry to Haines/Skagway, an initial EIS was completed in 2006 to determine what impact the road would have on the environment and also to determine what would be the best way to improve the Upper Lynn Canal travel corridor.
Federal District Court Judge John Sedgwick deemed the 2006 EIS inadequate, as it did not consider the enhancement of the Alaska Marine Highway ferry services as a way to develop travel.
Skagway Mayor Stan Selmer signed a letter addressed to Federal Highway Administration’s Alaska Division Administrator David Miller asking that DOT not make the SEIS public during its scheduled time of the holiday season.
“We request that the draft EIS not be released over the holidays as this would be counter productive to substantive review,” Selmer wrote.
Selmer said he doesn’t think the document should be released over the holidays because a lot of government agencies would be off work and not available to discuss the draft.
“A lot of Skagway residents are going to be commenting on the EIS,” Selmer said. “And a lot of them might be out of town during that time, too.”
Selmer suggested the draft document be made public after January 1 when people are focusing on the year ahead and back from holiday vacations.
Selmer also asked Miller to extend the period in which the public had an opportunity to comment on the SEIS.
“We request that the comment period on the draft EIS be extended to no less than 60 working days in order to provide adequate time for evaluation of alternatives by local officials and residents,” Selmer wrote.
Selmer also suggested that Skagway’s coastal zone management program, which is in the final states of development, be included in the planning process as a cooperating agency.
“The Marine Highway System serves an important mass transit function in our region,” Selmer wrote. “Over the past ten years, our community has consistently voiced concerns about the large percentage of marine highway passengers who travel without a vehicle. We request that the EIS devote significant analysis to determining how under the various alternatives foot passengers will be transported between communities and what the added costs will be for the state and the end users in each situation.”

SPRINT TO THE FINISH – Skagway’s Ethan Goebel, left, smiles as he beats a Ketchikan runner to the finish line of a cross-country race in Juneau last weekend. See story and more photos in this issue's Sports & Rec.
Klas Stolpe, Juneau Empire


Sales tax holiday to be in place for six months
The Skagway Borough Assembly unanimously passed a resolution that will allow for a sales tax holiday from October 1 to March 31 for all Skagway residents.
During the six-month time period, all retail sales in the Municipality of Skagway will not include the summer-wide 5 percent sales tax.
During discussion at the September 19 meeting, there were concerns at the table about the absence of the Celebrity Millennium, which had to cancel its last six sailings because of a mechanical issue.
Because Skagway missed out on about 10,000 Celebrity passengers, there was worry that the drop in tourists would significantly lower the amount of collected sales tax for the year, resulting in a shorter tax holiday.
Though the final sales tax numbers for the 2013 cruise ship season won’t be available until November, Assemblyman and Finance Committee Chair Dan Henry assured other assembly members that the Solstice’s absence wouldn’t be so detrimental to the sales tax fund that the municipality would have to shorten the sales tax relief for its residents.

Mayor stipend jumps from $200 to $1,000 per month
The assembly unanimously approved an ordinance that will bump its volunteer mayor’s pay from $100 per meeting to $1,000 per month.
According to the ordinance, the complexity of the mayor’s role and time demands have increased since Skagway changed from a city to a borough.
Mayor Stan Selmer, who introduced the idea for this ordinance to the assembly, said the time he has spent at City Hall and dealing with municipal issues has greatly increased during his term in comparison to when he was mayor 20 years ago.
Though Selmer attributes his increase in time spent on mayoral issues to Skagway having three different borough managers during his term, he said the role has changed and he thinks the mayor’s stipend should reflect that.
In the September 19 meeting, Assemblyman Mike Korsmo, who suggested in a September 5 meeting that the assembly table the ordinance so it could go through committee process, said he agrees with the increase in pay for the mayor’s position as it is consistent with surrounding Southeast Alaska communities with volunteer mayors, such as Juneau and Haines.
Ordinance No. 13-24 reads “surrounding communities also electing a mayor in an assembly/manager form of government provide a stipend recognizing time demands and surrounding communities have adopted a mayoral stipend greater than $1,000 per month.”
The ordinance will become part of the Skagway Municipal Code immediately, but the increase in the mayor’s stipend will not start until Fiscal Year 2014 begins in July.

School to replace 30-year-old boilers with muni. money
The Skagway School received emergency funding from the Borough Assembly for new boilers before winter, as the existing ones are in bad condition and could fail at any time.
The boilers, which are close to 30 years old, came with the building in 1985 and provide heat to the entire structure.
Skagway School Superintendent Josh Coughran said the normal performance time of a boiler is about 15-20 years.
“These have outlived their lifecycle, which I think is a testament to the maintenance department for taking care of them so well,” Coughran said.
Coughran had a conversation about the condition of the boilers with the school maintenance department and Harbor Plumbing his first day at Skagway School.
“I found out we were just putting a BandAid on something that needed to have surgery,”
he said.
During the September 19 assembly meeting, Assemblyman Gary Hanson said he agrees with giving the school the emergency funding in the form of up to $125,000 for new boilers, but he hopes the school will look into applying for grants if something like this comes up in the future.
The assembly voted unanimously to give the school money for the replacement.
Coughran said the municipality has ordered the boilers already, and they will be replaced by the end of November. – KE

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