August 27, 2010 • Vol. XXXIII, No. 15

Concert by the Lake

The weather cleared last Saturday in time for an afternoon concert by local musicians Chris and Kathy Wassman, Tom Lux, Candace Cahill, and Carol Borg by the new cabin at Upper Dewey Lake. See more photos from way above Skagway on pages 8 and 9 of our print edition. Another event is being planned for Labor Day weekend.

Photo by Jeff Brady

Selwyn Mine gains $10 million partner

Skagway shipping options on forefront of planning

By JEFF BRADY

There was considerable excitement in Skagway Aug. 19 following a public teleconference held by Selwyn Resources president Harlan Meade in Vancouver.
During the teleconference, Dr. Meade not only outlined how Selwyn had recently closed on a $100 million Cdn. joint venture investment by Yunnan Chihong Zinc & Germanium Co. Ltd of China, he mentioned Skagway several times when questioned about shipping options being explored from the huge zinc-lead property in western Yukon.
The joint venture will operate as Selwyn Chihong Mining Ltd., with equal representation from the Canadian and Chinese partners in the operation of the mine, expected to be the largest zinc-lead prospect in the world. He said the two parties had agreed to use “all commercial and reasonable efforts to bring the Selwyn project into production as soon as possible.”
The $100 million provides a solid footing for ongoing exploration of the property and feasibility studies, but more funds will have to be raised before it can go into production. One estimate pegs the total project cost at $700 million.
The company is in the process of getting its feasibility plan ready to submit to the Yukon government’s environmental branch in 2011, and Meade noted an “aggressive schedule” has them getting approval and permits by the end of 2012, and commissioning the mill on the site during the first quarter of 2014.
The initial mine plan calls for producing 5,000 metric tons per day from its XY central deposit and 3,000 metric tons from its Don Valley deposits, which would amount to 250,000 metric tons of zinc concentrates, and 65,000 metric tons of lead concentrates per year for at least 12 years.
Meade said those are levels that are equivalent to what the Faro mine was producing at its peak when ore was being shipped to Skagway via train in the 1970s.
When asked about transportation by an investor, Meade said the high cost would prohibit use of an all-truck route, adding that they had been looking at a slurry pipeline from the mine site at Howard’s Pass near the Yukon-Northwest Territories border to the Robert Campbell Highway, and trucking the concentrates to Skagway from there.
However, he noted there had been recent advanced discussions on a rail component.
“Our preference is the concentrate pipeline, but there are recent developments on rail in the Yukon,” Meade said. “White Pass and Yukon rail has been considering reactivating the former rail line and that could make a difference to our project, so we will continue to advance those for several more months. But at this point the front runner is a concentrate pipeline out to the Robert Campbell Highway and then more traditional truck transport from there to the port of Skagway.”

The Skagway Ore Terminal, as seen from hight above town on the Devil's Punch Bowl trail. JB

When asked by an investor if Skagway could handle something of Selwyn’s size, Meade mentioned that the port had handled Faro in the past, but that storage facilities would need to be upgraded to handle the new mine’s volumes, especially if the ore body expanded.
When looking at capital to fund these improvements, Meade noted that governments should be the ones to provide infrastructure like a new ship loader. In regard to the pipeline and rail, he noted the mine would look at investing some capital into the pipeline and rail.
WP&YR president Eugene Hretzay in recent interviews with news media here and in Whitehorse has stated the company is serious about looking into a year-round ore haul again, including possible extension of the line from Whitehorse to Carmacks.
During a break at the Aug. 19 assembly meeting, Hretzay invited Mayor Tom Cochran to attend upcoming meetings with the railroad, Selwyn and the Yukon government in Whitehorse. The municipality and railroad in June signed a Memorandum Of Understanding on working together to develop the port.
The mayor said he will invite representatives to come to Skagway for a port summit some time next month.

Update - After meeting with Meade in Whitehorse, the mayor said Stewart, BC is still under consideration as a port by Selwyn, and Skagway is being asked to submit a list of port costs and a letter saying it is okay to ship lead through the port. See story in Sept. 10 issue.

Borough renews estoppel certificates with WP&YR

Provision allows negotiations to proceed on tidelands lease

By JEFF BRADY

White Pass and Yukon Route, through its American railroad affiliate Pacific and Arctic Railway & Navigation Co., recently asked the Municipality of Skagway to renew two estoppel certificates between PARN, the borough and Wells Fargo Bank that were first granted in 2008.
Estoppel certificates are basically agreements that banks require when they are dealing with loans relating to assets on leased property. The estoppel stops the parties from changing the lease during the period of the loans, and enables the bank to pay the lease if the renter defaults for some reason.
After much debate at meetings on Aug. 13 and Aug. 19, the Skagway Borough Assembly approved the new certificates on an unanimous vote by all six members. The certficates are for a large piece of the tidelands lease, and a smaller piece just north of the lease.
After conferring with its attorney in executive session, and then meeting with White Pass, language was added that would allow the parties to renegotiate the terms and extend the expiration date of the lease (2023), but not allow changing it to an earlier expiration date.
At the initial meeting, WP&YR president Eugene Hretzay told members that the certificates were needed because the company was asking the bank for an increase in its operating line of credit and its term loan. Wells Fargo’s position is that the lease is a source of revenue for the company, Hretzay said.
There was a discussion about the environmental requirements placed on the 2008 agreements. At the time, the borough required a $50,000 deposit into an account in case any contamination was found in the ore basin from previous lead-zinc activity at the old ore terminal in the 1970s and 80s. The funds have not been drawn upon because the state Department of Environmental Conservation has not made a final determination, said Mayor Tom Cochran, but he expects one this fall.

GOING UP FAST - Steel workers put up walls on the new WP&YR paint shop this week. JB

There was a long discussion on time limits for the certificates, and some members were uncomfortable with how the lease had progressed from a two-party agreement to one that now included a third party, the bank. The certificates go away when the loans are paid.
Port Commission member Steve Hites, who runs a winter railroad on St. Kitts in the Caribbean, said estoppel certificates are standard documents and part of the process of getting financing. He said it is important for White Pass to have access to financing so it can help support the community and the waterfront.
After the 40-minute executive session with attorney Bob Blasco via teleconference on the 16th, the mayor said he and Borough Manager Tom Smith would pursue a renegotiation of the tidelands lease with PARN, and the estoppel certificates would be part of the renegotiation.
They met with Hretzay the following Monday and added the new language in the two certificates about renegotiating the lease. The amended versions of the certificates were presented to assembly for approval on the 19th.
At the start of the discussion that evening, the mayor indicated that the attorney does not like the certificates, but Cochran said he felt White Pass had done a “180 degree turnaround” in the past couple months in regard to working with the borough on port development issues, including pursuing a possible ore haul again on the railroad. He noted that Hretzay was agreeable to the language the municipality wanted added, and that the loans could be going to infrastructure improvements that would be a match toward the borough’s recent federal TIGER grant application for ore dock improvements.
Local businessman Ed Fairbanks said that after studying estoppels, he supported granting the certificates. He said the borough was not “giving anything away” by locking into the agreements.
“I think it’s appropriate to issue the estoppels in the interest of moving on with port development,” Fairbanks said.
Assemblyman Tim Cochran said he had some issues with parts of the certificates with regard to the lender, and whether White Pass needed loans when it had a net profit last year of $19 million. But with the prospect of a slurry pipeline and railroad shipping concentrate from the Selwyn Mine to Skagway, “we can only come out of this ahead.”
Others said they agreed with the attorney on some points, but were willing to proceed with the new certificates since the 2023 date was locked in. Paul Reichert wanted some stronger language instead of “may renegotiate the lease” but said he would support it.
Finance chair Dan Henry said that the borough definitely would like to get more money out of the lease, and he expected White Pass to come to the municipality soon for an extension while the economy is down.
“Thirteen years is nothing (in business),” remarked Colette Hisman, referring to the time from now until the lease expires.
There was no talk about the borough taking over the lease in 2023, nor talk about taking the issue to the voters – options that have been mentioned in the past when the tidelands lease came up for discussion. The state agency AIDEA also has written expressing an interest in the tidelands lease after 2023.

ELECTION RESULTS: How Skagway voted in the Aug. 24 state primary



DESK ORGANIZERS – Grades 2-3 teacher Courtney Pfannenstein (Ms. Fun) helps students Dawson Clem and Peyton Rodig stock their desks on the first day of school. See more photos on page 4 of our print edition. Jeff Brady

Slight increase in cruisers expected in 2011

Skagway could see an increase of about 19,000 cruise visitors next season, if numbers hold up from a preliminary 2011 schedule released by Cruise Line Agencies and the Skagway Convention and Visitors Bureau this week.
The schedule shows a noticeable drop in ships visiting on Thursdays – traditionally a strong three- or four-ship day in the past – but there are more ships coming on Fridays, Saturdays and Sundays next season.
New to the port in 2011 will be the Disney Wonder, joining the Carnival Spirit every Friday. This will make up for the loss of Holland America’s Amsterdam to Hoonah every other Friday. Also new to the port will be the Crystal Symphony, the Regatta, and the Bremen on more irregular schedules. They usually will call on weekends.
Princess is not bringing back its smaller Royal Princess, and is diverting the larger Island Princess to a schedule that alternates visits on Saturdays and Sundays, making those days busier. The IP had been calling on Thursdays and Fridays this year. Next year, most Thursdays will see just two ships calling on the port.
This all translates into a slight increase in numbers next season, according to SCVB. The preliminary 2011 schedule’s average passenger totals add up to 681,831. This total does not include the smaller Cruise West vessels that are not yet on the draft 2011 schedule. Cruise West this year was expected to bring 2,838 visitors to Skagway for an estimated total count of 665,491. If one assumes the Cruise West total will be similar next year, then the total expected increase from 2010 to 2011 could be 19,177 passengers for an estimated total of 684,668. And the total number of port calls would increase from 370 in 2010 to 378 in 2011.
Still, those figures are substantially lower than the 779,043 actual cruise passengers Skagway saw on 421 ships in 2009, the second best year on record. Various cruise lines, however, have indicated they may be bringing more ships back to the Alaska market in 2012, now that the State Legislature has reduced the cruise excise tax.
Final numbers from the 2010 season, including actual counts of all visitors entering the port, are usually made available through the CVB in November. To request a copy of the draft 2011 schedule, contact SCVB at skagwayinfo@gmail.com .
The final 2011 ship schedule with berth locations and port times will be released early next year. It is printed in the first newspaper in March with the borough’s annual sales tax statistics.

NEWS FEATURE: Three months on the BP oil spill: Skagway man returns after summer cleaning beachers

Juneau Access heard by Ninth Circuit

The federal Ninth Circuit Court of Appeals, convening in Anchorage last month, heard the state’s appeal of a Alaska District Court ruling that halted work on the Juneau Access Project.
The state’s preferred alternative, a nearly 60-mile road up the east side of Lynn Canal from Juneau to Katzehin flats, with connecting ferry service to nearby Haines and Skagway, was challenged in fall 2008 by several environmental groups led by the Southeast Alaska Conservation Council. In a February 2009 ruling, federal District Judge John Sedwick of Anchorage blocked further work on the project, citing that the state did not explore an alternative of improving access with existing ferry service.
The state vowed to fight that ruling, saying it had explored all alternatives and concluded that extending the road system would decrease travel time and lower costs for users. The appeal landed before the Ninth Circuit on its annual visit to Anchorage at the end of July.
KTUU.com reported the following exchange during presentations by the state and SEACC before the court of appeals:
“Currently we transport about 80 cars a day, which is just a fraction of the number of people that would travel if they had a cheaper, more frequent and easier-to-travel system,” said Reuben Yost with the state’s Juneau Access Project.”
“This is a dead-end road, so you are spending $500 million to a billion dollars that will require a ferry to go over to Haines and Skagway, so this doesn’t really solve any key issues,” said Lindsey Ketchell, an attorney for SEACC.
“What the state has looked at doing is either building a lot of new stuff or else making ferry service worse that it is right now. And what the agencies said the state should have done in the first place and what we think they should have done is just to look at the ferries they’ve got and see if they can do a better job with those to provide service to Juneau,” said Earthjustice attorney, Kate Glover.
“We’ve been pursuing this project for a long time because we recognize the transportation problem and the state is committed to finding the best solution we can,” Yost said.
The Ninth Circuit, which is based in California and serves the western states and Alaska, is expected to issue a ruling on the appeal in three to six months.



SPECIAL FEATURE: Father and son on the Chilkoot: Trail power to the 10th (PART TWO)

BOROUGH DIGEST (complete digest in print edition)

Mike Korsmo joins assembly race
 After a year’s absence from local government, former assemblyman Mike Korsmo has decided to jump back in and will run for a three-year term this fall. He filed his candidate papers by the Aug. 16 deadline and joins incumbents Mark Schaefer and Paul Reichert on the Oct. 5 municipal election ballot. Two three-year seats are up for grabs this fall.
No other candidates filed by the deadline, so veteran school board member Darren Belisle will be unopposed on the ballot.
The annual candidate forum will appear prior to the election in the Sept. 24 issue of The Skagway News. – JB

Dyea zip line permit approved, ; wildlife viewing delayed by P&Z
The Skagway Planning and Zoning Commission voted unanimously to grant Alaska Excursions a conditional use permit for a proposed zip line tour on property in Dyea owned by tour operator Robert Murphy. Murphy, who is also P&Z chair, recused himself during the discussion at the Aug. 12 meeting. Commissioner Matt Deach chaired the proceedings.
There was little public testimony concerning the proposal. Dyea resident Denny Bousson asked if there would be a way to mitigate the impact of employee parking. Murphy said that a shuttle service from town was already offered to current employees and that he would ideally like to work with the municipality to build a bridge over Nelson Slough to allow parking on his property along the hill.
Murphy added that there was no way to be certain what the overall numbers for the new tour would be, as the idea was in its infancy. The commission approved the permit with the stipulation that it be revisited in one year to determine impacts on the area.
The meeting was well-attended by persons who were going to speak in relation to another conditional use request: a proposed bear viewing facility and sled dog demonstration tour in Skagway which was also being applied for by Murphy.
The agenda item was postponed to the next scheduled P&Z meeting on Sept. 9 due a municipal oversight whereby adjacent landowners had not been notified of the permit application. The proposed use would be located on the highway just north of Jewell Gardens. – AC

ARCS Channel 13 may go away
 The waste water treatment plant expansion project may spell the end of ARCS-TV in Skagway. The borough sent out a notice this week saying that the new footprint includes the current location of the Channel 13 ARCS transmitter for Skagway.
ARCS, the free state rural channel – the first live TV channel offered in the community over 30 years ago – can only be accessed via rabbit ears and through the cable system. But most residents in the community have satellite dishes now.
“The municipality requests that users of this service contact the municipal administrative office at 983-2297,” the notice states. “This information will allow a decision to be made on continuing the service or terminating it.”
The state has no funds to relocate the transmitter, according to a memo from municipal employee Frank Wasmer. For the municipality to relocate the ARCS dish to a new pad and building, the cost would be an estimated $60,000, he wrote. – JB

The municipality received its Safety & Health Achievement Recognition Program (SHARP) flag from the Dep. of Labor on Aug. 17. Skagway was honored for implementing the worker safety program at five sites: Rec. Center, public safety buildings, clinic, City Hall, and public works. From left are Grey Mitchell of the Division of Labor Standards & Safety, Donna Powell (SRC), Grant Lawson and Frank Wasmer (Public Works), Manager Tom Smith, Emily Deach (City Hall), Emily Rauscher (SFD), and Kathy Moody (City Hall). The clinic and police were shown the flag later that day. The local Westmark Inn also was honored for being SHARP. JB

STIP list approved
 During a relatively short meeting on Aug. 19, the assembly spent most of its time addressing the White Pass estoppel agreement (see separate story).
It did approve the annual list of projects to present to DOT for its State Transportation Improvements Program (STIP). The list, which will be officially presented as a resolution next month, includes these projects:
• Basin dredging and improving harbor entrance
• Renovation of Small Boat Harbor
• Moore Bridge replacement
•Skagway Gateway pedestrian improvements
• Klondike Highway bike path from Pat Moore Bridge to Liarsville Rd.
• Skagway River bridge replacement
• Broadway railroad crossings
• Port area connector pathway
• Taiya River Bridge replacement
• AMHS terminal floating dock replacement.
The order does not matter, said Mayor Tom Cochran, as the projects go on the STIP so they can be considered as funds become available to the state. The vote was 6-0. – JB

West Creek cutting waiting for flight
The Parks and Recreation Committee held a meeting on West Creek wood cutting last week and determined that it would be best, for the time being, to select an area in the old logging area off West Creek Road for wood cutting.
Members said there had been cutting of green wood across the new bridge up the road, but that a designated trail to Lost Lake and cutting of trees for the trail would not occur until a plan is in place.
Committee chair Paul Reichert liked an idea presented to take a look at the old 1950s logging roads that spur off to the north of the West Creek road and see if a loop road could be developed for four-wheel-drive access to wood cutting areas.
Members Reichert, Mark Schaefer and Manager Tom Smith were going to fly over the area in a helicopter and report back at the next assembly meeting. In the meantime, only marked trees are allowed to be cut near the new bridge. – JB