Pebble Mine: A Scam with No Clothes?

While Army Corps of Engineers “assumes” reckless Bristol Bay mine won’t “lose money,”  Northern Dynasty Minerals’ latest financial statement raises “substantial doubt” about company’s “ability to continue as a going concern,” and Pebble Partnership says failure to produce financial feasibility study is due to “resource limitations.” 

Hans Christian Andersen’s tale of “The Emperor’s New Clothes” has become synonymous with the gullibility of arrogant bureaucrats, surrounded by unquestioning sycophants. It’s an age-old story, timeless in its inexhaustible relevance to human folly. Sadly, the story comes all too frequently to mind these days, as respect for science and even for basic facts is in daily decline at the highest levels of our government, where fiction too often trumps reality.

Take, for example, the case of the Pebble Mine—the widely condemned copper and gold mine proposed for construction in southwest Alaska, at the headwaters of the greatest wild sock-eye salmon fishery on Earth, over the overwhelming, bipartisan opposition of the people who live there. According to EPA Administrators from the Presidencies of Nixon, Reagan, George H.W. Bush, and George W. Bush, as well former Interior Secretary Bruce Babbitt, it’s the “wrong mine in absolutely the wrong place.”

Hoping to defuse this opposition, the Pebble Partnership (now consisting only of Northern Dynasty Minerals, the under-funded Canadian project owner) (“Pebble”) has proposed for permitting—and has limited its environmental analysis to—a mine covering just about 10 percent of what it claims to be the overall resource. Their application thus conflicts directly with the much larger, even more destructive mine that Pebble has been describing to potential investors.

This blatant disconnect is well known to the U.S. Army Corps of Engineers (“Corps”)—the federal permitting agency—which seems not to care either about the inconsistency or about the resulting inadequacy of its environmental and permit review of Pebble. “Our regulations,” said Army Corps spokesman David Hobbie to E&E in late October, "assume nobody will develop a project where someone is going to lose money."

Nobody, that is, except an under-funded Canadian mining company hoping to entice investors with a “multi-generational opportunity,” leading to “a very long-life mine.”

Consider the following, and decide for yourself:

• Investor pitch belies ten percent project – Although Pebble has applied to the Corps for a permit to mine just about ten percent of the projected ore body, it has simultaneously pitched to potential investors a much larger project. As explained, for example, by Northern Dynasty CEO Ron Thiessen (at the Denver Gold Forum in September 26, 2017) and Cambridge House Silver and Gold Summit in November 20-21, 2017):​​

• “This project, it’s a multi-generational opportunity. It’s size and scale will lead to a very long life mine . . . .”
• This is 10 billion tons. It’s open in three directions.”
• “Pebble west . . . that’s where the project is going to start its focus . . . for the first two decades of operation . . . and then the deeper resource Pebble East which is high grade, ‘mother load’ if you will . . . east of the deposit which does continue even [further] east to an area we call ‘Pebble Far East.’ At Pebble the resource is about 10 billion tonnes . . . eighth largest copper deposit in the world and largest contained gold deposit.”
• “In some respects, some of the antagonists to Pebble say that, you know, this is too much for the region, but the reality is, you know, this represents development for many years, perhaps centuries into the future. And when you build the infrastructure in there and you’ve got a concentrator you can feed it forever.”

But Pebble has limited its environmental analysis to the smaller project—an analysis that fails to identify, much less address, the true environmental risks of the much larger project.

• Northern Dynasty is under-funded – Northern Dynasty is the sole remaining Pebble partner following the departure of Mitsubishi Corporation (2011), Anglo American (2013), Rio Tinto (2014), and First Quantum Minerals (2018). According to its recently released third quarter financial report, “there is material uncertainty that raises substantial doubt about the Group’s (Pebble and its parent company’s) ability to continue as a going concern.” The report shows a loss of about $40 million since the beginning of the year, with about $14 million in the past three months, and, following repeated stock issuances and special warrants to raise operating cash, the company has recently announced that it has taken a loan of $3.5 million. According to the report, “[i]f the Company is unable to raise the necessary capital resources to meet obligations as they come due, the Company will at some point have to reduce or curtail its operations.”
• Economic feasibility fails – Former Rio Tinto environment and permitting director Richard Borden has reviewed the project’s economics and concluded that the proposed ten percent project is “almost certainly not economically feasible,” with an estimated net present value of negative $3 billion—that is, projected costs would exceed projected revenue over the life of the project by billions of dollars.
• Need for profit compels expansion – According to Borden, “to make a profit—or even to recoup the necessary financial investment for construction and operation—developers would be compelled to immediately begin the process of expanding the permitted mine plan, leading to an accompanying significant increase in size, waste, disturbed footprint—and risk.” In other words, the project makes financial sense only if the mine plan is eventually expanded significantly—at a point when, due to a dramatically changed base-line, consideration of the true environmental trade-offs will no longer be possible.

• Pebble refuses to produce economic feasibility analysis – Despite repeated requests from a range of stakeholders for an analysis showing the financial feasibility of the ten percent project, Pebble has been unable to produce one:
  • Media requests declined – When members of the media have asked about economics—e.g., by Bloomberg Environment, E&E News, and KTUU— Pebble has consistently declined, deploying a series of spokespeople with a diversity of excuses. Just last Friday, KTUU reported Pebble spokesperson Mike Heatwole’s response that the company “has not been able to complete an economic feasibility study due to resource limitations.” “An economic analysis is not a required piece of the permitting puzzle,” Pebble Partnership CEO Tom Collier told E&E News, “so we're focused on those things that are.” Sean Magee, a spokesman at Pebble owner Hunter Dickinson Inc., responded to Bloomberg Environment that the analysis by longtime Rio Tinto expert Borden was “considerably less than objective or independent.”
  • Congressional request declined – When pressed by House Transportation and Infrastructure Committee Chair Peter DeFazio at an October subcommittee hearing, Pebble’s CEO summarily dismissed the need for a financial feasibility analysis because “[i]f it’s not financially viable, it’s not going to be built. And if it’s not going to be built, what the hell are we doing here today . . . .  It’s going to make money going forward.”
  • AECOM requests declined – When in 2018 the Army Corps of Engineers’ consultant AECOM sent two requests to the company for information on “estimated costs” and “cost/feasibility” of the project, Pebble declined, citing a Canadian securities regulation—National Instrument 43-101—whose purpose is to ensure that misleading, erroneous or fraudulent information relating to mineral properties is not published or promoted to investors on the stock exchanges overseen by the Canadian Securities Authority.
  • Bristol Bay requests declined – When in 2018 the Bristol Bay Native Corporation (“BBNC”) asked for an economic feasibility analysis, the company declined, saying only that such an analysis “remains on our to-do list.” No such analysis has been produced.
• Draft EIS is fatally flawed – While Pebble promotes the fiction that “the debate is now over” because the Army Corps has “unequivocally concluded that the project will not harm the Bristol Bay fishery,” the overwhelming consensus of public comment on the Corps’ draft environmental impact statement (“EIS”) documents a dramatically different reality. The Department of the Interior, for example, called the draft “so inadequate that it precludes meaningful analysis.” The EPA concluded that “Pebble may have substantial and unacceptable effects” on fisheries in Bristol Bay, and the Fish and Wildlife Service and the National Marine Fisheries Service, too, raised a range of similarly significant issues. According to Alaska’s senior Senator Lisa Murkowski, “the Corps’ DEIS has failed to meet my standard of a robust and rigorous process.”

In the face of such disconnects and many more, the Army Corps seems determined to look the other way. To stakeholder objections and media questions, the Corps has consistently pretended not to notice, or suggested that addressing the reality of the project’s failures is not its responsibility, or promised, without conceding any significant change in its accelerated permitting schedule, that in a matter of weeks it can fix all that is wrong with its deeply flawed process.

It’s no wonder, then, that the Corps’ arrogant indifference in its tone-deaf handling of concerns about the Pebble process calls to mind a modern-day incarnation of the arrogant indifference of H.C. Andersen’s unclothed Emperor. In the case of the Pebble Mine, the Corps is unable to see or unwilling to concede the fiction that is obvious to virtually everyone else—from other federal agencies to members of Congress to potential investors to representatives of the media to the people of Bristol Bay.

And it’s obvious, it seems, even to Pebble itself. The mine plan for which Pebble is seeking permit approval is, in the words of mining expert Richard Borden, “almost certainly not economically feasible” in the absence of the kind of significant expansion that Pebble has itself been promoting to potential investors.

Until this is recognized and remedied by the Army Corps, the reality any potential investor ignores at its peril is that the true environmental risks of the Pebble project will never be meaningfully addressed in the EIS or in any aspect of the Corps’ fatally flawed permit process. And that’s what the courts will eventually conclude.

But the most fundamental reality—eventually understood by each of the major mining companies that walked away from the Pebble project—is that the people of Bristol Bay, supported by an unprecedented array of supporters and allies in Alaska and around the world, will never relent in their opposition to the Pebble Mine.

Because the health of the greatest wild sock-eye salmon fishery on Earth—the cultural and economic lifeblood of their families and communities for millennia—depends on ensuring that the Pebble Mine is never built. Not in their lifetimes, and not in the generations that follow. Never.