Teck Alaska, which operates the Red Dog mine in northwest Alaska, has filed a complaint in the Superior Court for the state of Alaska over a tax increase that Teck estimates could more than triple its annual payments as of 2016. This tax increase may impact the competitiveness and longevity of the mine, putting jobs and economic activity at risk, the company said.
For more than 25 years, Red Dog has provided annual contributions to the Northwest Arctic Borough (NAB) under a negotiated Payment in Lieu of Taxes (PILT) agreement, which averaged about $11.5 million per year over the past five years; more than double the average borough tax payment for an Alaskan mine.
However, as of January 1, in place of a negotiated PILT, the NAB has levied a severance tax. If legal, this tax would increase the payment to an estimated $30-$40 million per year over the next five years; about seven times greater, on average, than the next highest municipal taxes paid by any other mine in the state, according to Teck.
“This massive tax hike could not come at a worse time, as the mining industry is in the midst of the biggest downturn in decades,” said Henri Letient, general manager, Red Dog operations. “All we are asking is for the Borough to come to the table and negotiate a reasonable payment that supports the region and the continued operation of Red Dog.”
The complaint filed by Teck requests an injunction against enforcement of the severance tax and a requirement for the Borough to meet with Teck to negotiate a new payment agreement. Red Dog is the largest private-sector employer in the NAB, with about 715 jobs.