How could COVID-19 affect the Pebble project?

In a March 26 press release Northern Dynasty Minerals (NDM) said that efforts to gain permits for the Pebble mine prospect in Bristol Bay were moving forward despite the COVID-19 pandemic and precautions taken by the company to “ensure the health and safety of its employees, consultants, partners and Alaska neighbours.”

However, financial statements filed four days later painted a more uncertain picture for investors who read the fine print. Like many other businesses, NDM faces challenges caused by the novel coronavirus. In NDM’s case, it adds stressors to an already shaky financial situation.

Before the pandemic, several factors were raising “substantial doubt about its ability to continue as a going concern,” according to auditors. These include:

A deficit of $556 million at the end of 2019.
No determination whether the Pebble Project contains mineral reserves that are economically recoverable.
Access to value in the mineral interests that are entirely dependent on 1) the existence of economically recoverable mineral reserves, 2) the ability to obtain financing to complete the exploration and development of the Pebble Project, 3) obtaining the necessary permits to mine, and 4) future profitable production or proceeds from the disposition of the Pebble Project.

On top of this, the company noted potential COVID-19 related impacts:

Material adverse effect on global and local economic business conditions.
Possible delay in permitting process related to government efforts to curtail the COVID-19 outbreak, including a possible delay by the USACE to release its Final EIS and the Record of Decision.
Personnel (employees and contractors) may be delayed in completing required work due to quarantine, self-isolation, social distancing, restrictions on meetings and work from home requirements.
Adverse effect on global and regional economies, including negative impact on the stock market and NDM shares.
Impact to the stock market and shares could adversely affect NDM’s ability to raise capital, causing delays and increased costs.

For the last few years, Northern Dynasty Minerals has managed to raise funds through special warrants and private placements, along with a fleeting partnership with First Quantum Minerals. However, it really needs full-fledged partners to move the project forward. The COVID-19 pandemic may make that search more difficult than ever.

Federal Permitting

In early February the lead agency for federal permitting, the U.S. Army Corps of Engineers (Corps), Alaska District, released a Preliminary Final Environmental Impact Statement (PFEIS) to cooperating agencies for a 45-day review. It also held a week of technical meetings with those agencies in early March. When the pandemic began to affect normal business operations, some cooperating agencies requested an extension on the comment period.

The Corps did extend the comment period by a week – to March 30. It has received comments from almost all of the cooperating agencies. Although some were received after the deadline, the Corps will consider them as on time and part of the official administrative record.

Throughout this process, the Corps has made documents available to the public as part of its mission to be “open, transparent, and timely.” However, the public will not have access to the PFEIS or to the comments written by cooperating agencies. The Corps notes that the decision to produce a PFEIS was optional. It was shared with cooperating agencies and with the Pebble Limited Partnership, and parts of it were obtained by media outlets. Pebble Limited Partnership shared excerpts in its marketing emails. However, according to the Corps, “agency comments on the PFEIS will not be made public, as that document is not intended to be a public document.”

Like many businesses and agencies around the country, the Alaska District is conducting its work via distance for the foreseeable future. The remaining work on the Final Environmental Impact Statement (FEIS) will be done by the Corps and its third-party contractor AECOM, with an expected release date of mid-summer 2020.

A Record of Decision on the permit is published no sooner than 30 days after publication of the FEIS. According to David Hobbie, Chief of the Regulatory Division for the Alaska District, the ROD is anticipated in the fall.

“We’re going to do our best to complete it as soon as we can,” said Hobbie in a March 10 media advisory. “To be completely honest, Pebble consumes a lot of resources for me and my team. Pebble is one project we have on the books of, you know, probably several hundred. So, we just want to come up with a final decision on Pebble so we can move on to the rest of the projects we have in our queue.”

Agency resources

Even as cooperating agencies met for technical meetings in early March, the national landscape was changing related to responses to COVID-19. All organizations have been impacted, as employees transition to telework and learn how to conduct business from afar. Larger agencies also have various responsibilities whenever there is a global or national situation, with resources and attention diverted to other tasks.

In addition to permitting projects like Pebble, the Corps plays a role in emergency situations like the COVID-19 pandemic. According to a spokesman, the “Alaska District is dedicating its expertise and capabilities to assist the State of Alaska with its response to the coronavirus health crisis. The team is working with federal, state and local partners to provide engineering solutions to combat the COVID-19 pandemic. During an emergency, we are the federal government’s lead agency for public works and engineering support in Alaska. If called upon, we possess the expertise and experience to design and construct critical medical facilities in Alaska.”

EPA has responded to the pandemic in several ways, from providing guidance on qualified disinfectants against COVID-19, to relaxing enforcement of certain regulations and waiving others. While it is making these decisions, EPA is also on deadline with the Corps to determine whether it will request elevation of decision-making on the 404 permit to higher levels. The agency was critical of the Corps’ Draft EIS, and has requested three extensions on the timeline for delivering a “will affect” letter as part of an established dispute resolution process between the EPA and the Corps.

EPA’s latest request came a few days before the previous Feb 28 deadline, and also before impacts of COVID were widely understood. “This additional time will allow EPA to review the PFEIS and continue engaging in discussions with the Corps to better evaluate the extent to which EPA’s comments have been addressed before making any decisions regarding whether to proceed in the 404(q) process,” wrote EPA’s General Counsel Matthew Leopold. The Corps granted EPA an extension until May 28. Before then, personnel from the two agencies must find time for those discussions.

A call to relax the timeline

Some organizations wrote to the Corps asking for a longer extension for cooperating agencies to submit PFEIS comments. Others have asked it to suspend the NEPA process for the Pebble permit.

“With the major disruptions caused all across the Nation as a result of COVID-19, we respectfully ask the USACE to formally relax the timeline for the development of the Final EIS and extend the deadline for cooperating agencies to provide comments on the Preliminary Final EIS (PFEIS). With requirements for social distancing, offices shut down or minimally staffed, the challenges of teleworking, and because the impacts of the COVID-19 virus will last for an uncertain amount of time, extensions of the timeline and PFEIS comment deadline are absolutely necessary.” – March 19 letter from Bristol Bay Regional Seafood Development Association, Commercial Fishermen for Bristol Bay, Bristol Bay Economic Development Corporation, Bristol Bay Native Corporation, Bristol Bay Native Association, United Tribes of Bristol Bay, and the Bristol Bay Reserve

“The community leaders who have served as representatives of Tribal, local, and state Cooperating Agencies in the Pebble NEPA process are now focused on minimizing the COVID19 outbreak and impacts to their communities. The Army Corps unwillingness to adjust to this reality leaves Cooperating Agency participants in a terrible bind where they either give less than full attention to one of the two major threats to their communities; one that is happening right now, and one in the future…..Due to the unprecedented circumstances the world is facing, and the all-hands-on deck needed to combat the COVID-19, SalmonState requests the Army Corps suspend the current NEPA process for the Pebble mine project. A delay in the permitting process for the Pebble mine project would not detriment Pebble Limited Partnership’s interests, as the project requires multiple state and local permits, for which PLP has not yet submitted applications.” – March 31 letter from SalmonState

As noted previously, the Corps extended the PFEIS comment period by seven days, but has not adjusted the overall permitting timeline.

Bristol Bay effects

One of the major challenges for Bristol Bay communities in light of the pandemic is that they cannot just stay at home as the fishing season gears up. The potential for a COVID-19 outbreak in small communities with limited medical infrastructure presents challenges to the industry and local government.

The Alaska Department of Fish and Game forecasts a potential total harvest of 34.56 million sockeye in Bristol Bay in 2020. Attention has been focused on how to manage an already hectic season with new and complex logistical challenges – from travel restrictions to mandatory quarantines for an influx of thousands of workers.

Residents know all too well the impact that COVID-19 could have on their communities. Previous epidemics devastated the region, including the SpanishFlu during the 1919 fishing season, which orphaned 238 children, and tuberculosis in the 1940s and 1950s.

As noted in an interview with the National Fisherman, Bristol Bay Regional Seafood Development Association (BBRSDA), Executive Director Andy Wink reported that fishermen, processors, and local tribes and governments are working to create protocols for keeping both industry workers and residents of Bristol Bay safe.

Currently fishermen are advised to delay travel to Bristol Bay until at least May 1, 2020. BBRSDA has posted a COVID-19 Fleet Plan, Bristol Bay Native Association has posted protocols for the 2020 salmon season, and the Bristol Bay Borough has posted a sample response plan developed by a fish processor.

While addressing these issues, stakeholders in the fishery and leaders in the region continue to be concerned about the proposed Pebble mine and the risks it poses.

State permitting

Although PLP has not yet submitted any state permit applications*, COVID-19 could have potential impact on that process, as state resources are dedicated to combatting spread of the virus. It could potentially make the process faster if decision makers believe the economic benefits of the project to the state outweigh risks to the salmon fishery.

This week another controversial project got a boost on the basis of its economic impact to the state. The Alaska Industrial Development and Export Authority (AIDEA) board voted to invest $35 million into Arctic Infrastructure like the Ambler Road during an emergency meeting this week. Although public testimony was critical, the Board noted that the project could bring 100-200 jobs to the state.

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*While no permit applications have been filed, Northern Dynasty Minerals’ financials indicate it has posted a US$300,000 bond with the State of Alaska “for a performance guarantee related to any potential reclamation liability as a condition for a pipeline right-of-way to a subsidiary of the Pebble Partnership, the Pebble Pipeline Corporation.”