Powerful Outsiders continue to target the giant Pebble prospect in Southwest Alaska, with the latest salvo coming from the trustees of pensions funds for California and New York City that hold “substantial” shares in Pebble investor Rio Tinto.
In a short Dec. 19 letter expressing their personal views, John Chiang, controller for California, and John Liu, comptroller for New York City, tell Rio Tinto chief executive Sam Walsh they want London-based Rio Tinto to divest its 19 percent stake in the huge copper-and-gold prospect located in Southwest Alaska.
The two chief financial officers note that Pebble developer Northern Dynasty Minerals has lost 80 percent of its market value over the past two years, reducing Rio Tinto's investment to less than $25 million.
Involvement in the controversial project could hurt Rio Tinto's reputation and hurt the value of the pension funds, together totaling more than $500 billion. “Notably, the Pebble project has obtained neither social nor regulatory licensing despite a decade of exploration and outreach,” says the letter.
The mineral prospect has faced a tsunami of opposition from within Alaska and Outside, with critics ranging from key lawmakers to the Environmental Protection Agency to prominent jewelers. Opponents fear that toxic mining waste would pollute key headwaters draining into Bristol Bay salmon, home of the world's most valuable wild sockeye salmon fishery.
Chiang and Liu together signed an earlier, Nov. 4 letter to Rio Tinto's Walsh asking for an assessment of the legal and regulatory risks of “this uncertain investment,” including a review of potential liabilities to Rio Tinto “in case of a failure or breach of the project which could affect salmon habitat and thus the economic well-being of the area's community.”
The two men demanded a commitment that Rio Tinto will pull out of the project in the absence of “full social, regulatory and legal licensing.”
They said that Northern Dynasty has moved ahead with efforts to develop Pebble despite having warned investors that environmental concerns remain a significant challenge at Pebble, and that spills after earthquakes or accidents may not be fully insurable and could result in a total collapse of shareholder equity, notes the letter.
According to their Nov. 4 letter, Pebble has significant risks that include:
• The EPA, already having concluded that a mine would put “toxic levels of copper” in nearby streams even if nothing goes wrong, could stop the mine at any time, even after hundreds of millions of dollars has been spent.
• Many Alaska Native tribes, corporations and Bristol Bay residents are opposed to the mine's development and may refuse to give up lands needed to construct facilities such as pipelines and roads.
• Staunch legal opposition from a variety of groups, including conservation groups, commercial fishermen, Alaska Native subsistence users and sportfishing organizations.
• Adverse impacts to shareholder relations and public image.
Chiang and Liu weren't happy with Rio Tinto's reply. On Nov. 14, Jean-Sebastian Jacques of Rio Tinto said the company has maintained since 2007 that it will only participate in Pebble if it can be built, operated and closed in a way that protects the environment, health and safety, cultural heritage and community relations.
“Our Kennecott Minerals Company was, for several decades, the majority owner and operator of Greens Creek Mine on Admiralty Island near Juneau. In managing the operation, we gained extensive experience with the regulatory and permitting process in Alaska, and found it to be transparent, rigorous and comprehensive,” he said.
Rio Tinto will “continue to carefully review and analyze the environmental, regulatory, legal and reputational risks” related to the project, said Jacques.
Jacques' reply was “cursory” and failed to address “in any meaningful way” the concerns that had been raised, Chiang and Liu said in their followup letter.
Rio Tinto officials could not be immediately reached for comment on Friday.
Contact Alex DeMarban at alex(at)alaskadispatch.com.