An old airstrip and work camp are being used in the effort to develop mineral deposits at Icy Cape. The Alaska Mental Health Trust Land Office owns the land and mineral rights and is overseeing exploration. (Photo courtesy Alaska Mental Health Trust Land Office)

Developers are optimistic about the potential for a beach-sand-mining operation in northern Southeast Alaska.

The Alaska Mental Health Trust Land Office claims good results from its second season of exploring Icy Cape, on the Gulf of Alaska between Yakutat and Cordova.

When mountains erode, they shed tiny particles of rock. They’re washed into streams to be deposited in lakes, deltas or the ocean.

In the Gulf of Alaska, strong waves toss them back on shore to help form beaches.

When those mountains contain veins of rare minerals, those sediments may have enough value to be worth mining.

That’s what’s happening at Icy Cape, where crews are drilling into the beach to see what – and how much — is there.

“There is gold, there’s zircon, there’s garnet, there’s epidote, there’s some platinum,” said Wyn Menefee, acting executive director of the land office of the Alaska Mental Health Trust Authority.

Its Icy Cape property includes about 25 miles of beach, plus forested uplands as wide as 2.5 miles. Those forests cover layers of sand and could be developed.

It’s an isolated area, about 75 miles west-northwest of Yakutat and nearly twice that distance east-southeast of Cordova.

“Right now, we’re in the exploration phase, which is determining what the resource is now, the lay of it … and we’re not at the point of identifying how we’re actually going to mine it,” he said.

About a year ago, the trust’s board allocated $2 million toward the project.

Officials said the new source of income could surpass all of its other efforts, bringing in hundreds of millions of dollars annually.

A work crew of about 16 spent last summer drilling cores from the sands, which stretch as far as 100 feet below the surface in some areas. Menefee said those samples are being analyzed.

The results have caught the attention of potential investors.

“We already have international companies that are interested in the project. They’ve already been visiting the site. They’ve already been trying to check out the resource and trying to see what quality it is,” he said. “This is a continual process.”

Land trust officials will discuss their plans for mining Icy Cape at meetings in two nearby communities.

The first is 6:30 p.m. Nov. 1 at Yakutat High School. The second is 6:30 p.m. Nov. 2 at the Cordova Center.

Gold and platinum’s value is obvious.

The other minerals have industrial uses as sand-sized particles.

The Trust Land Office manages its property to support mental health services for Alaskans.

It usually does that by leasing property or selling resources, such as timber, for others to harvest or extract.

But in this case, the agency is putting its own money into exploration and – possibly – development.

“We could potentially lease it out to an entity. We could lease it out to multiple entities. We could potentially go into a joint venture with entities,” he said. “There’s a lot of options that could be on the table.”

Menefee said further exploration is needed to determine whether there’s enough value to develop.

He expects that to take several more years.

The Alaska Mental Health Trust Land Office is developing its property at Icy Cape, which runs from the beach to the mountains. Logging will begin next year and and a mining project is in the exploration phase. (Photo courtesy Alaska Mental Health Trust Land Office)

Menefee said it will be a placer-mining operation, which sifts through material near the surface, which would impact the environment less than mining into bedrock. It will also take advantage of existing roads, left over from earlier development.

But the potential project still raises concerns, especially about salmon habitat.

“Virtually every river and creek within the proposed area is listed on the anadromous streams catalog,” said Guy Archibald, staff scientist for the Southeast Alaska Conservation Council.

He worries, because a dozen streams and rivers flow through the land that could be mined. Like most nearby waterways, they’re short and their mouths are sometimes protected by sandbars or spits.

Archibald said they’re susceptible to the gulf’s frequent heavy winds and waves.

“I’m just concerned if they start removing these barrier sands, basically strip-mining them, that it’s going to expose the foot of these rivers to massive erosion during the winter storms and create a barrier to fish passage,” he said.

The Mental Health Trust Land Office plans to harvest more than minerals from the site.

It’s sold roughly 50 million board feet of timber to Sealaska Corp., Southeast’s regional Native corporation.

Menefee said he expects Sealaska to begin logging next year.

The property is within the boundaries of the Yakutat Borough. Officials there did not respond to requests for comment by deadline.

A somewhat similar proposal was made by an out-of-state company for mining beach sands in and near Yakutat about six years ago. That effort ended after initial mineral values could not be confirmed.

Editor’s note: KTOO’s building sits on land leased from the Alaska Mental Health Trust Authority. KTOO has also applied for and received occasional grants for special reporting projects from the authority.

Sealaska CEO Anthony Mallott discusses the regional Native corporation’s finances May 2, 2016, during a press briefing in the Sealaska Board Room. (Photo by Ed Schoenfeld/CoastAlaska News)

Sealaska, Southeast’s regional Native corporation, continues its financial recovery. But its operational side is still losing money and even its investments are in the red.

Sealaska just released its 2015 annual report, which illustrates its financial ups and downs.

Those affect more than 22,000 shareholders, who receive dividends twice a year. It also impacts businesses and communities where shareholders spend their money. That’s mostly in Southeast and Southcentral Alaska, but also the Pacific Northwest.

“We’re not where we want to be, but we are excited and happy that we are showing steady progress,” said Anthony Mallott, president and CEO of Sealaska, which is headquartered in Juneau.

He points to figures showing net income of about $12 million out of total revenues of nearly 10 times that amount. It’s a little less than the previous year, but far, far better than the disastrous year before that.

“Our operations are making money. They’re just not covering the full cost structure of Sealaska,” Mallott said.

Sealaska Plaza, headquarters of the Southeast regional Native corporation, in Juneau. (Photo by Ed Schoenfeld/CoastAlaska News)

Including those costs leaves an overall loss of around $12 million.

That amount is also less than the previous year and a far cry from devastating losses the year before that. In 2013, Sealaska’s construction company badly underestimated two federal projects, losing more than $25 million. Problems with other businesses more than doubled that loss.

Like many regional Native corporations, Sealaska’s finances are like a three-legged stool.

One leg is a mix of business earnings and operational costs. Another is investments, which usually boost the overall total, but not last year.

“The investment market was flat-to-down in 2015. And it fell from over $7 million to about a $600,000 loss,” he said.

Then there’s what’s been the corporation’s largest revenue source for years. It’s a shared pool of all regional Native corporations’ resource earnings called 7(i).

That added about $25 million in 2015. Half covered losses and the rest went toward profits – and shareholder dividends.

Sealaska has a variety of businesses, but reports their earnings in groups, not as individual enterprises.

Its service group, including contracts with government agencies, brought in close to $4 million, around a 10 percent increase from the previous year.

“There was improvement across the board. Sealaska Environmental Services improved their income. Managed Business Solutions and their data-analytics team improved their income,” Mallott said.

The natural resources group earned about $700,000 in 2015. That’s not much, but it was better than the previous year, when losses were twice that amount.

He said Sealaska’s logging subsidiary, once its largest source of income, should see revenues rise.

It almost shut down a few years ago as the timber supply ran out. But a Congressional lands-claim deal provided more than 70,000 additional acres of the Tongass National Forest.

Mallott said the corporation will still mostly clear-cut trees for overseas sales. But it’s a different operation.

“It’s much smaller. And we’re at the point where we have to save infrastructure, which means to be financially feasible, landowners have to work together and find those efficiencies,” he said.

Other landholders include the Forest Service and the state.

Sealaska’s long-term goal is to expand into seafood, natural foods and other industries closer to home. Corporate projections show that bringing full profitability by the end of the decade.

“We still want our businesses to cover that entire cost structure. Because the reality of having 7(i) and investment income, just income and cash flow on top of what the businesses create, can be very powerful for us,” he said.

The vetting process for acquiring new businesses has been long. But Mallott said announcements will be made soon.

Those will face intensive scrutiny from critics, who say Sealaska has been mismanaged for years.

At 17 million acres, the Tongass National Forest, pictured here near Sitka, is the country’s largest. (Photo by Mike Hicks)

What is the future of the Tongass National Forest? Will there be a timber industry, and what will it look like in five, ten, fifty years?

Those are the daunting questions before the Tongass Advisory Committee, which is meeting for the fifth time in Juneau this week (wk of 1-20-15). The committee is tasked with hammering out how the Forest Service should handle the Obama Administration’s “transition” away from old-growth logging and to a new focus on younger trees.

But for some people both on and off the committee, the most important questions are the ones the committee isn’t supposed to address.

Downloadable audio

If you want to know how it feels to be on the Tongass Advisory Committee (TAC), the key word seems to be: risky.

“This is kind of the moderate group, and that was by design,” said committee member Wade Zammit, former president of the Sealaska Timber Corporation, speaking at the last meeting, in Sitka. “But there is tremendous pressure [on] every single person sitting at this table from influences in their constituency, about the direction they need to take this. And that — that’s risk. I mean, they are out on the limb on some of the things we’re about to tackle.”

Those things include how soon the Forest Service should taper off old growth timber sales, and how quickly it can ramp up sales of younger, second growth trees.

The Tongass committee is made up of over a dozen representatives from timber and conservation groups, local communities and Native organizations. And they are haunted, in part, by the history of past stakeholder groups who couldn’t hammer out a “made in the Tongass” solution.

But, said Zammit, “I think this group is different. I really feel strongly about this group and what it can accomplish.”

It’ll soon be clear whether that’s true. The committee has to come up with recommendations for the upcoming amendment to the Tongass Forest Plan by late February — though they’ve asked for more time.

That Forest Plan is a sort of zoning map for the entire Tongass — essentially, what can happen where.

And for now, everyone agrees on one thing: the current situation is untenable.

“We can’t go on like what’s been going on,” said committee member Eric Nichols of Ketchikan, owner of Alcan Forest Pro  ducts and Evergreen Timber. “The industry is devastated, a lot of these communities are devastated. Something has to change. ”

For the timber industry, lawsuits have made it impossible to get a sale out on any reliable timeline. For conservationists, there’s still too much old growth slated for logging. And for communities across Southeast, the long, slow decline of the timber industry has left a major economic hole.

Robert Bonnie, U.S. Department of Agriculture Under Secretary for Natural Resources and Environment, attended the last committee meeting in Sitka.

“I think everybody recognizes that we can’t just flip a switch and immediately begin to bring second growth online,” Bonnie said. “That’s because there’s not a whole lot of second growth out there, and because there’s some constraints on the Forest Service’s ability to do that…What we’d like to do is, over time, decrease the amount of old growth timber and increase the amount of second growth, and that’s the opportunity here. Now, the faster we do that from the standpoint of the conflicts we’ve seen, the better. But we also have to give the industry time to adapt.”

But for many of those watching the process, the biggest questions on the Tongass are outside the committee’s timber-only assignment.

Fishing and recreation groups, in particular, want more attention from the Forest Service. During public comments at the TAC’s last meeting, people said over and over again that the Forest Service — and the committee — need to move beyond a single-minded focus on timber.

Malena Marvin is the executive director of the Southeast Alaska Conservation Council.

“We want to see the Forest Service redirect its budget to prioritize the industries that most Southeast Alaskans depend on,” Marvin said. “That’s everything related to salmon: commercial fishing, sport fishing, subsistence, personal use. And  visitor industries, tourism. Those are our economic power-houses, and so many people really feel that those should be the focus of Tongass management.”

A recent report from Rain Coast Data found that in 2013, the timber industry directly employed 325 people in Southeast Alaska. Together, the seafood and tourism industries employed nearly 11,000 people.

So, commenters asked, why is there a special committee to address timber industry needs, and not for fishing, or recreation?

Joel Hanson is the conservation director for The Boat Company, which runs small cruise ships in Southeast.

“I just wanted to let you know that we at the Boat Company feel both irrelevant to the process and threatened by it, and that’s not a good place for us to be,” Hanson told the committee. “So for those of you hoping the TAC would bring about some changes which might actually reduce the amount of controversy over timber sales on the Tongass, and result in fewer lawsuits: I suggest that you either don’t get your hopes up, or try like hell to find a way to reduce the threat that this transition process poses to recreational  interests.”

“I think we understand that criticism,” Bonnie said.  “Clearly, recreation, salmon are vitally important to the economy here.”

But, he said, the Tongass committee’s charter is deliberately narrow. “I think it’s also important to recognize that we need to move to a place around forest management where there’s more of a shared vision.”

In other words, he said, timber is the most controversial piece of the Tongass puzzle, and the Forest Service worries that giving the committee too much to do might undermine its ability to get anything done at all.

In its meetings so far, the committee has found common ground: there is agreement that the timber industry needs a steady supply of young growth into the future, and that even after the transition, some old growth should be available for niche industries.

But the big, thorny issue before the committee remains how quickly to scale back industrial old growth logging, and how much will get cut in the meantime. And those questions  may be more than enough for one committee to handle.

The Tongass Advisory Committee is meeting through Friday (1-23-15) in Juneau. You can find the meeting agenda here, and instructions on how to submit public comment here.

Oxidized rock colors a valley where one of Seabridge Gold’s KSM project’s open pit mines will be dug in British Columbia. (Photo by Ed Schoenfeld/ CoastAlaska News)

One of 2014’s largest Southeast Alaska issues didn’t even start in the state.

It happened just across the border, in British Columbia. There, mining companies were searching for gold and making plans to dig it – and other valuable metals – out of the ground.

Annita McPhee is a tribal activist critical of mining near her Northern B.C. home.

“We don’t want our livelihood destroyed. We don’t want our watershed destroyed. It’s a very sacred place to us,” McPhee said.

She joined Southeast tribal leaders in a spring forum raising the profile of transboundary mine threats.

Concern spread on this side of the border, as fisheries, environmental groups and some cities lobbied for action against the mines.

But developers said they’d be careful.

“The guiding principal behind the design of the KSM project was the protection of the downstream environments,” said Brent Murphy, president of Seabridge Gold. Seabridge owns a large exploration site northwest of Ketchikan.

At year’s end, the only mine close to opening was the Red Chris, upstream from Wrangell and Petersburg. Its start was delayed after a dam break at its sister mine, the Mount Polley, to the east.

2014 saw several major developments in the timber industry.

Clearcuts and old-growth forests are part of the view of Indian Valley on Prince of Wales Island. The Forest Service just announced three more timber sales in the Island’s Big Thorne area. (Nick Bonzey, Flick Creative Commons)

The Forest Service began the year by forming a citizens’ committee to help map a transition from logging older trees to younger stands of timber. The fall brought a large timber sale, Big Thorne, on Prince of Wales Island. That of course is tied up in the courts.

The industry got a huge boost in December, when Congress passed a bill transferring 70,000 acres of the Tongass National Forest to the Sealaska regional Native corporation.

Most of the land is for logging, which brought opposition from fishing, conservation and other groups concerned about impacts.

During a congressional hearing, General Counsel Jaeleen Araujo said the corporation would take care of the land.

“My people have loved this place, lived in this place, savored this place for longer than your lifetimes, and mine,” Araujo said.

2014 saw some changes in Southeast’s legislative delegation.

Ketchikan Independent Dan Ortiz narrowly won a House seat that had been held for years by a Republican.

And Juneau Democrat Sam Kito III won one of the capital city’s House seats after being appointed to fill in for a retiring lawmaker earlier in the year.

Among other top regional news of 2014:

• Juneau’s Byron Mallott, a Native leader and former mayor, became Alaska’s first Tlingit lieutenant governor.

• Work began in Ketchikan on new ferries that will sail northern Southeast.

• New leaders took the helm at Sealaska, Tlingit-Haida Central Council and the Southeast Alaska Conservation Council.

• And, cruise-ship tourism remained about the same, with about a million people sailing through Southeast waters.

The village of Kake is on Keku Strait, 38 miles northwest of Petersburg and 95 miles southwest of Juneau. A local contractor starts soon on a Forest Service project tailored for local businesses. Photo by Melati Kaye.

Luther Coby lives in Kake, a village of about 600 on the northwest coast of Southeast’s Kupreanof Island.

His business, CSC Tree Service, was recently awarded a contract for some small Forest Service projects about 15 miles from town.

But he has to wait.

“The moose season started and there’s going to be a lot of people driving back and forth. So I’m just waiting for the big bang starting out, everybody’s all excited about hunting, and give them a few days to calm down and there won’t be as many people out there,” Coby says.

What’s called the Little John Stewardship Project will replace or repair some deteriorating culverts and bridges.

Coby says he and two other residents will work on the project.

“They money I make on this job goes back into the community, like the gas, the wages, equipment rentals. … These small villages, they really need stuff like that,” Coby says.

The contract was originally larger and included tree-thinning and other timber work. But the Forest Service scaled it back, making it easier for local businesses to compete. The logging component could become part of a separate contract.

The changes came after meetings with local businesses, conservation groups and others. Tom Parker is an agency resource planning supervisor.

“The Petersburg Ranger District

Kake’s main employers are the city, the school district and Kake Tribal Corporation. Unemployment is high, as are fuel prices.

is working heavily on collaboration with local communities and it’s an emphasis that I see coming from the Forest [Service] itself as well as from our district ranger, who brings over a lot of experience from the Thorne Bay Ranger District and a lot of collaborative efforts over there,” Parker says.

The Forest Service also purchased and shipped in supplies and materials because Kake businesses could not afford to buy them up front. That practice also saved some money.

The work will help improve salmon streams in the area. Old and damaged culverts can act as barriers for fish returning to spawn.

The Southeast Alaska Conservation Council, a coalition of environmental groups, was among those collaborating on the project. Community Organizer Daven Hafey says it was a success.

“The Little John Stewardship Project intended to package work on Kupreanof Island in a way that actually benefitted the ecological health of Kupreanof Island as well as the economic health of Kake,” Hafey says.

Coby, of CSC Tree Service, says he’s been awarded two other small Forest Service contracts. And he’d like to see more on the table. He says one could turn trees that mills don’t want into a marketable product.

“There’s a lot of timber out here in the Kake area, a lot of stuff not merchantable as lumber. But you can have a firewood processor right on site and you can be cutting up firewood and then bring it in on big trailers and dump it and let it sit for a couple years and let it season under a roof and … sell it as packaged firewood,” he says.

SEACC’s Hafey says the group is involved in similar efforts in the Wrangell and Hoonah areas. It’s among conservation groups working with the Forest Service on its transition from large-scale logging to restoration.

“All those are multi-intentioned. They’re all geared toward improving subsistence use, ecological health of watersheds and putting locals to work rather than bringing folks in from outside and employing them for a few months and then sending them back home,” Hafey says.

Many in the timber industry say the transition is bad for the region.

Critics point out that a small contract’s value – $26,000 in this case – is just a fraction of what one logger could make in a year.

Read and hear an earlier report on the transition to restoration in the Tongass.

Tenakee Springs | The era of large-scale logging might be gone from northern Southeast Alaska, but across the region, people are turning to smaller timber sales to earn a living. Officials hope the model can support local economies in the region. And for one family in Tenakee Springs, the effort has paid off.

Gordon Chew pilots his boat, the Cool Cat, to the Tenakee Springs fuel dock on Monday, Oct. 24. Chew runs Tenakee Logging Company. (Photo: Ed Ronco)

Gordon Chew runs a small logging operation in Corner Bay, just across the inlet from Tenakee Springs. And it keeps him busy. So busy, in fact that he says he doesn’t have time to stop for an interview, but that I can borrow his adult son’s bike and talk to him as we ride down to the harbor. In the interest of my own safety, I wait until we get to his boat before I reach for a microphone.

“We have to do a little bit of everything, between all the boating and barging and lumber milling and logging and construction and restoration around town,” he says.

Chew runs the Tenakee Logging Company, and he’s part of the changing face of the lumber industry. In this part of Southeast Alaska, large-scale logging doesn’t exist anymore. But smaller, selective cuts – like the 100,000 or so board feet each year that Chew takes from the Tongass – are becoming more popular.

Chew’s company logs, but it also builds. He uses the timber taken from Corner Bay on projects in Tenakee Springs. As we leave the harbor, he opens up the throttle and we head to the fuel dock. There’s a 55 gallon drum in the back of the boat.

The fuel will go over to Corner Bay to feed the company’s truck. But not far from where we’re tied up is the Snyder Mercantile – a general store dating back to 1899. Chew and his team are working to restore the old building, along with its adjacent property, using wood they’ve harvested and milled. Chew says that part of the business is essential.

“The foundation under that warehouse are all hemlock pilings,” he says. “We drag a lot of them over here as pilings. Also, the underpart of the store is all repaired with cedar pilings. I’m not sure if we could manage it on our timber sales alone. The fact we get to work with the timber as builders is what makes it lucrative for us. It’s not selling the timber.”

Zia Brucaya, of the Sitka Conservation Society, says Chew’s operation “is definitely unique in our ranger district,” but not to the region.

“Throughout Southeast Alaska there are lots of small mills that are operating to different degrees,” she said. “Some of them are doing construction as well as milling, like Gordon is. Some of them are just doing milling, putting together cabin kits and things. They’re all working at that smaller scale of a few hundred thousand board feet per year.”

SCS and other environmental groups in Southeast have taken an interest in operations like Chew’s because they say they’re smart, sustainable ways to use the Tongass. It was never logging outright that was the problem, she says. It was the scale of what happened in years past.

“We’re now working at a scale that is appropriate for the community, and it’s needed in the community,” she said.

Brucaya says it’s also an opportunity to build up the local economy for the benefit of local residents – a way to keep people living in Southeast, especially in small, remote communities, where the loss of even a family or two can be felt throughout town.

And few are more aware of that than Chris Budke, a forestry technician in the U.S. Forest Service’s Hoonah office.

“It seems like every time I turn around I read something in the paper or I see a reason or I look at people and I see lots of reasons for people to be leaving Southeast Alaska,” he said.

He lists off reasons: it’s a harsh environment, goods and services are expensive, and more. But he says offering opportunities to run small businesses using Tongass resources might help keep people around.

“If we can work with local people that are using local products and meet the objective of everybody – which is really difficult, by the way – and provide a product for those people they can turn around and make a living off of, that, to me, gives you reasons to be here,” Budke said.

And giving people reasons to be here can have big implications for Southeast, which is hemorrhaging population.

“This is incredibly important for people to be working. It’s incredibly important for us to be using our natural resources. It’s incredibly important for people to understand that we can use it responsibly. So we can meet the objectives of a lot of things here and give people a reason to stay in Southeast.”

Gordon Chew and his family are examples of that. They saw Alaska during a trip in 1995, and loved it so much that they went back south and made plans to move up. They returned in 1999 and have been here since. Back in Tenakee Springs, Chew’s 55 gallon drum is nearly full of No. 2 diesel.

As the nozzle is hoisted back onto the fuel dock, Chew says there’s a future in the kind of small-scale logging he does, not only for places like Tenakee Springs, but for the entire region.