Mining taxation in alaska

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Mining Taxation Policy:
Finding the Balance

Alaska’s mineral tax policy must balance a fair share for the state while maintaining an attractive investment climate. A strong, responsible mining industry benefits Alaska through:

  • High-paying jobs in rural and urban communities
  • Infrastructure investment that supports local economies
  • Procurement and contract opportunities for Alaska businesses
  • Revenue sharing with Alaska Native Corporations

Despite Alaska’s world-class mineral reserves, only six large metal mines have been developed. High operational costs, geographic challenges, and lengthy permitting timelines make mine development more expensive here than in the Lower 48. To stay competitive, Alaska must ensure its tax policy encourages responsible investment.

Alaska has world class mineral reserves.

Despite this potential Alaska only has 6 large metal mines.

How do we make Alaska more competitive?

Alaska’s Mining Tax System Works

Mining provides a stable revenue stream for state and local governments.
In 2023, the mining industry contributed $186 million to Alaska through:

Tax & Revenue Type Amount ($M)
Mining License Tax $52.5
State Corporate Income Tax $5.8
State Fuel Tax $1.4
Rents & Royalties $16.2
Other Payments to Department of Natural Resources $4.2
Payments to Other State Agencies $56.1
Local Government Payments $49.8
Total Contributions to Alaska $186

The industry’s contributions extend beyond taxes, with millions spent on local jobs, contracts, and community investment.

Alaska Mining License Tax (AMLT)

All mines and royalty holders in Alaska, regardless of ownership or location, are subject to the state mining license tax. The large mines (net income greater than $100,000) pay the highest rate: 7% of net income. In 2023, the state received $52.5 million in AMLT revenue.

Mining Net Income AMLT Rate
$0 - $40,000 No Tax
$40,001 - $50,000 $1,200 + 3% over $40,000
$50,001 - $100,000 $1,500 + 5% over $50,000
Over $100,000 $4,000 + 7% over $100,00
Total State & Federal Government Take

Corporate Taxes

Mining corporations, like all corporations in Alaska, pay up to 9.4% in state corporate income tax, one of the highest rates in the U.S. In 2023, the industry contributed $5.8 million in corporate taxes.

Alaska’s corporate tax rate is
one of the highest in the country.

Rents & Royalties: Revenues for the State & the Alaska Permanent Fund

Revenue payments to the state, beyond mining license and corporate taxes, depend on land ownership.

  • State Lands – Mines operating on state lands pay annual claim rentals and 3% net income royalties. A portion of these royalties is deposited directly into the Alaska Permanent Fund, ensuring long-term benefits for Alaskans.1
  • Alaska Native Corporation Lands – Mines on privately owned lands, such as those owned by Alaska Native Corporations, pay royalties and additional landowner fees. These revenues directly support regional economic development.
  • Alaska Mental Health Trust Lands – The Alaska Mental Health Trust Authority (AMHTA) selected lands with known mineral potential to generate revenue for its programs. Mines like Fort Knox operate on Mental Health Trust land, contributing to this mission. In 2023, the AMHTA received $2.4 million from mining claim and lease rent, royalty payments, and construction material sales.
1 If the mineral lease was issued before December 1, 1979, 25% of the lease rentals, royalties, royalty sale proceeds, mineral revenue sharing payments and bonuses received by the state are deposited in the PF. For mines operating with state leases issued after December 1, 1979, 50% is deposited in the PF.

Net Income: Accounting for Alaska’s Unique Challenges

Alaska’s net income-based taxation system ensures that the state benefits from mining while recognizing the high costs of developing and operating mines in Alaska’s remote, harsh environments.

  • High Operating Costs – Alaska’s mining operations face significant challenges due to limited infrastructure, extreme climate, and costly transportation.
  • Seasonal Logistics – Mines like Red Dog, located above the Arctic Circle, must operate year-round despite only a 3-4 month ice-free shipping season. All supplies, including fuel and equipment, must arrive in that short window—or be delivered at extremely high air freight costs.
  • Exploration & Development Costs – Bringing a mine from exploration to production requires hundreds of millions of dollars in upfront investment. The Donlin Gold project in the Yukon-Kuskokwim region faces similar logistical and development hurdles.
A net income calculation takes into account the high cost of developing and operating a large metal mine in our state.

What's Deductible? What's Not?

Alaska’s tax regulations are strictly prescriptive on what can be deducted in determining net income. Pre-production costs like exploration and permitting are not deductible—despite being essential for developing new mines and extending the life of existing operations.

Deductable Expenses

Operating costs (wages, transportation, power, legal, insurance)
✔ Cost of supplies & contract services
✔ Capital costs (depreciation & amortization)
✔ Royalties & interest
✔ State corporate income tax, local taxes, and fees

Not Deductable

✘ Exploration costs (except a one-time, maximum $20M tax credit)
✘ Pre-production costs like permitting and site development
✘ Federal income tax & operating losses

The Role of Depletion Allowance

A depletion allowance accounts for the gradual use of a mineral deposit—similar to how depreciation applies to equipment. Alaska’s depletion allowance mirrors the federal tax system, allowing mines to claim either cost depletion or percentage depletion (15% of gross income). According to the IRS, depletion acknowledges that natural resources are finite and that mining, drilling, and quarrying gradually use up an asset over time.

Apart from the one-
time, $20 million pre-
production exploration
tax credit, exploration
costs are not
deductible expenses.

Local Broad-Based Property Taxes Support Communities

Mining contributes millions in property taxes each year to boroughs across Alaska, providing stable revenue for local governments. Unlike many other mining jurisdictions, Alaska allowslocal governments to impose additional, unpredictable taxes onmining, creating financial uncertainty for both operating and potential mines.

Alaska’s Mining Property Tax Contributions (2023)

Borough 2023 Property Tax / Payment in Lieu of Taxes / Sales Tax
Fairbanks North Star Borough $10.6 million
City and Borough of Juneau $4.2 million
Northwest Arctic Borough $34.8 million
Other $.2 million
Total $49.8 million

While property taxes provide an equitable, broad-based source of revenue, Alaska is one of the few places where local governments can impose additional mining-specific taxes, such as severance taxes. These taxes, which could be introduced at any time without limit, create serious business risks and make the state less competitive for mining investment.

The Risk of Unpredictable Local Taxes

Alaska’s net income-based taxation system ensures that the state benefits from mining while recognizing the high costs of developing and operating mines in Alaska’s remote, harsh environments.

  • Severance Taxes Create Uncertainty – A borough or municipality can impose an unlimited severance tax on minerals it does not own, creating financial instability for existing and future mining operations.
  • Statewide Resource Policy Should Be Set at the State Level – Other resource industries, like oil and gas, have tax structures set by the state legislature to ensure fair distribution of revenue. Mining, however, lacks this protection.
  • State Control is the National and Global Norm – Across the U.S. and internationally, resource-specific taxes are determined at the state or national level, not by local governments.

For more than a decade, the Alaska Minerals Commission has recommended that local jurisdictions be precluded from imposing additional taxes on metal mines beyond property taxes. Without reform, the risk of sudden, excessive taxation threatens the longevity of existing mines and undermines the economic feasibility of future projects—jeopardizing both jobs and state revenue.

How Alaska Incentivizes Mining

Alaska provides two targeted tax incentives to encourage mining development:

  1. A 3.5-year exemption from the Alaska Mining License Tax (AMLT) for new mines.
  2. The Exploration Incentive Credit Program, a one-time tax credit of up to $20 million—only usable if the mine goes into production.

As a high-cost jurisdiction, these incentives can be critical to making projects economically feasible. Large mines require years—sometimes decades—to develop, with exploration, permitting, and pre-construction costs often reaching hundreds of millions or even billions of dollars.

The 3.5-Year AMLT Exemption: Supporting New Mines

New mines are exempt from the Alaska Mining License Tax (AMLT) for their first 3.5 years of operation. This recognizes the significant upfront costs required to bring a mine into production.

  • High initial costs & delayed profits – Large capital investments are required before production begins, and most exploration, permitting, and pre-construction expenses cannot be deducted.
  • Cash flow challenges – It can take up to 20 years for a mine’s cumulative cash flow to turn positive.
  • Complex ramp-up period – Even after a mine begins operations, achieving full-scale production can take time. Higher operating costs during this ramp-up phase make early years financially challenging.

The exemption ensures that new mines can stabilize operations before becoming subject to full state tax obligations.

Mining Exploration Tax Credit: Encouraging Discovery & Production

The Exploration Incentive Credit Program (AS 27.30.010-27.30.99) allows companies to deduct up to $20 million of pre-operational costs from AMLT and/or state royalty payments. While exploration costs for a large mine can total hundreds of millions of dollars, this credit provides some relief during the mine’s early years when it is still managing large capital costs.

Key Differences from Oil & Gas Credits:

  • The credit can only be used once a mine is in production—unlike oil and gas credits, which were applied before production began.
  • The maximum credit is $20 million per mine, not an annual amount. It cannot be used by multiple owners.
  • The credit can only offset up to 50% of total tax liability or royalty per year and must be claimed within 15 years of the mine starting production.

Since pre-production exploration and permitting expenses cannot be deducted, this credit provides one of the only financial incentives for mineral exploration in Alaska.

“The Exploration Incentive Credit Program was established to stimulate new mineral exploration activities in the State of Alaska.”

- Alaska Department of Natural Resources (DNR)

Mining Provides Far More than Taxes - It Benefits Alaska and Alaskans

Mining strengthens Alaska’s economy far beyond tax revenues. It creates thousands of jobs, supports local businesses, and contributes to community development. Many communities, hundreds of businesses, and thousands of Alaskan families rely on a healthy mining industry to thrive.

Jobs & Economic Impact

  • Mining directly supports 5,900 jobs in mineral exploration and production, plus 11,800 indirect jobs in support industries.
  • The average salary for a mining job in Alaska is $122,568 per year, not including benefits.
  • In 2023, mining payroll totaled over $1.1 billion, supporting families across the state.
  • Mining operations purchased goods and services from over 450 Alaska businesses in 2023.

Community Impact

  • Mining employees live in more than 90 communities across Alaska, contributing to local economies and supporting civic organizations.
  • Mine employees pay local property and sales taxes (where applicable), which fund schools and public services.
  • Mining companies donate millions annually to community groups, nonprofits, and educational programs.
  • Communities with mines benefit from direct financial support through property taxes or payments in lieu of taxes (PILT), which help fund schools, emergency services, and local government programs.

Mining on Native Land Benefits All Alaska Native Corporations

The Alaska Native Claims Settlement Act (ANCSA) ensures that the economic benefits of mining are shared among all Alaska Native Corporations.

  • Under Section 7(i) – 70% of mining royalties from Alaska Native land development are shared among the 12 land-based regional corporations.
  • Under Section 7(j) – 50% of the 7(i) royalties are distributed to village corporations and at-large shareholders.

Red Dog Mine: A Legacy of Economic Contribution

  • In 2023, $235 million in 7(i) and 7(j) payments were distributed to regional and village corporations.
  • Since 1990, Red Dog has contributed $3.2 billion in total royalty payments.
  • Red Dog provides direct employment and business opportunities for NANA shareholders, with 53% of year-round jobs at the mine filled by NANA shareholders working with Teck Alaska, NANA companies, and other service providers.

Donlin Gold: Generating Benefits Even Before Production

  • The Donlin Gold project sits on land owned by Calista Corporation (subsurface) and The Kuskokwim Corporation (surface).
  • Once operational, it could generate substantial revenues for these corporations, along with 7(i) and 7(j) payments to other Alaska Native corporations.
  • Even before production, advance payments have been made to both corporations, and Calista has already received millions in royalties and revenues from mineral agreements.

Mining Builds Critical Infrastructure in Alaska

Beyond its economic contributions, mining has helped develop essential infrastructure across the state:

  • Juneau’s hydroelectric power system was originally built by the mining industry over 100 years ago.
  • Pogo Mine funded a 50-mile road and power transmission line to connect its operations.
  • Kensington and Greens Creek Mines developed their own ports and roads to support mining operations.
  • The Delong Mountain Transportation System, built by the Alaska Industrial Development and Export Authority (AIDEA), provides road and port access for Red Dog Mine. Red Dog pays tolls to AIDEA, generating a 6.5% return on investment and more than repaying AIDEA’s initial construction costs.

Mining helps build long-term economic and infrastructure assets that benefit all Alaskans.

Mining helps build long-term economic and infrastructure assets that benefit all Alaskans.

Mining Pays Its Way and More

Mining is a net benefit to Alaska, generating far more revenue than it costs to manage the industry.

  • In 2023, mining contributed $186 million to local and state governments through rents, royalties, fees, and taxes.
  • A 2022 study by UAA’s Institute of Social and Economic Research (ISER) found that mining provides a high net benefit to Alaska’s General Fund, supporting essential services like schools, public safety, and infrastructure.
  • The cost of managing mining in Alaska is kept low through cost recovery and Reimbursable Service Agreements (RSAs), meaning the state charges the companies for permitting, monitoring, and oversight costs—leaving more mining revenue available for state programs.
Mining Annual Revenue & Expense

Over a four-year period (2016-2019), ISER’s study confirmed that the state consistently receives far more revenue from mining than it spends on regulation and oversight, making mining a valuable, self-sustaining contributor to Alaska’s economy.

Conclusion

Mining is unlike other industries due to long investment timelines, high capital costs, and dependence on global commodity prices. Large, modern mines require billions in upfront investment—often with no guarantee of long-term pricing stability.

  • The shift to “all-in sustaining costs” reflects the reality that profitability isn’t just about covering operating expenses but also recovering massive initial capital investments.
  • New taxes, like severance taxes or increased royalties, would add financial risk by reducing revenue regardless of whether a mine is profitable.
  • To remain competitive for global exploration and development dollars, Alaska must maintain a stable, predictable, and competitive tax structure.

Alaska’s current mineral taxation system is fair and comprehensive. Other than limiting local governments to broad-based property taxes, no major revisions are needed. Keeping existing mines strong and supporting new development will:

✔ Grow the taxpayer base
✔ Create more high-paying jobs
✔ Expand contracting opportunities for Alaskan businesses
✔ Increase contributions to state and local government revenue
✔ Support Alaska Native Corporations through revenue-sharing provisions

A balanced and competitive tax structure ensures that mining continues to benefit all Alaskans while keeping the state attractive for future investment.