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 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.

• 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.

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.

• 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 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.

• 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.

• 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.

• 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.

• 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.

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.

• 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.

• 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.