Six years from now, the Red Dog Mine, the major funding source for the Northwest Arctic Borough, is expected to run out of existing developed deposits. But even before then, production at the mine is expected to shrink, and with it, contributions to the borough budget.
Last week, the borough started discussing the 2025 budget and began brainstorming potential budget cuts, with ideas ranging from scaling down borough subsidies for water and sewer services, reducing donations to such events as Kobuk 440 and snowmachine races and cutting medical insurance for assembly members.
“It’s a hard reality. Red Dog Mine, … it’s our economic engine. Our revenue future, at least for the borough, doesn’t look great,” said borough Treasurer Angie Sturm. “We have to start cutting our budget now to prevent facing even more serious pain later.”
Declining profits
Kotzebue’s Red Dog Mine is expected to produce zinc and lead through 2031, based on existing developed deposits, according to the mine operator, Teck Alaska. Leading to that, the production amounts and profits from the mine are expected to shrink in the upcoming years.
For example, in 2025, the mine is estimated to produce between 460,000 and 510,000 metric tons of zinc, in 2026 — between 410,000 to 460,000 metric tons; and in 2027 —between 365,000 to 400,000 metric tons, according to the data from Teck.
Teck has been providing funds to the borough, supporting infrastructure projects, programs and services within the region. In 2022, Red Dog paid $26.7 million in Payments in Lieu of Taxes to the Northwest Arctic Borough, plus another $8 million to the borough’s Village Improvement Fund, according to the data from the Alaska Department of Natural Resources.
Historically, Sturm said that the borough has received anywhere from $4 million to $8 million annually from the Village Improvement Fund, which helped pay for such projects as water treatment plant in Kiana, an evacuation road in Kivalina and a landfill cleanup in Noorvik. In 2023, the borough will receive only $4 million from the fund she said.
“With decreased production,” she said, “the Village Improvement Fund is going to get closer to the minimum of $4 million going forward.”
The Red Dog Mine has been projected to run out for a long time, and Teck has been considering exploring new areas for production.
However, in a recent Community Economic Development Commission meeting, Teck informed the borough that the permit for the access road to potential new deposits has been delayed by another year, said Fritz Westlake, senior director of operations at the borough’s Community and Economic Development Department. The process has been delayed for at least four years total, he added.
“Each year that it gets delayed, it puts the opportunity to study ... potential new deposits in jeopardy,” Westlake said.
Teck’s spokesman Chris Stannell said that the company wants to ensure that the Red Dog operation continues.
“We have submitted the 404 permit to U.S. Army Corps of Engineers, which is required to build the proposed 10-mile access road, and we are working cooperatively with the USACE and engaging with communities in the NANA region on the project,” Stannell said.
Still, if there is a gap between the current mine deposits running out and the new ones starting to bring profits, “that’s going to have a huge impact on the region with the economics and several other things,” Westlake said.
“The services that we provide are going to be impacted,” Westlake added.
Ideas to reduce the 2025 budget
The revenue for the fiscal year 2025 is now estimated at $30.6 million. However, Sturm said that with potential changes in investment, it would be realistic to expect a $2.5 million reduction that would total in approximately $29.4 million.
During the first reading of the 2025 budget, the borough assembly brainstormed ideas to reduce its spending going forward.
Reid Magdanz suggested reducing spending for the water and sewer subsidies that the borough provides to the villages — and, at a lower level, Kotzebue — which amount to about $2.4 million.
“The program currently covers about two-thirds of utility bills,” Magdanz said. “My proposal was to reduce spending to a point where it covered half of utility bills instead.”
Several assembly members spoke against the idea.
“That has a direct benefit to our residents,” said assembly member Craig McConnell. “We sponsor Kobuk 440, we sponsor the snow machine races, we sponsor lots of events and activities that I ask myself, ... is that more important that subsidizing water sewer? I don’t think so.”
McConnell recommended consulting with the subsidy program manager Chris Cox to ask how the assembly can cut the budget “and not hurt ourselves and the residents.”
Another idea to save money was reducing medical expenses.
Assembly member Elmer Armstrong Jr. proposed cutting medical insurance for assembly members, which costs the borough about $316,000.
In opposition, several members stated that insurance is too valuable of a benefit.
“I would have never had some medical work done without the insurance that I did have in the last two years,” said assembly member Dood Carr. “It does make a difference. If you have it, then they will take care of you sooner, the surgeries are sooner.”
McConnell suggested the borough offer an incentive to those who want to opt out of the insurance and have another source for health benefits.
Another cost-saving idea was to change the insurance company.
Strum said that generally, assembly members in other organizations are not provided health insurance. She also commended Armstrong for bringing up the discussion.
Armstrong withdrew his motion.
At future budget readings, assembly members will have more opportunities to propose amendments to the budget.
The 2025 budget already reflects several areas the borough plans to decrease spending, including travel budget, printing and publication and donations.
“I’m proud that we’re really engaging and not burying our heads in the sand and waiting until we can’t ignore it any longer,” Magdanz said.
Correction: A previous version of the story incorrectly reported that Magdanz proposed cutting the water and sewer subsidy in half. He proposed to reduce the borough spending to cover half of utility bills, instead of two-thirds.
Clarification: The story was updated to clarify that the current life of Red Dog Mine, based on existing developed deposits, is expected to extend through 2031, according to Teck’s website. Additional information was added to reflect that Teck submitted the permit to U.S. Army Corps of Engineers to build the access road.