Yukon North Of Ordinary

News archive for July 8, 2010

Chevron plans to cling to ore deposit

Chevron will clean up the mess at its Crest iron leases located in a remote corner of the Peel Watershed, but the company has no intention of giving up its claim to the largest iron ore deposit in North America.

By Jason Unrau on July 8, 2010 at 2:28 pm

Chevron will clean up the mess at its Crest iron leases located in a remote corner of the Peel Watershed, but the company has no intention of giving up its claim to the largest iron ore deposit in North America.

Last month, two Yukon conservation groups asked Chevron not to renew its leases in the 68,000 sq. km watershed currently embroiled in a land use planning process that has pitted mining interests against environmental concerns.

While the company intends to mop up fuel spilled at a staging area and remove 200 abandoned barrels of fuel, plans to mine the ore remain on the table, according to Dave MacInnis, vice-president of policy for Chevron Canada.

“The obvious issue is it’s not easy to move the product to market and as such we’re looking at a number of options on that front,” MacInnis told the Star. “And there’s a number of private rail options that have been floated to move the product.”

The idea of building a rail network linking the Yukon with Alaskan ports in the state’s panhandle, and using Carmacks as a hub, was studied and a subsequent report released in 2007 pegged the cost at $10.5 billion.

And the price of laying a spur line from Carmacks to the Crest iron deposit, situated along the banks of the Snake River, 230 km northeast of Mayo (more than 450 km from Carmacks), is said to be in excess of $1 billion.

“Given the size of the resource, you have to trade off costs of development against the potential returns,” MacInnis said.

In May, global steel consumption increased 12 per cent and demand for iron is growing – a contributing factor in Chevron’s intention to maintain Crest in its portfolio.

But leading consumers of iron, like China, have a preference for low-cost producers, and as India leads the pack for offering the cheapest iron ore products, the recent three-per-cent slip in global iron ore prices favours producers with the lowest overhead.

Karen Baltgailis, director of the Yukon Conservation Society, said the staggering cost of a railway to the Crest deposit would likely keep iron ore production out of that region, but that the society would continue to lobby Chevron to relinquish its claims.

“What we’d really like is to have some direct conversations with (Chevron) and talk about some of the benefits to giving up those claims ... in terms of their corporate image,” Baltgailis told the Star. “We feel for a company of this size, the Crest claims would be a fairly small thing to give up.”

Estimates peg the cleanup of Chevron’s exploration site in the Peel at $688,000. Before the Yukon government can approve renewal of the 21-year leases for the 525 claims Chevron holds (set to expire over the course of the next three years), the company must deal with the contamination located at the site’s staging area.

In 2004, just 1,658 mineral claims dotted the Peel Watershed, but that number spiked to more than 12,000 after the Peel Watershed Planning Commission began its deliberations on the future of the region.

Approximately 8,400 active claims remain in the watershed and in February, the government ordered a staking moratorium until the planning commission has finished its work. The government is also on record stating it would not accept expropriation of claims or compensation.

While conservationists like Baltgailis are pleased that the commission has recommended 80 per cent of the watershed be protected from mining and exploration, the mining industry takes a different view.

Not only does industry believe too much of the watershed could become off limits, but that the planning commission recommended access to existing claims be done by air only.

CommentsAdd a comment

Don McKenzie

Jul 9, 2010 at 12:57 am

If Chevron is looking at something that will cost $11 billion dollars, and not running away from it, then I doubt if they think their claims are something fairly small to give up.

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