When the Trump administration approved permits for the Ambler road in October, the White House announcement included an unusual feature: It said the U.S. government is buying a 10% stake in Trilogy Metals Inc., the company trying to explore for mineral prospects in the Ambler area.
Trilogy’s stock price soared on the news. The arrangement, though, raises a lot of questions about the dual role of government as both an investor in a controversial mining project while also deciding whether the project moves forward.
“If the government buys itself in as a shareholder, can it really still be an honest broker or an honest voice with respect to permitting?” asks Tom Moerenhout, a political economist and professor at Columbia University.
The Trilogy contract is part of a raft of deals the Trump administration made this fall, becoming a direct equity investor in mining companies, U.S. Steel and chipmaker Intel. It's part of a broader strategy to improve national security through resource independence. But the Trilogy deal stands out because the project is at an early stage and there’s substantial opposition to the road and the mine from the region’s Alaska Native villages and subsistence hunters and fishermen.
Even Sen. Lisa Murkowski, who celebrated the Trump administration’s decision to grant the right-of-way permit for the Ambler road, questions what it means for the government to hold shares in Trilogy while also deciding on environmental permit applications that could determine the company's future.
“You could have a government interest to see this develop more quickly. And so do you shortcut some things? Do you give a more favored status?” she asked. “You certainly shouldn't. All projects need to be able to stand on their own and be able to meet the tests that we put in place in terms of the regulations and the environmental hurdles.”
She said the announcement of the equity stake came as a surprise to her and she still has a lot of questions. Some of her concerns are whether it fits with American ideals about the private sector economy and competition.
The government usually helps encourage certain industrial directions with loans or grants or tax breaks, not by becoming a significant shareholder in particular companies.
“I think this is new territory,” she said.
Others on Capitol Hill are raising the same point.
“I just hope it’s not an example across other industries,” Rep. Dusty Johnson, R-S.D., told mining executives at a recent hearing. “Because it does seem that if we start doing this in other industries, we’re going to go to a place that doesn’t feel like free-market capitalism.”
The deal announced in October calls for the government to pay $38 million for a 10% share of Trilogy, with an option, after the road is built, to acquire another 7.5%. The government would also be able to select a member to sit on Trilogy’s board of directors.
It’s not clear what happens if the next administration doesn’t favor the Ambler project. The next president, though, won’t have as much influence over Trilogy, since the right to name a board member lasts just three years.
Ambler Metals, a subsidiary of Trilogy Metals, declined interview requests. The company sent an email saying it will follow stringent state and federal standards to minimize environmental impacts. An executive at the parent company, Trilogy, did not respond to an interview request.
Moerenhout, the political economist, said that some of the concerns the government’s Trilogy deal prompts are the kind that arise whenever the government picks winners in the private sector.
“If you're going to put equity in one single company, you of course take the risk of choosing a winner, but potentially an economically inefficient winner,” he said.
The government’s choice might discourage investment in a competing project that has more merit, he said, and it could distort the decision-making of private investors.
“The fact you have a little government flag on your project, it kind of really sends a signal to the private market that, despite certain risks in the project, the government is here to back it, and that can be an important catalyst to unlock private capital,” he said.
For Alaska, using government investment to spur domestic business activity is nothing new. The Alaska Industrial Development and Export Authority has a long history of it, with some prominent failures. Economist Gregg Erickson co-authored a 2022 report on AIDEA’s track record and concluded the state would be $10 billion richer if the state-owned corporation had invested with the goal of optimizing returns.
Politically driven investment decisions tend to be bad for the bottom line, he said.
“You get projects that don't pan out economically, and you end up having to write them off your balance sheet,” he said.
But, Erickson added, if the primary goal is to secure minerals deemed vital to military preparedness and national security, maybe the bottom line doesn’t matter.
