Legislature(2021 - 2022)ADAMS 519
03/11/2022 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB283 | |
| Presentation: Port of Nome | |
| Presentation: Port of Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 283 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE BILL NO. 283
"An Act making appropriations, including capital
appropriations, reappropriations, and other
appropriations; making supplemental appropriations;
and providing for an effective date."
1:33:46 PM
^PRESENTATION: PORT OF NOME
1:33:49 PM
JOHN HANDELAND, MAYOR, CITY OF NOME, introduced himself and
provided a prepared statement:
Thank you for convening this hearing on Ports of
Alaska. Just as my friend from Anchorage will convey,
ports are vital links not serving just a single area
or need but are vital links to communities across the
State of Alaska connecting us both within the state
and to the Lower 48 and the rest of the world. The
Arctic deep draft port in Nome is not a new concept by
any stretch of the imagination. Nome long promulgated
the need for this causeway to avoid costly and
sometimes dangerous lightering of commodities.
Mr. Handeland provided an example of the dangers that
occurred. He explained that barges would go through a jetty
causing wakes. He recalled as a child one of the barges had
lost its cargo, which happened to be the winter's beer
supply. When the incident had occurred, the community had
been fortunate to have numerous concerned citizens who had
assisted with the cleanup. He returned to the prepared
statement:
Mayors before me and everyone in the interim have been
stanch supporters of the port expansion, but no one
was more enthusiastic as a proponent than my good
friend and neighbor, the late Mayor Richard Beneville,
who I'm sure many of you have heard from before and
his famous introduction to everybody, "Hello central."
As a 60-year resident of Nome I've seen our port
dramatically change with freight including food,
fuels, for houses, and gravel shipments increasing
exponentially both in imports and now as exports as
well.
The current port has served our needs for the past 20
years. The new port is projected to serve our needs
for at least the next 50. When Nome was selected by
the Corps of Engineers for funding thanks to the
ardent support and unceasing persistence of our
federal delegation most of the people of our community
were quite excited as was I, what many had brushed off
as a pipe dream is so close to fruition, so close to
becoming a reality. In working with the corps, port
users, communities, and also consulting with our
Native organizations and subsistence users, we believe
we've worked out a program and a project that balances
the needs of all people in our community. This project
will position Nome to meet extra capacity
requirements.
Today I sit here before you as a 17-year mayor of Nome
and I can't be more proud of our community including
our port commission, city administration, consultants,
engineers, and advisors, but is the diligent work of
our long-term port director Joy Baker here that has
got us to this point. In a presentation by Ms. Baker
in a few minutes, you'll see the rendering of the
final project of the ADDP [Arctic Deep-Draft Port] as
we call it. We are satisfied this project will
compliment the existing port and balance the nation's
needs as well as our own.
One just never knows what challenges and opportunities
lie ahead. After all, it seems we all expected the ice
curtain that melted 20 years ago to be something
permanent. Sadly, it appears that that is now coming
back into place and just right across the water a few
miles from where I live. In addition to local,
regional, statewide benefits, the ADDP may see
somewhat unexpected benefits, but we will be poised to
further provide for a benefit for greater national
security.
As weather evolves, we are seeing longer shipping
seasons every year. With that there is exponentially
more traffic on the water. Global warming is resulting
in changes but also in opportunities. My good friend
Richard espoused when he returned from an Arctic
conference that, "Here they were talking about global
warming in the future tense. Heck, up here in Nome and
the Arctic, we're in it."
In summation, we must be prepared for the increasing
activity in Nome and the Arctic area. The $250 million
already released by the federal OMB provides the need
to kickstart and take our needs to reality. But in
order to proceed, we require partnership with the
State of Alaska to provide matching funds. This
project got funded more rapidly than we had ever
anticipated, and we continue to seek out other
partnerships including other federal entities that
might assist us in other components that will enhance
the benefit of the project completion even more. The
corps is ready for seed, they would like to bid the
project by about November of this year and cannot
proceed if the match is not available by that time.
Without financial participation by the State of
Alaska, the corps will likely move the $250 million
down to another project on their list, not in the
state. That would result in an opportunity being lost
for Nome and for our state as well. We respectfully
request your assistance this legislative session.
1:40:21 PM
Mr. Handeland continued reading from a prepared statement:
The investment needed sounds staggering, but to put it
in perspective, this is a 50-year project so that's
about $3.5 million annually.
Mr. Handeland thanked the committee for its time.
Additionally, he relayed his support for the needs of the
Port of Alaska. He hoped the ports were not competing for
funds. He spoke to the importance of both of the projects.
He introduced the city's port director and turned the
presentation over to her.
1:41:21 PM
Co-Chair Merrick noted that Representative Johnson had
joined the meeting.
JOY BAKER, PORT DIRECTOR, CITY OF NOME, introduced herself
and shared there would be a video clip prior to the
presentation.
[A video clip was shown.]
1:44:57 PM
Ms. Baker provided a PowerPoint presentation titled
"Alaska's Arctic Deep-Draft Port at Nome," dated March 2022
(copy on file). She began on slide 2 titled "Regional
Transshipment Hub." She read from a prepared statement:
In a regional sense, the Port of Nome serves as a
transshipment hub for the western part of Alaska,
shipping to over 60 coastal and river communities from
Platinum to Barrow at one time or another since
statistical tracking began in 1987 following the
construction of the original port causeway. Prior to
that all of the cargo was lightered from offshore and
offloaded and offloaded in the small boat harbor at
the dock operated by Crowley. In 1977, Crowley built
the small push-tug and barge sets and began delivering
cargo and fuel to the regional communities along the
coast and in the rivers that they and others still do
today.
The port has grown significantly in the last 15 years,
so much so that it has been a challenge for the city
to keep up with the demand for additional facilities.
However, over time, incremental progress has been made
through construction of an additional dock, a loading
ramp, floats, and some dredging, all of which were
funded by the city partnering with federal, state, and
local entities.
1:46:32 PM
Ms. Baker turned to images of commodity movement on slide 3
and continued with prepared remarks:
To better demonstrate our transshipment role, I pulled
together some visuals here that give a better
perspective. With the exception of the tankers on the
left, these pictures show the port causeway structure
that host three commercial docks, each 200 feet in
length. Due to the significant demand by multiple
industries, our facility operators must conduct
operations as safely and efficiently as possible as
the dock schedule is tight and there is almost always
another vessel waiting for that space. In addition,
stockpiling gravel rock and containers doesn't happen
quickly, so coordinating is key so as not to delay
other operators. This drives up cost and creates
shipping inefficiencies in an industry that is already
subject to weather delays, tidal fluctuations, and a
limited operating window.
One thing here worthy to note, the top photos
demonstrate our export of rock and gravel, which has
grown exponentially and is now putting greater demands
on the docks, basically taking over the northern dock
and occupying the center dock for most of the season.
This has caused congestion to escalate, driving the
need for additional dock space so other industries can
conduct operations as well. Lastly, depth at the dock
limits how much fuel can be loaded onto a barge to
bring in and discharge, which requires vessels to
perform the on-water transfers from deeper draft
vessels to bring in deliveries. That is what is
demonstrated by the tankers alongside offshore.
1:48:08 PM
Ms. Baker moved to images related to ship resupply/crew
change on slide 4 and continued with prepared remarks:
In addition to the commodity fleet demands for dock
space, we also service many ship fleets as shown here.
We are actually excited to have 22 cruise ships on the
dock schedule, but we anticipate some may cancel soon
as the stops that they had planned for Russian ports
will likely not occur. However, with the Port of Nome
serving as critical refueling and resupply point for
vessels transiting to and from the Northwest Passage
are those with seasonal missions in the Artic, both
have grown considerably and the congestion and the
challenge and competing for space at the docks has
only accelerated.
As mentioned in the last slide, the ships must compete
for space with the commodity vessels and most of the
time my harbor master likes to call it a game of
Tetris. So, the ships you see on the right are about
the largest we can bring into the existing dock based
on the length or draft as the navigation channel is
only 500 feet wide at zero mean lower low water and
based on the existing basin depth of minus 22 feet, we
are unable to refuel the national security cutters and
icebreakers of the Coast Guard, the new polar class
vessel, nor the Navy destroyers.
Ms. Baker addressed Bering Strait vessel traffic on slide 5
with prepared remarks:
Speaking of vessel traffic at Nome, that and more make
up the tracks and transit shown here in this table and
graphic as provided by the Marine Exchange of Alaska.
The number of transits have more than doubled since
2009, which corresponds with the Port of Nome's
growth, all of which is clearly shown in the graphic.
The traffic growth is immense and shows no hint of
slowing down. Without the capacity to accommodate
these vessels into a secure protected dock facility,
their needs to resupply and refuel must be done on
open water or they must transit to Dutch and return to
continue with their mission sets.
1:50:25 PM
Ms. Baker turned to slide 6 and discussed general
navigation features cost-shared with corps with prepared
remarks:
Now stepping briefly into the development of the
Arctic Deep-Draft Port, I wanted to bring some clarity
to the overall project and how the corps has broken
this out into three separate phases. Each phase shown
here lists the primary elements of construction with
the corresponding traded area reflected in the drawing
below. The extension of the existing causeway shown in
the shaded structure is the largest phase of the
project Phase 1 on the left as this requires the
bulk of the armourstone and construction of a 2,000
foot continuous dock phase with all the associated
utilities. Phase 2 will provide the necessary dredging
to minus 40 feet in the new deep-water basin and a
minus 28 dredging basin in the existing outer basin.
Phase 3 will remove the existing breakwater to the
east and reconstruct it into a causeway with two 400-
foot docks and perform the remainder of the dredging
to minus 28 feet. For now, the city and the corps are
fully focused on Phase 1.
1:51:37 PM
Ms. Baker looked at a rendering of the Port of Nome on
slide 7. She continued with prepared remarks:
Here we have a rendering or cartoon of the Phase 1
project, which provides a bit of a different
perspective that helps define the features cost-shared
with the corps and those that are actually 100 percent
non-federal sponsor responsibility, which is the city.
The blue rectangle represents the existing facility we
are operating. Under the corps logo on the right, the
breakwaters and dredging are the only two elements the
corps controls and pays a portion for, which are
considered the general navigation features under the
navigation program. The federal cost-share is 65
percent, leaving 35 percent for the sponsor. More
details will come up here in a few slides. Shifting
onto the left, the city is contracted with PND
Engineers and CRW Engineering for what is identified
as the local service facilities, of which the sponsor
pays 100 percent of all design and construction.
Ms. Baker advanced to slide 8 titled "Arctic Deep Draft
Port Modifications" and continued with prepared remarks:
Within the Army Corps feasibility study completed in
Spring of 2020, the corps identified the project
purpose and objective shown here, which justify the
project under the RSH program and elevated the
completed study to corps headquarters for
consideration. Once the report was signed in May of
2020, there was an increased level of interest well
across federal/state agencies as well as industry,
which prompted what appeared to be an acceleration
towards construction. Each of the elements listed
above demonstrate a critical need in this remote area
of Alaska and the U.S. Arctic, needs which have
escalated due to increased vessel traffic in support
of commerce, resource exploration and development,
fisheries, construction, and tourism. All of which
have grown exponentially, driving demand for a
seasonal presence by regulatory, life safety, defense,
and response agencies.
1:53:47 PM
Ms. Baker briefly looked at the project benefits on slide 9
and continued with prepared remarks:
Here we'll take a brief look at the project benefits,
which correspond well with the objectives. We'll get
into slides on some of these individual benefits, but
just wanted to highlight that this graphic reflecting
the LNG tanker transits that occurred in January of
2021 without icebreaker escorts, which was a complete
surprise to the residents along the Alaska coastline.
Although transiting within the northern sea route in
Russian waters, this activity raised significant
concerns with the coastal residents as products that
enter the water know no bounds for spreading into the
sea and across to the American side causing serious
risks to the food safety for those who rely on
indigenous foods from the sea in an effort to sustain
their cultural ways and educate their younger
generations.
Ms. Baker advanced to national security/mariner safety on
slide 10. She continued with prepared remarks:
I think most everyone in the state and nation would
agree that national security and life safety are of
the utmost importance, which is reflected in all the
coast guard stations you see along the other coasts in
the country. With ongoing actions by Russia driving
the need even further. In fact, many people with
historical knowledge and/or experience in the Arctic
realize that we are well behind the curve in
developing maritime facilities in the Arctic to
support our strategic defense and life safety assets
in fulfilling their critical missions. While some of
the smaller Coast Guard vessels can dock in Nome and
do, neither the national security cutter nor the
icebreakers from any country were able to resupply or
refuel at the dock.
This expansion of the port will enable all Coast Guard
and U.S. Navy assets to use Nome as a port staging
base with dock access with dock access for resupply,
refueling, minor ship repairs, maintenance, crew
changes, shore leave, medical, etcetera. Taking the
time to transit to Dutch Harbor creates mission
inefficiencies and increases operating costs,
especially when it concerns a damaged or sinking
cruise ship with over 1,000 people aboard in inclement
weather that needs response assets to deport quickly
to save as many as possible.
1:56:16 PM
Ms. Baker turned to slide 11 titled "Arctic port reception
facility." She continued with prepared remarks:
Recent polar code changes have mandated the need for
action to develop regional port reception facilities
in the Arctic. As the only coastal port north of Dutch
Harbor, Nome feels it has an obligation to develop
these facilities and pull the region into compliance.
The city has completed a feasibility study and
currently securing design and construction funds to
enable Nome to serve this critical role in the Arctic
region keeping ship waste out of Arctic waters.
Ms. Baker discussed mining and resource development on
slide 12 with prepared remarks:
Resource and exploration is yet another benefit to the
region that can continue to be further investigated
and the ability to transship these minerals will be
attainable with the extension to deeper water and
increased laydown facilities that serve to attract
industry. There are a variety of deposits on the
Seward Peninsula that with suitable and efficient
oversight can be responsibly developed to bring an
economic boost and more jobs to the region.
1:57:27 PM
Co-Chair Merrick noted that Vice-Chair Ortiz had joined the
meeting online.
Ms. Baker spoke to economic benefits during construction on
slide 13. She read from prepared remarks:
This table shows jobs and income at the regional,
statewide, and national levels considered as primary
spending. With secondary spending rolling these
dollars into further industries. This economic influx
alone will bring significant benefit to a region that
is still hovering in the recession.
Ms. Baker addressed economic benefits post construction on
slide 14 with prepared remarks:
This is brought by additional employees and services
needed for the port: external vendors, fuel delivery,
landlords, hotels, groceries, restaurants, etcetera.
This economic trickle down will spread throughout the
region as residents come to Nome for jobs during the
operating season.
Ms. Baker discussed the cost on slide 15 with prepared
remarks:
What you have here is both the cost shared to the
corps and the standalone cost to the city. All numbers
in red are the city's responsibility. At the top of
the second and third columns you'll see a 75/25 spilt,
which is how the corps handles the construction. All
the way to the right you'll see a plus 10 percent
general navigation features that they require to be
paid over time.
For this exercise, we are looking at a 75/25 split for
the construction of Phase 1. You'll see the $250
million under the corps that was allocated by the
federal dollars. Under the non-federal sponsor, the
$83 million is our 25 percent match to the Army Corps.
Further under the LSF 100 percent column, we have $81
million in local service facilities: docks, roads, and
utilities. In addition to some final design and
bidding and inspection during construction as well as
design and inspection of Phase 2, as the corps wants
to move into Phase 2 for design at the end of this
year. This brings the city's total requirement for our
local service facilities to $92 million with the 25
percent match to the corps of $83 million, which
brings us to the $175 million.
The city has already paid over $2 million for design
of Phase 1 to 65 percent and was working with an in-
house engineer for collaborating, tying those
intricate designs into the core design.
2:00:40 PM
Ms. Baker concluded the presentation with the project
design and construction schedule on slide 16. She read from
prepared remarks:
Lastly, here's the schedule the city is currently
working on with funding deadlines for construction as
defined by the corps, which require both the general
navigation features (GNF) and the local service
facilities construction funding upfront. Before
construction, the solicitation package is final and
goes out for bid. Under design, 100 percent we expect
to be complete both the city's elements and the corps'
by January of 2023. Once that is complete and is
compiled into a solicitation package, the corps is
requiring the city to sign a PPA, which is a project
partnering agreement, for construction. The bids will
go out in March or April of 2023, award in the fall,
and construction will begin in 2024 through 2025. We
anticipate two seasons for Phase 1. Our deadline to
sign the project partnering agreement, which is when
the corps requires construction funds upfront in order
to proceed with soliciting.
Ms. Baker was happy to answer questions and thanked the
committee for asking them to present.
Representative LeBon thanked the presenters for the
presentation. He referred to Ms. Baker's reference to the
possibility of a U.S. Naval ship using Nome as its home
port. He asked if it was a tangible possibility or
currently a hope.
Ms. Baker replied that it was currently a hope. She
elaborated that the port's engineering specifications were
being planned to meet the requirements of Naval vessels, so
there would not be a conflict.
Representative LeBon asked for verification that the
project would prepare for the possibility and would not
need more money.
Ms. Baker replied that the project planned for the
possibility and would not need more money.
Representative LeBon asked for verification the proposed
business model was self-sustaining.
2:04:02 PM
Ms. Baker answered affirmatively. She stated the vessels
were already there; the current port could accommodate some
vessels but not others. She confirmed the city was
confident the port would be self-sustaining. She clarified
that the dredging to 40 feet in the deep water basin would
not take place until 2026 after the construction of the
extension was completed and the basin was protected. She
estimated it would be fall of 2026 before the port could
accommodate the deeper vessels.
Representative Johnson had heard about the possibility of
use by Coast Guard ships but not a Naval ship. She asked if
there was something different perhaps she had not heard
about, or if they were talking about military ships in
general.
Ms. Baker answered that the port had been talking to the
Coast Guard for quite some time. She believed there was
interest from the Coast Guard but noted there were always
funding challenges. The city had talked briefly to the Navy
because the Navy typically communicated with the corps
instead of the city. She relayed the city was hopeful
regarding the Navy but there had been more conversations
with the Coast Guard. She clarified there was nothing yet
on record.
Representative Johnson stated there had been many years of
conversations about the idea of having a Coast Guard vessel
ported in Nome at least during the summer months. She
thought it seemed like there was a good possibility. She
shared that she had numerous conversations about the
possibility over the years and thought the hope of
something coming to fruition contained substance as well.
2:06:36 PM
Mr. Handeland relayed that the city had numerous
conversations with the federal delegation on the Coast
Guard and Navy. He shared that the secretary of the Navy
had visited Nome. He referenced the BOT [Board of Trade
Saloon] and remarked that the secretary had remarked that
he would like to see gray hulled ships belonging to the
U.S. in Nome. He elaborated that the city had been working
with Senator Dan Sullivan and Senator Lisa Murkowski and
they had been in contact numerous times with the Navy and
Coast Guard. He noted that Senator Sullivan was a master of
using some of the confirmation hearings to solicit answers
to some of the projects, including the Nome port project.
Representative Johnson wished the city well in its effort.
She relayed that about five years back she had served as
president for the Alaska Conference of Mayors. She did not
think people realized the amount of transit and boat
traffic existed along western Alaska. She remarked on the
oil and sludge from boat bilges washing up and covering
walruses and so on. She considered the area may not
necessarily be a defense point for the Coast Guard, but
there could be policing of environmental discharge. She
highlighted that the breakdown of the substances did not
happen in the same way it did in a warmer area. She pointed
out there was currently no policing of limits in those
waters. She stated the issue was near and dear to her to
have some enforcement and presence in the area. She thought
it was important for the communities in the area. She
shared that she had been working on the issue and having
discussions on the topic for quite some time.
Mr. Handeland thanked Representative Johnson for her
perspective. He was appreciative they were not the only
ones thinking that way.
Representative Edgmon welcomed the presenters. He recalled
visiting Nome years back when Mr. Handeland had been the
port director. He expressed appreciation for former
Representative Richard Foster who had served on the House
Finance Committee for many years. He shared that the late
representative would have been proud to know the city was
at the current point with the project. He remarked it was a
moment in history for a small community. He elaborated that
like other small communities in Alaska, Nome had
experienced its ups and downs in terms of moving forward
including rising and falling fuel prices. He assumed the
armourstone and gravel would come from a local source to
avoid the transportation cost. Additionally, the issue of
dredging was always an issue of concern where there was
tidal action. He shared his experience from his hometown of
Dillingham where the harbor and other places had to be
dredged annually. He asked about annual maintenance cost
and the difference between dockage and moorage fees. He
expressed his affinity for Nome and had a connection to the
community.
2:12:32 PM
Mr. Handeland answered that the community had an abundance
of good material as a result of long-term mining activity
in the area. The city believed here were a couple of
sources of armourstone including the Cape Nome Quarry
operated by the Bering Strait Native Corporation.
Additionally, there were some quarry potentials on state
lands. He stated it would make no sense to ship the
materials from Camas, Washington. The city would like to
see all of the mining, development, hauling, and placement
of the stone to be done by as many local and Alaskan
residents as possible. He addressed the annual dredging
done in Nome's inner harbor. He detailed that the city had
entered into a contract in 1940. He asked Ms. Baker for
confirmation that the city paid $25 or $2,500 per year for
the work.
Ms. Baker answered that the city used to pay $2,500 and
currently paid zero.
Mr. Handeland relayed that as the project went on, the
corps would maintain responsibility for the dredging in the
new and expanded area. The city would be responsible for
annual maintenance on physical structures and connections
to the port including the docks, bollards, anodes, driving
surfaces, and utility connections. He explained that the
items had been calculated and included in the city's tariff
rates. He relayed that the community's biggest concern was
whether it would have to pay more for fuel and groceries to
support the port. The city felt confident in working with
the Corps of Engineers that the additional traffic and port
activity would be sufficient to fund the types of
requirements and that costs would not be put on the backs
of the general public.
2:15:40 PM
Co-Chair Foster emphasized some of the positives of the
port in Nome. In the past, Nome had been focused on
increased shipping, tourism, and exploration for oil. He
explained that none of those activities were going away
even though Shell's work had been paused. He thought it was
necessary to get ahead of the curve and not behind. He
noted the activities were global items. Additionally, as
oceans warmed, fish moved north, which would result in
increased fishing up north. He highlighted that things were
changing geopolitically. He stated it would be great if
there was an icebreaker sitting at the end of port and the
ability for the Navy to come in and have a presence.
Co-Chair Merrick asked when the first [Iditarod] musher was
expected in Nome.
Co-Chair Foster replied Monday or Tuesday morning.
Co-Chair Merrick thanked the presenters.
2:17:40 PM
AT EASE
2:22:08 PM
RECONVENED
^PRESENTATION: PORT OF ALASKA
2:22:16 PM
DAVE BRONSON, MAYOR, MUNICIPALITY OF ANCHORAGE, provided
opening remarks. He hoped to convince the committee of the
importance of the Port of Alaska project. He listed
multiple presenters who would provide information.
2:24:02 PM
KOLBY HICKEL, DEPUTY MUNICIPAL MANAGER, MUNICIPALITY OF
ANCHORAGE (via teleconference), thanked the committee for
the opportunity to present. She provided an opening
statement with prepared remarks:
We appreciate the opportunity to provide the
legislature an update on the condition of the port and
urgency of attaining funding. The Port of Alaska is
the lifeline for 90 percent of Alaskans, and it is in
critical condition. In November 2018, Anchorage was
hit with a 7.1 earthquake; if that earthquake lasted
an additional seven seconds, the port would have
failed. Alaskans would be without food security, so we
must act now to rebuild the corroded and broken
infrastructure. A failure of this magnitude would
affect everyone from the North Slope to Nome,
Fairbanks, Wasilla, Seward, Southeast communities, and
everyone in between.
The municipality received positive news a few weeks
ago that we won the MARAD [Maritime Administration]
lawsuit with an amount of $367 million awarded. While
this is an encouraging first step towards recovering
the financial burden the municipality sustained, it is
still subject to the judicial appeals process. This
will likely take years to complete. We do not know
when we will get the final settlement, we don't know
the final number either. In addition, the amount
awarded and what the municipality receives could be
altered by the appeals process. The MARAD settlement
is an award for damages incurred by the failed
northwest extension construction project, and it
really should not be viewed as a windfall for the
municipality.
In addition, this settlement money may be tied to
stabilizing the north extension portion of the
modernization program, which means we couldn't use it
on other portions of the program unfortunately. The
port will need $1 billion by 2025 for this project to
move forward. We are asking for $600 million from the
state to rebuild terminal 1, which will help achieve
food security in Alaska for generations to come, and
we are pursuing all funding options including tariff
increases. Tariff increases will directly impact the
financial burden to all Alaskans. In order to minimize
the impact of potential tariff increases to Alaskans,
we must receive a substantial portion of funding from
both the state and federal governments. Prices of
groceries and commodities will increase for everyone
in Alaska based on the tariff increases. Those
affected especially will be in rural communities, low
income, and fixed income residents, because tariff
increases are pass through costs to all consumers.
I want to reiterate, our highest priority is
rebuilding a seismically stable port to benefit all
Alaskans and we will achieve this goal. However, we
cannot take the risk of destabilizing our state and we
truly need your help. Thank you very much for the
opportunity to speak.
2:27:58 PM
DAVID AMES, PROGRAM MANAGER, JACOBS ENGINEERING, provided
opening remarks and was honored to be part of the program
due to its critical nature. He shared that he had been the
program manager of the Port of Alaska modernization program
since the end of November 2021. He read from prepared
remarks:
The first generation of marine structures at the Port
of Alaska is in grave condition; if the structures are
not replaced, they will fail. Whether the failure
happens suddenly as the result of a major seismic
event or happens slowly over the next decade as a
result of ongoing corrosion that renders the
structures unsafe for operation, its not a question of
if, but when. The Port of Alaska modernization program
has been working diligently and intensely towards
replacing these facilities. With the completion of the
new petroleum and cement terminal this summer, Phase 1
of the program, the state will restore fuel security
to Alaska in the form of a resilient fuel import
terminal designed to withstand seismic and other
physical risks for the next 75 years.
In 2021, we commenced Phase 2, the longest and most
challenging phase of the modernization effort, which
focuses on replacing the deteriorating cargo docks and
restoring food security to the state. Despite all of
the physical challenges to construction in Alaska,
such as shortened construction seasons, extreme tide
ranges, environmental permitting restrictions, and
long deployment distances, the primary challenge to
Phase 2 at this time is the assurance of funding to
complete it.
2:29:37 PM
Mr. Ames provided a PowerPoint presentation titled "Port of
Alaska Modernization Program: Presentation to House Finance
Committee," dated March 11, 2022. He turned to the program
phasing on slide 2:
• Successful Completion of Phase 1
• Immediate and Worsening Risk to Food Security
• Plan for Phase 2 and New Cargo Terminals
• Challenges to Phase 2
• Construction Phasing and Costs
Mr. Ames spoke to the successful completion of phase 1 on
slide 3 with prepared remarks:
We really encourage you to visit this newest facility
at the Port of Alaska, which is a petroleum cement
terminal, commonly known to us as the PCT. It might
not look that complex at first glance, but it is a
structural engineering marvel. The structures that you
see on the right side of the screen are 12-foot
monopiles with fenders designed for 35-foot tides.
They are unique in the world and to Alaska.
Mr. Ames addressed the final stage status of Phase 1 on
slide 4 with prepared remarks:
The major marine structures were completed in November
of 2021. Equipment commissioning is ongoing and will
be completed by the end of this month. It will be open
to barge services next month and it will be fully
complete and open to tankers following dredging this
summer. There's some minor additional marine work plus
dredging to open it up to tankers, but effectively it
will be operating in April and operating for tankers
at the end of this summer. It had a $225 million
budget, $126 million of which was funded by a state
contribution, and with it fuel security has been
established.
But there's an immediate and worsening risk to food
security. The November 2018 earthquake registered a
magnitude of 7.1 and the epicenter was less than eight
miles from our dock. The port survived and remained
open, but if the earthquake happened today, we could
expect even greater damage. It has highlighted the
risk of food and fuel security presented by seismic
events. As I mentioned, Phase 1 took care of the
latter, but food security is obviously a more critical
risk right now. The existing facilities are supported
by more than 1,400 piles that are suffering severe
corrosion, which is normal with marine structures.
They have survived between 40 and 60 years depending
on which structure we're looking at and are nearing
the end of their useful lives due to this corrosion.
2:32:21 PM
Mr. Ames turned to food security and risk on slide 5. He
highlighted that the red dots on the image reflected areas
that were damaged by the 2018 earthquake.
Mr. Ames discussed the condition of the existing facility
on slide 6 with prepared remarks:
It is very important that we know it is already
laterally unstable. What does that mean? The largest
lateral forces to which an overall dock structure is
susceptible would typically be generated by
earthquakes and the liquefaction of soils that they
may cause. The port was not originally designed to
withstand the level of earthquakes that Anchorage has
experienced and expects to experience again and
deterioration of the structures via corrosion has
worsened any lateral capacity that the facilities did
have. There's a significant risk of catastrophic
failure in an earthquake of sufficient size, duration,
or location.
The top photo is a pile that actually failed during
the 2018 earthquake; it split at a horizontal weld.
What you're seeing in the photo below, I'll get into
in the next bullet. Just as importantly to the
catastrophic concern from earthquakes, the structures
are also losing vertical capacity. Basically, due to
the corrosion, the remaining life and the strength of
the piles is decreasing, and the remaining operating
life as designed is estimated to be between four to
eight years. What that means is within about four
years the seismic engineers who have evaluated the
structure are indicating that we will most likely have
to put operating restrictions on the terminal and on
existing operations. That might not impact operations
as they stand right now, but within six to eight years
or so, it most likely will. So, productivity at the
terminal will slow down.
What you're seeing in that second photo are repairs
that were done to corroded piles to restore the
vertical capacity back in the early 2000s. Those
repairs are single event repairs, and they are past
their useful life as well; they usually last about 15
years and can't be redone. Even the repaired areas are
losing their capacity. The most important thing is
this condition worsens with every tide cycle because
one of the main reasons for the corrosion was the
exposure to air after moistening in a marine
environment.
2:35:59 PM
Mr. Ames discussed liquefaction and lateral failure on
slide 7 with prepared remarks:
Liquefaction occurs when certain types of soils that
are saturated it becomes liquid and unstable when
exposed to the stresses and motion of earthquakes.
These pictures are damage that occurred to the soil
slope at the port during the 2018 earthquake. They are
the initial signs of liquefaction. If the earthquake
had gone on longer or had been stronger or more
centrally located this could have liquified. If this
soil liquifies, it destabilizes and slides off the
slope and puts a lateral force on those piles that
you're seeing on the right.
In this case, the entire continuous dock would
experience this lateral force from the collapsing soil
and could wipe this dock out because it is not
laterally stable.
Mr. Ames spoke about statewide cargo transport hub on slide
8 with prepared remarks:
The port structures are at risk and to what does that
actually translate. I'd like to show a few slides that
highlight the importance of the Port of Alaska to the
state, to the nation, and even to the world and I
should thank the Port of Alaska and the municipality
for statistics and other information in the following
slides.
The port is Alaska's intermodal transport hub that
connects the state's primary cargo distribution
systems: marine, road, rail, air, and pipeline. Barge
terminals that serve western Alaska, connections to
the Alaska highway system - and I understand 75
percent of all Alaskans live on the Anchorage
connected road system multiple rail connections on
the port property, the Ted Stevens International
Airport and JBER runways within sight of the dock, the
Port of Alaska valve yard, and pipelines that connect
on and off-port tank farms, truck loading racks, rail
loading racks, and also the Nikiski petroleum dock and
refinery infrastructure. All of these are
infrastructure that exist at the port.
This interconnected infrastructure gives the port a
more abundant and more efficient inbound cargo
handling facility than every other Southcentral Alaska
port combined.
Representative Johnson asked if there was ever a potential
for a ferry dock at the port.
Mr. Ames answered that from a business perspective he could
not speak to the concept because he was involved in the
engineering of the project. He thought it did not seem like
a bad idea. He reasoned it would depend on the areas the
ferry would serve and what the routes would be.
2:39:46 PM
Mr. Ames moved to the three major functions on slide 9 with
prepared remarks:
The Port of Alaska's role is not just commercial. The
port plays a critical role in national defense and in
state disaster response. It is a primary tool for
disaster resiliency for the region, yet it is
currently itself at a profound risk, which only
increases the importance of the dock's replacements.
Mr. Ames turned to slide 10 and read from prepared remarks:
The Port of Alaska is the state's primary inbound
cargo handling facility; it handles half of all Alaska
inbound freight (it is the state's main inbound
containerized freight and fuel distribution center),
it handled roughly 4.7 million tons of fuel and cargo
in 2020, supporting more than $14 billion in statewide
commercial activity, and handled goods consumed by 90
percent of Alaska's population. Half of all the Port
of Alaska's freight is delivered to final destinations
outside of Anchorage statewide, including Southeast
Alaska via empty barge backhauls. The port accounts
for 75 percent of all non-petroleum marine cargo
shipped into Alaska.
So, when we talk about food security, we of course
mean in part, actual groceries and foodstuffs that
cross the Port of Alaska's dock. But we also mean the
equipment, tools, and other goods necessary to ensure
subsistence food security. These statistics should
make it easy to see how any risk to the port itself is
an immediate threat to the food security of the entire
state.
2:41:27 PM
Mr. Ames looked at a map of Alaska showing the importance
of the hub on slide 11. He moved to activities at the
existing cargo docks on slide 12 with prepared remarks:
There's containerized cargo, which is the one we most
often talk about and what we really think when we
think about food security. As I mentioned, the port
has multiple roles. The containerized cargo included
crane service, what we call lift-on/lift-off container
offloading and we also have truck service, roll-
on/roll-off container operations. In addition, there
are military deployments, vehicles and aircraft arrive
to the port on vessels and are either lifted off or
rolled off, similar to containers. Cruise vessels also
use the port. Fuels and cement vessels also use the
port, they would be serviced now by the new PCT. There
are dredging and other maintenance vessels that use it
as well.
2:42:51 PM
Mr. Ames moved to slide 13 and discussed that Phase 1 would
be completed in the coming summer and would be receiving
barges in in April. He noted the location was shown on the
righthand side of the slide. He moved to slide 14 and
discussed that Phase 2 would occur from 2021 to 2032. He
explained the demolition would take place from south to
north where the existing terminal 1 would be demolished and
replaced with a crane service berth, followed by the
demolition of terminal 2, which would be replaced with a
new RORO [roll-on/roll-off] berth. Another part of phase 2
was the north extension stabilization, which was a
rectification of the problems caused by the element under
MARAD in the early 2000s. He stated it would need to be cut
back and restabilized in order to make save navigating room
for the new terminals.
Representative Johnson asked if there was a plan in place
to ensure the port would be operational during the
demolition and reconstruction.
Mr. Ames answered affirmatively. He explained that one of
the challenges of the project was maintaining ongoing
operations while construction was taking place. He stated
it was one of the reasons for the long construction period
due to the need to maneuver around existing operations and
plan the staging to accommodate operations.
2:44:43 PM
Mr. Ames discussed the status of Phase 2, which started in
2021 on slide 15. He read from prepared remarks:
The preliminary engineering is ongoing for the cargo
terminals. We have just completed and submitted a
draft report on the structural alternatives
engineering and analysis, which looks at modifying the
support foundation for the concept designs with a
means to accelerate construction and also make the
facility more permittable to speed up the permitting
process. We are already designing the access trestles.
We have a peer review ongoing from an outside firm
just to ensure we're squeezing everything we can out
of the schedule and the cost. We are also in the
process of hiring another independent technical
reviewer to be the constructability reviewer during
the design process.
We are developing requests for proposals to design and
build the north extension stabilization work. The work
would be done in parallel to the cargo docks work.
2:46:09 PM
Mr. Ames returned to a drawing on slide 14 showing the
Phase 2 design. He explained that inshore of terminal 2 on
the drawing was the existing port administration building,
which was actually sitting on a dock that was laterally
compromised. One of the steps to protect workers at the
port was to build the new administration building. He
relayed that proposals had been received and the contract
should be awarded in April.
Representative LeBon asked if the primary purpose of the
peer review was to validate engineering conclusions as the
project went on.
Mr. Ames answered affirmatively. He explained it
specifically looked at the construction staging, phasing,
and scheduling, in addition to the permitting plan.
Representative LeBon asked how peer review interfaced with
the independent technical review. He asked if the items
were one and the same.
Mr. Ames answered it was not the same contractor and the
two reviews served slightly different purposes. He
explained that the initial peer review was requested by the
municipality to ascertain that the viability of the plan
and construction phasing and that the project was
optimizing everything possible in the construction
scheduling and permitting. The independent technical review
was a check on the detailed design that took place as the
detailed structural design was going on. He elaborated it
entailed checking calculations of the very specific
detailed designs rather than the overall phasing concept.
2:48:24 PM
Mr. Ames continued with slide 15 and discussed permitting
efforts. The project had already requested a jurisdictional
determination and a draft permit for the north extension
stabilization to separate the landside work from the marine
work and commence with the landside work to get it moving
quicker. The project had started to prepare the draft
permit application for cargo terminals 1 and 2.
Mr. Ames moved to phase 2 challenges on slide 16. He read
from prepared remarks:
What are the major challenges to Phase 2? First of
all, the climate. Shortened construction seasons due
to weather and ice conditions make it necessary for
multiple mobilizations and demobilizations,
essentially doubling the required time for marine
construction as compared to warm weather projects. In
addition, tides. Extreme tides and the strong currents
associated with them make scheduling and safety
concerns during construction. But these two categories
are technical challenges that we as engineers can
resolve directly.
The other two categories listed permit restrictions
and funding we should discuss in further detail. Our
biggest permitting challenge is the need to protect
the Cook Inlet Beluga whales. The noise created by
marine construction is considered detrimental to their
survival. So, our permits carry with them a
requirement to shut down pile driving and other marine
construction operations when Belugas are sighted
within specific distances of the worksite. This
significantly impacts construction time. It is
estimated that over 30 days of construction time were
lost over the last two years at the petroleum and
cement terminal due to these restrictions. When you've
only got a six month construction time and you're
losing 15 percent of it, it was an even greater
challenge. Even longer delays can be experienced
during the permitting process as mitigation measures
are proposed and debated. Of course, funding is one of
our biggest challenges.
2:51:11 PM
Mr. Ames spoke to slide 17 related to meeting the
challenges with prepared remarks:
I want to speak a little bit more about what we're
doing to meet these challenges. On the permitting
side, we've actually engaged in a Section 214
agreement within the last three months with the U.S.
Corps of Engineers to fund and assign a position
dedicated at the corps to prioritize our permit
applications and the effort that the corps has in
processing them.
In addition, we have already begun preparation of a
draft application for the U.S. Corps permits to begin
discussion of the permits before the official process
begins. We are also applying for FAST-14 Dashboard
status, which is a federal program to prioritize the
permitting process for dashboard projects. The status
does not guarantee us permits, but it does guarantee
priority processing.
The last thing I'll mention is the structural
alternatives analysis where we are looking at reducing
the number of piles in the foundation, investigating
quieter alternative piling technologies, and the
ongoing peer review used the information for
evaluation of the phasing schedule. With that, the
hope was not just to speed up the construction
process, but to speed up the permitting process.
Mr. Ames moved to funding challenges on slide 18 and read
from prepared remarks:
Funding presents many challenges that we're here to
discuss today. Building facilities in Alaska is
expensive, even more expensive than anywhere else in
the U.S. With the climate and tidal challenges I
mentioned earlier, in combination with the seismic
risks that require enhanced designs simply make the
higher cost unavoidable. Cargo docks 1 and 2 will cost
a total of $1.05 billion. The biggest challenge is the
funding must be secured for the whole package before
proceeding with initial demolition and construction.
2:53:40 PM
Representative LeBon stated that the project needed $600
million immediately. He asked if there had been a bond
proposal to Anchorage community to help with the $1 billion
total price tag.
Mr. Ames deferred the question to the mayor and
municipality.
Mr. Bronson replied that the short answer was yes. He
detailed that he had gotten together with the Anchorage
Assembly several months earlier and there had been an
ordinance for $165 million. He reported that over $40
million of the bond package had been sold.
Representative LeBon asked for verification it was $165
million in voter approved funding and the city was in the
process of selling the bonds.
Mr. Bronson replied that the bonds had been approved by
himself and the assembly. He reiterated that over $40
million had been sold and the bonds would be sold along the
way.
2:55:04 PM
Mr. Ames addressed the Phase 2 schedule on slide 19. He
relayed the first step of the north end stabilization was
included, but there was a focus on the cargo terminals. The
completion of the first terminal was expected to be by
2029. He explained that the terminal would provide the food
security talked about during the presentation. He noted it
would not meet the full demand for cargo volume, but it
would provide a seismically resilient dock designed to
withstand earthquakes and other physical risks for the next
75 years. Terminal 2 construction would go through 2033. He
highlighted that through the various alternatives analysis
he had mentioned, the schedule would be compressed. He
explained the schedule on slide 19 reflected a worst case
scenario. He stated that if the project received the
funding as planned, the schedule could be compressed.
Mr. Ames advanced to estimated annual costs on slide 20. He
shared that his colleagues would further address the topic
in the next part of the presentation. He moved to a funding
summary by project on slide 21. He relayed that the
petroleum and cement terminal cost about $225 million. The
state had supported about $126 million of the total
(roughly 56 percent of the total cost). The overall cargo
docks should cost $1.05 billion. The current request was
for $600 million to establish food security, which equated
to roughly the same percentage provided by the state for
the petroleum and cement terminal. He thanked the
committee.
2:57:32 PM
Mr. Bronson shared that he and staff had been in Juneau a
couple of weeks earlier to gather questions on the project;
the questions from legislators had informed the content of
the presentation in the current meeting.
2:58:21 PM
ROSS RISVOLD, PUBLIC FINANCE MANAGER, MUNICIPALITY OF
ANCHORAGE (via teleconference), introduced himself and
shared information about his career background. He
expressed appreciation to the committee for hearing the
presentation. He moved to slide 24 and addressed the cost
of the Port of Alaska modernization project. He noted the
cost was phased in and the cost of the different phases was
shown in yellow at the bottom of the slide. He relayed that
Phase 1 was nearly complete, Phase 2 had several different
components, and Phases 3 and 4 were single components that
together comprised the modernization program.
Mr. Risvold moved to slide 25 related to Phase 1 funding
sources comprised of three different categories. He
outlined that the petroleum cement terminal cost
approximately $225 million. The state had paid $148.5
million. Additionally, the project had received grant
funding from MARAD, the municipality had contributed
funding, and port equity of about $11.5 million had been
used. In December of 2020, port revenue bonds in the amount
of $20 million had been issued. To support the bonds, the
municipality had issued a tariff over a ten year period (to
mitigate rate shock) to cover the debt service. As part of
the bond issuance in 2020, the municipality had sold
another $40 million in bonds to refund some existing bonds
from the prior project in 2008. He summarized that the city
had sold $65 million in bonds in 2020. Another $7 million
in bonds had yet to be issued and would complete Phase 1.
3:01:56 PM
Co-Chair Merrick looked at the graph on slide 25 and noted
that it did not appear to show the state's portion at 56
percent. She shared that she had come up with 66 percent
when she had done the math. She asked for clarification.
Mr. Risvold answered he was not sure where the calculation
had come from, and he could follow up. He stated that there
may have been some other funds that perhaps had been used
for the prior project.
Representative Johnson noted there was $175 million in the
governor's budget for ports on the Knik Arm. She asked if
the amount was factored into the municipality's
calculations.
Mr. Bronson answered that the municipality was considering
all options. He assumed Representative Johnson was
referring to a port authority mechanism. He noted that the
governor was fairly focused on the concept. He relayed that
the municipality was looking at the concept but had made no
commitment thus far.
Representative Johnson asked if the $175 million [in the
governor's budget] was outside the calculation in the
presentation.
Mr. Bronson replied that was his understanding.
Mr. Risvold moved to the Phase 1 funding timeline on slide
26. He relayed the timeline had begun in 2011. The State of
Alaska had offered support to the project for four years.
He pointed to the last two lines of a table and explained
that the PIDP and BUILD grants were awarded from the
federal government. The total was $193 million.
3:04:42 PM
Mr. Risvold addressed funding sources for Phases 2 through
5, which would complete the entire Port of Alaska
modernization program (on slide 27). The majority of the
funding was needed for Phase 2. He detailed that the cargo
terminals 1 and 2 would cost approximately $1 billion. In
order to commence with the construction, the municipality
needed a source of funds committed to support the cost. He
stated the cargo terminal could not be started with
anything less because they needed a commitment supporting
the entire Phase 2. The municipality was asking the state
to contribute $600 million. He noted the municipality had
$233 million set aside, which was comprised of a short-term
bargaining program including debt and revenue bonds
authorized by the municipality. Additionally, funding from
federal grants was to be determined. He elaborated that if
federal grants did not materialize, the municipality would
be forced to use municipal debt to support the project
(assuming the project also received the $600 million from
the state).
Co-Chair Merrick referenced the range of $1.6 to $1.8
billion and asked about the variation.
Mr. Risvold responded that the numbers changed periodically
based on the engineer's forecast. He explained that the
dollar amount used for many months was $1.6 billion. There
had been a recent update to the numbers provided by Mr.
Ames and his colleagues, and he believed the number had
been updated to $1.79 billion. He relayed that the updated
number was fairly current and would add up to the numbers
across the bottom of slide 24. He noted that page 24 added
up to $1.792 billion. He highlighted the estimates did not
include inflation or cost escalations over time.
Co-Chair Merrick asked if the graph in the middle of slide
27 reflected the total project for Phases 2 through 5.
Mr. Risvold answered affirmatively.
Co-Chair Merrick asked if it was possible to receive a
graph reflecting Phase 2 only.
Mr. Risvold agreed.
3:08:13 PM
Representative LeBon asked if the municipality's short-term
borrowing was an obligation of the residents of Anchorage
in addition to their property tax bill. Alternatively, he
asked if it reflected an interim borrowing event that would
bridge state or other monies.
Mr. Risvold replied that a short-term borrowing program was
a mechanism used to finance major construction projects. He
stated it involved borrowing money using short-term rates,
which was cost-effective and a savings to the project
overall. Eventually, short-term borrowing programs would be
required to be converted to long-term revenue bonds. He
elaborated that the short-term borrowing program had
authorization from the municipal assembly and would
eventually turn into long-term revenue bonds. The revenue
bonds had been authorized as well. He explained that
revenue bonds by the municipality for a project like the
port were not required to be approved by the voters. He
expounded that the investors relied on the revenue of the
port for payment of their investment. He clarified there
was no taxing of property owners for debt service for the
port revenue bonds.
Representative Carpenter asked about the construction cost
estimates. He observed that there was not a construction
cost escalation used for projected future costs. He asked
what numbers the municipality was contemplating for several
years in the future. He could easily see the cost could be
much different than it was currently.
Mr. Risvold answered that the municipality had not
addressed that question; the municipality was using numbers
reflecting present day. He suggested that Mr. Ames may be
able to address the question. He reiterated that the
municipality was using today's dollars, which was an
important factor to note.
Mr. Ames replied that the estimates generated for going
into the preliminary design phase were based on a "mid-
construction estimate." He explained the estimates were
based on prices anticipated through the middle of the
construction period to be the prices throughout the
project. He elaborated that the numbers would be tweaked as
the project got further into the detailed design stage. He
clarified that the estimates did consider escalation during
the planned construction period. He noted that the numbers
would be off if the work commenced much later than
anticipated, but the numbers should be reasonable if the
work progressed as expected. He remarked that the estimate
became more refined as the design was more refined. He
added that the docks were still in the concept stage.
3:12:53 PM
Representative Carpenter remarked on forthcoming [federal]
infrastructure funding to be distributed to states
nationwide. He highlighted that it was already hard to find
labor. He could not imagine what the situation would be
like in a number of years. He suspected the cost would be
larger in a couple of years.
3:13:32 PM
Mr. Risvold turned to slide 28 and discussed the
municipality's $600 million request in the FY 22 capital
budget. The funding would allow for the completion of cargo
terminal 1, which is a portion of Phase 2 of the project
and would provide food security for the residents across
Alaska. He stated it was the top priority of Mayor
Bronson's administration. In order to enter into contracts
for construction activity, an identified source of funds
was necessary. He reiterated earlier testimony that $1
billion was needed to start construction of the cargo
terminal (terminal 1 and terminal 2). The municipality had
$200 million in authorized, but not yet issued, revenue
bonds.
Mr. Risvold explained that the municipality had a $100
million authorization of revenue bonds that were in a
municipal ordinance a couple of years back. The
municipality had sold $65 million of the bonds to refinance
$40 million of outstanding debt for the prior project from
2008. Additionally, it had provided $20 million in new
money for the PCT. He relayed that another $5 million was
needed to fund a debt service reserve account required by
investors and to pay cost of issuance fees. There were $35
million in unissued bonds remaining from the original $100
million. He noted an ordinance had recently passed the
Anchorage Assembly for $165 million in bonds. The combined
amounts resulted in the $200 million authorized, but not
yet issued revenue bonds. The municipality hoped to be
awarded additional grants on an annual basis by MARAD. The
grants were called the RAISE grant and Port Infrastructure
Development Program (PIDP). The municipality would continue
to actively pursue the grants.
Mr. Risvold continued that the municipality hoped to
receive $600 million from the state to reach the $1 billion
amount. Additionally, the municipality hoped to continue to
gain awards from the federal government. The municipality
would ask the Anchorage Assembly to continue to support the
project to make up any difference. The funding would enable
the project to enter into Phase 2 and into contracts for
the entire cargo terminal.
3:17:13 PM
Representative Johnson referenced the mention of food
security several places in the presentation. She referenced
the deep draft Port of Whittier, the Port of Seward, and
Port MacKenzie, which were all accessible by rail, road, or
both. She asked how the port in Anchorage would provide
additional food security to the state. She remarked that
the other ports would be used for imports.
Mr. Risvold responded that the other ports mentioned by
Representative Johnson could not handle the ships handled
by the Port of Alaska. He stated it was not practically
possible. He explained the other ports were not built with
cranes and roll-on/roll-off functionality. He estimated
there was five to seven days of food in Anchorage. He
stated that if the port failed, the ships could not go to
another port.
Mr. Bronson elaborated that the municipality, Jacobs
Engineering, TOTE, and Matson, had all looked at it over
the years. He stated that with additional funding $5
million had gone towards a RORO ramp in Seward (the total
project had been $25 million), which would be helpful in an
emergency. He explained that the connectivity to airports,
the pipeline, trucking, shipping, and barge traffic already
existed in Anchorage. He highlighted that the port in
Anchorage was the one tsunami-proof port. He pointed out
what had happened in Seward and Whittier in 1964 [during a
large-scale earthquake]. He stated the whole threat was an
earthquake. He elaborated that an earthquake could cause
the port in Anchorage to fall over due to the liquefaction
issue; however, the Anchorage port was immune to a tsunami
while the other ports were not, which had been demonstrated
in 1964. He remarked that Valdez and Homer could possibly
be brought in but looking at the trucking traffic to make
it happen was not feasible. He noted that the cost would be
exorbitant due to the cost of transportation.
Representative Johnson asked if Mr. Bronson was including
Port MacKenzie when making the determination there was only
one tsunami-proof port. She asked if Port MacKenzie was
vulnerable to tsunami as well.
Mr. Bronson answered, "It's certainly in the same structure
and that's a different conversation." He stated that Port
MacKenzie had no means to offload container ships and did
not connect to a pipeline. The other thing to consider when
thinking about the upper Cook Inlet was that shippers knew
that when building a port, it was necessary to get to 75
percent operating capacity before considering expansion. He
detailed that currently the Port of Alaska in Anchorage was
operating at about 35 percent in the winter and 40 percent
in the summer. He stated that it was a fundamental and
economic principle of port design that until 75 percent of
operating capacity was reached "you don't start looking for
another port."
3:21:45 PM
Representative Carpenter stated it was a valid concern
there were not ports currently able to pick up the slack.
He referenced the timeframe provided in the presentation of
four to six years. He considered the degraded operations on
the dock as it currently stood. Additionally, he believed
the timeline was to begin construction around 2025. He
surmised that based on the timeline there would be degraded
operations before construction or demolition of terminal 1
began. He asked how the slack could be picked up if there
were no other ports capable of offloading containers.
Mr. Ames answered the concerns were valid, which was the
reason the port was critical. He highlighted that the north
extension that needed to be fixed due to poor design had
been started in the early 2000s foreseeing the problem. He
stated that 20 years down the line the problem had
worsened. He stated the four to eight years referred to the
timeframe in which the engineers called for putting
capacity restrictions on the existing terminal. He relayed
the existing debt capacity of the terminal was higher than
what was needed for the existing operations. He elaborated
that the initial restrictions that may be implemented may
download the load capacity of the deck, but it would not
impact the existing container operations because their
operating load was less. Once the six to eight-year range
was reached, there may be restrictions and there may be a
small section of the terminal that could not tolerate
vehicles or they may be limited to loads that could be put
on the deck in certain locations.
Mr. Ames characterized the problem as critical. As far as
the lack of other ports to pick up the load, it was not
just about the fact that ships could not get in, it was
about the infrastructure to move the cargo once it arrived.
He recognized there was a rail and highway from Seward, but
it could not be relied on to handle the weekly volume
coming through Anchorage. He pointed out that if an
earthquake destroyed the Port of Anchorage, it would likely
destroy some of the bridges and highway along the route to
Seward, in addition to other areas in Anchorage. He stated
it was a concern and the reason it was important to get the
more resilient docks up and running.
Representative Carpenter asked where the slack would be
picked up once demolition had started if the other ports in
Alaska could not be relied on.
Mr. Ames answered that at no time during construction under
the current plan would operations be reduced below the
current capacity; it was a reason for the long timeframe.
He elaborated that currently there were three terminals. He
detailed that 2 and 3 were the container terminals that
would become 1 and 2. He clarified the existing terminal 1
was the petroleum oil and lubricants terminal that would be
picked up by the existing PCT. Meanwhile, container
operations could continue. He expounded that terminal 1
would be built just offshore and Matson would move to that
location. Subsequently, terminal 2 would be demolished and
the new build would be constructed in front of the
demolished terminal 2. He explained that the phases ensured
that container handling capacity was not diminished during
the project.
Representative Carpenter asked for verification that the
project did not require any additional use of any of the
other ports in Alaska to accommodate construction.
Mr. Ames responded it was more of a shipping company
decision about whether they needed to go to other places.
He reiterated that the requirement at the Port of Alaska
was to keep the capacity available.
3:27:07 PM
Mr. Risvold looked at scenario 1 on slide 29 where the
State of Alaska provided a contribution of $600 million.
The scenario also assumed the municipality would borrow up
to $1 billion, there would be no further federal grants,
and port users would pass the increased cost to consumers.
There was a current tariff of $3.30, which was a user fee
per ton and was part of the tariff 9.0. Under the scenario,
the surcharge per ton increase would be $21.90, making the
new per ton cost $25.20 (an 8x increase in the surcharge
per ton).
Mr. Risvold turned to scenario 2 on slide 30 where the
Municipality of Anchorage funded the entire project on its
own. Under the scenario, the municipality would borrow $1.6
billion. The scenario included the worst case assumption
where no grants of any kind were received from the federal
government or the state. The scenario assumed port users
would pass increased cost to consumers. He explained that
the current port tariff was $3.30. The surcharge per ton
would increase $29.65 to $32.95. He detailed that the per
ton cost came out at a 9x increase for users. He
highlighted the importance of seaports across all ports and
communities of Alaska. The municipality was asking the
state to give serious consideration to the grant in order
to reduce the amount the municipality needed to borrow and
further the benefits to all Alaskans served by the port.
Co-Chair Merrick considered scenario 2 where the state did
not contribute to the project. She observed that the
scenario indicated the municipality would have to borrow
$1.6 billion. She remarked that the total cost was listed
at $1.2 billion on slide 24.
Mr. Risvold answered that the $1.2 billion was for the
cargo terminals only, so the difference was the other
components of Phase 2.
Co-Chair Merrick asked what the other components of Phase 2
were.
Mr. Risvold referenced slide 24 and answered it included
cargo terminals 1 and 2. There were two different users of
the terminal: one was a lift-on/lift-off crane mechanism
and one was a roll-on/roll-off drive the containers off
with trucks mechanism. The other parts of Phase 2 included
the first step of the north end stabilization of $140
million and an administration building of approximately $10
million. He explained the items made up the $1.2 billion in
Phase 2.
Co-Chair Merrick pointed out that slide 30 indicated the
municipality needed to borrow $1.6 billion. She asked for
clarification on the different amounts given.
Mr. Risvold answered that slides 29 and 30 reflected the
cost for the entire project instead of Phase 2 only.
Co-Chair Merrick had been under the impression the requests
were only for Phase 2.
Mr. Bronson replied there was an aggregate of five phases.
Phase 1 the PCT - would be complete in the coming month.
He detailed that food security was Phase 2 and comprised
the entire dock system. Terminal 1 was projected for
completion by the end of 2029 and included food security.
The contribution request to the legislature was for
terminal 1 in Phase 2. He speculated that the cost would
exceed $1.6 billion due to inflation. He explained that for
the sake of modeling, if the city had to finance the
project, $1.6 billion was what it would need for the entire
project (Phases 2 through 5).
3:34:08 PM
Co-Chair Merrick asked for verification that the total cost
of terminal 1 was $628 million.
Mr. Ames clarified the numbers. The total cost of Phase 2
was $1.05 billion for the cargo docks. The municipality was
requesting a $600 million contribution from the state,
which represented a similar contribution of 56 percent
provided in Phase 1. The completion of the cargo docks
would result in food security. He elaborated that the first
terminal would actually provide food security because it
resulted in a resilient dock. He noted it also happened to
cost $600 million, which matched the 56 percent, but that
was merely a coincidence.
Mr. Bronson described the process as living in a house as
it was torn down and completely rebuilt. He explained that
if the entire thing could be torn down and rebuilt while
needs were met via another port, the phasing would not be
required. He stated it did not work that way.
3:36:21 PM
Representative Carpenter referenced the per ton surcharge
of 8x or 9x [in the two provided scenarios on slides 29 and
30] and asked how long the increase would be passed on to
consumers.
Mr. Risvold answered that as debt was issued, the
municipality continued to revisit the tariff. He elaborated
that the municipality would only issue debt as it was
needed, in addition to grants from the state and federal
government. As debt was issued, the surcharge would be used
to service the debt. He explained that the debt service
ramped up as issued over time. He detailed that it would
hit a certain high level and the debt service at the high
level was approximately $113 million per year. It would
remain in place for 17 years and as the initial bond issue
started to pay off and mature, it would ramp back down,
reflecting a classic bell curve. The municipality would
reduce the per ton surcharge to cover the debt service and
other covenants investors may require.
Representative Carpenter was hearing there would be an 8x
or 9x increase to the per ton cost that would continue to
be passed on to consumers for the next several decades.
Representative Edgmon asked why there was not an effort to
tap into the big buckets of money tied to the federal
infrastructure act. It was his understanding the port was
eligible in theory to access some of the money.
Mr. Risvold referenced slide 27 showing Phase 2 through 5
funding sources. He pointed to a pie chart with a section
labeled federal grants to be determined. He explained it
reflected where the municipality would go after PIDP,
RAISE, and any other grants available under the new
Infrastructure Investment and Jobs Act (IIJA). He relayed
there were not any known amounts to apply for at present.
The known factors were with the two MARAD grants the city
believed would continue to be offered on an annual basis.
He assured the committee the municipality would continue to
apply for the grants and for anything that came from the
recently passed IIJA. He explained that the presentation
aimed to focus on questions that had been presented to the
municipality, which was the reason for the focus on the
cost and timing of Phase 2. Information on Phases 2 through
5 had been included because some of the questions were
focused on the entire PAMP cost. He remarked that it may
not have been as clear on slides 29 and 30.
3:40:53 PM
Representative Edgmon asked if it was conceivable the
project could receive most of its funding through the IIJA.
Mr. Risvold answered it was unlikely. He elaborated there
would be a mixture of funding sources. He remarked that it
was likely the second largest capital project ever done in
the state. He communicated it would take numerous funding
sources to complete the project and the municipality would
ambitiously pursue every one of the sources. The
municipality was present to pursue the committee's
consideration of its request. The municipality would do the
same with federal grants and MARAD grants and would ask the
assembly to authorize additional debt if needed.
Ms. Hickel added that the port funding allocated under IIJA
was primarily for large-scale ports and smaller ports,
which left the Port of Alaska in the middle. She explained
there was a lot of competition for the funds, and the
municipality did not anticipate receiving much or anything
from the current infrastructure bill.
Representative Edgmon asked if the $600 million request for
state funds was being presented because there was surplus
oil revenue. Alternatively, he asked if the municipality
was requesting the funding regardless of the source such as
the Permanent Fund or a bond package. He stated that the
bond package as proposed by the governor was something like
$320 million.
Mr. Bronson replied that the municipality was present to
present a problem, a fix, and the cost of the fix. He did
not want to tell the legislature how to do its business in
terms of how the funding was structured at the state level.
He elaborated that the planning was in place. He stated it
was one of the problems in life that enough money would
fix.
Representative Edgmon referred to a conversation at the
beginning of the presentation about putting in pilings that
would be able to withstand seismic shocks for a period of
30 years and the physical risks that would occur if there
was another 1964 episode. He remarked on the project being
the second largest in the state's history and assumed the
first was the pipeline. He asked if there was a strategic
plan that accompanied the demand for all five phases of the
project completion. He noted that the nearby airport was
growing. He wondered about the synergistic effects of the
airport and incoming at sea transportation. He remarked
that Alaska's population had declined in the past nine
years. He spoke to the sequential nature of putting the
project together. He underscored that everyone knew the
costs for supplies were escalating and skyrocketing in some
instances. He referenced the operating capacity cited by
the municipality of 35 and 40 percent depending on the
season. He wondered about the scale of the project in
relation to the aforementioned items.
3:45:42 PM
Mr. Ames referenced Representative Edgmon's mention of an
overall business plan. He relayed that as far as he had
seen there was not a specific master plan related to actual
port volumes on the cargo side. He had heard the same
statistics Representative Edgmon had mentioned of a 35 to
45 percent occupancy. He explained that because of the
criticality of the condition of the structures, the cargo
docks were seen as a replacement in-kind that would support
the existing capacity and any growth that occurred in the
future. He would advocate doing a full master plan related
to the cargo docks. On the fuel side, they were in the
process of doing that; it was where he saw the volumes
potentially increasing more. They were in the process of
preparing a petroleum terminal optimization study as part
of the port modernization.
Mr. Ames confirmed it was a sequential development. The
reason it was sequential on the cargo dock side was because
the dock was continuous, and it was necessary to keep the
current operations running during development. The
petroleum dock had been moved to a later phase. With
volumes increasing, the project was looking at whether
there was a need to develop an alternative petroleum dock
plan and not delay that development. The study was ongoing
and should be completed in the coming three months. There
were a number of ways to resolve the problem. One was to
expand the capacity of the new PCT in terms of unloading
fuels and cement. He reiterated that the cargo dock side
was about replacing in-kind because of the vital need
served by the cargo dock and the understanding they were
still underutilized of what they could be in the future;
therefore, there would be room for expansion built in.
3:48:42 PM
Representative Edgmon relayed that his questions were in
the spirit of supporting the project because he lived in
Southwest Alaska and knew how everything flowed through the
port and airport in Anchorage. He noted there was a lot of
synergy with rural Alaska and Anchorage. He noted the
prices in Anchorage impacted the prices in his district. He
stated that $600 million in the current year would be a big
bite out of additional oil revenue expected and would
compete against many other things.
Representative Johnson would like to be supportive in the
sense that the Point MacKenzie and the Anchorage dock had a
strong synergy. She stated there was no question with the
deep draft and barge traffic. She highlighted that the Mat-
Su Borough had recently received a $8 million grant to
develop a roll-on/roll-off dock. She elaborated Mat-Su
currently had a barge dock that could handle a 500 foot
barge. She detailed it was a deep draft port and incoming
ships could have their own offloading cranes. She suggested
it was not as big of a problem as far as "when you have to
take that down" because there were alternatives. She hoped
they could create a synergy between the two ports to make
work across the state for Interior Alaska and Anchorage.
She hoped it was not a competition but to make the two
ports work together somehow. She emphasized that they could
and they should.
3:51:35 PM
Representative Josephson thought the municipality had
historically made a strong case for what it sought. He
noted it had successfully litigated in the MARAD dispute.
He remarked the municipality had skin in the game
associated with the project. He shared that he had done a
skiff tour and had seen the corrosion firsthand. He stated
the issues and need for a resolution were apparent. He
looked at slide 27 showing the federal grants were to be
determined. He referenced Ms. Hickel's statement that the
IIJA was not a great opportunity for the project. He was
hearing anecdotally other opinions on the topic. He looked
at the pie chart showing an expectation of just under 50
percent from a federal grant. He asked if Mr. Ames could
reconcile Ms. Hickel's comment with the slide.
Mr. Ames could not reconcile the slide because he believed
there was a slight difference on what the slide showed
looking at the whole project compared to his portion of the
presentation focused on the cargo docks. The project was
working directly with the Port of Alaska that was applying
for the grants. Currently, the only two grants out there
for application were the PIDP and RAISE grants. He
elaborated it had been determined that RAISE grants in the
current year were focused on surface transportation, not
ports; however, the port was actively pursuing the PIDP
grant. The value of what the project was seeking would be
in the $20 million range.
Mr. Ames continued that in terms of the infrastructure and
mega grants, the project was still investigating what the
options were. He noted that the project was looking at the
IIJA funds to determine applicability.
3:55:12 PM
Representative Josephson had some concern over what he
interpreted as ambivalence related to the federal grants.
He wanted the envelope to be pushed as much as possible,
which he believed the state's federal delegation wanted "in
a state way where we're not competing with one another." He
remarked that the pie chart [on slide 27] needed to work or
the project was left with half of a plan.
Mr. Bronson understood the comments and stated it was a
difficult ask because the municipality had to identify a $1
billion commitment by the third quarter of 2025. He relayed
that he and his team were traveling to Washington D.C.
later in the month to meet with Congressional members. He
shared that the municipality anticipated that the secretary
of transportation would come do a boat tour once the
weather warmed up and ice around the pilings melted. He
relayed that the municipality had not asked the Department
of Defense (DOD); however, the port was not being designed
for the new DOD requirement for Bob Hope-class ships. He
could not ask the Anchorage taxpayers to finance a DOD
requirement; however, the municipality hoped the DOD would
come in and help with the project. He spoke to the
importance of the ports in Nome and Anchorage and
highlighted the port in Anchorage fed 90 percent of the
state. He commented that Nome's potential for defending the
Arctic was also essential. He stated that the two ports
worked together.
Mr. Bronson recognized there were many unknowns and no
quick fix. He understood the municipality was asking for a
colossal amount of funding. He stressed that the situation
was an existential threat to the state. He noted that it
would not impact Southeast Alaska because there were other
deep saltwater ports in the region. He emphasized that if
the dock fell over, all of the other conversations in the
state would stop because there would be no food for months
if not years. He underscored that if there was no food
there were no workers, if there were no workers there would
be no oil in the pipeline. He pointed out that if
subsistence users needed a snow mobile, boat motor, or
spare parts, they would be out of luck. He explained that
life would get really bad really fast in rural areas. He
stated that the questions people would be asking at their
dinner tables were "where does my family go for the next
year or two while we get this mess fixed?" He reiterated
there would not be enough food.
3:59:06 PM
Representative Carpenter appreciated the picture painted.
He did not know what an 8x or 9x per ton increase meant in
food cost. He pointed out that whether the port fell over
or not, there would be an increase in food cost for a
generation of Alaskans. He stated they could not squabble
over the billions of dollars and put 9x the cost of food on
a generation of Alaskans. He thought it was unacceptable.
He believed there was no question that the problem needed
to be solved, but he wondered at what cost it would be
done. He asked if the burden would be placed on people
through debt or if the state would use the available
resources.
Co-Chair Merrick aligned herself with Representative
Josephson about the concern related to federal grants. She
stated her understanding from Mr. Ames' testimony that the
only thing the state was currently qualified for was $20
million. She stated there was more discussion needed on the
topic. She requested further information on how the federal
funding would be shored up. Additionally, she requested
updated slides 27, 29, and 30 with only Phase 2
information.
HB 283 was HEARD and HELD in committee for further
consideration.
She set an amendment deadline for HB 149 for Wednesday,
March 16th. She reviewed the schedule for the following
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 283 Port of Alaska HFIN-Final-03112022.pdf |
HFIN 3/11/2022 1:30:00 PM |
HB 283 |
| HB 283 CON ADDP - 03.11.22 HF.pptx.pdf |
HFIN 3/11/2022 1:30:00 PM |
HB 283 |