Legislature(2013 - 2014)BARNES 124
02/13/2014 01:00 PM House TRANSPORTATION
Audio | Topic |
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Start | |
HB260 | |
HB271 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+= | HB 260 | TELECONFERENCED | |
+= | HB 271 | TELECONFERENCED | |
HB 271-APPROP: RAILROAD FEASIBILITY STUDY CHAIR P. WILSON announced that the final order of business would be HOUSE BILL NO. 271, "An Act making a special appropriation to the University of Alaska Fairbanks for a study of the feasibility of constructing a railroad between Fairbanks and Deadhorse; and providing for an effective date." 1:52:20 PM REPRESENTATIVE ISAACSON, speaking as sponsor of HB 271, offered to keep his remarks brief. He referred to information in members' packets, including a copy of a PowerPoint and academic paper by Dr. Paul Metz [entitled, "Economic Impact of a North Slope Rail Extension on Northern Energy and Mineral Development."] He stated this paper highlights a number of natural resources that could be accessed if the rail between Fairbanks and Deadhorse is built. He predicted that if 10 percent of the available natural resources were put into place it would generate $18 billion in revenue to Alaska's treasury without changing any tax structures. He indicated that DNR confirmed that "we're not far off the mark." He also highlighted an e-mail [in members' packets] from Great Bear Petroleum LLC [Great Bear] which indicates that the proposed rail project between Fairbanks and Deadhorse could provide significant transportation cost savings for delivering materials and another option for North Slope product delivery to in-state locations or tidewaters. He asked members for their support for HB 271. 1:54:09 PM PAUL METZ, Professor, Ph.D., P.G., Geological Engineering, University of Alaska Fairbanks, stated that he provided a report and PowerPoint presentation to the committee to outline the benefits of extending the Alaska railroad to the North Slope, which is in members'' packets. He offered to answer any questions members may have. CHAIR P. WILSON, after first determining no one else wished to testify, closed public testimony on HB 271. 1:56:22 PM REPRESENTATIVE KREISS-TOMKINS stated that the proposed rail extension project would be a huge infrastructure investment to the North Slope. While he finds the idea intriguing and compelling, the price tag for the feasibility study is substantial. He asked why the private sector hasn't made any initial investment in the feasibility of extending the railroad to enhance North Slope mineral development. CHAIR P. WILSON remarked that since Alaska does not have a transportation plan it leaves private industry in limbo. She emphasized the focus of this committee is to consider the policy and decide what is best for the state and to pass on any financial considerations to the House Finance Committee. She acknowledged the importance of verbalizing the financial concerns. 1:58:37 PM REPRESENTATIVE KREISS-TOMKINS said he has difficulties subscribing to the philosophy that this committee can't consider the financial implications of investments since that seems to be the fundamental policy of transportation. He commented that the difficulty is that if the state spends $2 million for a feasibility of a railroad to Deadhorse, it means the state will not have $2 million to spend on the Northern Rail Extension or the Port MacKenzie Rail Extension since state funds are limited. He acknowledged the importance of considering investing substantial sums of money to ensure the best return. CHAIR P. WILSON agreed that it is important to consider the financial realities. 1:59:48 PM REPRESENTATIVE FEIGE said he agreed with the representative from Sitka. He pointed out $2 million is a lot of money and thus far there hasn't been a lot of interest in this project other than one e-mail from Great Bear. He surmised that Great Bear will need to travel a significant distance before providing assurances that it will develop those areas. He suggested alternate shipping, such as barging in any sand and steel Great Bear might suffice. He stated that railroads are designed to carry lots of heavy material cheaply. In order to make a $5 billion investment to build a railroad without capitalization will require a significant economic driver that results in heavy loads moving from point A to point B. He acknowledged that someday oil production might be so low that transporting by rail will be more economical; however, he offered his belief that transporting oil by rail is a long way down the road. He commented that mines in the Ambler and Livengood represent potential customers, but these projects are not at that stage either. In concept, perhaps the state should consider a shorter line since the committee has essentially only heard from one potential customer. He acknowledged the [1972] vintage study previously mentioned, but noted that the mountains haven't moved a whole lot since then. While that particular route through Atigun Pass - including a tunnel - certainly could be an adequate route, he questioned the legislature funding the university for this study without a reasonable expectation that the project is going to go forward. He said that it's also not the legislature's job to "come up with welfare-type projects to keep university researchers engaged." He viewed the decision [on HB 271] from the perspective of whether to fund $2 million to the university to study [the Fairbanks to Deadhorse rail extension project] when the university could focus its research and intellect on other efforts that would provide a much more immediate return. 2:03:04 PM REPRESENTATIVE GATTIS echoed Representative Feige's comments. She related her constituents complain that the state funds feasibility studies but does not further it with an actual project. She emphasized that given declining revenues she is reluctant to fund yet another study that may not result in any project. Instead, she would prefer to fund projects that have not yet been finished. She said, "I won't be voting for this." The committee took an at-ease from 2:03 p.m. to 2:04 p.m. 2:04:58 PM REPRESENTATIVE ISAACSON asked to first address this bill and then hold the bill over to get some of the points fine-tuned. He acknowledged the importance of frugality during declining revenues; however, he urged the state to take the necessary steps to diversify its economy. He said, "Folks, we are so addicted to oil that is all we can see and oil is declining in its revenue stream so we need to diversify." He offered his belief that the proposed rail extension could help open new mines, oil development, and expand other economic opportunities for the state. He characterized [the feasibility study in HB 271] as being a very good use of money. He argued that the project doesn't represent "university welfare." He pointed out that frequently when the state makes an investment it is also sending a signal to the resource development industry that the state is serious about diversifying its economy and providing access and transportation. He lamented that he didn't ask Dr. Metz to provide more details and outline the benefits of this project. He referred to a four-page brief on this [study] in members' packets. He lauded Dr. Metz's knowledge and project experience. He emphasized the aforementioned study indicates that the state could realize a 30 percent return on investment from just one application this railroad would serve. 2:08:52 PM REPRESENTATIVE ISAACSON offered his belief that the rail investment is worthwhile, particularly since the railroad has been suffering staggering revenue losses due to Flint Hills Resources' refinery and Usibelli Coal Mine, Inc.'s decisions. For example, Flint Hills Resources refinery has not elected to ship any fuel in April. He predicted that the legislature will be asked to "help prop up" the Alaska Railroad Corporation (ARRC) with far more than $2 million based on the drastic revenue reductions the ARRC is experiencing. He supports HB 271 as an investment to assist the ARRC, to provide economic diversity, and to take advantage of a great opportunity. He vowed to "crank out" a simplified bullet sheet to outline the importance of this bill including any benefits to the state. Further, he stressed that ultimately private funds will build the railroad if it proves viable so it won't be necessary to spend general fund or capital fund monies to do so. He emphasized that the state must begin by proving the concept and send signals to the parties and the bond markets that the rail extension project from Fairbanks to Deadhorse is viable. He characterized this project as an important one for the general welfare of the state. 2:10:32 PM REPRESENTATIVE LYNN echoed Representative Isaacson's comments. He offered his belief that no one will fund a railroad extension project unless a study verifies that the project is feasible. He asked which will come first, the chicken or the egg. He recognized the tremendous potential of North Slope development and eventually a rail link could spur a connection to Lower 48. He hoped the bill would come back before the committee. He pointed out that the state has studied the gasline countless times, yet the state is currently closer than ever before in making the gasline a reality. He asked members to evaluate the bill and take action. 2:12:24 PM REPRESENTATIVE GATTIS emphasized that she isn't suggesting that a study isn't important. She understands that sometimes "we have to spend money to make money." She acknowledged the importance of building infrastructure. She said she did not hear the compelling reason to move forward. She agreed with Representative Lynn that it is important, but not at this time. [HB 271 was held over].
Document Name | Date/Time | Subjects |
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Economic Impact of a North Slope Rail Extension 2014 power pt.ppt |
HTRA 2/13/2014 1:00:00 PM |
HB 271 |
Economic Impact of a North Slope Rail Extension-Metz (2).pdf |
HTRA 2/13/2014 1:00:00 PM |
HB 271 |
CS HB260 version R 2_13_14.pdf |
HTRA 2/13/2014 1:00:00 PM |
HB 260 |