Legislature(2011 - 2012)CAPITOL 17

04/07/2011 01:00 PM House TRANSPORTATION


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01:54:25 PM Start
01:54:53 PM Presentation on the State Transportation Improvement Program (stip) by the Department of Transportation & Public Facilities
02:56:12 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 1/2 hr. After Session --
+ Presentation on STIP by Dept. of Transportation TELECONFERENCED
& Public Facilities
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
                         April 7, 2011                                                                                          
                           1:54 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Peggy Wilson, Chair                                                                                              
Representative Eric Feige                                                                                                       
Representative Max Gruenberg                                                                                                    
Representative Pete Petersen                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Lance Pruitt, Vice Chair                                                                                         
Representative Craig Johnson                                                                                                    
Representative Cathy Engstrom Munoz                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION ON STATE TRANSPORTATION IMPROVEMENT PROGRAM                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MARK LUIKEN, Commissioner                                                                                                       
Department of Transportation & Public Facilities                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions during the overview of                                                                
the State Transportation Improvement Program (STIP).                                                                            
                                                                                                                                
JEFF OTTESEN, Director                                                                                                          
Program Development                                                                                                             
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented an overview and answered                                                                       
questions the discussion of the State Transportation Improvement                                                                
Program (STIP).                                                                                                                 
                                                                                                                                
PAT KEMP, Deputy Commissioner                                                                                                   
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Presented  an  update  on  the  Roads  to                                                             
Resources Program.                                                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:54:25 PM                                                                                                                    
                                                                                                                                
CHAIR  PEGGY  WILSON  called the  House  Transportation  Standing                                                             
Committee meeting to order at  1:54 p.m.  Representatives Wilson,                                                               
Feige, Gruenberg and Petersen were present at the call to order.                                                                
                                                                                                                                
^Presentation  on the  State  Transportation Improvement  Program                                                               
(STIP) by the Department of Transportation & Public Facilities                                                                  
  PRESENTATION ON THE STATE TRANSPORTATION IMPROVEMENT PROGRAM                                                              
 (STIP) BY THE DEPARTMENT OF TRANSPORTATION & PUBLIC FACILITIES                                                             
                                                                                                                                
                                                                                                                                
1:54:53 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON  announced that the only order  of business would                                                               
be  a  presentation  on   the  State  Transportation  Improvement                                                               
Program (STIP).                                                                                                                 
                                                                                                                                
1:55:31 PM                                                                                                                    
                                                                                                                                
MARK LUIKEN, Commissioner, Department  of Transportation & Public                                                               
Facilities,  introduced  his  team  and  discussed  the  DOT&PF's                                                               
mission.   The  State Transportation  Improvement Program  (STIP)                                                               
will be presented by Mr. Ottesen, he said.                                                                                      
                                                                                                                                
1:58:02 PM                                                                                                                    
                                                                                                                                
JEFF  OTTESEN,  Director,   Program  Development,  Department  of                                                               
Transportation  &  Public  Facilities (DOT&PF),  stated  that  he                                                               
would  briefly discuss  the Long  Range Transportation  Plan 2030                                                               
and  the 2011  State  Transportation  Improvement Program  (STIP)                                                               
[slide 1].  The Long  Range Transportation Plan was last approved                                                               
in 2008  and has a five-year  life under federal law  so the plan                                                               
will  need   to  be  replaced   by  2013.    The   Department  of                                                               
Transportation  &  Public  Facilities   (DOT&PF)  has  begun  its                                                               
efforts  to  update the  plan  [slide  2].   The  consultant  has                                                               
performed  a data  refresh, reviewing  the new  demographic data,                                                               
and  how the  highway and  aviation and  other systems  are being                                                               
used.   He related that  the DOT&PF's commissioner would  like to                                                               
integrate the new  plan with the Strategic Plan  this year [slide                                                               
3].   He reviewed the  DOT&PF's overall planning structure.   The                                                               
Strategic Plan  sets the  vision and broad  agenda for  the other                                                               
transportation   planning   documents   while  the   Long   Range                                                               
Transportation Plan  (2030) provides the details  of the DOT&PF's                                                               
policies.  The federal government  requires states to have a long                                                               
range  transportation plan.   Thus,  the policy  plan must  be in                                                               
place in the  STIP, or the state would not  be to receive federal                                                               
funds.   Since the  state's transportation  systems are  so large                                                               
and  its systems  are complicated,  it is  not realistic  for the                                                               
state to select projects at this level.                                                                                         
                                                                                                                                
2:00:31 PM                                                                                                                    
                                                                                                                                
MR.  OTTESEN  discussed  the  subordinate  plans,  which  include                                                               
regions, metropolitan  areas, corridors,  or subsystems,  such as                                                               
aviation and ferry.  Lastly,  the DOT&PF has subject matter plans                                                               
for specific topic  issues, major earthquake response  plans.  He                                                               
emphasized the plans  are organized to work together.   The final                                                               
piece  of the  planning  process is  performance measures,  which                                                               
identify progress  or delays in  fulfilling the  planning process                                                               
and is the starting point for the next planning cycle.                                                                          
                                                                                                                                
2:01:50 PM                                                                                                                    
                                                                                                                                
CHAIR P.  WILSON asked how  long it  has been since  the DOT&PF's                                                               
Strategic Plan was last prepared.                                                                                               
                                                                                                                                
MR. OTTESEN  explained Commissioner von Scheben  prepared a small                                                               
plan but  it did not get  integrated into the overall  plan.  The                                                               
DOT&PF has  worked to integrate  the Strategic Plan  that relates                                                               
to all  of the DOT&PF's  transportation plans.  He  reported that                                                               
the Strategic  Plan will  help guide the  DOT&PF during  the Long                                                               
Range Transportation Plan's preparation.                                                                                        
                                                                                                                                
CHAIR P. WILSON related her  understanding that the process seems                                                               
similar  to  the  overall school  planning  process  that  school                                                               
districts use.                                                                                                                  
                                                                                                                                
2:02:44 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN  described the past  three years in which  the DOT&PF                                                               
has  had very  large funding,  including the  "Stimulus Funding."                                                               
The net effect of that funding  has been to reduce the backlog of                                                               
projects.  The  STIP has provided a list  of alternative projects                                                               
for the DOT&PF  to use when a project encounters  time delays due                                                               
to  right-of-way or  other issues.   Since  many of  the projects                                                               
have  moved  forward,  the department  currently  does  not  have                                                               
enough  "shovel-ready"  projects  to   capture  all  the  federal                                                               
funding.    He identified  "shovel-ready"  projects  as those  in                                                               
which the  design, permits, and right-of-way  have been performed                                                               
and  the project  is ready  to  receive federal  funding for  the                                                               
construction   phase   of   the   project.     In   response   to                                                               
Representative  Petersen,  he  answered  that the  funds  he  was                                                               
referring  to are  formula funds  which  will expire  the end  of                                                               
September 2011.  The DOT&PF must  be finished with the process by                                                               
September 10, 2011  in order to complete any wrap  up required by                                                               
the FHWA.                                                                                                                       
                                                                                                                                
MR. OTTESEN related  that the projects must  be "shovel-ready" to                                                               
qualify for  funding, but does  not mean  that all of  the design                                                               
and construction has been done or  even that the project has been                                                               
awarded.  Projects that are "shovel  ready" are ones in which the                                                               
federal government  has committed federal  funding.  The  term is                                                               
the  "obligation" of  federal funds,  when essentially  the state                                                               
signs a contract with the  Federal Highway Administration (FHWA),                                                               
he said.   In further response  to Chair P. Wilson,  he clarified                                                               
that the  design, right-of-way, and permitting  must be completed                                                               
prior to federal obligation.                                                                                                    
                                                                                                                                
2:06:05 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN  referred to a  chart that demonstrates  the DOT&PF's                                                               
federal  obligation  process  [slide  5].  He  pointed  out  that                                                               
numbers on the  right of the slide vary by  funding year, yet the                                                               
DOT&PF  obligated all  of the  federal funds  for the  five prior                                                               
years,  he said.   He  referred to  February 2011  column, noting                                                               
that $50 million  was obligated thus far. The star  at the top of                                                               
the chart  indicates the 2011  target, he explained.   The DOT&PF                                                               
must obligate about  $350 million plus an  additional $60 million                                                               
by the end of the federal  fiscal year.  He characterized this as                                                               
a "big, tall order" to fulfill.                                                                                                 
                                                                                                                                
MR. OTTESEN related  that the DOT&PF went from  not having enough                                                               
funding to  not having  enough projects  to fund  [slide 6].   He                                                               
explained  that the  American Recovery  and  Reinvestment Act  of                                                               
2009  (ARRA)  added  $175  million in  addition  to  the  regular                                                               
funding in  2009-2010.   Last year, the  Congress decided  not to                                                               
earmark projects so  it restored the equivalent of  five years of                                                               
earmarks to lapsable funding.   Lastly, what helped contribute to                                                               
the issue  was the anomaly  in which  bids came in  under budget.                                                               
When that  happens, the DOT&PF  must find other projects  to fund                                                               
with the  cost savings or  risk losing  the funding.   In further                                                               
response to Chair P. Wilson, he agreed  that the STIP is a mix of                                                               
projects in  different stages so all  the design work or  all the                                                               
construction  are not  done in  one year.   He  characterized the                                                               
process as  a factory with some  projects taking from one  to ten                                                               
years to complete.                                                                                                              
                                                                                                                                
2:08:53 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN  referred to the  Federal Highway Funding  [slide 7].                                                               
He pointed  out that the  chart demonstrates federal  funding has                                                               
steadily increased  since 2008.    He identified the  increase in                                                               
2009 and 2010 was due to  earmarks so the funding that previously                                                               
had  been  earmarked projects  is  distributed  to the  state  as                                                               
"formula" funding, he  said.  The column for 2001  shown in green                                                               
represents  approximately  $60  million  in  unexpended  funding.                                                               
Three  weeks ago  the Congress  considered stripping  the state's                                                               
funding  and while  it  not happen  it remains  a  threat so  the                                                               
DOT&PF is  anxious to  obligate those  funds.   In doing  so, the                                                               
overall  target  for  projects  will  be raised,  he  said.    In                                                               
response to Chair  P. Wilson, he agreed the state  is receiving a                                                               
little  more money.   Prior  to Safe,  Accountable, Flexible  and                                                               
Efficient  Transportation  Equity  Act of  2004  (SAFTEA-LU)  the                                                               
state  received formula  funds.   At the  time SAFTEA-LU  passed,                                                               
some of  the funds  were "earmarked" so  the formula  funding was                                                               
also  reduced  correspondingly.    The  Congress  has  eliminated                                                               
earmarks so the formula has  increased.  Overall, this translates                                                               
to more projects.                                                                                                               
                                                                                                                                
MR. OTTESEN  advised that  the DOT&PF  must obligate  almost $400                                                               
million  this  year.    Thus far,  the  regions  have  identified                                                               
approximately  $259  million  likely projects  and  another  $150                                                               
million of  possible projects.   However,  the DOT&PF  must still                                                               
contend  with  third  party  permissions  on  projects,  such  as                                                               
permits, right-of-way,  or local  government decisions,  so final                                                               
approval cannot be  made.  The DOT&PF has pared  down the list to                                                               
about $272 million.  This  represents the department's best guess                                                               
on the  total projects that  will be "shovel-ready."   Last year,                                                               
the DOT&PF's slippage was 50  percent and this year's estimate is                                                               
35 percent.  While the  amount of slippage sounds significant the                                                               
FHWA's performance  measure allows  50 percent slippage  or less.                                                               
However, the DOT&PF must still  identify at least $121 million of                                                               
eligible projects to obligate [slide  8].  He referred members to                                                               
a bar chart that identified the  projects in the STIP and funding                                                               
for the remainder of 2011 [slide 9].                                                                                            
                                                                                                                                
2:13:41 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN  identified the four  major reasons projects  must be                                                               
delayed [slide  10].  First,  delays happen when permits  are not                                                               
issued timely.   Secondly, projects  are delayed when  the DOT&PF                                                               
encounters right-of-way  difficulties such as when  a significant                                                               
number  of  parcels  must be  purchased  or  ownership  interests                                                               
become complicated.   Third, the department may  need to relocate                                                               
utilities, which may include negotiating  with the utilities.  In                                                               
response to  Chair P.  Wilson, he explained  that when  the state                                                               
relocates  the utility,  the  state  must pay  for  it.   Lastly,                                                               
delays  occur  due  to  third-party   issues  such  as  obtaining                                                               
permission  from  local  government  or when  documents  must  be                                                               
reviewed  by  multiple  agencies.    He  commented  that  funding                                                               
shortfalls have previously been the  source of delays but that is                                                               
not currently true.                                                                                                             
                                                                                                                                
2:17:03 PM                                                                                                                    
                                                                                                                                
CHAIR  P.  WILSON  related her  understanding  that  the  federal                                                               
funding may decrease.                                                                                                           
                                                                                                                                
MR.  OTTESEN agreed  one  proposal  is to  reduce  funding by  an                                                               
overall 10 percent cut.  In  further response to Chair P. Wilson,                                                               
he  acknowledged  that  the  bill  under  consideration  was  not                                                               
friendly to  Alaska.  However, that  bill is gone, he  said.  The                                                               
Congress  is  currently working  on  another  bill that  is  more                                                               
favorable to the  state.  However, the state  should be concerned                                                               
about the formula changes since the pie may shrink, he said.                                                                    
                                                                                                                                
2:18:45 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN cautioned committee members  that in the event DOT&PF                                                               
cannot obligate its funds, that the  federal aid would be cut and                                                               
returned   to  the   U.S.   Department   of  Transportation   for                                                               
reallocation to  other states  [slide 11].   He pointed  out that                                                               
Alaska  has  always been  the  recipient  of  this "end  of  year                                                               
reallocation of funds."  He  commended the DOT&PF for its ability                                                               
to  obligate funds  and obtain  funding originally  designated to                                                               
another  state.    However,  any  substituted  projects  must  be                                                               
"shovel-ready," and  that process  takes time.   It takes  one to                                                               
two  years  for  a  simple  project  and  much  longer  for  more                                                               
complicated projects, he said.   The DOT&PF can select substitute                                                               
any  projects from  the STIP  with legislative  budget authority.                                                               
In  response  to Chair  P.  Wilson,  he affirmed  the  substitute                                                               
projects must  already be in  the STIP.   He reported  the DOT&PF                                                               
will  evaluate  the   process  in  June  and   request  any  STIP                                                               
adjustment via the legislature.                                                                                                 
                                                                                                                                
CHAIR  P. WILSON  asked whether  the DOT&PF  could make  the STIP                                                               
adjustment on its own.                                                                                                          
                                                                                                                                
MR. OTTESEN  answered yes.  He  related that the DOT&PF  must get                                                               
FHWA and  Federal Transit  Authority permission.   Thus  far this                                                               
year, the  DOT&PF has made  two STIP amendments.   He anticipated                                                               
another request would be made in June 2011.                                                                                     
                                                                                                                                
2:20:33 PM                                                                                                                    
                                                                                                                                
MR. OTTESEN  identified actions  the DOT&PF  has taken  to ensure                                                               
the state  can obligate FHWA  funds [slide  12].  The  DOT&PF has                                                               
identified  all  feasible  alternative  projects.    The  state's                                                               
Office  of Management  and Budget  Committees has  been informed.                                                               
The  DOT&PF currently  has  been working  to  manage the  project                                                               
list,  including tracking  primary  and alternate  projects.   In                                                               
response  to Chair  P. Wilson,  he  agreed the  projects must  be                                                               
included in the  Capital Budget.  He recalled that  costs for re-                                                               
powering  the  M/V  Columbia  would  need  to  be  added  to  the                                                               
additional authorization.                                                                                                       
                                                                                                                                
MR. OTTESEN reviewed  the lessons the DOT&PF has  learned for the                                                               
future [slide  13].  The  DOT&PF must prepare  significantly more                                                               
projects each year  to ensure ready alternates.   The DOT&PF must                                                               
also  obtain  any  necessary  permissions  including  legislative                                                               
permission to  make the  substitutions.   While the  2012 federal                                                               
funding is still uncertain, the  state has enjoyed three years of                                                               
high funding.   He characterized this  as a trend that  the state                                                               
should not overlook.  The  DOT&PF must anticipate the possibility                                                               
that funding may remain high.                                                                                                   
                                                                                                                                
MR.  OTTESEN  discussed  other   observations  [slide  14].    He                                                               
remarked that  the federal  aid program  workload has  doubled in                                                               
just four years without any increase  in DOT&PF design staff.  He                                                               
expressed  concern over  the  high  pace and  the  lack of  ready                                                               
project alternatives.  "It's almost like  a horse race.  How long                                                               
can  you  keep asking  the  horse  to go  fast?"  he  asked.   He                                                               
answered that  the DOT&PF is no  longer in a short  sprint but is                                                               
now in a marathon.                                                                                                              
                                                                                                                                
2:23:26 PM                                                                                                                    
                                                                                                                                
PAT  KEMP, Deputy  Commissioner, Department  of Transportation  &                                                               
Public  Facilities (DOT&PF),  discussed  the  Roads to  Resources                                                               
program [slide 1].  The Roads  to Resources program began in 2003                                                               
as  "short   quick  shots  in   the  arm"  on   smaller  economic                                                               
development projects.   Currently,  the DOT&PF has  been focusing                                                               
on larger projects, which are  larger projects, particularly ones                                                               
that  would  "fill  the  pipeline,"  create  jobs,  and  increase                                                               
commerce.   These projects are  ones that are  significant enough                                                               
that they would likely require  an Environmental Impact Statement                                                               
(EIS) and a U.S. Corps of Engineers permit, he said.                                                                            
                                                                                                                                
2:25:22 PM                                                                                                                    
                                                                                                                                
MR.  KEMP   reviewed  the  guidelines  for   funding  and  design                                                               
standards [slide  2].  He  pointed out that road  construction is                                                               
costly, especially in  rural Alaska, where most  of the resources                                                               
are  located.     The  DOT&PF   has  been   considering  building                                                               
acceptable, low-standard  roads for its Roads  to Resources (R2R)                                                               
program,   which  would   cost  about   $750,000  per   mile  for                                                               
construction costs.   These roads  would consist of  16-foot wide                                                               
"pioneer  roads,"  which  would   be  strong  enough  to  support                                                               
construction  equipment.   The DOT&PF  would also  consider other                                                               
features such as  turnouts and may impose travel  limits, such as                                                               
east bound  traffic traveling in  the morning alternated  by west                                                               
bound traffic in the afternoon.   He recapped the R2R projects as                                                               
ones  that  would  provide  basic  road  access  to  support  the                                                               
resources ventures.  The DOT&PF  characterizes these as "long and                                                               
skinny" projects  that use state  funding and are  constructed to                                                               
minimum designs.                                                                                                                
                                                                                                                                
CHAIR P. WILSON asked whether permits  will be issued for a wider                                                               
road or only for the narrow access road.                                                                                        
                                                                                                                                
MR. KEMP  answered that  each project would  vary.   He suggested                                                               
that the  road to Umiat would  likely be for a  "wider footprint"                                                               
since it may  be necessary to bring the road  up to standard more                                                               
quickly than  another project, such  as the  road to Ambler.   He                                                               
explained  the  road   standard  would  be  a   function  of  the                                                               
private/public  partnership (PPP)  with the  developer, and  each                                                               
project  would be  considered separately.   He  characterized the                                                               
process as similar to the one  used for the Alaska Highway, which                                                               
was constructed  in eight months  and finished over  fifty years.                                                               
The  goal would  be  to  build the  R2R  projects  as quickly  as                                                               
possible  to facilitate  the developer's  needs to  explore.   He                                                               
envisioned that the original road  would be a "pioneer road" used                                                               
to extract the  ore or product and any upgrades  would take place                                                               
over time.   The  roadway would be  designated as  an "Industrial                                                               
Use Highway (IUH)"  a term used for 20 years,  he said [slide 3].                                                               
The   IUH  would   have  stronger   embankments  to   accommodate                                                               
overweight  and  oversize  vehicles.   The  DOT&PF  would  charge                                                               
developers a toll to use the  IUH highways.  The Klondike Highway                                                               
in Skagway  is an  example of  an IUH,  which was  developed when                                                               
mines opened up in Canada.   The DOT&PF has received toll revenue                                                               
for the  Klondike Highway for  nearly 20  years.  The  DOT&PF has                                                               
anticipated  $5 million  in revenue  per year  will be  generated                                                               
from the  proposed road to Umiat.   The Umiat road  project would                                                               
be  a long-term  project developed  under  a PPP  agreement.   He                                                               
suggested  that the  project could  initially  be funded  through                                                               
Alaska Industrial  Development & Export Authority  (AIDEA) bonds.                                                               
In response  to Chair P.  Wilson, he responded that  the Klondike                                                               
Highway is  the only toll  road the  state operates.   When mines                                                               
opened up in Canada, the  ore shipper participated in the funding                                                               
to reinforce the roadway embankment.   The ore shipper paid costs                                                               
up  front, while  others paid  tolls.   Currently, the  DOT&PF is                                                               
working to revisit the 20-year-old  regulations and probably will                                                               
increase the toll rate on the Klondike Highway, he said.                                                                        
                                                                                                                                
2:30:22 PM                                                                                                                    
                                                                                                                                
MR. KEMP stated the annual  maintenance and operation costs (M&O)                                                               
could  be  funded   with  IUH  fees.    He   offered  the  DOT&PF                                                               
anticipates  general fund  revenues from  tolls would  exceed the                                                               
cost  to maintain  the  toll  road, he  said.    Since funds  are                                                               
deposited   to  the   general  fund   the  department   does  not                                                               
specifically use  toll revenue to  perform work.  In  response to                                                               
Chair P. Wilson, he agreed that  the potential exists to start an                                                               
infrastructure bank at some point  to fund future resource roads.                                                               
However, he  did not think  the state is ready  to do so  at this                                                               
time.  He  pointed out the Klondike Highway  will need additional                                                               
work,  noting that  the bridge  is currently  the "choke  point,"                                                               
since it is not strong enough to accommodate the larger loads.                                                                  
                                                                                                                                
MR. KEMP  reviewed the current  Roads to Resources program.   The                                                               
DOT&PF  has three  projects  under  consideration, including  the                                                               
Umiat Oil  and Gas  fields known as  the Foothills  West project,                                                               
the Ambler Mining  District, and the Western  Alaska project also                                                               
known as  the Road to  Nome [slide 4].   He reported  these three                                                               
projects are included in the Capital Budget this year.                                                                          
                                                                                                                                
2:32:50 PM                                                                                                                    
                                                                                                                                
MR. KEMP discussed  the R2R projects, noting Umiat  is located on                                                               
the Colville  River about  100 miles west  of the  Dalton Highway                                                               
[slide 5].   The DOT&PF  studied three potential  corridor routes                                                               
for the  Umiat Road project,  including two  routes perpendicular                                                               
to the  highway, and  one at  an angle near  Galbraith Lake.   He                                                               
related that the preferred corridor  for the Umiat project is the                                                               
angled  corridor.     The   geologists  and   geophysicists  have                                                               
indicated  by approaching  at  an angle  could  provide a  better                                                               
accounting of  resources, would avoid two  major river crossings,                                                               
and would reduce capital costs.                                                                                                 
                                                                                                                                
2:33:54 PM                                                                                                                    
                                                                                                                                
MR. KEMP related that the U.S.  Navy first explored Umiat in 1946                                                               
in search of oil for the World War  II war effort.  It drilled 11                                                               
oil wells and one well produced 400  barrels for 93 days.  In the                                                               
past year the  state discovered 85,000 abandoned  barrels of oil,                                                               
which represents a major cleanup  for the U.S. Corps of Engineers                                                               
(Corps).  As a result,  the DOT&PF has initiated discussions with                                                               
the  Corps  to consider  whether  it  would participate  in  road                                                               
construction to aid in the  cleanup efforts.  The estimated clean                                                               
up costs  range from $135  million to  $800 million.   The DOT&PF                                                               
hopes for participation  since the road could  reduce the cleanup                                                               
costs  by   half.  Currently,  the   Umiat  project  is   in  the                                                               
environmental impact statement (EIS)  stage and the consultant is                                                               
gearing up  for this season's  field work.   He reported  that if                                                               
the funding  is not approved this  year the DOT&PF would  need to                                                               
stop work sometime soon when the  existing funding runs out.  The                                                               
developer estimates  the oil fields  contain 250  million barrels                                                               
of oil and 7 trillion cubic  feet of gas.  The state's Department                                                               
of Natural  Resources (DNR) also  estimated the  reserves between                                                               
100 million and  300 million barrels of oil.   He stated that the                                                               
oil is unique  since the oil is about 37  degrees.  The developer                                                               
would  like  to transport  the  oil  as  is to  the  Trans-Alaska                                                               
Pipeline  System (TAPS)  via an  underground conduit  to keep  it                                                               
cold.   It would subsequently  be heated at TAPS  and transported                                                               
via a gas line.  Thus,  this project could potentially be brought                                                               
to a higher standard earlier in order to bury the pipeline.                                                                     
                                                                                                                                
2:36:32 PM                                                                                                                    
                                                                                                                                
CHAIR P. WILSON asked whether the  pipeline work would be done at                                                               
the same time as the road to save money.                                                                                        
                                                                                                                                
MR. KEMP answered probably not  since road access is important to                                                               
provide  access to  do more  drilling.   He emphasized  that road                                                               
access  is  of  the  utmost   importance.    The  Alaska  Gasline                                                               
Development  Corporation is  overseeing the  24-inch bullet  line                                                               
from Prudhoe  Bay to Point MacKenzie,  he said.  He  recalled the                                                               
estimated cost of the pipeline  would be $8 billion, although the                                                               
projections include  an estimated  $4 billion for  a conditioning                                                               
plant  at Prudhoe  Bay  on a  70-acre parcel.    The plant  would                                                               
remove  impurities from  the natural  gas.   However, if  the gas                                                               
were brought  from the Gubik  oil fields, which  contains cleaner                                                               
natural  gas,   the  conditioning  plant  would   not  likely  be                                                               
required.   Eliminating  the conditioning  project could  save $4                                                               
billion.   He stressed the  importance of studying  and reviewing                                                               
the  project since  new information  can surface  during the  EIS                                                               
project.  In  response to Chair P. Wilson, he  explained the U.S.                                                               
Navy  initially discovered  oil seepage.   He  recalled reviewing                                                               
the   seismic  information   with   Commissioner   Luiken.     He                                                               
characterized  DNR as  a really  good partner.   The  DOT&PF just                                                               
received analysis from  the DOR on the Umiat Oil  and Gas fields,                                                               
noting   the   known   oil   reserves   alone   could   represent                                                               
approximately $6  billion in revenue  to state the over  the life                                                               
of  the  project.     The  net  present  value  of   the  oil  is                                                               
approximately $2 billion, he said.                                                                                              
                                                                                                                                
2:40:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FEIGE  asked whether  the  DOT&PF  has talked  to                                                               
Anadarko  Petroleum Corporation  (Anadarko)  as the  leaseholders                                                               
for the area from Chandler River to Anaktuvuk River.                                                                            
                                                                                                                                
MR.  KEMP answered  yes.   He acknowledged  multiple leaseholders                                                               
exist.   He pointed out that  having multiple owners adds  to the                                                               
complexity  of the  funding and  raises  issues of  how to  bring                                                               
another party  on mid-stream or after  the project is built.   He                                                               
was  unsure  of  how  to accomplish  that  but  acknowledged  the                                                               
process is still in the early stages.                                                                                           
                                                                                                                                
MR. KEMP  discussed some of the  attributes of the Umiat  Oil and                                                               
Gas  fields [slide  6].   This  project would  provide an  access                                                               
portal into  the National Petroleum Reserve-Alaska  (NPR-A).  The                                                               
DOT&PF would  like to  start construction  in 2013,  provided the                                                               
EIS and permitting process have been completed.                                                                                 
                                                                                                                                
2:42:53 PM                                                                                                                    
                                                                                                                                
MR.  KEMP discussed  the Ambler  Mining District  [slide 7].   He                                                               
pointed  out  the  stars  represent  resource  areas.    The  EIS                                                               
initially  considered alternatives  to tidewater  and the  Dalton                                                               
Highway.   He related that  the developer prefers  highway access                                                               
rather than port  access.  The proposed plan  would transport the                                                               
product  via the  Dalton Highway  and the  Parks Highway  to Port                                                               
MacKenzie.   The highway option  offers facility  and development                                                               
support,  including other  attributes of  surface transportation.                                                               
He referred to  a letter from Nova Gold the  DOT&PF just received                                                               
containing mineral resource projections.   He also referenced DNR                                                               
projections on  mineral resources in the  Ambler Mining District.                                                               
The  Ambler area  could support  several massive  sulfide mineral                                                               
deposits, each  similar in size  to Greens Creek mine  in Juneau.                                                               
The Greens  Creek mine has  operated in  Juneau for 25  years and                                                               
employs  about  325  people.   He  suggested  the  Ambler  Mining                                                               
District is  so large  it could support  six Greens  Creek mines.                                                               
The mineral belt area stretches 15  miles wide and 68 miles long.                                                               
A "pioneer  road' would  help facilitate  additional exploration,                                                               
site development,  and ore haul.   He pointed out  the importance                                                               
of caribou to  the region and related the  $1.25 million included                                                               
in  this year's  Capital  Budget would  be  used for  subsistence                                                               
studies.   He  related that  the developer  must also  perform an                                                               
economic analysis, which is detailed  in the letter he previously                                                               
mentioned.                                                                                                                      
                                                                                                                                
2:44:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether the DOT&PF  has considered                                                               
a railroad  rather than a  road.   He recalled that  some federal                                                               
funds target railroad development.                                                                                              
                                                                                                                                
MR.  KEMP answered  that a  rail  line requires  a more  detailed                                                               
alignment as well as permafrost  considerations.  He stated he is                                                               
not a mining  expert so he preferred not to  broach the amount of                                                               
ore.                                                                                                                            
                                                                                                                                
REPRESENTATIVE PETERSEN  asked whether  basic processing  of ores                                                               
would be conducted onsite.                                                                                                      
                                                                                                                                
MR. KEMP  answered he  was unsure.   He stated  that he  is civil                                                               
engineer and  not a  mining engineer.   He  offered to  check and                                                               
report back to the committee.                                                                                                   
                                                                                                                                
2:46:40 PM                                                                                                                    
                                                                                                                                
MR. KEMP discussed  the Western Alaska Access  project [slide 9].                                                               
He  stated that  this  project is  different  since this  highway                                                               
would not  only access resources  but would  connect communities.                                                               
He offered his  belief that the project could be  built in stages                                                               
with immediate benefits.   He said that the DOT&PF  could build a                                                               
78-mile  extension  to Tanana.    This  would provide  access  to                                                               
resources  and Tanana  would  have a  connection  by road,  which                                                               
would lower  its cost of living  and promotes commerce.   He said                                                               
he was  unsure whether Tanana  would want a road  connection, but                                                               
used  it as  an  example of  how  this project  is  unique.   The                                                               
preferred alternative would be almost  the lowest route and would                                                               
begin  at Manley  Hot  Springs.   He  referred  to the  resources                                                               
indicated on  the map by  stars, noting some resources  exist all                                                               
along the  way.  This  project is not as  far along as  the other                                                               
two projects.  This is more of a long-term project, he said.                                                                    
                                                                                                                                
MR. KEMP discussed project details  for the Western Alaska Access                                                               
[slide  10].   The DOT&PF  would develop  this project  in phases                                                               
because of its independent utility.   The FY 12 requested funding                                                               
of $1.25  million would be  used for survey, mapping  and refined                                                               
cost estimates, he said.                                                                                                        
                                                                                                                                
2:49:00 PM                                                                                                                    
                                                                                                                                
MR. KEMP  pointed out other  potential projects [slide 11].   The                                                               
DOT&PF  has  been  working  with  DNR  on  future  R2R  projects,                                                               
including the rare earth element  deposit access on the Prince of                                                               
Wales  Island. The  Niblack  Mineral  Development, Inc.'s  copper                                                               
sulfide  deposit has  the potential  to become  another mine  the                                                               
size of Greens Creek mine.   He acknowledged that some developers                                                               
may  not  wish to  have  the  DOT&PF  involved in  R2R  projects,                                                               
whereas others  may welcome partnerships.   The DOT&PF's  goal is                                                               
to  create jobs  and  help promote  commerce in  the  state.   In                                                               
response to Representative  Feige, he responded he  was unsure of                                                               
the  location  of the  location  of  the Deadfall  Snycline  coal                                                               
project.                                                                                                                        
                                                                                                                                
CHAIR P. WILSON asked for clarification on the term "PGE."                                                                      
                                                                                                                                
REPRESENTATIVE FEIGE stated that  the acronym stands for Platinum                                                               
Group Elements (PGEs).                                                                                                          
                                                                                                                                
MR.  KEMP related  his understanding  that  legislators may  have                                                               
lots  of questions,  although  some cannot  be  answered at  this                                                               
time.   He  offered his  belief that  the EIS  documentation will                                                               
answer many  of the questions.   He  explained that the  EIS will                                                               
cover  the  socio-economic,  caribou  studies,  subsistence,  and                                                               
natural  environmental aspects.   He  stressed the  importance of                                                               
maintaining   a  steady   stream  of   funding  to   support  the                                                               
permitting.                                                                                                                     
                                                                                                                                
2:51:53 PM                                                                                                                    
                                                                                                                                
CHAIR  P. WILSON  offered her  belief that  the R2R  projects are                                                               
important.    She  referred  back   to  the  three  R2R  projects                                                               
discussed today and asked him to prioritize the projects.                                                                       
                                                                                                                                
MR. KEMP  offered to rank  the projects according  to importance,                                                               
with  the  Umiat Foothills  West  Transportation  project, Ambler                                                               
Mining District, and Western Alaska Access study project.                                                                       
                                                                                                                                
2:53:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  suggested the  need to  communicate with                                                               
public so they feel like they are part of the process.                                                                          
                                                                                                                                
MR.  KEMP agreed.   He  related that  the department  has held  a                                                               
substantial number  of informal  public meetings.   The Anaktuvuk                                                               
Pass has had  three meetings to date.  He  stated that the formal                                                               
meetings will start  during the EIS process.  He  stated that the                                                               
DOT&PF has selected a consultant and  have signed a contract.  He                                                               
contractor will  conduct filed studies  this year,  including two                                                               
seasons of field studies to  complete the caribou studies for the                                                               
Foothills West Transportation project.   The DOT&PF is performing                                                               
work and  hopes to have  the EIS completed, including  permits in                                                               
late 2012 on the Foothills  project. He anticipated permits being                                                               
issued late in 2012.                                                                                                            
                                                                                                                                
2:56:12 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Transportation Standing  Committee meeting was adjourned  at 2:56                                                               
p.m.                                                                                                                            

Document Name Date/Time Subjects
FINAL - Roads_to_Resources_House_4 7 11.pdf HTRA 4/7/2011 1:00:00 PM
House Trans STIP in 2011.pptx HTRA 4/7/2011 1:00:00 PM