Legislature(2015 - 2016)SENATE FINANCE 532
01/22/2015 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Marine Highway System (amhs) Report to the Legislature by Matt Mcclaren, Business Development and Enterprise Manager and Captain John Falvey, General Manager, Amhs | |
| Discussion of Status of Projects: Road to Ambler Mining District, Juneau Access Road Project, Susitna Watana Hydro Project, Knik Arm Bridge, Alaska Stand Alone Pipeline Project, and the Kodiak Launch Complex | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE TRANSPORTATION STANDING COMMITTEE
SENATE TRANSPORTATION STANDING COMMITTEE
January 22, 2015
1:07 p.m.
MEMBERS PRESENT
HOUSE TRANSPORTATION
Representative Neal Foster, Co-Chair
Representative Shelley Hughes, Co-Chair
Representative Charisse Millett
Representative Benjamin Nageak
Representative Louise Stutes
Representative Matt Claman
Representative Dan Ortiz
SENATE TRANSPORTATION
Senator Peter Micciche, Chair
Senator Click Bishop, Vice Chair
Senator Mike Dunleavy
Senator Bert Stedman
Senator Dennis Egan
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Sam Kito
Representative Cathy Tilton
COMMITTEE CALENDAR
OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM (AMHS) REPORT TO THE
LEGISLATURE BY MATT MCCLAREN~ BUSINESS DEVELOPMENT AND
ENTERPRISE MANAGER AND CAPTAIN JOHN FALVEY~ GENERAL MANAGER~
AMHS
- HEARD
DISCUSSION OF STATUS OF PROJECTS: ROAD TO AMBLER MINING
DISTRICT~ JUNEAU ACCESS ROAD~ SUSITNA-WATANA HYDRO PROJECT~ KNIK
ARM BRIDGE~ ALASKA STAND ALONE PIPELINE PROJECT~ AND THE KODIAK
LAUNCH COMPLEX
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CAPTAIN JOHN FALVEY, General Manager
Ketchikan Office
Alaska Marine Highway System (AMHS)
Department of Transportation & Public Facilities (DOT&PF)
Ketchikan, Alaska
POSITION STATEMENT: Testified during a PowerPoint overview of
the AMHS.
MATT McLAREN, Business Development & Enterprise Manager
Alaska Marine Highway System (AMHS)
Department of Transportation & Public Facilities (DOT&PF)
Ketchikan, Alaska
POSITION STATEMENT: Testified during a PowerPoint overview of
the AMHS Tariff Study.
MARK R. DAVIS, Deputy Director
Infrastructure Development
Alaska Industrial Development and Export Authority (AIDEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
discussion of the Road to Ambler Mining District.
JOHN BINDER, Acting Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Testified during the Juneau Access Road
project.
KIM RICE, Deputy Commissioner
Office of the Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Juneau Access Road project.
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Susitna-Watana Hydro project.
WAYNE DYOK, Project Manager
Susitna-Watana Hydro
Alaska Energy Authority
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the overview of the status
of the Susitna-Watana Hydro project.
CRAIG CAMPBELL, President & Chief Executive Officer
Alaska Aerospace Corporation (ACC)
Department of Military and Veterans Affairs
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Kodiak Launch Project.
JOHN BINDER, Acting Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Juneau, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Knik Arm Crossing project.
KIM RICE, Deputy Commissioner
Office of the Commissioner
Department of Transportation & Public Facilities (DOT&PF)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Knik Arm Crossing project.
FRANK RICHARDS, Vice President
Engineering and Program Management
Alaska Gasline Development Corporation (AGDC)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of the status of the
Alaska Stand Alone Pipeline (ASAP) project and offered the spend
rate response to Administrative Order [AO] 271.
ACTION NARRATIVE
1:07:37 PM
CO-CHAIR NEAL FOSTER called the joint meeting of the House and
Senate Transportation Standing Committees to order at 1:07 p.m.
Present at the call to order from the Senate Transportation
Standing Committee were Senators Bishop, Egan, Dunleavy, and
Micciche and present from the House Transportation Committee
were Representatives Millett, Stutes, Claman, Ortiz, Hughes, and
Foster. Senator Stedman and Representative Nageak arrived as
the meeting was in progress. Representatives Kito and Tilton
were also in attendance.
^OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM (AMHS) REPORT TO THE
LEGISLATURE BY MATT MCCLAREN, BUSINESS DEVELOPMENT AND
ENTERPRISE MANAGER AND CAPTAIN JOHN FALVEY, GENERAL MANAGER,
AMHS
OVERVIEW: ALASKA MARINE HIGHWAY SYSTEM (AMHS) REPORT TO THE
LEGISLATURE BY MATT MCCLAREN, BUSINESS DEVELOPMENT AND
ENTERPRISE MANAGER & CAPTAIN JOHN FALVEY, GENERAL MANAGER, AMHS
1:08:53 PM
CO-CHAIR FOSTER announced that the first order of business would
be an Overview: Alaska Marine Highway System (AMHS) Report to
the legislature by Matt McLaren, Business Development &
Enterprise Manager and Captain John Falvey, General Manager,
AMHS.
1:10:03 PM
CO-CHAIR FOSTER explained that the operating budget passed last
year required the AMHS to complete a review and analysis of
current passenger, vehicle, and cabin rate structure for the
system and report a modified tariff and fee schedule to the
legislature no later than February 1, 2015. [House Bill 266,
Chapter 16, SLA 14].
1:10:52 PM
CAPTAIN JOHN FALVEY, General Manager, Ketchikan Office, Alaska
Marine Highway System (AMHS), Department of Transportation &
Public Facilities (DOT&PF), related he will provide a PowerPoint
focusing on a brief review of the AMHS.
1:12:07 PM
CAPTAIN FALVEY referred to the "Organization/Leadership" chart
[slide 4]. At the height of the summertime traffic, the AMHS
has 1,018 staff, with the majority in vessel operations, he
said. The remaining employees staff shore-side facilities,
marine engineering, reservations and marketing (Juneau), and
administration. He reported that staffing is reduced by
approximately half during the winter when vessels are reduced
from 11 ships to 5-6 ships. In terms of crews, it takes 2.3
crews to crew the vessels, which allows for crew vacation and
shift changes. Staff at terminals is also reduced in the winter
with the AMHS hiring significant seasonal summer on-call
employees.
1:13:01 PM
CAPTAIN FALVEY directed attention to the "Fleet Composition"
[slide 5]. The "mainliner" ferries consist of the [motor
vessel] MV Malaspina, MV Taku, MV Matanuska, MV Tustumena, MV
Columbia, and MV Kennicott. He noted the slide indicates the
date the vessels were built, which ranges from 1963-1998. He
reported the next class of vessels, the 235s, or Aurora class
consist of the MV Aurora and the MV LeConte. The MV LeConte
serves as a day vessel for the panhandle and Lynn Canal while
the MV Aurora functions as a 24/7 vessel serving Prince William
Sound. The shuttle ferries consist of two fast ferries, the FVF
[fast vessel ferries] Fairweather and FVF Chenega as well as the
MV Lituya. These vessels operate as day boats and return to
their home port each evening, he said.
1:13:47 PM
CAPTAIN FALVEY reviewed the ports on the slide entitled
"Terminal Composition" [slide 6]. He reported the AMHS consists
of 35 ports of call ranging from the southern terminus at
Bellingham, to the northern terminus at Valdez, and the western
terminus at Dutch Harbor. Of these 35 ports of call, 17
facilities are located in Southeast Alaska and Canada, with 18
located in Southcentral Alaska and Southwest Alaska. The AMHS
manages these ports of calls in a variety of ways, he said,
noting the state owns and maintains 17 ports, with 12 manned and
5 unmanned facilities. He described manned facilities as
smaller ports with crew loading and unloading vehicles and
issuing tickets with the new reservation system anticipated to
streamline this process. Four leased facilities - located in
Bellingham, Prince Rupert, Seldovia, and Kodiak - use
subcontractors to manage vehicle loading and passenger
ticketing. The 14 privately-owned terminals, primarily located
on the Aleutian Chain, consist of city-owned docks to cannery
docks, with most unmanned, he said. The DOT&PF in Juneau
oversees capital projects and any large projects to maintain
AMHS's facilities, but the AMHS does handle smaller maintenance
projects.
1:15:29 PM
CAPTAIN FALVEY directed attention to the "Route Summary" [slide
7]. The AMHS's system is large, as depicted by the overlay of
the State of Alaska on a map of the Lower 48. In addition, the
AMHS's system is quite different from the three largest ferry
systems in the US, noting the AMHS's system consists of a 3,500
mile route that carries approximately 340,000 passengers and
115,000 vehicles. He contrasted this to ferries in Washington
and BC [British Columbia] with much smaller routes but much high
passenger volumes, primarily serving commuters and some
tourists. In other words, the AMHS carries fewer people and
vehicles over much longer distances, he said.
1:16:32 PM
CAPTAIN FALVEY turned to the "Monthly Traffic Activity" [slide
8]. He explained that traffic peaks in July, reaching the
lowest point in January and beginning to increase by April. He
noted the vehicle traffic has less fluctuations although vehicle
traffic does bottom out a bit in the winter. Thus, vehicle
transport figures tend to be more consistent than passenger
ridership.
1:17:14 PM
CAPTAIN FALVEY directed attention to the "On-time
Departures/Customer Satisfaction" [slide 9]. He explained that
on-time departures is gauged by ships sailing within 30 minutes
of the published departure time and is also based on customer
satisfaction [feedback]. The AMHS keeps its vessels moving and
ridership has been very happy, he said. The new reservation
system [online automatic reservation system (OARS)] will provide
significant data and the AMHS will be able to send customers an
e-mail questionnaire. One advantage of this is an e-mail allows
the survey to be changed more readily than the current hard copy
survey which will allow the AMHS to gain more customer
satisfaction information. Since the OARS system was initiated
in 2005 - allowing customers to book their own reservations -
the AMHS has seen an increase from 2005 to 2014 for online
bookings from 18.5 percent to 41 percent.
1:18:43 PM
SENATOR DUNLEAVY, referring back to the graph on slide 8
[Monthly Traffic Activity], asked whether the same vessels with
the same capacity are being run during times of low volume.
CAPTAIN FALVEY answered that ferry service is generally reduced
during the winter; for example, the AMHS may not have the same
two vessels running in Prince William Sound during the winter as
they do in the summer; instead, one vessel provides winter
service. In further response to Senator Dunleavy, he replied
that the vessels have more open [or vacant] passenger seats in
the winter.
SENATOR DUNLEAVY further asked whether the AMHS attempts to sell
more open seats at a discount to increase capacity during the
winter.
CAPTAIN FALVEY answered that the AMHS has struggled with that
concept, in part, since the current reservation system is aged.
He said he hopes to address increased capacity once the new
system is implemented in the fall since the OARS will have
ability to offer discounted fares.
1:20:50 PM
CAPTAIN FALVEY directed attention to the "Operating Expenditure
Analysis FY 08-14" [slide 10]. He noted the bar chart in blue
depicts GF [general fund] monies and the green shows the revenue
generated. Thus, for example, the total cost in FY 14 was $166
million, including embedded fuel trigger monies. These figures
do not include the state general fund capital funds for the
annual CIP [Capital Improvement Project] overhauls. During the
six week vessel overhaul, significant equipment certifications
and hull inspections required by federal regulations are
conducted, as well as minor maintenance. Major renovations for
federal CIPs are also separate; for example, the current
overhaul for the MV Kennicott spanned two years and cost $14
million.
1:22:43 PM
REPRESENTATIVE NAGEAK asked for the major cost driver of the
operating expenditure analysis.
CAPTAIN FALVEY directed attention to the pie charts for "FY 14
Revenues and Costs" [slide 11] to the annual operating costs of
$166 million. He provided a brief overview of the two largest
cost drivers: 40 percent for wages and 23 percent for payroll
benefits. In addition, other costs include 2.8 percent for
travel, which includes crew travel for non-bid jobs; 10 percent
for services, which includes approximately $1 million for
broadband fees, as well as terminal contracts and laundry costs
- provided by the prison; 19 percent for fuel costs; 5 percent
for commodities such as supplies; and 1 percent for support
services provided by the DOT&PF, such as human resources or
attorney general costs. He next directed attention to the pie
chart on the left to FY 14 revenue sources. The two major
revenue drivers are passenger ticket sales and car deck ticket
sales. He said the 48 percent of the AMHS's revenue is derived
from the car deck ticket sales, 33 percent from passengers, 10
percent for stateroom sales, 8 percent from passenger services,
and 1 percent from interest derived from fund investments.
1:25:12 PM
CAPTAIN FALVEY turned to the next slide, entitled, "FY 15 Look
Forward" noting the AMHS strives to manage within its budget and
has been successful in doing so [slide 12]. He reported that
the overall traffic figures have improved by 7 percent in the
past year, and that the system has encountered very few
mechanical casualties and few weather cancellations. Given the
aging fleet, the system has been running well overall, he said.
CAPTAIN FALVEY said the AMHS will implement a 4.5 percent tariff
increase, which will be discussed in more detail in the next
presentation. Briefly, [as Co-Chair Foster mentioned earlier]
intent language language was added to the operating budget
during the last legislature requesting the AMHS reduce its
general funds subsidy. In 2008, [Northern Economics, Inc.]
completed a rate study for the AMHS. Further, the AMHS Tariff
Analysis [dated January 2015] was just completed. The initial
study provided information on the AMHS's approximate tariffs,
numbering about 20,000, including combinations for every ship
and every port, and for vehicles ranging from kayaks to vans.
He acknowledged that the tariff structure had become
unmanageable, especially using the old reservation system. The
new OARS reservation system and a new tariff method that Mr.
McLaren will describe will make significant improvements. The
studies have identified the AMHS's high tariffs and low tariffs.
Embedded in the 4.5 percent tariff increase, the AMHS isolated
any tariffs 25 percent higher than the norm and have frozen
them. The AMHS has been moving slowly in an effort to even out
the tariffs, with an overarching goal to have fair and equitable
tariffs based on vessel miles. Fares will be based on the
number of miles traveled and the services received. Tariff
changes are currently underway and should generate about $1.8
million in savings in the current budget.
1:27:56 PM
SENATOR STEDMAN, speaking as a frequent AMHS traveler, noted
that some of Alaska's ferries travel directly between Petersburg
and Sitka, but others stop in Juneau before traveling on to
Sitka. He asked how the new tariff structure will handle the
added miles for passengers who must travel to an additional
port, not by choice.
1:28:51 PM
MATT MCLAREN, Business Development & Enterprise Manager, Alaska
Marine Highway System (AMHS), Department of Transportation &
Public Facilities (DOT&PF), answered that this has been
considered. In the aforementioned scenario, the tariff will
consider the beginning port of Petersburg and the destination of
Sitka and will not penalize passengers who are routed through
Juneau.
1:29:34 PM
SENATOR STEDMAN asked whether any data is available for non-
revenue passengers.
CAPTAIN FALVEY answered that the AMHS has discontinued non-
revenue passes.
1:30:35 PM
SENATOR STEDMAN asked for efficiencies that the AMHS has
aggressively pursued to reduce its costs; for example, with
respect to engines, propellers, and other cost saving measures.
He suggested information on cost savings could be quite
important to new members who may not be aware of ongoing efforts
the AMHS has made to control costs.
CAPTAIN FALVEY offered to report on cost reduction efforts at
the end of his presentation. In response to Senator Dunleavy,
he confirmed that the AMHS has been in the process of
identifying potential AMHS reductions for Governor Walker.
CAPTAIN FALVEY reported that the 4.5 percent tariff increase
will generate $1.8 million in reduced general funds for FY 16.
1:32:18 PM
CAPTAIN FALVEY directed attention to the next slide, entitled,
"Dayboat Alaska Class Ferries" [slide 13]. Two Alaska Class
ferries are currently being constructed in Ketchikan. These
vessels will be 280 feet in length, seat up to 300 passengers,
and carry 53 Alaska standard vehicles, approximately the size of
a Ford Expedition. The vehicles will feature very fast loading
and unloading bow and stern doors. He anticipated the AMHS will
build a double stern berth facility in Haines by FY 17 with the
capability to accommodate rapid movement of vehicles. Further,
the new ferries will have enclosed car decks, in part, in
response to public and legislative concerns about protecting
vehicles against the seas. These vessels will be equipped with
efficient propellers to maximize maneuverability and fuel
efficiency. The vessels are slated for a 2018 delivery date -
with one delivered in the spring and the other in the fall - and
will provide shuttle service between Juneau and Haines; and on
to Haines and Skagway. In addition, the AMHS was able to
purchase four engines prior to January 1 that allowed Tier III
emission engines as opposed to Tier IV engines, which will
result in significant cost savings over time. The AMHS was able
to meet the Environmental Protection Agency (EPA) requirements
to qualify and the engines have been purchased and stored in
Ketchikan. He reported the project is on budget and on time.
1:34:26 PM
REPRESENTATIVE CLAMAN asked for further clarification on where
the Alaska Class ferries fit in the vessel category.
CAPTAIN FALVEY answered that the Alaska Class ferries are
considered day vessels, which means crew will return to Juneau
and Skagway each evening.
1:34:52 PM
SENATOR DUNLEAVY asked for total cost of each vessel.
CAPTAIN FALVEY described the cost process of the Alaska Class
ferry, noting initially the AMHS budgeted $120 million to
construct one 350-foot vessel; however, the process was halted
after realizing construction costs would exceed $120 million.
Although $3.5 million was expended the AMHS owns the design
work. The remaining $117.5 million will provide the design,
construction engineering, direct cost allocation, and
construction for two Alaska Class ferries. In response to
Senator Dunleavy, he clarified the $117.5 million is the total
construction cost for two vessels. In response to Senator
Stedman, he offered to discuss repowering the MV Columbia at the
end of his presentation.
1:36:39 PM
CAPTAIN FALVEY turned to "Reservations & Manifest System"
[slides 14-15]. The new reservation system will be fully
available for public use in October 2015, but will run parallel
to the old system from July to October in case any glitches
arise. Carus, a Finnish company delivering the system, is well
versed in reservation systems. Carus has experience working
with operators in the Baltic region, the United Kingdom,
mainland Europe, Australia, Africa, and the US. He
characterized the company as being very successful and he
expressed confidence the new system [CarRes] will provide
efficiencies and be more user friendly; for example, the system
will have the capability of using smart phones for scanning
tickets. Further, the CarRes system will assist the AMHS with
security by tracking passengers as well as for outreach. The
AMHS will eventually use kiosks like the airlines, he said.
1:38:38 PM
CAPTAIN FALVEY, in response to Senator Stedman's earlier
question about cost savings, reported that during the past two
years the AMHS has reduced its costs by $4.5 million. For
example, the AMHS reduced travel agent commissions on point to
point in-state travel resulting in $450,000 in savings. In
addition, the AMHS reduced the 30 percent round trip winter
discount and discontinued free passes for drivers during the
summer, but retained the winter discount. The AMHS has closed
gift shops on the ships, reassigned gift shop personnel, and
will hire fewer new employees for the summer season resulting in
approximately $1 million in savings. The AMHS reduced the
running time for the MV Taku by a month resulting in $1 million
in savings. The MV Lituya now uses the Annette Bay terminal,
cutting its run time cut in half yet still providing two runs a
day to serve Ketchikan, resulting in a $250,000 in savings.
1:41:01 PM
CAPTAIN FALVEY detailed other savings including pushing back one
of the fast ferries by four or five months resulting in $800,000
in savings. The AMHS has also eliminated outsourcing, has been
vigilant on shore side and ship side staff, and has facilitated
a stipend plan with AT&T saving $40,000 on cell phones. The
cell phones are integral to operations since the AMHS runs 24/7
with shore side and ship side staff.
CAPTAIN FALVEY reported the MV Columbia spent nine months in a
Portland shipyard receiving new engines from $32 million in
federal funds, which has saved 10 percent in fuel costs. The
FVF Fairweather now has four new engines and is running nicely,
also with a 10 percent savings in fuel costs. As you may know,
the state settled with the contractor for approximately $30-$35
million to replace the fast ferry engines at no cost to the
state. The AMHS also purchased two spare swing engines housed
in Ketchikan at about half cost. In addition, the AMHS employs
fuel management systems on mainline ships that result in about 5
percent fuel savings. In response to an earlier question, he
indicated that the MV Matanuska will be repowered in 2016 and
2017, which should result in additional fuel savings.
1:43:12 PM
SENATOR EGAN asked for an update on the Prince Rupert terminal.
CAPTAIN FALVEY reported that the effort to rebuild the dock is
ongoing. The dock was condemned about six years ago and the
AMHS worked at that time with the BC [British Columbia] ferry
system to dock AMHS's ships using their terminals, but that dock
is no longer available. Two years ago the state signed a 50-
year lease with the Canadian government, including providing a
$3.3 million down payment using federal funds. The 50-year
lease essentially means the AMHS "owns" the terminal and is
responsible for property taxes and maintenance fees. The intent
was to spend approximately $11 to $20 million in federal funds
to rebuild the dock; however, a dilemma arose due to the "Buy
American" rules, which requires purchasing American steel when
federal monies are involved in a project. Canada objected and
invoked the Foreign Extraterritorial Measures Act, which meant
that Canadian firms bidding on the project may be subject to
potential fines. Thus, the state withdrew its bid yesterday, he
reported.
1:46:02 PM
CO-CHAIR HUGHES commented that she lived in Hoonah as a teenager
and understands how important the ferries are to the
communities. The AMHS has been subsidized by the state; for
example, by approximately $120 million in the last fiscal year.
She asked for the administration's long-term plans and vision to
reduce state subsidies to the ferry system, noting that Norway
and Canada have built tunnels, roads, and bridges [to reduce or
eliminate runs].
CAPTAIN FALVEY, referred back to the chart on slide 3, noting
the two biggest cost drivers for the AMHS are wages and fuel.
He highlighted cost savings, noting the department strives for
efficiency with is marine contracts while still maintaining fair
and equitable contracts, that the AMHS has enjoyed about a 10
percent reduction in fuel costs attributable to the new engines.
The mainline ferries also employ fuel throttle systems, he said.
CO-CHAIR HUGHES remarked that she appreciated the DOT&PF's
efforts, but encouraged the department to look at what other
countries have done to bring in other modes of transportation to
lower ferry costs.
1:49:52 PM
REPRESENTATIVE STUTES asked for a report on the MV Tustumena and
the dock repairs in Kodiak, which were hampered by the presence
of sea lions. She further wondered how this delay will affect
the projected costs.
CAPTAIN FALVEY answered that the design for the new MV Tustumena
is underway with $10 million in design funds, with an estimated
completion by December or early next spring. Further, not all
the design monies will be necessary, he said. He reported the
fund balance at $50 million. He estimated construction costs to
build the ship will be $220 million. In response to the dock
repair, that project is being overseen by the DOT&PF regional
office. He acknowledged the setback in terms of [federal]
permitting for sea lions, although the department has been
actively working to obtain the permits and anticipates
construction will occur thereafter, dependent on the
construction window.
1:52:07 PM
REPRESENTATIVE STUTES asked whether the department is
"reinventing the wheel" since the old MV Tustumena has operated
for 50 years.
CAPTAIN FALVEY emphasized the need to be cognizant of the vessel
service life, which he estimated at 10 years for the current MV
Tustumena. Ships are maintained via the federally-sponsored CIP
[capital improvement program]. The MV Tustumena underwent a
large project at the Seward shipyard, but some issues arose with
the shipyard; however, the ship had a good overhaul and repairs
were made. Nevertheless, it would be remiss not to start the
process for replacement so the AMHS has been proactively using
two processes: state funds, federal funds, or a combination of
the two to plan for the MV Tustumena's replacement.
1:54:22 PM
SENATOR STEDMAN stated one radical measure is to tie up ships to
the dock. He asked whether doing so would incur costs or if the
operating costs will be reduced to zero.
CAPTAIN FALVEY advised that costs will not be reduced to zero
unless a ship is scrapped or surplused and some costs due to
risk management to oversee the vessel would be incurred. In
addition, certificates must be maintained to keep the ship in
ready status, although he said he did not have the specific
figures available today.
1:55:38 PM
SENATOR STEDMAN agreed that it wasn't simple to just tie up
ships to bring down the subsidy since the AMHS would still incur
costs. In addition, the issue is complex, he offered, since
union agreements are in place and the state cannot unilaterally
make decisions. He emphasized that the AMHS faces challenging
problems, which is one reason why pressure has been made to
increase efficiencies.
1:56:54 PM
CHAIR MICCICHE said his last district was dependent on the
services of the MV Tustumena. He thanked Captain Falvey for his
management and the unprecedented safety record. In terms of the
governor's request for budget cuts, he asked whether
efficiencies including rates, schedules, and service adjustments
are also being considered.
CAPTAIN FALVEY agreed that the AMHS is looking at those
considerations.
1:57:52 PM
REPRESENTATIVE CLAMAN, in terms of the design costs for the MV
Tustumena, recalled the auto industry often faces design
considerations. He wondered if the AMHS is seeking a simple
design or cutting edge design and whether some design costs
could be eliminated by using a standard design being effectively
used in other parts of the world.
CAPTAIN FALVEY replied that some of the design considerations
are necessary because the MV Tustumena's routes are unique. For
example, the state doesn't own most of the docks so huge tide
differentials exist that requires vehicle elevator use, which
doesn't happen worldwide. The replacement ship must employ very
good design. The naval architectural firm has taken the basic
design and is building in efficiencies, ranging from hull
efficiencies to propeller efficiencies.
2:00:21 PM
REPRESENTATIVE CLAMAN understood this ship is a unique ship and
the AMHS is starting with the existing MV Tustumena's design.
CAPTAIN FALVEY agreed; noting the AMHS met with communities on
the replacement MV Tustumena and has incorporated their feedback
into the design; thus, the new ship will be slightly bigger but
the AMHS is cognizant of the size since it must accommodate the
existing docks.
REPRESENTATIVE CLAMAN acknowledged he had answered his question.
2:02:10 PM
MATT McLAREN began his PowerPoint on the AMHS Tariff Study by
reporting that Northern Economics, Inc. completed the rate study
for the DOT&PF in 2008. Northern Economics, Inc. made tariff
recommendations and recommended tariff formulas, which the
briefing will cover [slide 2]. He directed attention to their
recommendations. First, the Northern Economics, Inc. study
identified the state's current tariffs for passengers, vehicles,
and cabins ranged significantly. In fact, some fares were 25
percent above or below the average tariff per nautical mile.
The study recommended the AMHS freeze any tariffs that were 25
percent above the average tariff. Secondly, the study
recommended adopting a formula approach to setting the tariff in
an effort to design a more equitable tariff throughout the
system. Third, the study recommended the AMHS set a two-tier
tariff approach with some seasonal adjustments to accommodate
summer and winter demands. Further, they recommended that the
overall tariffs be increased from zero to 30 percent higher for
passengers and 30-40 percent higher for vehicles. He noted some
ridership doesn't vary much between summer and winter due to
local traffic. Third, the study recommended fare recovery rates
between 39-65 percent [slide 4.] He reported that the AMHS has
only been recovering approximately 31 percent of the recovery
rates, so it will consider some increases, either by
incorporating more efficiencies to reduce costs or combining
cost savings with adjusted tariffs to reach the minimum of 39
percent recovery.
2:05:39 PM
MR. McLAREN reported that the study also recommended
differentiating between commercial and passenger vehicle
tariffs, noting the current fares have been based on the amount
of room each vehicle uses. The commercial transport industry
typically has higher fees so the study recommended a 60-120
percent increase in commercial tariffs. The study also
recommended adopting a tariff premium for express and high
demand routes starting with an increase of 10 percent for these
routes; however, the study also recommended that these tariff
adjustments be implemented gradually over time to avoid shocking
the system.
2:07:02 PM
MR. McLAREN directed attention to "Passenger Tariff Formula"
[slide 5], to demonstrate the fee structure. The Northern
Economics, Inc. study recommended fixed embark and disembark
fees and adding a distance-based fee, with a seasonal multiplier
and a route-type multiplier to arrive at the passenger tariff.
MR. McLAREN next directed attention to the "Vehicle Tariff
Formula" [slide 6]. This formula would be similar with a
dimensional adjustment for larger vehicles plus adding a
commercial fee. He turned to the "Cabin Tariff Formula" [slide
7] stating that the fee would be based on the cabin type by size
and location plus a distance-based fee with a seasonal and route
adjustment. He next referred to the sample table of the current
tariff plan adjusted with the new structure [slide 8]. Again,
tariffs on routes that were greater than 25 percent would be
frozen, he said.
2:09:43 PM
MR. McLAREN highlighted the plan moving forward is to keep the
high tariffs frozen and adjust the lower fares until the system
fares area fair and equitable [slide 9]. Thus far a 4.5 percent
across the board tariff increase has been implemented on all
routes except the high tariffs. All routes will be analyzed to
determine the feasibility of seasonal adjustments. A premium
tariff will be implemented on express, dedicated and highly
utilized routes. The tariff formulas will be gradually
implemented over several years.
CAPTAIN FALVEY said the AMHS is currently working on formula
changes to calculate the tariffs. He anticipated that the new
tariffs will be embedded in the system when the new reservation
system is brought on next fall.
2:12:19 PM
REPRESENTATIVE CLAMAN said he's received some feedback that the
ferry system may be somewhat inflexible in recognizing and
serving communities hosting events. For example, he suggested
the AMHS might make some small adjustments to the schedule to
serve the Kodiak Crab Festival.
CAPTAIN FALVEY answered that AMHS works hard to accommodate
local communities, hold a summer and winter teleconference to
facilitate events, and has a comment period prior to finalizing
the schedules. They have a full-time scheduler who works to
make the very complex schedules work and accept e-mail and phone
call comments. He related that the AMHS has a list of special
events ranging from festivals in Cordova and Haines to kids
coming to Ketchikan for the music festival. He reiterated that
the AMHS attempts to accommodate communities, although some
issues can arise due to weather.
2:14:35 PM
REPRESENTATIVE CLAMAN interjected that he has heard of issues
arising in late spring or summer.
CAPTAIN FALVEY maintained the AMHS accommodates communities as
best as the system can.
2:14:52 PM
SENATOR STEDMAN mentioned that the number of complaints he has
received has been greatly reduced since Captain Falvey has taken
charge. In fact, significant improvements have occurred in the
AMHS in the past several years. He expressed concern that
budget concerns will raise issues for the legislature.
CAPTAIN FALVEY characterized his staff as hard working and very
skilled, performing a large volume of work, for example the crew
handle 15,000 dockings and undockings per year and based on
customer satisfaction [surveys] provide good service.
2:16:16 PM
CHAIR MICCICHE related the longer distances for the AMHS and the
2014 highs with about 350 percent differences in tariffs. He
understood the tariff changes will be implemented gradually and
asked for a definition of gradually.
MR. McLAREN related the AMHS's plan to implement the tariff
changes over a period of four to five years, which is somewhat
dependent on the route per mile embarking fees and the route
costs per mile. Of course, freezing the higher tariffs while
raising the lower ones helps bring the average tariff closer, he
said. He estimated the fare cost recovery rate will equate to a
$13 million difference from the current structure, which will be
met by incorporating efficiencies or increasing revenue;
probably a combination of the two. However, some areas may end
up paying twice their current fares, for example, a $20 fare may
increase to $40, which can be significant to communities so the
AMHS would like avoid instituting big increases.
2:18:59 PM
SENATOR BISHOP, referring to $2.4 million in support services on
the pie chart [on slide 11], indicated his preference to have
the department negotiate down the internal rate between the two
departments.
CAPTAIN FALVEY acknowledged his concern.
2:19:50 PM
CO-CHAIR FOSTER passed the gavel to Co-Chair Hughes.
The committee took at-ease from 2:19 p.m. to 2:21 p.m.
2:21:35 PM
CO-CHAIR HUGHES called the committees back to order.
^DISCUSSION OF STATUS OF PROJECTS: ROAD TO AMBLER MINING
DISTRICT, JUNEAU ACCESS ROAD PROJECT, SUSITNA WATANA HYDRO
PROJECT, KNIK ARM BRIDGE, ALASKA STAND ALONE PIPELINE PROJECT,
AND THE KODIAK LAUNCH COMPLEX
DISCUSSION OF STATUS OF PROJECTS: ROAD TO AMBLER MINING
DISTRICT, JUNEAU ACCESS ROAD PROJECT, SUSITNA WATANA HYDRO
PROJECT, KNIK ARM BRIDGE, ALASKA STAND ALONE PIPELINE PROJECT,
AND THE KODIAK LAUNCH COMPLEX
2:22:24 PM
CO-CHAIR HUGHES announced that the final order of business would
be a discussion of status of projects: Road to Ambler Mining
District, Juneau Access Road Project, Susitna Watana Hydro
Project, Knik Arm Bridge, Alaska Stand Alone Pipeline Project,
and the Kodiak Launch Complex. She noted that she has
previously referred to these projects as mega projects, but she
would like to withdraw that designation. She said she
recognizes that they are important and major projects, but are
not on the scale of mega project. She identified the Knik Arm
Bridge Crossing project as one of great interest to her district
projected at $1 billion. In terms of cost, she related the
bridge between Portland and Vancouver is a $3 billion bridge.
She expressed concern that labels can create certain connotation
that can kill projects.
CO-CHAIR HUGHES asked Mr. Davis to provide a status report on
the next project listed on the Governor's Administrative Order
(AO) 271, the Road to Ambler Mining District.
2:25:16 PM
MARK R. DAVIS, Deputy Director, Infrastructure Development,
Alaska Industrial Development and Export Authority (AIDEA),
Department of Commerce, Community & Economic Development
(DCCED), stated that AIDEA has issued stop orders and is in the
process of paying outstanding invoices. He further reported
that AIDEA has been working to stabilize the data that has been
collected to date, but not go to a final report. For example,
on the fisheries report the AIDEA believes it can expend $20,000
on a draft report versus issuing a final report for $70,000.
AIDEA always intended to use the appropriated funds for an
environment impact statement (EIS), he said. The appropriated
funds to date total $9.7 million, with an estimate of $1.4 to
$1.6 million necessary to shut down the project if the
administration and legislature desire to do so.
MR. DAVIS indicated that AIDEA has collected base data and has
prepared a draft application to the US Army Corps of Engineers
[USACE] and has selected a third party contractor to prepare an
EIS if the project were to move forward. He estimated an
additional $6.8 to $7 million will be necessary to continue to
reach a record of decision on the EIS. If the project is shut
down, he estimated that AIDEA could return approximately $7.6 to
$7.9 million to the legislature. In response to Co-Chair Hughes
he reiterated $1.4-$1.6 million to shut down and preserve the
data, with $7.6-$7.9 in general fund monies available to return
to the legislature. Finally, it would cost an additional
estimated $6.8 million in FY 17 to move forward with the
project, he said.
2:28:16 PM
CO-CHAIR HUGHES asked for an overview of scope of the Road to
Ambler Mining District. She understood it would be a 220 mile
industrial road - not paved - but a gravel road. She further
asked for a timeline to move forward.
MR. DAVIS summarized the Ambler Mining District Road project,
such that AIDEA has been working to obtain a record of decision
for the EIS. If AIDEA were to file for an EIS it would take
three to four years to obtain it. If the EIS were granted by
the US Army Corps of Engineers (USACE), the AIDEA's board would
declare the project and would undergo a finance plan to seek
private capital to build a road estimated at $200-$258 million,
according to Dowl. He anticipated that the construction would
take 3-4 years, with the final process 8 years out. In response
to Representative Ortiz, he reported that the state has invested
about $20 million to date. He explained that some funds were
spent by DOT&PF and some by AIDEA. He noted AIDEA received two
appropriations from the legislature with $9.3 million of the
appropriation remaining.
2:29:55 PM
REPRESENTATIVE NAGEAK commented that during his time in the
legislature he has often discussed the necessity to access
Alaska's resources. The cost to do business in rural Alaska is
very high, largely due to transportation costs. In fact, he
lives 150 miles from the source of the wealth of the state yet
he still pays $7 per gallon for gasoline. Further, the state
relies on oil and gas revenues, which has been driving the
economy. He emphasized that natural resources are located in
rural Alaska and building infrastructure such as ports and roads
are necessary to diversify the economy. He reminded members
that today's dollars are cheaper than tomorrow's dollars. He
urged members to build the infrastructure at today's costs since
the projects will cost significantly more in the future.
2:33:21 PM
SENATOR STEDMAN acknowledged that it is difficult to represent a
region and see a project disappear. He noted that the bridge to
Gravina Island funding was reappropriated to the Railbelt
communities. He emphasized that he has long been a supporter of
the Ambler Mining District road project, the Knik Arm Bridge,
and the Watana [Hydro project]; however, the state is facing a
$4 billion deficit. He said it will be tough to see any of
these projects be shelved for some time.
2:33:43 PM
SENATOR BISHOP asked for the annual dividend to the state on Red
Dog Mine port road and the dividend to NANA Regional Corporation
(NANA).
MR. DAVIS offered to provide the information. He understood
that it is significant revenue. He offered his belief that the
net present value of the road would be about $84 to $90 million
over a 30 year life of the project back to the developer.
2:35:20 PM
CO-CHAIR HUGHES commented that [the legislature] wants the
private sector to be strong as the necessary budget cuts occur.
She stated that the governor's [Administrative] order [AO 271]
is to review the projects so they can be prioritized. She hoped
members will have an open mind and consider the statewide
perspective.
2:36:18 PM
CO-CHAIR HUGHES turned next to the Juneau Access Road project.
2:36:36 PM
JOHN BINDER, Acting Commissioner, Department of Transportation &
Public Facilities (DOT/PF), stated that the Juneau Access Road
project is a proposed Federal Highways Administration (FHWA) and
DOT&PF action to improve surface transportation to and from
Juneau within the Lynn Canal Corridor. This project has been
under consideration for a long time, he said. In 2006, the
final EIS was issued that would have allowed the project to move
forward with the East Lynn Canal Highway alternative for
construction. Several lawsuits were filed arguing the EIS
failed to consider improved ferry service could be made
available using current infrastructure. After many days in
court the lawsuit was upheld. In January 2012, a supplemental
EIS process was initiated to consider the additional
alternative. In November 2014, a draft EIS was issued regarding
that alternative. Significant public comment was received and
the contractor is currently responding to the comments. He
anticipated that a draft final EIS will be available for a
record of decision in early 2016. Thus a significant amount of
time will be spent incorporating the comments into the EIS.
ACTING COMMISSIONER BINDER related that the estimated total cost
for the project in 2013 dollars is $570 million. Thus far $26
million of federal funds and $20 million of state funds have
been expended or approximately $45 million total funds to date.
2:39:01 PM
CO-CHAIR HUGHES asked for further clarification on the remaining
state general funds necessary for the Juneau Access project.
ACTING COMMISSIONER BINDER answered that he doesn't have the
figures broken out between state and federal funds necessary,
but offered to provide it.
REPRESENTATIVE HUGHES understood it was approximately $9
million.
2:39:32 PM
KIM RICE, Deputy Commissioner, Office of the Commissioner,
Department of Transportation & Public Facilities (DOT&PF),
stated that the estimated cost is approximately $523 million to
construct the roadway. She stated that the federal aid
typically comes in at ten percent so it would cost approximately
$52 in [state funds].
2:39:57 PM
SENATOR EGAN, with respect to funding, asked what happens if
there are substantial delays to the EIS.
ACTING COMMISSIONER BINDER answered that this is still to be
sorted out with the FHWA. He anticipated that as the
administration highlights its vision that some of it will flesh
out. He said he doesn't know the answer, but in the worst case
scenario, the state has expended $26 million federal funds that
may need to be reimbursed. Again, at this point, this is
unknown.
2:40:48 PM
SENATOR EGAN asked whether the funds would need to be returned
to the federal government.
MS. RICE answered that significant debate has occurred. She
went to the source 23 CFR 630, the federal regulation. She
offered her interpretation, that from the time of the EIS and
the right-of-way is opened, the state has 20 years to complete.
If the project is in preliminary engineering the state has a 10
year deadline. The end of the regulation says that the state
may request a time extension beyond the 20 year limit, with no
repayment of federal funds and the FHWA may approve this request
if it is considered reasonable. She reported this is why the
DOT&PF is working closely with the FHWA. She offered two
examples, first, with the Tony Knowles Coastal trail [extension]
project, the DOT&PF worked through an EIS, got to the end of the
project, and the project was either supported by Municipality of
Anchorage or the state, but never supported by both at the same
time. Ultimately the decision was made not to build the
project, and the DOT&PF did not repay.
2:42:05 PM
MS. RICE turned to the second scenario in which a controversial
Anchorage highway-to-highway project was halted. In that
instance the state repaid the $10 million when the decision was
made not to move forward. However, the federal funding that is
returned is put on another project; thus, the state doesn't
really lose the federal funding, although it returns any general
fund monies. In a sense, the effect expands the programming,
she said.
2:42:40 PM
REPRESENTATIVE CLAMAN related that the answers to Senator Egan's
questions sufficed.
2:42:50 PM
SENATOR EGAN referred to the Gravina Island bridge funding that
was used elsewhere. He asked for further clarification on what
happens to all the money that has been appropriated; for
example, another $35 million was appropriated last year [for the
Juneau Access project]. He expressed concern about the funds
going elsewhere.
MS. RICE acknowledged that Senator Egan was referring to the
appropriated money but she offered to discuss the STIP
[Statewide Transportation Improvement Program] first.
SENATOR EGAN asked her to address the funding also.
MS. RICE was unsure if any federal earmarks have been provided
for the Juneau Access project. She explained the program
process, such that when the STIP is developed, AC or advanced
construct is built into the program. Thus, the DOT&PF can
advertise that projects are being worked on that need to move
forward, especially given that projects take anywhere from 5 to
10 years to develop. The STIP covers three years. She was
unsure whether the Juneau Access Road project has any
"earmarks." It's essential that the DOT&PF has the flexibility
to move funding around for projects that run into snags and do
not move forward. Thus, some AC projects move forward in the
program as regular construction projects. She reported that the
DOT&PF currently has an amendment to move the [Juneau Access
project] funding to future years. This will be reflected in the
STIP in future years. Typically, the DOT&PF carries forward
about 30 percent, which is the national average of shuffled
projects. She offered her belief that [Gravina Bridge project]
funds are dedicated to be used in other Ketchikan projects. She
cautioned that she knows less about Southeast Alaska than other
parts of the state, but she envisioned that some funding could
be reappropriated to other projects, noting the decisions are
not totally within the DOT&PF's control.
2:45:45 PM
CO-CHAIR HUGHES asked whether the administration agrees that the
Juneau Access Road project would save subsidies for the ferry
system. She asked whether Alaska should move forward with
remedies taken in other parts of the world.
MS. RICE answered that the DOT&PF is currently transitioning.
Historically, in recent history, the draft Southeast Plan
identifies quarters. The federal program requires planning
documents that have "big picture" vision and projects are
developed for the plan. One project in the Southeast Plan
[Southeast Alaska Transportation Plan (SATP) is the Juneau
Access Road project; another is Sitka to Warm Springs Bay.
Certainly, people will review the plan from the perspective that
some projects are "pipe dreams." Other projects may upset
people since the projects represent change. She said she wasn't
advocating either way; however, this is the process used to
develop projects. Numerous hearings were held on the draft
plan, which has been controversial. Funding changes and policy
direction also affect the transportation plans.
2:47:37 PM
REPRESENTATIVE MILLETT related that budget amendments are due to
the legislature on February 18. She asked for further
clarification on when the "go" or "no go" decision will be made
on the Juneau Access Road and Knik Arm Crossing projects. She
asked whether the legislature will get prior notification.
ACTING COMMISSIONER BINDER answered that the DOT&PF is currently
holding discussions with the governor's office. He anticipated
that the decisions would happen in the near future. In further
response he replied that he hoped it would be by February 18.
2:48:34 PM
SENATOR BISHOP said he still supports the [Juneau Access] road.
2:48:47 PM
CO-CHAIR HUGHES asked whether a meeting was held with
Commissioner Kemp after the commissioner issued the memo [with
respect to the aforementioned project].
ACTING COMMISSIONER BINDER answered that he was unsure. He
recalled that the administrative order [AO 271] issued by
Governor Walker requested an assessment on each of these
projects and the prior commissioner provided the information to
the governor's office.
2:49:39 PM
CO-CHAIR HUGHES asked which of the six projects are the most
"shovel ready."
MS. RICE answered that she and Acting Commissioner Binder have
only been involved recently in two of the projects so she said
they would decline to comment.
2:50:00 PM
CO-CHAIR HUGHES further narrowed the aforementioned question to
which projects under the DOT&PF's purview are most "shovel
ready."
MS. RICE speculated that both projects are considerably far
along in development. The Juneau Access Road project would have
gone to construction if it had not gone to court, she said.
Things will need to change; however, she couldn't predict if
another court case would arise. The Knik Arm Crossing project
has purchased 86 percent of the right-of-way. In addition, the
whole KABATA funding structure changed last year.
2:51:00 PM
CO-CHAIR HUGHES turned to the Susitna-Watana Hydro project.
2:51:20 PM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), Department of Commerce, Community & Economic Development
(DCCED), stated she would not give the PowerPoint on the project
but provide an update on the Federal Energy Regulatory
Commission {FERC] licensing process. She directed attention to
the agency's response to Administrative Order No. 271. The
authorized funds for the project totals $192 million, of which
$158 million has been expended to date. Approximately $20
million has been encumbered. If the project is shelved, it
would require additional work to appropriately shut down the
project to retain the data collected in a useful form for future
potential development. She reported that if the project is shut
down that the AEA would have approximately $6.6 million of
available funds from existing appropriations.
2:52:45 PM
MS. FISHER-GOAD noted some milestones in 2014, including that
the AEA filed an initial study with FERC, which is an extensive
report. The AEA has held several stakeholder meetings and of
the 58 studies, the agency has completed data collection on 13
studies. She pointed out that the AEA submitted a thorough
report to the legislature on January 20, 2015. An e-mail to
legislators links to this report, which provides a full annual
update on the status of the Susitna-Watana Hydro project.
2:53:40 PM
SENATOR BISHOP noted he is halfway through the Susitna-Watana
Hydro report. He asked for further clarification on how much
more money is required to obtain a FERC license.
MS. FISHER-GOAD answered that the AEA anticipates that it would
require $102 million to get to the license.
2:54:06 PM
SENATOR BISHOP asked for a timeline.
MS. FISHER-GOAD deferred to Mr. Dyok.
2:54:20 PM
WAYNE DYOK, Project Manager, Susitna-Watana Hydro, Alaska Energy
Authority, Department of Commerce, Community & Economic
Development (DCCED), reviewed the timeline for the Susitna-
Watana Hydro project if $102 million [was appropriated]. He
anticipated that the project would file a license application to
FERC in early 2017 with an anticipated issuance by FERC at the
end of 2018, with construction commencing in 2019.
2:55:10 PM
REPRESENTATIVE CLAMAN asked for the current estimated cost of
construction after the $102 million necessary to obtain the
permit.
MS. FISHER-GOAD reported the current estimated cost of the
project engineering feasibility report of $5.655 billion. She
detailed that the agency has had three tracks in the development
of the project, including that a significant portion of the
funds have gone to collect environmental data to comply with the
study plan determination from FERC. The financing estimate
would encompass reviewing various ways the project could be
financed. There has never been an assumption that the state
would appropriate the $5 billion to build the project; instead,
it would be a financing process, she said. She elaborated that
the financing would occur through power sales agreements and a
combination of loans and bonds.
2:55:59 PM
CHAIR MICCICHE commented that the best organizations
periodically pause to prioritize projects, which he viewed as a
healthy exercise. He has been frustrated with the lack of
infrastructure investment related to access commerce and energy.
A new administration should reprioritize and evaluate
directions. He did not view this process as one in which
projects are eliminated forever. He expressed a range of
support for the six projects under consideration, noting he is
very supportive of some and less supportive of others.
2:58:00 PM
CO-CHAIR HUGHES acknowledged that she received a range of
feedback and support for these projects. She also agreed it is
a good exercise. She asked for the best guess on additional
costs to ramp up the Susitna-Watana Hydro project if it is
shelved.
MS. FISHER-GOAD answered that the AEA has been internally
struggling with the shelf life of the project. She reminded
members this project was shelved in the 1980s after the state
spent $140 million. The information to show trends and
consistency with respect to the data, noting the 1980s data was
very valuable, the project required a complete new study plan
determination and FERC approval to move forward on the 58
studies. At this point, there are too many factors to consider
to provide much of an estimate. She felt it was safe to say
that the project would need $102 million, plus additional funds.
She deferred to Mr. Dyok to weigh in.
2:59:48 PM
MR. DYOK replied that he did not have an educated guess;
however, it would likely depend on how long the project would be
shelved. The data probably would have a shelf life of three to
four years, but if that if the project was shelved beyond five
years the state would likely need to start over. Thus, between
zero and five years, some additional costs would be necessary.
He offered to provide some scenarios for the committee to
consider.
3:00:54 PM
CO-CHAIR HUGHES referenced the next project, the Kodiak Launch
Complex.
3:01:17 PM
CRAIG CAMPBELL, President & Chief Executive Officer, Alaska
Aerospace Corporation (ACC), Department of Military and Veterans
Affairs, reported, via teleconference, that in 2012 the
legislature approved $25 million in capital funds for the
development of three phases of medium lift out of the Kodiak
Launch Complex. Phase 1 was $3 million for design, engineering,
infrastructure preparation, and environmental work which could
be accomplished right away; Phase 2 was $10 million which could
not be spent without a signed contract; and Phase 3 for $12
million could only be spent once the necessary additional
funding was available to build a full medium lift complex. He
estimated the cost at that time to be approximately $125
million. Therefore, it was necessary to raise $100 million
against the $25 million to the state to be able to provide
medium lift. Legislation was passed for an Athena III rocket by
Lockheed Martin to be built at Kodiak Launch Complex for medium
lift. Over the last two years Lockheed has only been able to
build a business case for the Athena II-S which is a smaller
rocket with lift potential to do medium lift. Alaska Aerospace
Corporation offered a Request for Proposal [RFP] to the industry
as to whether there was interest in medium lifts in Alaska. It
received four proposals and selected Lockheed Martin and the
Athena II-S to proceed with the medium lift opportunities at
Kodiak.
MR. CAMPBELL said the uniqueness was that for AAC to convert the
existing launch facility at Kodiak to medium lift would only
require a $3-4 million investment, not the $125 million required
for the Athena III. He advised that a contract has not been
issued as Governor Bill Walker issued AO 271, and therefore a
hold was put on the project. He said that AAC advised Governor
Walker that $22 million of the $25 million appropriation is
available to the state and AAC would like the remaining $2.3
million of the $3 million of Phase 1 to complete medium lift for
Lockheed Martin's Athena II-S at Kodiak. Currently, he noted,
approximately $700 thousand has been spent on design and other
work, but there has been no construction toward medium lift.
The only outstanding issue is the last phase of the Federal
Aviation Administration (FAA) environmental assessment and, he
offered, that it should be completed within the next sixty days.
3:04:55 PM
REPRESENTATIVE STUTES questioned if the launch is rebuilt,
whether launches were lined up.
MR. CAMPBELL responded that AAC is in the process of rebuilding
launch pad 1, which was not impacted by AO 271 as it is being
built with insurance monies. He said the project should be
completed by October 2015 for "our customer that had the last
launch that is planning another launch in 2016."
3:05:44 PM
REPRESENTATIVE STUTES questioned whether the rebuilding was just
for small rocket launch or whether there would be the capability
of both small and medium rocket launches.
MR. CAMPBELL responded that AAC is rebuilding to small lift
under the insurance monies. He highlighted that should AAC be
authorized to move forward with a medium lift it would be an
additional project added to the current project to provide
medium capability.
3:06:31 PM
REPRESENTATIVE STUTES asked what the additional cost would be to
allow medium lifts in the rebuilding process.
MR. CAMPBELL explained that the Athena II-S is a medium lift
rocket and is the size that fits into AAC's current facility for
small lift as it is not a tall rocket. However, he offered, it
is heavier and requires a new stool, different umbilical
connections, and different paneling allowing individuals to work
on the rocket. He noted that it would cost approximately $3-4
million to retrofit inside the existing facility for medium
lift.
3:07:24 PM
CO-CHAIR HUGHES questioned if insurance had covered the cost of
repairs for the "mishap" this summer.
MR. CAMPBELL advised that the repairs have not been completed as
currently there is a demolition contract in place and the
insurance adjuster engineers are assessing the work required for
a rebuild. He relayed that the project is estimated to cost
approximately $29 million which will be paid through insurance,
and reconstruction should start in six weeks to be completed by
October.
3:08:13 PM
CO-CHAIR HUGHES moved to the Knik Arm Bridge Crossing.
3:08:23 PM
ACTING COMMISSIONER BINDER, Department of Transportation &
Public Facilities (DOT&PF), stated that the purpose of the
project is to improve surface transportation between the
Municipality of Anchorage and the Matanuska-Susitna Valley by
constructing a bridge across the Knik Inlet. He noted there
were several pieces currently in place, which includes a Letter
of Authorization required from the National Marine Fisheries
Service for the interruption of Beluga whales during
construction due to the Marine Mammals Protection Act. He noted
the letter has been requested and the anticipated time is
approximately 11-13 months. He remarked that approximately 86
percent of right-of-way acquisitions have been acquired and the
remaining properties are primarily government to governments
which, he noted, have been put on pause as a result of AO 271.
He described the Transportation Infrastructure Finance and
Innovation Act (TIFIA) loan requirement as the third pillar of
the overall funding structure. It includes a letter of interest
stage in which eligibility is determined as well as credit
worthiness of the state, and an application stage where the loan
strives to be conditionally approved and federal budget
authority is obligated at that time, he explained. The total
process for both stages is anticipated to take 12-18 months or
longer. He noted that a procurement piece has been put on hold.
3:10:20 PM
ACTING COMMISSIONER BINDER advised that internally the
contractors have been obligated, but there is a pause on those.
The remaining items yet to be procured include procuring a
contractor to determine who and what the design will be - about
an 18-month process; an owners' representative procurement for a
contractor to assist in developing the contractual documents
required and oversee the administration and execution of the
construction contract; to procure a tolling contractor that will
both design the tolling system and be responsible for running
and maintaining it after construction; and to procure a
contractor to perform the annual audit required by legislation
passed last year, he explained. He further noted that the
project will cost roughly $1 billion. Currently, he indicated,
the project has received and expended approximately $73 million
in federal funding, approximately $6 million in state funds, and
other general fund items roughly about $5.5 million. He
assessed that the total monies expended so far is approximately
$84.8 million.
3:12:02 PM
CO-CHAIR HUGHES asked what additional costs could be expected if
the state delays its TIFIA application.
ACTING COMMISSIONER BINDER responded that it would not be cost
as much as how the delay would impact certain pieces, including
whale permits, EIS pieces, and other pieces beyond a two-three
year delay in which the pieces begin expiring and have to be
redone.
CO-CHAIR HUGHES questioned whether the department had determined
the cost of redoing certain pieces due to a delay.
ACTING COMMISSIONER BINDER answered no; and explained that it
depends upon the length of the delay in order to determine which
pieces must be redone.
3:13:25 PM
KIM RICE, Deputy Commissioner, Office of the Commissioner,
Department of Transportation & Public Facilities (DOT&PF),
stated that the Federal Highway Administration (FHWA) has a
"rule of thumb" of three years and then requires a document
being refreshed. She noted that "that doesn't mean you have to
redo everything but you have to figure out if there are any laws
that have changed, any impacts have changed." During this
project Beluga whales were listed and were not listed
previously, she observed. If nothing changes in terms of
footprint, impacts, and laws do not change, then "we" say it all
looks good, "it's just a review".
3:14:10 PM
SENATOR BISHOP asked how long the traffic count study would be
relevant as it pertains to the TIFIA loan process.
MS. RICE responded that she would have to get back to the
committee, but noted that a traffic study is a model and there
are different inputs depending on planning. Development can
change according to what is occurring today and what is on the
market, she explained.
3:14:50 PM
CO-CHAIR HUGHES pointed out that during previous testimony it
was stated that 86 percent of right-of-way has been purchased
and her understanding is that all that is left is government to
government. She asked if the administration supports the
project as a solution to the growth in that area or if funding
is the issue.
3:15:05 PM
ACTING COMMISSIONER BINDER responded that projects are being
reviewed by the administration as to whether priorities are
correctly aligned, and offered that the information will be
revealed in the future.
3:16:51 PM
CO-CHAIR HUGHES described a situation wherein oil was $130 per
barrel and asked if the governor would support the project. She
offered that possibly Acting Commissioner Binder could not
answer at this time.
ACTING COMMISSIONER BINDER responded "that is correct."
3:17:06 PM
CO-CHAIR HUGHES turned to the Alaska Stand Alone Pipeline
(ASAP).
3:17:25 PM
FRANK RICHARDS, Vice President, Engineering and Program
Management, Alaska Gasline Development Corporation (AGDC),
Department of Commerce, Community & Economic Development
(DCCED), referred to a slide overview of the status of the
project, and spend rate in response to AO 271. Slide 2, the
AGDC was charged under AS 31.25, in House Bill 4, in developing
the Alaska Stand Alone Pipeline Project (ASAP) to provide energy
relief for Alaskans. The Alaska Gasline Development Corporation
was granted $355 million to advance the ASAP project through an
open season and ultimately to a project sanction decision. He
offered that the class-3 estimate and project execution plan has
been completed, which would have been the precursors to going
into a regulatory filing with the Regulatory Commission of
Alaska and an open season. However, he remarked, in response to
the ultimate signing of Senate Bill 138, and with the
involvement of the state in the Alaska Liquefied Natural Gas
(LNG) project, the policy was changed in regard to ASAP schedule
as it must align its projects to co-align with the decision
point within Alaska LNG as to whether or not to proceed into
front-end engineering and design (FEED.) With the passage of
House Bill 138, ASAP initiated an extensive review of all work
activities going forward and essentially re-aligned its schedule
to that the 1Q (first quarter) 2016 Alaska LNG FEED decision.
Consequently, ASAP has delayed some of its commercial
activities, which is recourse filing and open season. The ASAP
scaled its work projects in order to maintain the viability and
readiness of the project. This includes performing work that
would also be of value and benefit to the Alaska LNG project and
approximately 98 percent of ASAP's center line is a common
center line alignment between the two projects, he explained.
In essence, all of the work ASAP is performing has value to both
projects. The Alaska Stand Alone Project revised its 2015/2016
spend plan which was provided to the Office of Management and
Budget and ASAP's board of directors in response to AO 271
[slide 3].
3:20:27 PM
MR. RICHARDS, referring to slide 3, stated the spend curve
identifies the original spend plan to get to project sanction
which totaled approximately $150 million over the next 15-16
months to advance the ASAP project. However, ASAP prepared a
new 2015/2016 work plan which reduced approximately $90 million
in expenditures which is approximately a 60 percent reduction in
anticipated costs.
MR. RICHARDS pointed to slide 4 [ASAP Revised 2015/2016 Work
Plan] and offered that ASAP will be delaying or deferring some
of its activities, such as commercial activities, and design
efforts that it normally would have proceeded with after an open
season to redesign portions of the project to fit shipper
commitments as it depends upon what the shippers want the
project to do and be. The ASAP would then make modifications to
meet their expectations which could potentially mean re-
designing the gas conditioning facility to accommodate new Point
Thomson gas that will be available with the ExxonMobil
developments. In reference to potential intermediate compressor
stations there would be procurement of long lead type items such
as equipment, pipe, and specifically the major modules necessary
for a gas conditioning facility. He noted that ASAP would have
started its construction execution contracting in advance of a
major execution. He estimated that to date ASAP has spent $176
million following the legislature's intent under House Bill 4.
3:22:27 PM
MR. RICHARDS explained that slide 5 is a reflection of the
revised schedule as an outcome of Senate Bill 138, and re-
alignment of the two projects. He pointed to the one quarter of
2016 for an [Alaska LNG FEED] decision to advance either with an
Alaska LNG project or continue with ASAP and do the recourse
tariff filing, the open season, and ultimately the project
sanction and execution with first gas showing in 2024. He
opined that legislative intent was for a backup project to the
Alaska LNG, which would be ASAP. The funds from the general
fund have been placed into the Instate Natural Gas Pipeline Fund
created specifically for use in advancement of the ASAP project
and no federal funds are being used on this project, he
expressed.
3:23:38 PM
CHAIR MICCICHE advised the public that Mr. Richards and the AGDC
team gave a thorough presentation of ASAP during the January 25,
2015 Senate Resources meeting.
3:24:10 PM
CO-CHAIR HUGHES characterized that much of the work ASAP has
performed ties in and is helpful and usable as far as the Alaska
LNG project. In the event the project was not halted, she
questioned how much overlap would there be as far as what ASAP
would spend that would still go into the other project. At some
point, monies ASAP would be spending would not be applicable to
the other project and, further questioned, if there would be any
dollars going to the other project as well.
3:24:47 PM
MR. RICHARDS, referring to the spend curve shown on slide 3,
said that ASAP efforts were to continue work efforts that would
have transferability and durability to benefit a pipeline
project in Alaska. For instance, he offered, in benefiting both
projects ASAP is currently performing winter field work, and it
will continue with its environmental and regulatory work. The
goal is to align ASAP with the spend plan that would have major
transferability. He reiterated that ASAP has completed front-
end engineering and design [FEED] and are essentially several
years ahead of an advance in its work as opposed to the Alaska
LNG project which is now in its pre-FEED efforts. The ASAP has
performed detailed engineering, environmental work, regulatory
work, that is of benefit to the Alaska LNG project.
3:26:13 PM
CO-CHAIR HUGHES referred to the $60 million Mr. Richards had
discussed and questioned if ASAP already has that money or would
it need to be appropriated.
MR. RICHARDS answered that the legislature "fronted" ASAP with
the full $355 million in 2013, and what is represented "here" is
money in the Instate Natural Gas Pipeline Fund available for the
project and no new general funds are being requested.
3:27:41 PM
CO-CHAIR HUGHES turned the gavel to Chair Micciche.
3:28:09 PM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House and Senate Transportation Standing
Committees was adjourned at 3:28 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Jan 22 AMHS Overview Senate House Transportation Committee.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 House Trans Tariff Study Presentation.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 AMHS Tariff Analysis- Final.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 Admin Order 271 megaprojects.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 Transportation Committees Susitna Watana Hydro.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 AGDC Joint Transportation Committee.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 Response to Joint Transportation Meeting.pdf |
HTRA 1/22/2015 1:00:00 PM |
|
| Jan 22 Support documents - Walker Letter RR 01 12 15.pdf |
HTRA 1/22/2015 1:00:00 PM |