Legislature(2013 - 2014)BARNES 124
02/18/2014 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Port of Anchorage by Mayor Dan Sullivan | |
| 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
SENATE TRANSPORTATION STANDING COMMITTEE
HOUSE TRANSPORTATION STANDING COMMITTEE
February 18, 2014
1:05 p.m.
MEMBERS PRESENT
SENATE TRANSPORTATION
Senator Dennis Egan, Chair
Senator Fred Dyson, Vice Chair
Senator Anna Fairclough
Senator Click Bishop
HOUSE TRANSPORTATION
Representative Peggy Wilson, Chair
Representative Doug Isaacson, Vice Chair
Representative Eric Feige
Representative Lynn Gattis
Representative Bob Lynn
MEMBERS ABSENT
SENATE TRANSPORTATION
Senator Hollis French
HOUSE TRANSPORTATION
Representative Craig Johnson
Representative Jonathan Kreiss-Tomkins
COMMITTEE CALENDAR
PRESENTATION: PORT OF ANCHORAGE BY MAYOR DAN SULLIVAN
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN SULLIVAN, Mayor
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation on the status of the
Port of Anchorage project.
LUCINDA MAHONEY, Chief Financial Officer
Port of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Answered financial questions on the Port of
Anchorage project.
ACTION NARRATIVE
1:05:55 PM
CHAIR DENNIS EGAN called the joint meeting of the Senate and
House Transportation Standing Committees to order at 1:05 p.m.
Present at the call to order were Senators Egan; Representatives
Feige, Gattis, Isaacson and Chair P. Wilson.
^Presentation: Port of Anchorage by Mayor Dan Sullivan
Presentation: Port of Anchorage by Mayor Dan Sullivan
1:06:44 PM
CHAIR EGAN said on today's agenda was a presentation on the Port
of Anchorage by Mayor Dan Sullivan.
1:07:03 PM
DAN SULLIVAN, Mayor, Municipality of Anchorage, Alaska, provided
a brief history of the Port of Anchorage saying it had been in
operation since 1961 and is the only port in the area to have
survived the 1964 Good Friday Earthquake and has been the
central operating port for the entire State of Alaska ever
since.
1:09:51 PM
He said one reason it is important to point this out is that an
incredible amount of goods pass through the Port, an estimated
90 percent of the merchandised goods, 4 million tons, going to
80 percent of Alaska's populated areas serving over 200 towns,
villages and rural communities. It is the major point of entry
for containerized cargo with over 240,000 containers moving
through it annually. It is clearly a $1 billion economic engine
for the state with an aggregate payroll of $50 million. In one
given day when the big barges are in, over 36,000 vehicles move
through the Port taking nearly 100 million pounds of goods from
them and distributing it.
1:10:04 PM
He said the facility is on 220 acres of land that is both
developed and available to be developed; it has two petroleum
berths, three cargo berths, a dry barge berth, a floating dock
for small vessels and the three petroleum pipelines. Two of
these go to JBER and the Ted Stephens International Airport and
one to the Tesoro Refinery on the Kenai Peninsula. He pointed
out a small boat launch, "a little known gem," which serves a
small commercial fishery. Next to it, Ship Creek is the area in
which they had just undertaken a major development plan, the
goal being to develop it as a waterfront community.
1:11:10 PM
SENATORS FAIRCLOUGH and DYSON joined the committee, as well as
REPRESENTATIVE LYNN.
MAYOR SULLIVAN said some major corporations - Horizon, Totem
Ocean Trailer Express (TOTE), Alaska Basic Industries (ABI),
Tesoro, Crowley Marine Services, Flint Hills Resources, and more
- do their business at the Port and are essential to its
operations.
1:12:10 PM
REPRESENTATIVE ISAACSON asked how the reduction associated with
Flint Hills would impact the Port.
MAYOR SULLIVAN answered that new field capacity is coming in
with Delta Western, so rather than a negative impact he saw more
of a neutral impact.
He said that two distinct types of vessels come into the Port of
Anchorage: Horizon uses cranes to unload the containers onto
trucks and chassis and TOTE uses roll-on/roll-off (RORO)
vehicles that drive right on the ship, hook up to the
containers, and drive off. So, one of the Port's challenges is
having two separate capacities for two very different ways of
unloading freight; that has to be taken into account in
designing the Port for the future.
1:14:48 PM
He described the Port of Anchorage as an important hub for
distributing fuel including jet fuel, avgas, unleaded gas, and
diesel. He said 100 percent of the jet fuel is used at Joint
Base Elmendorf Richardson (JBER), the Ted Stevens Airport gets
about 65 percent of its fuel from there, and 1.5 million gallons
of fuel goes to Western Alaska.
1:15:21 PM
The Port operates in very extreme conditions with the second
largest tides in North America, icy conditions and swift current
moving those chunks of ice around within those massive tide
changes. So, the daily operations are a tremendous logistical
feat.
1:15:49 PM
MAYOR SULLIVAN stated that the U.S. Department of Defense has
designated the Port of Anchorage as a strategic seaport, one of
only 19 in the nation. It has had over 30 deployments since 2005
with over 18,000 pieces of military cargo passing through it in
the past 7 years. As part of the Port expansion project, a
direct haul road was built from JBER that does not have to
intersect with any other road systems or railroad tracks.
He said the Port continues to seek new business; construction
starts on the new Delta Western Tank Farm this year adding fuel
storage capacity, and TOTE is starting a new "Just-in-Time
project" on the North Extension Area. He noted the Port had been
able to handle the huge pieces of equipment associated with the
Fire Island Wind turbines and bases and the new generators that
Matanuska Electric Association is installing outside of Eklutna.
He anticipated more big energy projects going forward whether
it's a dam or a pipeline.
1:17:24 PM
SENATOR BISHOP joined the committee.
MAYOR SULLIVAN said they just completed a draft 2023 Business
Plan and wanted to make sure the next port expansion met its
business needs. It includes some of the things they are doing
now and additional things like barge services to rural Alaska
and expanded petroleum products including possibly LNG and
compressed natural gas (CNG).
The Port Intermodal Expansion Project (PIEP)
1:19:27 PM
MAYOR SULLIVAN said that during his transition period he heard
rumors that the Port construction project was not going well.
Major damage had been sustained during installation of the Port
facilities and the design itself was called into question in
terms of seismic stability. He said the Port had been band-
aiding its 1400-plus corroded pilings that sit in a high tidal
area with swift currents by repairing 25 in 2012 and 46 in 2013;
100 more will be done in 2014 and that will cost an estimated
$3,000,000. But by the time you get to the 1400th pile the ones
you started repairing are corroded again and that can't go on.
Another major seismic event similar to 1964 could happen and
while it withstood that, the experts now have concerns. Also,
people who use the Port have said that any major damage to it
would be catastrophic.
He said the PIEP spent about $300,000,000 and accomplished some
pretty good work including rail extensions, a floating dock, a
gravel haul road, the creation of 65 acres of new land
(important for staging large projects), road intersections,
utility relocations, and drainage improvements, but
unfortunately, a lot of bad work was done, as well.
MAYOR SULLIVAN explained that work was done in a "sheet pile
design" where sheets were installed up the front, connected, and
filled in with dirt to create the land mass. When he came into
office, people were questioning whether that design was suitable
for the seismic conditions at the Port. So, the Corps of
Engineers commissioned CH2M HILL to look at the design and they
concluded that it was not suitable. The original engineers,
Peratrovich Nottingham & Drage (PND), contested and said that
design had worked all over Alaska and in other places around the
world and that it was the construction that went bad. So, he
decided to get a third-party review by Simpson Gumpertz & Heger
(SGH), a world renowned forensic engineering team, and they also
concluded that the original design was not suitable for seismic
conditions at the Port.
1:23:18 PM
With that conclusion, they are not going forward with the same
design that the Port project started with; they will go back to
a traditional pile-type system and replace the 1400 piles with
the new design. The dry barge dock will stay, as all the
engineers have agreed that it is functional and safe and doesn't
have the same risk as the sheet pile areas.
1:24:22 PM
He said the Corps commissioned CH2M HILL to make recommendations
on an alternative design and that was to first construct a new
dock on the left; then TOTE would move to that new dock while
work was started on the original dock area. Then Horizon would
move to the north and the Port facility would be pushed out
another 10 feet to a depth of 45 ft. When that is constructed,
Horizon would move to that dock and work could get done on the
left. Both facilities would be moved out to the 45 ft. depth
area and TOTE could ultimately move back to its original
berthing area.
MAYOR SULLIVAN said everyone knows that money will be a
challenge for this project going forward, so he asked them to
scale down the facility by eliminating the $280,000,000 north
dock, because it does nothing to improve the existing
facilities. So, instead of one of the shippers moving to the new
facility in the north they would move up and down the face of
the Port as the different phases are built. This makes the
project affordable and scalable. Having newly designed pilings
and moving out to the 45 ft. depth level is very important
because that is what the U.S. Department of Defense requires for
a strategic port. He noted that new ships are being built bigger
and with deeper drafts and as a business model, he wants to make
sure the Port can handle them.
1:28:41 PM
SENATOR DYSON asked if barges go aground there at low water.
MAYOR SULLIVAN answered yes.
SENATOR DYSON said for many years the Corps of Engineers had
been dredging further out for about $25 million/year, and he has
heard that might go away. He asked how fast he expects the
silting to fill in, how much dredging will be needed, and what
it will cost.
MAYOR SULLIVAN answered that dredging the Port of Anchorage is
the number one expenditure of the Corps in Alaska and it is in
the $20-plus million range. They have made the commitment
knowing the strategic importance of the Port, not only
economically to Alaska but to the U.S. Department of Defense and
that it will continue to be a priority. Additionally, moving out
into the better current flow at the 45 ft. depth will solve some
of the siltation problem.
1:30:04 PM
SENATOR DYSON asked for historical data on the silt build up,
because it is always changing.
MAYOR SULLIVAN agreed that it is changing and that he had been
told silt in Cook Inlet is very dynamic. The face of the dock is
one thing but they are now encountering siltation in the channel
ships come in that is causing it to narrow.
SENATOR DYSON said commercial gold had been struck on every
stream in Cook Inlet and he had some miner friends who would be
glad to dredge it for free.
REPRESENTATIVE FEIGE commented that the original sheet pile
design had a smooth face and was self-scouring which greatly
reduced dredging costs and he asked if the new design could be
modified to preserve calm water behind the wharf face (leading
to silting in around the pilings which isn't necessarily bad) to
keep the dredging costs down.
1:32:54 PM
MAYOR SULLIVAN said the engineers told him two things with the
design will help with the siltation problem: scaling the north
end to where it's almost parallel with the Port front creates a
good flow almost the same as the sheet pile design and he had
also been told that the area behind the face could be filled in,
which would create more work area.
SENATOR FAIRCLOUGH asked if the Port operates as an enterprise
agency.
MAYOR SULLIVAN answered yes.
SENATOR FAIRCLOUGH asked if under that operation model there is
a retained earnings account for the Port.
1:33:49 PM
LUCINDA MAHONEY, Chief Financial Officer, Port of Anchorage,
Anchorage, Alaska, answered yes.
1:34:10 PM
SENATOR FAIRCLOUGH asked when they last looked at port and
docking fees.
MS. MAHONEY answered that the fees get looked at every year
during the budget cycle; increasing the rates is an option for
2014.
SENATOR FAIRCLOUGH remarked that it had been a decade since the
fees had been raised.
MS. MAHONEY said she didn't know but could find out.
1:35:05 PM
MAYOR SULLIVAN said different rates had been adjusted, the
cement rates for one. One thing that is preferable to the
stakeholders about this design is that TOTE would have had to
move its ship further to the north under the old design, which
would have put them even further away from their base
operations. In their business time is money so every minute
longer that it takes a truck to roll on and roll off over the
course of thousands of trips adds up to real money.
1:36:03 PM
MAYOR SULLIVAN said before he came on board, the Port project
had been managed by the Maritime Administration (MARAD), a
subset of the U.S. Department of Transportation (USDOT) that had
no experience in this area. By contrast, if the Corps of
Engineers had managed it, they probably would have avoided these
problems. Because of the problems with the Port, an audit was
done of MARAD'S work, and while it's very rare for a department
to issue something as terse as this about something within their
department, it essentially said MARAD failed in every single
aspect of their project management duties. They didn't conduct
planning, didn't follow federal contracting or establish a good
risk management program; there was no quality assurance, nobody
directly on the ground directly managing the project, no
benchmarks or timelines. One of their claims was that they
delegated, but it turns out the contract arrangement did not
allow delegation.
MAYOR SULLIVAN said that going forward the Municipality of
Anchorage is taking over all management duties and he had just
completed a request for proposal (RFP) for a new project
management team that will work directly for the Municipality.
1:37:49 PM
CH2M HILL was the winning respondent; they are by far the best
proposer. The final step in that process is for the Assembly to
give approval. He explained that years ago VECO had done some
work on the Port project, basically verifying that the design
would be suitable. So, when CH2M HILL bought VECO they bought
any liabilities that went with it. Some Assembly members have
concerns about that and their lawyers and purchasing people have
all investigated this top to bottom and found no legal
prohibition against CH2M HILL bidding or winning the bid, and it
has satisfied all rules and requirements. As a cautionary
measure, the Assembly asked to have the bid process reviewed by
the Bidding Review Board and they said it was done properly and
that CH2M HILL was not only qualified to bid, but certainly was
the proper winning respondent.
1:39:20 PM
The Port had contributed over $80 million to this project to
date (slide 31): the PEIP had received $439 million and $302
million of that was transferred to MARAD; there were
miscellaneous expenditures of $7 million (MARAD paid
contractors), and $130 million is unobligated (mainly because in
2012, Senate Bill 160 put $48.5 million into the project and a
GO bond for port energy added another $50 million). So, they
have enough money to move forward with first phases of
construction, but more is needed to continue. Contributions
totaled $300,087,562; $140 million of that came from the federal
government.
1:40:46 PM
REPRESENTATIVE LYNN asked if there is any liability on the part
of MARAD for what they did not do and why they are getting money
back.
MAYOR SULLIVAN answered that they are not getting money back;
it's just what they had already spent to date on the project.
REPRESENTATIVE LYNN asked if they spent a major share of it on
improper things.
1:41:33 PM
MAYOR SULLIVAN said he would show the answer to that question in
two slides. He said there is a good partnership between the Port
and the state and federal government going forward, but the
challenge will be the future decline in federal funding.
1:42:06 PM
REPRESENTATIVE ISAACSON asked if there are will be any penalties
for using federal funds for work that wasn't finished and if
those funds could be applied to the new alternative project.
MAYOR SULLIVAN answered that he had not heard any concern about
penalties; money was spent and work was done.
REPRESENTATIVE ISAACSON said he was thinking more along the
lines of since the Port was changing the plan they might
penalize them. That occurs in some transportation funds.
MAYOR SULLIVAN said it's not a challenge at this point.
1:43:22 PM
MAYOR SULLIVAN said a new management team is on board and
reporting to him; they will get new environmental assessments
done, new permitting and hopefully start construction. No stone
will be left unturned for funding at the federal level, but only
$30-40 million will be available through grants and those are
very competitive. He would continue working on getting state
funding and saw an opportunity through the Anchorage
Metropolitan Area Transportation Solutions (AMATS). Locally they
have the ability to incur a little more debt, but not as much as
years ago. P3 partnerships had been discussed and folks at the
Alaska Industrial Development and Energy Authority (AIDEA) had
talked about the potential for a public private partnership. The
challenge in that would be having a good revenue stream to pay
back plus make a profit. That would probably engender some sort
of rate increases, so a study of rates would have to be done.
REPRESENTATIVE ISAACSON asked how much future financing he is
looking for.
MAYOR SULLIVAN answered with the $130 million they have in hand,
probably $250-300 million more would be enough to finish the
project, but the final design isn't done. TIFIA loans/credits
are available that credits work that has already been done in
the calculation for an amount to qualify for.
1:47:28 PM
MAYOR SULLIVAN said they had filed a suit against the designer
and some of the contractors: Integrated Concepts and Research
Corporation (ICRC) was the general contractor, PND was the
designer, and CH2M HILL as VECO did some of the verification
work on the design and seismic work. Future litigation was being
considered against MARAD that spent $300 million without getting
to a finished project.
REPRESENTATIVE LYNN asked where they are in the process of
resolving the litigation.
MAYOR SULLIVAN said the litigation with MARAD had not been filed
yet and they are one year into the lawsuit with the contractors
and designers. Briefs had been filed and oral arguments, but he
didn't know what the attorneys see as a timeline for resolution.
1:48:51 PM
REPRESENTATIVE LYNN asked what oversight the state did. Did no
one locally know until it was too late?
MAYOR SULLIVAN answered that there was a whole series of
communications from contractors and PND engineers over the
course of 2008-10 with grave concerns about what was going on in
the construction aspect.
1:52:13 PM
CHAIR EGAN thanked the Mayor for his presentation and adjourned
the Joint Senate and House Transportation Committee meeting at
1:52 p.m.
| Document Name | Date/Time | Subjects |
|---|