Legislature(2019 - 2020)BUTROVICH 205

02/28/2019 01:30 PM TRANSPORTATION

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Audio Topic
01:31:21 PM Start
01:31:53 PM Presentation(s): Alberta to Alaska Railway
02:59:07 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: TELECONFERENCED
Alberta to Alaska Railway by Sean McCoshen, Mead
Treadwell & Jon Ketchen
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                       February 28, 2019                                                                                        
                           1:31 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Shelley Hughes, Chair                                                                                                   
Senator David Wilson                                                                                                            
Senator Peter Micciche                                                                                                          
Senator Jesse Kiehl                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Mike Shower, Vice Chair                                                                                                 
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S): ALBERTA TO ALASKA RAILWAY                                                                                      
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SEAN MCCOSHEN, Chair, Cofounder, and CEO                                                                                        
Alberta to Alaska Railway (A2A)                                                                                                 
Winnipeg, Canada                                                                                                                
POSITION STATEMENT: Participated in the Alberta to Alaska                                                                     
Railway presentation.                                                                                                           
                                                                                                                                
MEAD TREADWELL, consultant                                                                                                      
Treadwell Development                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the Alberta to Alaska                                                                     
Railway presentation.                                                                                                           
                                                                                                                                
JON KATCHEN, Counsel                                                                                                            
Holland and Hart                                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Participated in the Alberta to Alaska                                                                     
Railway presentation.                                                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                              
1:31:21 PM                                                                                                                    
CHAIR SHELLEY  HUGHES called  the Senate  Transportation Standing                                                             
Committee meeting  to order at 1:31  p.m. Present at the  call to                                                               
order  were Senators  Wilson, Kiehl,  and  Chair Hughes.  Senator                                                               
Micciche arrived soon thereafter.                                                                                               
                                                                                                                                
                                                                                                                                
^PRESENTATION(S): Alberta to Alaska Railway                                                                                     
           PRESENTATION(S): Alberta to Alaska Railway                                                                       
                                                                                                                                
1:31:53 PM                                                                                                                    
CHAIR HUGHES  announced the business  before the  committee would                                                               
be  a presentation  by Sean  McCoshen and  Mead Treadwell  on the                                                               
Alberta to Alaska Railway (A2A).                                                                                                
                                                                                                                                
1:32:21 PM                                                                                                                    
SEAN  MCCOSHEN, Chair,  co-founder,  and CEO,  Alberta to  Alaska                                                               
Railway, introduced himself.                                                                                                    
                                                                                                                                
1:32:31 PM                                                                                                                    
MEAD  TREADWELL,  Consultant, Treadwell  Development,  Anchorage,                                                               
introduced himself  and related that  he has worked with  A2A for                                                               
the last five years  to link Alaska to Canada by  rail and he has                                                               
never seen a more economic project than this one.                                                                               
                                                                                                                                
1:32:59 PM                                                                                                                    
SENATOR MICCICHE joined the committee.                                                                                          
                                                                                                                                
MR.  TREADWELL described  the  presentation  as an  informational                                                               
session.  He  clarified  that  he   and  Mr.  McCoshen  were  not                                                               
advancing   any  particular   legislation  and   they  were   not                                                               
requesting money.  "We just  basically feel that  if we  can work                                                               
with  the  state,  the  Alaska  Railroad,  and  get  the  federal                                                               
permitting done,  we can bring  a large new  economic opportunity                                                               
to the state."                                                                                                                  
                                                                                                                                
MR. TREADWELL said the idea of  linking Alaska to the Lower 48 by                                                               
rail  has been  discussed  many times.  Colorado Governor  Gilpin                                                               
looked  at it  in the  1860s; some  thought that  E. W.  Harriman                                                               
would look at  it in the 1890s when the  Harriman Expedition came                                                               
to  Alaska; the  U.S. government  studied the  possibility before                                                               
World War II  and it resulted in the Alaska  Highway; the state's                                                               
North  Commission looked  at expanding  the  Alaska Railroad  and                                                               
linking it to the  Lower 48 in the 1960s; and  right of way bills                                                               
were introduced for a rail link to Canada in the 1970s and 2002.                                                                
                                                                                                                                
He  related  that  Mr.  McCoshen and  a  partner  co-founded  the                                                               
Alberta  to Alaska  Railway  with  the goal  to  build, own,  and                                                               
operate  in  partnership  with  the Alaska  Railroad  a  link  to                                                               
interconnect  with the  Canadian  Pacific  and Canadian  National                                                               
railroads to hook up with the  oil fields at Fort McMurray and to                                                               
complete a spur line to Point MacKenzie.                                                                                        
                                                                                                                                
1:36:18 PM                                                                                                                    
CHAIR  HUGHES  thanked him  for  clarifying  that they  were  not                                                               
seeking  funding  from  the  state. She  noted  that  her  office                                                               
reached out to  other entities to present on the  subject and A2A                                                               
was the only one who accepted the offer.                                                                                        
                                                                                                                                
MR.  TREADWELL described  the Alberta  to Alaska  Railway project                                                               
speaking to the following points:                                                                                               
                                                                                                                                
     • The A2A Rail Development Corp. is developing a new                                                                       
        rail corridor across the North connecting Alaska to                                                                     
        the North American Railroad system. Key components                                                                      
        of the general freight rail include:                                                                                    
             ? Intersecting with the North American railroad                                                                    
          system at Fort Nelson, BC, High Level, Alberta as                                                                     
          well as Fort McMurray, Alberta                                                                                        
             ? Transporting all forms of cargo both inbound                                                                     
          and outbound                                                                                                          
             ? A design to handle a host of different                                                                           
          resources including Alberta-sourced bitumen                                                                           
             ? An ability to add passenger service and local                                                                    
          freight service to communities along the corridor                                                                     
             ? A connection with the existing Alaska                                                                            
          Railroad system to deliver  cargo to purpose built                                                                    
          terminal  facilities at  ports located  in Alaska,                                                                    
          including  the existing  container Port  of Alaska                                                                    
          in  Anchorage and  Port  MacKenzie,  a bulk  cargo                                                                    
          port in the Mat-Su Borough.                                                                                           
       • Builds on the work conducted by the Van Horne                                                                          
        Institute in 2013                                                                                                       
     • Tremendous benefit to the people of the north.                                                                           
                                                                                                                                
MR. TREADWELL  directed attention to the  maps on slides 3  and 4                                                               
that look  at the  rail corridor.  He said  Alaska ports  are 2-4                                                               
days shorter  to Asia  than ports farther  south. For  example, a                                                               
ship carrying  cargo from the  port of  Shanghai to the  U.S. can                                                               
land in  Cook Inlet  and interconnect with  the rail  system into                                                               
the  heartland  of  the  U.S.  faster  than  from  ports  in  the                                                               
continental  U.S. The  ports  farther south  are  also much  more                                                               
congested. The  length of  new rail that  is envisioned  is 1,516                                                               
miles with a  little over 200 miles in Alaska.  He listed the new                                                               
rail line  in China  and new projects  to connect  Arctic seaways                                                               
that  are  contemplated  in  Russia,   Finland,  and  Norway  and                                                               
highlighted that, by comparison, A2A  is a very small addition to                                                               
the North American rail system.                                                                                                 
                                                                                                                                
1:39:43 PM                                                                                                                    
SENATOR  MICCICHE  asked  if  the research  to  analyze  the  A2A                                                               
project includes a study on  distribution distances and deltas to                                                               
key manufacturing areas in the U.S., Tokyo, or other ports.                                                                     
                                                                                                                                
MR. TREADWELL  explained that some  of the  work done by  the Van                                                               
Horn  study was  used  to help  A2A develop  cash  flows for  the                                                               
project  and   they  made  some  assumptions   based  on  general                                                               
transpacific  cargo  volumes.  A2A  did  not  do  specific  cargo                                                               
distribution studies, but they  did make conservative assumptions                                                               
related to the possibility of inbound cargo.                                                                                    
                                                                                                                                
1:41:04 PM                                                                                                                    
MR.  MCCOSHEN added  that they  sent  the business  study to  two                                                               
separate  engineering  firms  to  validate  the  assumptions  and                                                               
numbers, which  will be  required when  they seek  private sector                                                               
financing. That has been paid for, he said.                                                                                     
                                                                                                                                
1:41:51 PM                                                                                                                    
MR. TREADWELL directed attention to  the Google Earth map showing                                                               
the proposed rail  corridor from Alaska into Canada.  He said the                                                               
corridor in Alaska follows the  previously set aside right of way                                                               
that tracks the Alaska Highway  to Tok then northeast through the                                                               
Ledoux River  Valley to  the Canadian border.  The line  will run                                                               
close to mineralization  in the Yukon which will  bring access to                                                               
mining potential  in the  area. It  then travels  through British                                                               
Columbia to northern Alberta. He  highlighted that the Google Map                                                               
has the  names of the First  Nations along the route.  In Alaska,                                                               
the route is  through the Doyon region. Further along  there is a                                                               
group of First Nations in the  Yukon, one First Nation in British                                                               
Columbia, and another group of  first Nations in Alberta. Up till                                                               
now the company  has been working on  building relationships with                                                               
the  First  Nation  groups instead  of  holding/attending  public                                                               
meetings such as this, he said.                                                                                                 
                                                                                                                                
CHAIR HUGHES  asked if there  is rail  along any of  the proposed                                                               
route.                                                                                                                          
                                                                                                                                
MR. MCCOSHEN replied it's all new rail.                                                                                         
                                                                                                                                
MR. TREADWELL  clarified that the  new rail intersects  with rail                                                               
systems in British Columbia and northern Alberta.                                                                               
                                                                                                                                
CHAIR HUGHES  asked how long  it would  take a railcar  to travel                                                               
from Fort McMurray to Anchorage.                                                                                                
                                                                                                                                
MR. MCCOSHEN estimated it would be less than two days.                                                                          
                                                                                                                                
MR. TREADWELL  added that  it would depend  on speed,  the grade,                                                               
and curvature.                                                                                                                  
                                                                                                                                
He  turned  to  slide  5,  "A2A  Rail  Management  Resources  and                                                               
Financial Backing" and discussed the following bullet points:                                                                   
                                                                                                                                
        • The management team has retained advisors in all                                                                      
          key aspects of project development                                                                                    
             ? Engineering  HDR                                                                                                 
             ? Environmental  HDR                                                                                               
             ? Financial  Bridging Finance Inc.                                                                                 
             ? Indigenous Engagement  Fogler Rubinoff LLP                                                                       
             ? Legal  Holland & Hart                                                                                            
             ? Strategic advisors - Jack Ferguson, Mead Treadwell                                                               
        • The Principals behind A2A Rail have funded all                                                                        
          development costs to date ($35 million), own 100%                                                                     
          of the equity and are prepared to fund                                                                                
          construction of the rail spur ($125 million)                                                                          
                                                                                                                                
CHAIR HUGHES offered her understanding  that A2A is a three-phase                                                               
project.  Phase one  costs have  been about  $35 million  and the                                                               
project is about to enter phase two.                                                                                            
                                                                                                                                
MR. TREADWELL  said that's the  hope. They are  currently working                                                               
on  the  Presidential  Permit,  the  agreement  with  the  Alaska                                                               
Railroad, certain agreements with  First Nations along the route,                                                               
and  some  small  land-leasing  issues  with  the  Department  of                                                               
Natural Resources (DNR) and in Canada.                                                                                          
                                                                                                                                
He  highlighted Mr.  McCoshen's  background  and business  career                                                               
speaking to the following bullet points:                                                                                        
                                                                                                                                
        • Sean McCoshen is the co-founder of the Alberta                                                                        
          Alaska Railway Development Corporation.  He is also the                                                               
          Chairman and  Chief Executive  Officer of  the McCoshen                                                               
          Group,  a family  office, that  owns 14  privately held                                                               
          companies   ranging    from   housing,   manufacturing,                                                               
          finance, retail, and rail.                                                                                            
        • Established in 2012, The McCoshen Group has secured in                                                                
          excess  of 1  billion dollars  in transactions  in less                                                               
          than 7  years. The McCoshen  Group (MG) is  a privately                                                               
          held  company which  has assets  of  $740 million.  Mr.                                                               
          McCoshen  is  the  sole-shareholder. Alberta     Alaska                                                               
          Railway Development Corporation is TRACE certified.                                                                   
        • Prior to founding the McCoshen Group, Sean worked in                                                                  
          private banking  in conjunction with a  number of large                                                               
          American-based   private   equity   firms   until   his                                                               
          retirement in 2007.                                                                                                   
        • Sean grew up in Troy, New York and as a teenager moved                                                                
          to  Winnipeg, Manitoba.  He earned  a Bachelor  of Arts                                                               
          degree  with a  double major  in Political  Science and                                                               
          Philosophy  from McGill  University in  Montreal and  a                                                               
          Bachelor of Laws Degree from  the University of Ontario                                                               
          in London, Ontario.                                                                                                   
        • He currently lives in Winnipeg Manitoba, Vancouver                                                                    
          British  Columbia and  West  Hollywood California  with                                                               
          his 7-year-old son.                                                                                                   
                                                                                                                                
1:48:05 PM                                                                                                                    
MR. TREADWELL  turned to slide  7, "A2A Rail Financial  Plan" and                                                               
discussed the following points:                                                                                                 
                                                                                                                                
        • The project cost is estimated to be approximately $17                                                                 
          billion, $3  billion or  more will  be spent  in Alaska                                                               
          construction. Approximately $4  billion in steady-state                                                               
          revenues  annually  are  projected to  cover  costs  of                                                               
          operation and capital.                                                                                                
        • Private financing, with some support from global                                                                      
          sovereign  backed infrastructure  funding institutions,                                                               
          is  expected.  Canada  is launching  an  infrastructure                                                               
          bank.  Throughput agreements  between commodity  buyers                                                               
          and sellers will help back construction financing.                                                                    
                                                                                                                                
CHAIR  HUGHES asked  if the  funding to  help equip  the existing                                                               
railroad would come from the project itself.                                                                                    
                                                                                                                                
MR.  TREADWELL said  the negotiations  with  the Alaska  Railroad                                                               
aren't finished but  it's clear that the $3  billion financing in                                                               
Alaska  would be  driven  by the  same  offtake commitments  that                                                               
would allow the  $17 billion financing for the rest  of the line.                                                               
He said  they would look  for the  optimal financing plan  as the                                                               
costs are developed.                                                                                                            
                                                                                                                                
SENATOR  MICCICHE  referenced  the statement  about  intersecting                                                               
with  two existing  rail  systems  to get  to  the Fort  McMurray                                                               
terminus. He  asked why  there isn't  a phased  development using                                                               
the existing rail.  He surmised that it was related  to having an                                                               
anchor tenant.                                                                                                                  
                                                                                                                                
1:50:31 PM                                                                                                                    
MR. MCCOSHEN  responded that there  is no other rail  line. Phase                                                               
one to  finish the spur  line to  Port MacKenzie would  cost $125                                                               
million. Phase two would go to  Fort Nelson and phase three would                                                               
go to Fort McMurry, Alberta.                                                                                                    
                                                                                                                                
MR. TREADWELL  added that in  order to get the  major throughput,                                                               
it's   necessary   to   get   to    Fort   McMurry.   There   are                                                               
interconnections  at  the other  two  rail  points to  the  North                                                               
American rail  system for  "regular freight" but  there is  not a                                                               
rail link into Fort McMurray that is as direct as A2A can offer.                                                                
                                                                                                                                
SENATOR KIEHL questioned  the reason for going  through the Yukon                                                               
as opposed to the closer tidewater ice-free deep water ports.                                                                   
                                                                                                                                
MR. MCCOSHEN  said Mr.  Treadwell can  discuss the  valid reasons                                                               
not to do that.                                                                                                                 
                                                                                                                                
MR. TREADWELL  explained that to  move petroleum products  to the                                                               
British Columbia coast  entails going over the  Rockies, which is                                                               
expensive.  The energy  used  to  carry a  good  from Alberta  to                                                               
tidewater saves shipping costs and time and uses less energy.                                                                   
                                                                                                                                
SENATOR  KIEHL pointed  out that  Haines  and Skagway  sit at  59                                                               
degrees latitude.                                                                                                               
                                                                                                                                
MR.  TREADWELL  said  we  expect that  this  project  will  build                                                               
traffic from  ports in  Alaska such  as Skagway,  Haines, Valdez,                                                               
Seward, Anchorage, Port MacKenzie, and potentially the Arctic.                                                                  
                                                                                                                                
1:56:20 PM                                                                                                                    
MR. MCCOSHEN added  that $20 million of the $35  million that has                                                               
been  spent  was on  engineering  the  correct route  for  speedy                                                               
delivery to China  and the North American  continent. He stressed                                                               
that,  "The white  route  on  the map  is  the  fastest route  to                                                               
Alaska"                                                                                                                         
                                                                                                                                
MR. TREADWELL read the second bullet  on slide 7 to emphasize the                                                               
work  that has  already been  done  to secure  financing for  the                                                               
project.  He   said  Yukon  First  Nations   are  expecting  more                                                               
infrastructure development  funds to open access  to their mines.                                                               
The Alberta  government anticipates  a $3 billion  expenditure to                                                               
improve market access  for their oil. This is part  of the market                                                               
opportunity  A2A is  responding  to. He  said  the reason  people                                                               
haven't  heard a  lot about  the A2A  project is  because they've                                                               
been working on  the Presidential Permit to cross  the border and                                                               
with First Nations.                                                                                                             
                                                                                                                                
CHAIR HUGHES asked him to talk about the social license.                                                                        
                                                                                                                                
MR. TREADWELL deferred  the question. He said a  primary point he                                                               
and Mr.  McCoshen want to  leave with  the committee is  that for                                                               
Alaska,  this   is  an  opportune  time   in  the  transportation                                                               
industry.  West  Coast  ports  and  rail  lines  have  congestion                                                               
problems; it's easier  to build on "frontier land"  than to widen                                                               
rights-of-ways through cities;  and West Coast ports  want to get                                                               
rid of cargos  that require too much space. The  A2A project will                                                               
build a rail line that is speedy  and closer to Asia, and it will                                                               
remove some of the inefficiencies  associated with bringing goods                                                               
in and  out of North America.  He said an estimated  $750 billion                                                               
in mineral  resources are within  100 miles of the  proposed rail                                                               
corridor.  He emphasized  that  transportation alternatives  will                                                               
change the economics of many Alaskan enterprises.                                                                               
                                                                                                                                
CHAIR  HUGHES asked  how much  of the  estimated $750  billion in                                                               
mineral resources is in Alaska.                                                                                                 
                                                                                                                                
MR.  TREADWELL said  the Alaska  Department of  Natural Resources                                                               
has estimated  that Alaska's  resources and  mineral capabilities                                                               
are in the trillions of dollars.                                                                                                
                                                                                                                                
CHAIR HUGHES asked  how much is specifically within  100 miles of                                                               
the proposed corridor.                                                                                                          
                                                                                                                                
MR.  TREADWELL  responded  that  there  are  several  large  gold                                                               
prospects where the rail crosses  the border into Canada, there's                                                               
one  prospect near  Tetlin,  and there  is  capability along  the                                                               
Alaska Railroad to serve the  cement market. He acknowledged that                                                               
they would have a  better answer as they look at  ways to pay for                                                               
the Port MacKenzie spur.                                                                                                        
                                                                                                                                
2:03:31 PM                                                                                                                    
SENATOR MICCICHE  highlighted that  natural gas pipelines  have a                                                               
given   resource  and   a  target   market,  and   volume  is   a                                                               
consideration  of  pressure  and  diameter.  He  asked  what  the                                                               
volumetric consideration is  on whether a railroad is  a build or                                                               
no  build. He  said he  assumes it  is a  very different  kind of                                                               
science.                                                                                                                        
                                                                                                                                
MR. MCCOSHEN replied  that they have a supply  agreement with the                                                               
producers in Alberta and an  offtake agreement with the buyers in                                                               
Asia.  He described  the due  diligence his  family company  went                                                               
through when  he became interested  in the project.  The ultimate                                                               
decision  was  that  this  project  is  very  doable  and  nicely                                                               
profitable. He said there is  also massive room for expansion. He                                                               
reiterated that the company has  spent $35 million and expects to                                                               
invest  another  $10-15  million   to  keep  the  project  moving                                                               
forward.  He  will  personally  spend  another  $125  million  if                                                               
certain  conditions occur.  He  described the  project  as a  "no                                                               
brainer."  The   business  case  has  been   validated  twice  by                                                               
engineering  firms and  various  individuals  and private  equity                                                               
firms interested  in the project.  The question now, he  said, is                                                               
whether there is the political will to get this done.                                                                           
                                                                                                                                
MR.  TREADWELL  referenced   Senator  Micciche's  question  about                                                               
economics. He related that they  initially looked at the Van Horn                                                               
analysis  which was  $12 to  $21 to  get a  barrel of  bitumen to                                                               
tidewater. That analysis was to  bring 1.5 million barrels/day of                                                               
bitumen  to Glennallen  or North  Pole and  put it  in the  Trans                                                               
Alaska  Pipeline  System  (TAPS).  A2A determined  that  was  not                                                               
economic and changed  the route. Doing so brought  the per barrel                                                               
cost to  get to  tidewater down  to $10-$15.  He said  we believe                                                               
that is more economic than  a pipeline from Alberta to tidewater.                                                               
That is the economic advantage  we're trying to exploit, he said.                                                               
Not going through  the liquification process with  the bitumen is                                                               
also a substantial cost savings.                                                                                                
                                                                                                                                
2:13:01 PM                                                                                                                    
SENATOR MICCICHE  asked if  the project is  economic one  way and                                                               
the backhaul is the "cream."                                                                                                    
                                                                                                                                
MR. TREADWELL replied he didn't  know of a specific commodity but                                                               
there are two-way  flows on the railroad  "where locomotion would                                                               
be available as backhaul."                                                                                                      
                                                                                                                                
MR. MCCOSHEN clarified that the  financial modeling was done on a                                                               
one-way haul. That's how most shipping is budgeted, he said.                                                                    
                                                                                                                                
CHAIR HUGHES commented  on the potential for  Asian backhauls and                                                               
sending Palmer carrots to the Lower 48.                                                                                         
                                                                                                                                
SENATOR KIEHL asked  how 10-12 unit trains compares  to 1 million                                                               
to 1.5 million barrels.                                                                                                         
                                                                                                                                
MR. TREADWELL replied they're the  same; 6-12 unit trains carry 1                                                               
million to 1.5 million barrels.                                                                                                 
                                                                                                                                
CHAIR HUGHES asked if A2A would also develop the shipping.                                                                      
                                                                                                                                
2:15:06 PM                                                                                                                    
MR. MCCOSHEN  said no; it is  standard practice for the  buyer to                                                               
arrange for and pay the cost of the boat.                                                                                       
                                                                                                                                
CHAIR HUGHES asked, other than  the Presidential Permit, if there                                                               
was "any other political will piece needed from Alaska."                                                                        
                                                                                                                                
MR.  TREADWELL   listed  strong   cooperation  with   the  Alaska                                                               
Railroad, legislation similar to what passed  in 2004 to set up a                                                               
relationship  between  the railroad  and  DNR  on rail  extension                                                               
rights  of way,  support for  the federal  Surface Transportation                                                               
Board permit,  being a cooperating  agency for  the environmental                                                               
impact statement  (EIS), help  in determining  the right  of way,                                                               
making state land  available for the right of  way, and finishing                                                               
A2A's agreement  with the Alaska  Railroad to lease the  right of                                                               
way.  His understanding  is that  the  governor has  communicated                                                               
support.                                                                                                                        
                                                                                                                                
MR.  MCCOSHEN added  that  this is  the first  time  there is  an                                                               
economic  argument for  the private  sector  carrying through  on                                                               
this long-discussed rail link.                                                                                                  
                                                                                                                                
CHAIR HUGHES  asked if  the Presidential  Permit comes  first and                                                               
the Surface Transportation Board permit comes later.                                                                            
                                                                                                                                
MR. TREADWELL answered yes.                                                                                                     
                                                                                                                                
CHAIR HUGHES asked if A2A is  just starting to work on the Alaska                                                               
Railroad/DNR relationship.                                                                                                      
                                                                                                                                
MR. TREADWELL answered yes.                                                                                                     
                                                                                                                                
2:18:49 PM                                                                                                                    
MR. MCCOSHEN added that they are  ready to start building as soon                                                               
as the negotiations are complete.                                                                                               
                                                                                                                                
MR. TREADWELL  referenced slide 9 that  highlights the importance                                                               
of agreements with  indigenous groups in both  Alaska and Canada.                                                               
He said the  large sovereign banks in Asia have  asked about this                                                               
because they too realize how important it is.                                                                                   
                                                                                                                                
MR.  TREADWELL turned  to slide  10, "Master  Agreement -  Alaska                                                               
Railroad" and discussed the following bullet points:                                                                            
                                                                                                                                
        • A2A is developing a Master Agreement with the                                                                         
          Alaska Railroad, key terms include:                                                                                   
             Defining cooperation to achieve permitting,                                                                        
             including the ROW and Presidential Permit                                                                          
          ? Identifying material lease terms                                                                                    
          ? Establishing key economic principles that will                                                                      
             support financing                                                                                                  
        • Success will drive higher utilization of ARRC                                                                         
          facilities and greater revenues                                                                                       
        • Will allow ARRC to better serve the Alaska's                                                                          
          resource industry while maintaining passenger                                                                         
          service                                                                                                               
                                                                                                                                
He asked Jon  Katchen if he'd like  to speak to the  right of way                                                               
and Presidential Permit.                                                                                                        
                                                                                                                                
2:21:27 PM                                                                                                                    
JON KATCHEN, Counsel,  Holland & Hart, LLC,  Anchorage, said he'd                                                               
prefer  not  to  go  into  detail  since  negotiations  with  the                                                               
railroad are ongoing,  but it's a high-level  agreement that will                                                               
help define the relationship between  A2A and the Alaska Railroad                                                               
on permitting, cost sharing, and the lease agreement.                                                                           
                                                                                                                                
MR. TREADWELL  turned to slide  11, "Complete the  Port MacKenzie                                                               
Rail Extension" and discussed the following points:                                                                             
                                                                                                                                
        • A2A will fund the unfunded portion of Mat-Su Borough's                                                                
          Rail extension project                                                                                                
          ? Once the lease and operating agreement is finalized                                                                 
             construction will commence                                                                                         
        • A2A will design and develop a multi-purpose rail yard                                                                 
          ? The design will allow for rail shippers to move a                                                                   
          variety of types of cargo both inbound and outbound                                                                   
                                                                                                                                
2:24:39 PM                                                                                                                    
MR. MCCOSHEN  said the  existing rail line  at Port  MacKenzie is                                                               
stunningly beautiful but it was  never finished. He said A2A will                                                               
incorporate it  into the big picture  if at all possible  but the                                                               
negotiations have already gone on for  a long time. If it doesn't                                                               
happen, the  money will be  spent on  other ports. He  noted that                                                               
the Alaska  Railroad will need  to be  upgraded for this  kind of                                                               
traffic.                                                                                                                        
                                                                                                                                
CHAIR HUGHES asked if Port MacKenzie will make growth easier.                                                                   
                                                                                                                                
MR. MCCOSHEN said  he didn't believe there would  be 10-12 trains                                                               
per day  through Port MacKenzie.  The other ports  have expansion                                                               
capability and they  don't have the strong tides  to contend with                                                               
that Port MacKenzie has.                                                                                                        
                                                                                                                                
2:29:49 PM                                                                                                                    
MR. TREADWELL  skipped to  slide 13,  "Design for  Efficiency and                                                               
Safety" to respond to Senator  Kiehl's question about why and how                                                               
the route was selected. He discussed the following points:                                                                      
                                                                                                                                
        • The project has been designed with an eye to reducing                                                                 
          fuel consumption and improving safety                                                                                 
          ? The grade will average less than 1%                                                                                 
          ? The degree of curvature will not exceed 5%                                                                          
          ? This is considerably better than existing CP or CN                                                                  
             lines                                                                                                              
          ? The project will focus on handling goods that are                                                                   
             not hazardous                                                                                                      
                                                                                                                                
He noted that some tunnels will be required in Canada.                                                                          
                                                                                                                                
MR.  TREADWELL concluded  the presentation  with a  discussion of                                                               
"Next Steps." He spoke to the following points:                                                                                 
                                                                                                                                
        • A2A is working with the Dunleavy Administration to:                                                                   
         ? Finalize the Master Agreement with the ARRC                                                                          
          ? Support in the negotiations with the Mat-Su Borough                                                                 
          and Assembly                                                                                                          
          ? Support for the Presidential Permit                                                                                 
          ? Support for the right of way, establishing the rail                                                                 
          corridor                                                                                                              
          ? Cooperation to identify opportunities for ANCs and                                                                  
          Village Corporations along the alignment                                                                              
                                                                                                                                
MR.  TREADWELL  noted that  there  is  no specific  criteria  for                                                               
getting  a  Presidential  Permit  and there  is  no  geopolitical                                                               
reason to deny a rail line  from crossing the U.S. Canada border.                                                               
Nonetheless, A2A  is pleased that Governor  Dunleavy has signaled                                                               
his support  for the  permit to President  Trump. They  have also                                                               
asked state government  to work together on the right  of way and                                                               
establishing  the rail  corridor. His  understanding is  that the                                                               
460  right  of way  process  can  sometimes cause  problems.  The                                                               
current  negotiations  are to  work  with  the railroad  on  that                                                               
process.                                                                                                                        
                                                                                                                                
2:35:32 PM                                                                                                                    
CHAIR  HUGHES asked  if it  would be  helpful if  the legislature                                                               
passed a resolution supporting a  Presidential Permit, and if the                                                               
permit could be transferred to  another company should A2A decide                                                               
against moving forward.                                                                                                         
                                                                                                                                
MR. TREADWELL confirmed that a resolution would be helpful.                                                                     
                                                                                                                                
MR. MCCOSHEN  said a  resolution would  be a shot  in the  arm to                                                               
keep him going, but he  believes the legislation and Presidential                                                               
Permit would need to be specific to one company.                                                                                
                                                                                                                                
MR.  TREADWELL  said  A2A's  draft   agreement  with  the  Alaska                                                               
Railroad contemplates  what happens  to the  right of  way. Under                                                               
existing  Alaska law,  the state  would retain  ownership of  the                                                               
land  and the  railroad would  lease to  the corporation.  If the                                                               
corporation  didn't  work for  some  reason,  the railroad  would                                                               
still own  the right of  way and presumably the  improvements. He                                                               
offered  to work  with  the  committee on  the  language for  the                                                               
resolution.                                                                                                                     
                                                                                                                                
CHAIR HUGHES  asked if there was  a study on the  economic impact                                                               
(jobs  in  particular) to  Alaska  if  this  project were  to  go                                                               
through.                                                                                                                        
                                                                                                                                
MR.  TREADWELL said  he  couldn't be  specific  but this  project                                                               
entails hundreds of fulltime railroad  jobs and thousands of jobs                                                               
overall. Better studies will be  forthcoming, he said. Responding                                                               
to  a further  comment,  he  said the  whole  idea  is that  this                                                               
project will have a positive impact on the economy.                                                                             
                                                                                                                                
He concluded the presentation highlighting  that Alaska is an air                                                               
crossroad  of   the  world  and   this  project   offers  similar                                                               
opportunity for  the cargo market.  "I see this as  Alaska coming                                                               
into its destiny," he said.                                                                                                     
                                                                                                                                
2:44:37 PM                                                                                                                    
MR.  MCCOSHEN added  that both  Alaska and  Canada are  all about                                                               
resources and transportation and this project is their destiny.                                                                 
                                                                                                                                
2:46:31 PM                                                                                                                    
SENATOR KIEHL asked  about the spill risk if the  plan is to load                                                               
and unload the bitumen hot and transport cold.                                                                                  
                                                                                                                                
MR.  MCCOSHEN  said the  product  will  be  loaded warm  with  no                                                               
diluent  and  will   be  transported  cold.  Thus   it  would  be                                                               
relatively easy to clean up if there was a spill.                                                                               
                                                                                                                                
MR. TREADWELL said discussions on  the water-based aspect of this                                                               
venture have  not begun, but  they have looked at  rail standards                                                               
and  safety and  included them  in the  cost estimates.  He noted                                                               
that  transporting the  oil cold  is  safer and  it improves  the                                                               
economics. He said  he expects this will be a  major issue in the                                                               
EIS but it should not be a showstopper.                                                                                         
                                                                                                                                
2:50:30 PM                                                                                                                    
SENATOR MICCICHE commented  on the value of  backhaul traffic and                                                               
asked  if railroads  look at  that future  growth as  a means  of                                                               
maximizing profitability.                                                                                                       
                                                                                                                                
MR.  MCCOSHEN described  backhaul container  traffic as  icing on                                                               
the cake. He reiterated that  the project analysis conservatively                                                               
banked  on [bitumen]  going one  way and  backhauling empty,  but                                                               
anyone in the rail business will ship everything possible.                                                                      
                                                                                                                                
MR. TREADWELL said railroads make  estimates based on the current                                                               
market so  the focus is  on the bitumen  market but there  may be                                                               
some meaningful percentage of container flows from east to west.                                                                
                                                                                                                                
CHAIR HUGHES asked  the presenters to conclude  with a discussion                                                               
of the ideal timeline for the project.                                                                                          
                                                                                                                                
MR. MCCOSHEN  said once  the agreements,  permits, and  rights of                                                               
way are  obtained A2A can  go to  the capital markets  to finance                                                               
major  engineering. The  main construction  down  to Fort  Nelson                                                               
could probably  start in 18-24  months and the  construction will                                                               
take about 2.5 years.                                                                                                           
                                                                                                                                
MR. TRADWELL  added that the  goal is  to work through  the basic                                                               
agreements  this  year, do  solid  engineering  in 2020,  and  be                                                               
formally before the relevant agencies for approval in 2-3 years.                                                                
                                                                                                                                
2:57:55 PM                                                                                                                    
CHAIR HUGHES  observed that if  everything "stays on  track" cars                                                               
could be moving by 2024-2025                                                                                                    
                                                                                                                                
MR.  MCCOSHEN clarified  that if  things go  as planned,  a small                                                               
number of cars  could be moving within a year  and a major number                                                               
of cars would be moving in 2022.                                                                                                
                                                                                                                                
CHAIR   HUGHES  thanked   the  presenters   for  an   informative                                                               
presentation  and  expressed hope  that  this  would be  part  of                                                               
Alaska's destiny.                                                                                                               
                                                                                                                                
2:59:07 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Hughes adjourned the Senate Transportation Standing                                                                       
Committee meeting at 2:59 pm.                                                                                                   

Document Name Date/Time Subjects
STRA Agenda 2.28.19.pdf STRA 2/28/2019 1:30:00 PM
A2A Railway Presentation.pdf STRA 2/28/2019 1:30:00 PM