Legislature(2003 - 2004)

03/10/2003 04:14 PM WTR

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
   SENATE SPECIAL COMMITTEE ON WORLD TRADE AND STATE/FEDERAL                                                                  
                         March 10, 2003                                                                                         
                           4:14 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator John Cowdery, Chair                                                                                                     
Senator Robin Taylor                                                                                                            
Senator Gene Therriault                                                                                                         
Senator Donny Olson                                                                                                             
Senator Gretchen Guess                                                                                                          
MEMBERS ABSENT                                                                                                                
Senator Ralph Seekins                                                                                                           
COMMITTEE CALENDAR                                                                                                            
     NORTHERN FORUM                                                                                                             
     CIRCUMPOLAR INFRASTRUCTURE TASK FORCE                                                                                      
PREVIOUS ACTION                                                                                                               
No previous action to record.                                                                                                   
WITNESS REGISTER                                                                                                              
Ms. Priscilla Wohl, Executive Director                                                                                          
The Northern Forum                                                                                                              
Office of the Secretariat                                                                                                       
4101 University Drive, CGC 221                                                                                                  
Anchorage, AK  99508                                                                                                            
Mr. Mead Treadwell                                                                                                              
Managing Director                                                                                                               
Institute of the North                                                                                                          
PO Box 101700                                                                                                                   
Anchorage, Alaska 99510                                                                                                         
ACTION NARRATIVE                                                                                                              
TAPE 03-1, SIDE A                                                                                                             
Number 0001                                                                                                                     
CHAIR JOHN COWDERY  called the Senate Special  Committee on World                                                             
Trade and State/Federal  Relations meeting to order  at 4:14 p.m.                                                               
Senators Therriault, Guess, Olson  and Chair Cowdery were present                                                               
at the call to order.  Senator Taylor arrived shortly thereafter.                                                               
Chair Cowdery announced  that Senator Seekins was  excused from a                                                               
call of the  Senate. He informed members that  Ms. Priscilla Wohl                                                               
and Mr. Mead Treadwell would be presenting to the committee.                                                                    
MS.  PRISCILLA WOHL,  Executive Director  of the  Northern Forum,                                                               
explained that the Northern Forum  is an association of state and                                                               
regional governments  around the North.  The State of  Alaska has                                                               
been a  member of  the forum  since it was  founded in  1991. The                                                               
forum  is presently  comprised  of 29  member  regions; four  are                                                               
inactive and may lose membership  in April. The other members are                                                               
active, and  membership is growing. The  forum anticipates adding                                                               
four  new  members from  Northern  Canada  in  April and  it  has                                                               
letters  of interest  from ministers  or  premiers from  Northern                                                               
Quebec,  Labrador, Northern  Manitoba  and Nunavut.   With  those                                                               
members, the forum will essentially  be circumpolar with a strong                                                               
contingent from Russia, Northern Europe  and Canada. The forum is                                                               
sustained  by funding  from each  member  region in  the form  of                                                               
dues. It  has also received grants  from the State of  Alaska and                                                               
the Hokkaido Prefecture  in Japan. In the past few  years, it has                                                               
actively  pursued  grants  from  a variety  of  institutions  and                                                               
foundations to  support the project  work of the  Northern Forum.                                                               
Last year, U.S. Senator Stevens  provided the forum with $500,000                                                               
for specific projects. The forum  hopes to get additional funding                                                               
of that nature in the future.                                                                                                   
[CHAIR COWDERY acknowledged the presence of Senator Taylor.]                                                                    
MS. WOHL  told members  that Northern  Forum projects  fall under                                                               
four  categories:   sustainable  development;   the  environment;                                                               
society and culture; and governance.  The forum also recognizes a                                                               
need  to  work on  projects  that  focus on  emergency  response.                                                               
Within the four  program categories, the forum  performs a number                                                               
of different projects, based on  the interests of the membership.                                                               
Projects are brought forward to  the Board of Governors for their                                                               
approval  and then  proceed with  the support  of at  least three                                                               
member regions. Many of the  projects are supported by a majority                                                               
of the  member region;  Alaska has  been a  key participant  in a                                                               
number of  the projects that  have gone forward. During  the last                                                               
several years, the  forum has grown in  influence and activities.                                                               
It  is recognized  as an  observer of  the United  Nations, as  a                                                               
member of  the Committee  of NGOs within  the United  States, and                                                               
the forum has submitted for  ECOSOC [Economic and Social Council]                                                               
observer  status at  the United  Nations. The  Northern Forum  is                                                               
very active  in the Arctic Council,  made up of the  eight Arctic                                                               
nations that  are working cooperatively  on a variety  of issues.                                                               
The  forum is  a founding  member and  a member  of the  steering                                                               
committee of the Network of  Regional Governments for Sustainable                                                               
Development that was  recently formed out of the  world summit on                                                               
sustainable development in Johannesburg.                                                                                        
MS. WOHL  said over the  last two  years, the Northern  Forum has                                                               
expanded the  Northern Forum's operations to  include 20 business                                                               
members. The  governors recognized  that government, on  its own,                                                               
cannot legislate economic  development, environmental protection,                                                               
society and culture.  These projects can only  be accomplished in                                                               
partnership  with other  institutions. The  business members  are                                                               
from  Alaska, the  Lower  48 states,  Russia  and Finland.  These                                                               
business partners  are finding that  with the cooperation  of the                                                               
Northern  Forum, they  suddenly  have an  open  door to  business                                                               
relationships around the  world. A number of them  have been very                                                               
successful  in using  the Northern  Forum  as a  tool to  achieve                                                               
solid business deals. For example,  a small manufacturing company                                                               
from Finland was able to secure  $3 million in funding to provide                                                               
meat manufacturing equipment to  sheep herders in Northern China.                                                               
Another  business  has secured  a  $10  million road  project  in                                                               
China. Businesses are successfully using  the Northern Forum as a                                                               
tool to  open doors  to meet  with representatives  who are  in a                                                               
position to approve or sanction development projects.                                                                           
CHAIR COWDERY  told members that  he attended the  Northern Forum                                                               
meeting in  St. Petersburg, Russia.  The concern at  that meeting                                                               
was that the Panama Canal only  provides access to the East Coast                                                               
and that  the landowners on  either side  of the canal  may raise                                                               
the tariff  to such a point  that it might not  be competitive to                                                               
get to the East Coast.                                                                                                          
MS.  WOHL  told members  that  Mr.  Treadwell would  speak  about                                                               
circumpolar  infrastructure. The  Northern  Forum  has been  very                                                               
interested in East-West  transportation, both an air  and a polar                                                               
sea  route,  for a  number  of  years  now, but  the  circumpolar                                                               
infrastructure task  force is focusing  quite a bit  of attention                                                               
on it.                                                                                                                          
CHAIR COWDERY  pointed out  that the  Finnish have  developed the                                                               
most advanced icebreakers  that can travel through  ice nine feet                                                               
thick at  fourteen knots. He was  told it is similar  to a bottom                                                               
plow in that  it folds the top layer of  ice underneath the lower                                                               
level,  causing ridges.  The lower  layer  has greater  flotation                                                               
value and helps to break the ice up.                                                                                            
MS. WOHL told  members her message is that the  Northern Forum is                                                               
an organization that the State of  Alaska helped to find that can                                                               
be used  to the state's  benefit, as  many other regions  use it.                                                               
She likened it to  a membership in a health club:  one can pay to                                                               
join  but if  it isn't  used, no  benefits will  be derived.  She                                                               
noted the  forum has  produced concrete  results for  the members                                                               
who use it. The Sakha Republic  has a number of ongoing projects,                                                               
one  being the  transfer  of reindeer  husbandry technology  from                                                               
Northern Finland  to the  Sakha Republic  to benefit  small rural                                                               
communities  that   have  no  other   way  of   supporting  their                                                               
industries.  A number  of  the  regions are  using  the Forum  to                                                               
encourage Northern  tourism activities.  The State of  Alaska has                                                               
been  successful in  using it  in the  past to  open up  lines of                                                               
communication   and  to   encourage   economic  development   and                                                               
relationships  between  Alaska,  Sakhalin   and  the  Yukon.  She                                                               
believes many  of these relationships  can be expanded  using the                                                               
forum as a tool.                                                                                                                
CHAIR COWDERY noted  the Northern Forum office is  now located in                                                               
the  bottom  floor  of   the  Anchorage  Legislative  Information                                                               
MS. WOHL told members the forum  has four permanent staff and two                                                               
interns, as well  as representatives from two  member regions who                                                               
work  in the  office. The  forum also  has contract  staff to  do                                                               
accounting and website work. In  addition, the Northern Forum has                                                               
two offices  in Russia,  one in Yakutsk,  one in  St. Petersburg,                                                               
and an office in Northern Lapland.                                                                                              
CHAIR  COWDERY  informed  members  that  he  has  talked  to  Mr.                                                               
Treadwell, Ms. Wohl  and staff at the World Trade  Center and the                                                               
Department   of   Community   and  Economic   Development   about                                                               
coordinating staff and costs.                                                                                                   
MS. WOHL  said the Northern  Forum has a multi-lingual  staff and                                                               
said she  would be glad to  do that. Her staff  is experienced in                                                               
working with delegations and with  translation. She then provided                                                               
an  annual report  for legislators,  which  contains the  forum's                                                               
activities in 2002  and a financial report, as well  as an agenda                                                               
for the upcoming general assembly  at which the Prime Minister of                                                               
Russia will  be the keynote  speaker. The Northern Forum  has met                                                               
with the  foreign minister of  Russia twice  and has a  very good                                                               
relationship  with  him.  She  said  that  many  of  the  forum's                                                               
governors are in  the Russian Senate or federal  council and they                                                               
continue to focus  much of the Russian  government's attention on                                                               
working with other northern regions  to solve problems. They have                                                               
requested  information from  the State  of  Alaska on  how it  is                                                               
addressing  rural   issues,  such   as  sanitation,   energy  and                                                               
telemedicine.  She  also  distributed  an  activities  report  to                                                               
committee members that contains  information about Northern Forum                                                               
activities during the last two  months and upcoming meetings. She                                                               
then offered to answer questions.                                                                                               
CHAIR COWDERY asked the cost of Northern Forum membership fees.                                                                 
MS.  WOHL said  the  cost is  $10,000 per  year  for all  members                                                               
except those  regions with  a population of  100,000 or  less pay                                                               
SENATOR OLSON  referred to the  negative balance on  the Northern                                                               
Forum's income  statement and asked  if the Northern Forum  is in                                                               
danger of being cut.                                                                                                            
MS. WOHL said she does not think  so at this time. The profit and                                                               
loss in  the annual report  is from  the prior fiscal  year. This                                                               
year's  fiscal  statement  will represent  a  significant  change                                                               
because  of  project  income  and  the  grant  from  the  federal                                                               
government. In addition, the forum  has far more business members                                                               
who  are  contributing  materially  and  in-kind.  She  said  the                                                               
forum's fiscal  year is the same  as the State of  Alaska's. This                                                               
year's fiscal report  should show a far  different situation. She                                                               
emphasized that  she has taken the  fiscal situation, activities,                                                               
and membership  very seriously. If  an organization  continues to                                                               
function   with  deficits   and  a   membership  that   does  not                                                               
participate  actively, there  is no  reason to  exist. She  noted                                                               
that  many  forum  members  are  very  active  and  are  bringing                                                               
projects  forward.  The  Sakha  Republic  has  contributed  about                                                               
$150,000 to support activities;  Lapland is contributing close to                                                               
$100,000; and  St. Petersburg is contributing  about $75,000. She                                                               
pointed  out that  about 80  percent  of the  membership dues  is                                                               
spent in Alaska on salaries, rent and other services.                                                                           
SENATOR OLSON asked how much federal money the forum gets.                                                                      
MS. WOHL said  the forum has received $500,000  this fiscal year.                                                               
It anticipates $250,000 to $500,000 this next fiscal year.                                                                      
SENATOR OLSON asked which members are delinquent in paying dues.                                                                
MS.  WOHL  said delinquent  members  are  the regions  of  Evenk,                                                               
Nenets, Kamchatka, Magadan in Russia and Dornod, Mongolia.                                                                      
CHAIR COWDERY asked if Sakhalin Island is a member.                                                                             
MS. WOHL said it is a current member.                                                                                           
SENATOR THERRIAULT asked if anything  in particular happened last                                                               
year to cause the deficit.                                                                                                      
MS.  WOHL said  the  primary area  of deficit  is  the result  of                                                               
members not  paying their dues.  The forum budgets for  a certain                                                               
level of  activity so when members  do not pay their  dues or pay                                                               
late, the result is deficit spending.                                                                                           
SENATOR  THERRIAULT  asked if  any  particular  events caused  an                                                               
increase in spending.                                                                                                           
MS.  WOHL said  the deficit  was the  result of  regular, ongoing                                                               
SENATOR  THERRIAULT  asked  Ms.   Wohl  what  transpired  at  the                                                               
management team meeting.                                                                                                        
MS. WOHL explained that the management  team is made up of senior                                                               
staff  who represent  the executive  committee (the  chairman and                                                               
four vice chairs).  The management team met two weeks  ago in St.                                                               
Petersburg to  finalize the agenda  for the general  assembly and                                                               
it reviewed a slate of new  projects that have been proposed. The                                                               
board of  directors will  review those projects  in April  at the                                                               
general assembly  and move  some of  them forward.  Five projects                                                               
were  not approved  because they  were  too focused  on a  single                                                               
region or did not have adequate funding.                                                                                        
SENATOR OLSON asked why Greenland is not an active participant.                                                                 
MS.  WOHL said  Greenland  is  not an  active  participant for  a                                                               
number  of reasons.  Greenland  is a  home  rule protectorate  of                                                               
Denmark  and Denmark  is represented  in the  Arctic Council.  In                                                               
addition, Greenland has  a very small, poor  population. To date,                                                               
Greenland has felt it  is not within her means to  be a member of                                                               
two organizations  focused on northern  issues. She noted  she is                                                               
trying  to  resolve their  issues  through  partnership with  the                                                               
Indigenous People's Secretariat of the Arctic Council.                                                                          
SENATOR OLSON  asked why  Fitzburgen (ph) is  not a  member while                                                               
the other part of Norway is.                                                                                                    
MS. WOHL said the Northern part  of Norway has notified the forum                                                               
that  its membership  is no  longer active  but it  has not  been                                                               
taken off  of the map yet.  That area is similar  to Greenland in                                                               
that  it is  participating in  international cooperation  through                                                               
the Arctic Council.                                                                                                             
SENATOR OLSON  asked what the  relationship of the  eight nations                                                               
in the Arctic Council is to the Northern Forum.                                                                                 
MS. WOHL explained  that the Northern Forum is  an association of                                                               
regional governments,  state governments,  and it is  an observer                                                               
within the Arctic Council. The forum  does not have a seat at the                                                               
table  but is  allowed  to participate  in  projects and  provide                                                               
input into the council's actions.  She noted that during the last                                                               
two years,  while Finland had  the chair, the Northern  Forum was                                                               
given  quite a  bit  of  leeway in  addressing  the council.  The                                                               
Northern Forum has  acted in a consultative status  that it would                                                               
like to enhance and continue.  The governors feel it is important                                                               
that  the regional  governments  should have  a  strong voice  in                                                               
northern issues, rather than  Washington, D.C., Stockholm, Moscow                                                               
or Helsinki.                                                                                                                    
CHAIR COWDERY  asked Ms. Wohl  to keep the committee  informed of                                                               
forum activities.                                                                                                               
MS. WOHL agreed  to do so and offered to  forward future activity                                                               
reports to members, which is updated every two months.                                                                          
CHAIR  COWDERY asked  Ms. Wohl  to share  with the  committee the                                                               
names of her international contacts.                                                                                            
MS. WOHL agreed to do so.                                                                                                       
CHAIR  COWDERY  thanked  Ms.  Wohl and  asked  Mr.  Treadwell  to                                                               
present to the committee.                                                                                                       
MR. MEAD  TREADWELL, managing  director of  the Institute  of the                                                               
North  at Alaska  Pacific University  and a  commissioner on  the                                                               
U.S. Arctic  Research Commission, introduced Mary  Jane Fate, who                                                               
was  appointed  by President  Bush  to  sit  on the  U.S.  Arctic                                                               
Research  Commission.   He  informed  members  the   U.S.  Arctic                                                               
Research Commission  advises the  President and Congress  on U.S.                                                               
arctic research priorities, on which  the U. S. spends about $250                                                               
million  per  year. He  also  introduced  Dr. John  Tichotsky,  a                                                               
senior  fellow  at  the  Institute  of the  North,  who  will  be                                                               
testifying before  a companion committee  about a visit  from the                                                               
Russian duma,  who will  be coming  to Alaska  in April.  He also                                                               
extended best  wishes from  Governor Hickel,  the founder  of the                                                               
Institute  of the  North and  Secretary General  of the  Northern                                                               
In  response to  Senator  Olson's question  about the  difference                                                               
between the Northern Forum and  the Arctic Council, MR. TREADWELL                                                               
said  the  Northern Forum  was  formed  first when  Wally  Hickel                                                               
served  as  governor.  The eight  nations  met  on  environmental                                                               
issues. The  [State of  Alaska] urged  the federal  government to                                                               
support regional governments  and the attempts of  the people who                                                               
live in  those areas to  solve specific problems. As  the federal                                                               
government moved forward  with the Arctic Council  at the request                                                               
of Canada,  the [State of  Alaska] pushed for  additional support                                                               
for region-to-region cooperation.                                                                                               
MR.  TREADWELL  said  he  would focus  his  presentation  on  the                                                               
Circumpolar  Infrastructure  Task  Force  (CITF),  which  is  the                                                               
result of two  things: a disaster and a dinner  bet. The disaster                                                               
occurred  about four  years  ago  when the  people  of the  Sakha                                                               
Republic were starving and freezing  because regular shipments of                                                               
fuel and food had not arrived.  An ad hoc group of people working                                                               
on   international  Arctic   issues  suggested   establishing  an                                                               
international  effort  to look  at  transportation  to the  State                                                               
Department. The dinner  bet occurred when he was  sitting next to                                                               
the British  observer at  an Arctic Council  meeting. He  said to                                                               
the British observer that it would  be great if the eight nations                                                               
would deal  with something  to improve  the economy.  The British                                                               
observer  bet  him a  steak  dinner  that  there  was no  way  to                                                               
convince the eight Arctic nations  to work on economic issues. He                                                               
believes he won the bet.                                                                                                        
MR. TREADWELL  said the CITF  is a  project of both  the Northern                                                               
Forum  and the  Arctic Council.  It was  created in  September of                                                               
2000 to  identify opportunities for international  cooperation to                                                               
advance circumpolar infrastructure,  aviation, maritime, land and                                                               
telecommunication  linkages. The  secretariat of  the CITF  is at                                                               
the  Institute of  the North,  which  is part  of Alaska  Pacific                                                               
University, and  is supported financially by  the U.S. Department                                                               
of  Transportation,  the  Northern  Forum  and  the  U.S.  Arctic                                                               
Research Commission. He  noted when he became  a commissioner, he                                                               
asked the U.S. Arctic Research  Commission to cut off its funding                                                               
so  that there  would  be no  conflict. The  CITF  is working  on                                                               
aviation, infrastructure,  telecom, and  marine links.  It picked                                                               
up  people from  Northern  Forum regions.  The  Institute of  the                                                               
North recently  did a study  for the  CITF on how  Arctic regions                                                               
connect with  each other. Right  now it  is impossible to  get to                                                               
Greenland  from  North America  on  scheduled  air service.  That                                                               
service ceased  about one and  one-half years ago. Last  year, at                                                               
the time of  the Alaska Air Carriers' large  convention, the CITF                                                               
held a  meeting of  aviation experts from  around the  Arctic and                                                               
looked at a set of  recommendations. One of those recommendations                                                               
was the  possibility of  using mail  to strengthen  links between                                                               
nations  in the  Arctic.  The  CITF found  from  the U.S.  Postal                                                               
Service  that the  amount  of  mail going  into  Russia from  the                                                               
western  United States  is substantial  enough  to contribute  to                                                               
full time air links between Alaska and the Russian Far East.                                                                    
The CITF also designed an outline  for a feasibility study on air                                                               
routes  and  has  been  talking   with  the  U.S.  Department  of                                                               
Transportation about  supporting that  study. About four  or five                                                               
airlines in Alaska  have shown a strong  interest in establishing                                                               
East-West air links,  as well as a number of  airlines around the                                                               
CHAIR  COWDERY  interrupted  to   say  that  Alaska  Airlines  is                                                               
starting flight service  to Adak once per week. He  noted that to                                                               
get to Sakhalin now, one has to travel to Korea first.                                                                          
MR.  TREADWELL  acknowledged  that  the current  route  is  quite                                                               
roundabout. He said  that a member of the Alaska  Air Group Board                                                               
of Directors was present at the meeting.                                                                                        
MS. MARY JANE FATE told members  that Alaska Airlines has added a                                                               
route to Adak  and that it has been very  proactive about looking                                                               
at linkage of communities.                                                                                                      
MR.  TREADWELL  said  that  ERA,   Linden,  Northern  Air  Cargo,                                                               
Evergreen and  Alaska Airlines,  as well as  a number  of smaller                                                               
charter airlines,  have shown  interest in  this route.  The CITF                                                               
met with a  Russian representative on the aviation  issue about a                                                               
gateway to  Sakhalin. One possibility  is to meet up  with Alaska                                                               
Airlines in  Adak, another is to  meet at Anahir. At  this point,                                                               
the CITF is trying to stay out  of the way of the private sector,                                                               
but to determine  what the government can do to  help the private                                                               
sector. So  far, carriage  of the  mail would  be a  large enough                                                               
potential to the  revenue stream, so the CITF has  been trying to                                                               
get the  U.S. Postal Service  more involved. The post  office has                                                               
been  very forthcoming  and the  CITF  has planned  a meeting  in                                                               
Moscow with Russian postal officials later in the year.                                                                         
CHAIR  COWDERY  said  he spoke  with  representatives  at  Alaska                                                               
Airlines and Reeve  Aleutian Airways who felt the CITF  met a lot                                                               
of uncertainty when it dealt with the Russian representatives.                                                                  
MR. TREADWELL  told the  Chair that part  of his  presentation is                                                               
from  a  summary presentation  the  CITF  made for  the  Russian-                                                               
American Pacific partnership.  That group just held  a meeting of                                                               
transportation experts  in Anchorage.  He will  cover information                                                               
about how each of these entities  that are competing in the world                                                               
market  for transportation,  whether that  be the  Trans-Siberian                                                               
Railroad  or the  Northern  Sea Route,  are  gradually coming  to                                                               
market standards.  They have  taken some time  as the  process is                                                               
MR. TREADWELL  then discussed marine  linkages and the  major new                                                               
opportunity of  a northern sea route.  He noted that while  it is                                                               
possible to  deliver goods to  northern communities in  Europe by                                                               
icebreaker, full commerce  is not yet possible. He  said that one                                                               
way to look at the situation  is the Suez Canal collects revenues                                                               
of approximately $2 billion per  year. The Suez Canal ships about                                                               
144  million tons  of goods  per year.  About 75  percent of  the                                                               
cargo  is oil,  primarily moving  from  the Persian  Gulf to  the                                                               
Mediterranean.  About 16  million tons  of bulk  cargo goes  from                                                               
Europe  to East  Asia.  Studies show  that shipments  of  3 to  4                                                               
million  tons  per  year  would   make  the  northern  sea  route                                                               
economically feasible.  That would require  icebreaker capability                                                               
at the choke points.                                                                                                            
He pointed  out that  Alaska should be  concerned about  that for                                                               
several  reasons. First,  in the  basic  issue of  transportation                                                               
distances, the savings in distances  from the northern sea routes                                                               
versus the  Suez Canal  is large. For  example, the  savings from                                                               
Vancouver to  Hamburg is  9,000 miles. The  second issue  is that                                                               
climate change studies are showing  that the volume of Arctic sea                                                               
ice is getting thinner and is  shrinking in the Arctic Ocean.  He                                                               
noted  the  executive  director   of  the  U.S.  Arctic  Research                                                               
Commission  reported the  following five  points to  a U.S.  Navy                                                               
   · Within five years, the non-ice strengthened vessels will be                                                                
     able to traverse the northern sea route for at least two                                                                   
     months each summer.                                                                                                        
   · Within five years, the Northwest Passage may be open for at                                                                
     least one month each summer.                                                                                               
   · By 2015, both routes may remain ice-free for four to six                                                                   
     months per year.                                                                                                           
CHAIR  COWDERY  noted that  he  has  heard  that people  who  are                                                               
traveling around  the world on  their yachts are  looking forward                                                               
to traveling through  that passage. He added that he  was told by                                                               
the "Finns" when he visited  St. Petersburg that freighters could                                                               
travel through the passage without too  much armor as long as one                                                               
went through every few hours.                                                                                                   
MR.  TREADWELL said  the sovereignty  issues in  the Arctic  have                                                               
always  been interesting.  The United  States believes  that both                                                               
the   northern  sea   route  and   the   Northeast  Passage   are                                                               
international  waters  and  open   to  innocent  passage  by  all                                                               
vessels. The Russians  and Canadians consider those  routes to be                                                               
internal  waters and  use a  number  of environmental  protection                                                               
arguments  to support  that position.  Either way,  the issue  of                                                               
sovereignty  is  one to  be  considered.  Sovereignty issues  are                                                               
likely to  come forward  because of  the Law  of the  Sea Treaty.                                                               
Some nations  who have  signed that  treaty are  exercising their                                                               
rights to make a claim  for territory outside the 200-mile limits                                                               
on  the ocean  bottom and  discussed some  of the  problems those                                                               
claims  might present  to the  United States.  NEMA now  requires                                                               
notices to mariners in the Arctic  Ocean that the location of all                                                               
buoys must  be reported. The  Department of Defense  is expanding                                                               
its studies of what it will  do in an ice-free Arctic. This month                                                               
the Navy will  begin a two-month ice camp to  test submarines and                                                               
expand science in  the Arctic. In addition, the  residents of the                                                               
Arctic  have raised  concerns when  the  icebreaker Healy  headed                                                               
North  last year  for the  Shelf Basin  interaction cruises.  The                                                               
Arctic  Eskimo  Whaling Commission  asked  that  they be  stopped                                                               
because of a lack of consultation.  The Coast Guard was not about                                                               
to cede  the sovereignty  of the United  States but  a compromise                                                               
was  worked  out  whereby  the  icebreaker  sailed  west  of  the                                                               
international  dateline  reducing  the noise  that  might  impact                                                               
TAPE 03-1, SIDE B                                                                                                               
MR. TREADWELL said he brought  the committee's attention to those                                                               
things  because the  Arctic is  turning into  a much  more active                                                               
ocean. He pointed  out the other political  developments are that                                                               
the U.S. has been studying Russia's  oil and the CITF project was                                                               
recently appropriated  $500,000 that it will  probably share with                                                               
the Northern Forum.                                                                                                             
MR.  TREADWELL said  one reason  the U.S.  government is  doing a                                                               
major  Russian-Arctic oil  study is  because the  U.S. Geological                                                               
Survey  (USGS)   did  an  estimate   on  the  locations   of  the                                                               
undiscovered oil  in the  world. The  second largest  area (after                                                               
the  Middle East)  is  the  former Soviet  Union  where about  18                                                               
percent of the expected undiscovered  oil is located. The Russian                                                               
Arctic share  of oil and  natural gas  is about 20  percent. East                                                               
Greenland is also expected to have  large oil reserves.  He noted                                                               
the  Russians have  created a  user  group for  the northern  sea                                                               
route  called  Arctic  Trans.  He   then  pointed  out  that  the                                                               
container volume of the Trans-Siberian  Railroad is growing; most                                                               
of  the increase  is  from Korea,  which is  trying  to link  the                                                               
railroad  from South  Korea to  Europe. The  transit time  on the                                                               
railroad is most crowded during  the months when the northern sea                                                               
route is open.                                                                                                                  
SENATOR OLSON asked  if that is because there is  more traffic in                                                               
MR. TREADWELL  said that is probably  correct. He said if  one is                                                               
looking at bringing  goods out of the Russian  North or supplying                                                               
that area,  most of  the activity happens  where the  river meets                                                               
the rail and when the rivers are ice-free.                                                                                      
SENATOR  OLSON  asked if  the  Trans-Siberian  Railroad sees  the                                                               
northern sea route as a threat.                                                                                                 
MR. TREADWELL said  if one looks at the distance  map, the Trans-                                                               
Siberian Railroad  has the edge  on containers. The  northern sea                                                               
route is  likely to  get the  edge on bulk  and liquid  cargo. He                                                               
then  went on  to  say that  Dr.  Tichotsky, a  Cambridge-trained                                                               
economist,  has  looked at  the  bond  ratings for  many  Russian                                                               
regions and has helped to focus  CITF studies on what needs to be                                                               
done to squeeze  out the financial risk for  investors. Russia is                                                               
very interested in seeking outside  support in that area. He then                                                               
discussed   the  elements   essential  to   northern  sea   route                                                               
cooperation, which could take five  years to plan and develop and                                                               
another five years to meet.                                                                                                     
MR. TREADWELL said the benefits  to Alaska are the possibility of                                                               
transshipments in  Adak and Dutch  Harbor; the issue  of bringing                                                               
deep draft  vessels higher into  the Arctic thereby  lowering the                                                               
price  of  freight;  and  the   possibility  of  making  Alaska's                                                               
resources more competitive  on the world market.  He concluded by                                                               
saying   the  CITF   project  has   also  been   doing  work   on                                                               
telecommunications.  The CITF  believes that  cooperative efforts                                                               
between northern  regions could bring  broadband to the  parts of                                                               
Alaska that do  not currently have it.  Telemedicine and distance                                                               
learning  are potential  export commodities.  Alaska institutions                                                               
currently  export health  services to  the Russian  Far East.  He                                                               
noted  that  for  most  of   the  last  century  the  Arctic  was                                                               
inaccessible  because  of  politics,  not  physics.  However,  he                                                               
expects we will gradually see  a much more accessible Arctic from                                                               
an international standpoint.                                                                                                    
CHAIR COWDERY said he is  very intrigued with the Northern route.                                                               
He  asked  Mr. Treadwell  if  he  could  comment on  the  Finnish                                                               
opinion that if  commerce was interested, the  northern sea route                                                               
could be kept open and that  icebreakers would only be needed for                                                               
a shift in the ice.                                                                                                             
MR. TREADWELL  said one thing  to watch  is the condition  of the                                                               
U.S.  icebreaker fleet.  The Healy,  which  was commissioned  two                                                               
years  ago, has  already done  significant geological  studies in                                                               
the Arctic. He then said the  Panama Canal is considering a $5 to                                                               
$8 billion expansion to accommodate  larger ships. In comparison,                                                               
the capital  and operations  necessary to  make the  northern sea                                                               
route a commercial route would cost less than $1 billion.                                                                       
SENATOR  TAYLOR  noted  the  U.S. ran  a  significant  volume  of                                                               
freight through  that area during  World War  II but most  of the                                                               
information about those programs was classified until 1995.                                                                     
CHAIR COWDERY thanked Mr. Treadwell  and adjourned the meeting at                                                               
5:15 p.m.                                                                                                                       

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