Legislature(2013 - 2014)BARNES 124
02/13/2014 01:00 PM House TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| HB260 | |
| HB271 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 260 | TELECONFERENCED | |
| += | HB 271 | TELECONFERENCED | |
HB 271-APPROP: RAILROAD FEASIBILITY STUDY
CHAIR P. WILSON announced that the final order of business would
be HOUSE BILL NO. 271, "An Act making a special appropriation to
the University of Alaska Fairbanks for a study of the
feasibility of constructing a railroad between Fairbanks and
Deadhorse; and providing for an effective date."
1:52:20 PM
REPRESENTATIVE ISAACSON, speaking as sponsor of HB 271, offered
to keep his remarks brief. He referred to information in
members' packets, including a copy of a PowerPoint and academic
paper by Dr. Paul Metz [entitled, "Economic Impact of a North
Slope Rail Extension on Northern Energy and Mineral
Development."] He stated this paper highlights a number of
natural resources that could be accessed if the rail between
Fairbanks and Deadhorse is built. He predicted that if 10
percent of the available natural resources were put into place
it would generate $18 billion in revenue to Alaska's treasury
without changing any tax structures. He indicated that DNR
confirmed that "we're not far off the mark." He also
highlighted an e-mail [in members' packets] from Great Bear
Petroleum LLC [Great Bear] which indicates that the proposed
rail project between Fairbanks and Deadhorse could provide
significant transportation cost savings for delivering materials
and another option for North Slope product delivery to in-state
locations or tidewaters. He asked members for their support for
HB 271.
1:54:09 PM
PAUL METZ, Professor, Ph.D., P.G., Geological Engineering,
University of Alaska Fairbanks, stated that he provided a report
and PowerPoint presentation to the committee to outline the
benefits of extending the Alaska railroad to the North Slope,
which is in members'' packets. He offered to answer any
questions members may have.
CHAIR P. WILSON, after first determining no one else wished to
testify, closed public testimony on HB 271.
1:56:22 PM
REPRESENTATIVE KREISS-TOMKINS stated that the proposed rail
extension project would be a huge infrastructure investment to
the North Slope. While he finds the idea intriguing and
compelling, the price tag for the feasibility study is
substantial. He asked why the private sector hasn't made any
initial investment in the feasibility of extending the railroad
to enhance North Slope mineral development.
CHAIR P. WILSON remarked that since Alaska does not have a
transportation plan it leaves private industry in limbo. She
emphasized the focus of this committee is to consider the policy
and decide what is best for the state and to pass on any
financial considerations to the House Finance Committee. She
acknowledged the importance of verbalizing the financial
concerns.
1:58:37 PM
REPRESENTATIVE KREISS-TOMKINS said he has difficulties
subscribing to the philosophy that this committee can't consider
the financial implications of investments since that seems to be
the fundamental policy of transportation. He commented that the
difficulty is that if the state spends $2 million for a
feasibility of a railroad to Deadhorse, it means the state will
not have $2 million to spend on the Northern Rail Extension or
the Port MacKenzie Rail Extension since state funds are limited.
He acknowledged the importance of considering investing
substantial sums of money to ensure the best return.
CHAIR P. WILSON agreed that it is important to consider the
financial realities.
1:59:48 PM
REPRESENTATIVE FEIGE said he agreed with the representative from
Sitka. He pointed out $2 million is a lot of money and thus far
there hasn't been a lot of interest in this project other than
one e-mail from Great Bear. He surmised that Great Bear will
need to travel a significant distance before providing
assurances that it will develop those areas. He suggested
alternate shipping, such as barging in any sand and steel Great
Bear might suffice. He stated that railroads are designed to
carry lots of heavy material cheaply. In order to make a $5
billion investment to build a railroad without capitalization
will require a significant economic driver that results in heavy
loads moving from point A to point B. He acknowledged that
someday oil production might be so low that transporting by rail
will be more economical; however, he offered his belief that
transporting oil by rail is a long way down the road. He
commented that mines in the Ambler and Livengood represent
potential customers, but these projects are not at that stage
either. In concept, perhaps the state should consider a shorter
line since the committee has essentially only heard from one
potential customer. He acknowledged the [1972] vintage study
previously mentioned, but noted that the mountains haven't moved
a whole lot since then. While that particular route through
Atigun Pass - including a tunnel - certainly could be an
adequate route, he questioned the legislature funding the
university for this study without a reasonable expectation that
the project is going to go forward. He said that it's also not
the legislature's job to "come up with welfare-type projects to
keep university researchers engaged." He viewed the decision
[on HB 271] from the perspective of whether to fund $2 million
to the university to study [the Fairbanks to Deadhorse rail
extension project] when the university could focus its research
and intellect on other efforts that would provide a much more
immediate return.
2:03:04 PM
REPRESENTATIVE GATTIS echoed Representative Feige's comments.
She related her constituents complain that the state funds
feasibility studies but does not further it with an actual
project. She emphasized that given declining revenues she is
reluctant to fund yet another study that may not result in any
project. Instead, she would prefer to fund projects that have
not yet been finished. She said, "I won't be voting for this."
The committee took an at-ease from 2:03 p.m. to 2:04 p.m.
2:04:58 PM
REPRESENTATIVE ISAACSON asked to first address this bill and
then hold the bill over to get some of the points fine-tuned.
He acknowledged the importance of frugality during declining
revenues; however, he urged the state to take the necessary
steps to diversify its economy. He said, "Folks, we are so
addicted to oil that is all we can see and oil is declining in
its revenue stream so we need to diversify." He offered his
belief that the proposed rail extension could help open new
mines, oil development, and expand other economic opportunities
for the state. He characterized [the feasibility study in HB
271] as being a very good use of money. He argued that the
project doesn't represent "university welfare." He pointed out
that frequently when the state makes an investment it is also
sending a signal to the resource development industry that the
state is serious about diversifying its economy and providing
access and transportation. He lamented that he didn't ask Dr.
Metz to provide more details and outline the benefits of this
project. He referred to a four-page brief on this [study] in
members' packets. He lauded Dr. Metz's knowledge and project
experience. He emphasized the aforementioned study indicates
that the state could realize a 30 percent return on investment
from just one application this railroad would serve.
2:08:52 PM
REPRESENTATIVE ISAACSON offered his belief that the rail
investment is worthwhile, particularly since the railroad has
been suffering staggering revenue losses due to Flint Hills
Resources' refinery and Usibelli Coal Mine, Inc.'s decisions.
For example, Flint Hills Resources refinery has not elected to
ship any fuel in April. He predicted that the legislature will
be asked to "help prop up" the Alaska Railroad Corporation
(ARRC) with far more than $2 million based on the drastic
revenue reductions the ARRC is experiencing. He supports HB 271
as an investment to assist the ARRC, to provide economic
diversity, and to take advantage of a great opportunity. He
vowed to "crank out" a simplified bullet sheet to outline the
importance of this bill including any benefits to the state.
Further, he stressed that ultimately private funds will build
the railroad if it proves viable so it won't be necessary to
spend general fund or capital fund monies to do so. He
emphasized that the state must begin by proving the concept and
send signals to the parties and the bond markets that the rail
extension project from Fairbanks to Deadhorse is viable. He
characterized this project as an important one for the general
welfare of the state.
2:10:32 PM
REPRESENTATIVE LYNN echoed Representative Isaacson's comments.
He offered his belief that no one will fund a railroad extension
project unless a study verifies that the project is feasible.
He asked which will come first, the chicken or the egg. He
recognized the tremendous potential of North Slope development
and eventually a rail link could spur a connection to Lower 48.
He hoped the bill would come back before the committee. He
pointed out that the state has studied the gasline countless
times, yet the state is currently closer than ever before in
making the gasline a reality. He asked members to evaluate the
bill and take action.
2:12:24 PM
REPRESENTATIVE GATTIS emphasized that she isn't suggesting that
a study isn't important. She understands that sometimes "we
have to spend money to make money." She acknowledged the
importance of building infrastructure. She said she did not
hear the compelling reason to move forward. She agreed with
Representative Lynn that it is important, but not at this time.
[HB 271 was held over].
| Document Name | Date/Time | Subjects |
|---|---|---|
| Economic Impact of a North Slope Rail Extension 2014 power pt.ppt |
HTRA 2/13/2014 1:00:00 PM |
HB 271 |
| Economic Impact of a North Slope Rail Extension-Metz (2).pdf |
HTRA 2/13/2014 1:00:00 PM |
HB 271 |
| CS HB260 version R 2_13_14.pdf |
HTRA 2/13/2014 1:00:00 PM |
HB 260 |