Legislature(2023 - 2024)BARNES 124
03/21/2024 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB332 | |
| HB386 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 332 | TELECONFERENCED | |
| *+ | SB 141 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 386 | TELECONFERENCED | |
HB 332-SALE OF ALASKA RAILROAD
1:38:25 PM
CHAIR MCCABE announced that the first order of business would be
HOUSE BILL NO. 332, "An Act relating to the sale of the Alaska
Railroad; and providing for an effective date."
1:39:21 PM
REPRESENTATIVE JESSE SUMNER, Alaska State Legislature, as prime
sponsor, presented HB 332. He shared the sponsor statement
[included in the committee packet], which read as follows
[original punctuation provided]:
This legislation represents a critical turning point
for our state, unlocking economic potential while
ensuring protections for the interests of Alaskans.
For years, the Alaska Railroad has served our
communities, but it has not reached its full
potential. Operating under state ownership, the
railroad has faced limitations in terms of investment,
innovation, and strategic expansion. This bill
initiates a careful, responsible process to transfer
the Alaska Railroad to a private buyer committed to
the railroad's success.
This legislation protects Alaska's interests in
several ways. The potential buyer must agree to
operate the railroad for at least 50 years and assume
existing contracts, providing continuity for our
communities and businesses. The purchase price must
exceed the fair market value or the state's total
investment in the railroad, ensuring taxpayers receive
a fair return. The legislature retains the ultimate
authority to approve or reject a sale agreement,
safeguarding public interest. By establishing a
resource development agreement, this bill positions
the Alaska Railroad to be a key catalyst for unlocking
responsible, sustainable expansion of our state's vast
resources.
Additionally, this process will streamline governance
and inject much-needed private sector expertise into
the railroad's operations. The bill recognizes the
potential for modernization, expansion, and the
creation of new Alaskan jobs through this strategic
sale. I recognize that any change in the Alaska
Railroad's status raises questions and concerns. This
bill addresses those with care, through a transparent
process focused on obtaining the best long-term
outcome for our state. I urge my colleagues to join me
in voting in favor of this legislation, allowing us to
write the next successful chapter in the Alaska
Railroad's history.
1:41:29 PM
CLARK BICKFORD, Staff, Representative Jesse Sumner, Alaska State
Legislature, on behalf of Representative Sumner, prime sponsor,
gave the sectional analysis for HB 332 [included in the
committee packet], which read as follows [original punctuation
provided]:
Sections 1-3. Amends uncodified law of the State of
Alaska
Section 1.
This section mandates the sale of the Alaska Railroad
by setting strict timelines for the governor to issue
a request for proposals and enter into a sales
agreement. The buyer of the railroad must commit to
continuing operations for a minimum of 50 years,
assume all existing contracts of the Alaska Railroad
Corporation, and pay a purchase price exceeding either
the fair market value of the railroad or the total
amount the state has invested in the railroad. The
sale agreement is subject to legislative approval, and
the Alaska Railroad Corporation is restricted from any
actions that could diminish the railroad's value
before the sale. The state shall retain an easement on
Alaska Railroad right-of-way lands for transportation,
communication, and transmission purposes. The governor
must commission a fair market appraisal of the
railroad, report on both the appraisal and the sale
procedures to the legislature and adopt regulations to
implement this act. Upon completion of the sale, the
Alaska Railroad Corporation will be dissolved, and
nonessential railroad property will be transferred to
the Department of Natural Resources. The sale process
is exempt from standard state procurement codes and
regulations governing the Alaska Railroad Corporation.
Finally, the sale of the railroad is contingent upon
the execution of a resource development agreement,
which is likely outlined in a subsequent section of
the bill.
Section 2.
This section underscores the strong connection between
the sale of the Alaska Railroad and the state's goal
of promoting resource development. It requires the
buyer of the Alaska Railroad to enter into a resource
development agreement with the state within 180 days
of the sale. This agreement must demonstrate the
buyer's commitment to actively invest in expanding and
improving the railroad to better facilitate resource
development projects within the state.
The agreement must contain key elements, including a
state pledge to allocate a portion of the sale
proceeds (subject to legislative appropriation) for
railroad modernization, expansion, and maintenance,
specifically including new rail lines for resource
access. The buyer commits to working with the state,
local communities, and other stakeholders to determine
strategic locations for new railroad infrastructure to
support resource development. The buyer will regularly
report to the state and legislature on the agreement's
implementation, including construction progress.
Finally, the agreement must outline a process for
resolving any potential disputes between the state and
the buyer. Similar to the sales agreement, the
resource development agreement requires legislative
approval.
Section 3.
This section establishes a process to identify and
categorize all assets belonging to the Alaska Railroad
Corporation. The governor is tasked with compiling
this inventory, which must include all real property,
personal property, and intangible assets. The governor
must then determine which assets are vital for the
railroad's operation and classify the remaining assets
separately. This comprehensive report is due to the
Legislative Budget and Audit Committee by August 1,
2024.
Importantly, the Legislative Budget and Audit
Committee has the authority to recommend changes to
the governor's asset identification and
classification. This likely provides an additional
layer of oversight and scrutiny to the asset
identification process in preparation for the
railroad's sale.
Section 4.
Establishes that the Act will take place immediately.
1:45:43 PM
CHAIR MCCABE invited questions from committee members.
1:46:02 PM
REPRESENTATIVE STUTES questioned the ultimate goal of the bill.
REPRESENTATIVE SUMNER replied that the actual sale of the
railroad and the direction it is headed in resource development
should be up for debate. He indicated that the bill was a good
way to initiate a discussion.
CHAIR MCCABE added that the railroad had not built a single new
track since the 1980s. He said the best transportation facility
in the state, other than the Alaska Marine Highway System
(AMHS), was the railroad, which has not kept up with the state's
needs. He opined that something needed to be done, which starts
with a conversation, and he indicated that the bill was a
motivational bill.
REPRESENTATIVE STUTES said she understood that the bill was an
"attention getter."
1:48:57 PM
REPRESENTATIVE MINA shared that she looked into the history of
the Alaska Railroad Corporation (ARRC) and that after the sale,
it took two years for the state to buy it due to various
economic concerns. She asked whether resource development was
part of the statutory responsibility of ARRC.
REPRESENTATIVE SUMNER offered to follow up on the inquiry.
REPRESENTATIVE MINA requested to learn more about what ARRC
isn't doing currently, potential management changes, and its
lack of goals relating to resource development.
REPRESENTATIVE SUMNER offered his belief that ARRC had done a
decent job the past 40 years, but there is much more that it can
do, and he reiterated that something else needed to be done.
REPRESENTATIVE MINA asked whether anything in statute prevented
ARRC from doing something.
REPRESENTATIVE SUMNER answered no. He shared his understanding
that there was a process in statute and offered to follow up
with the requested information.
1:52:26 PM
REPRESENTATIVE MCCABE explained that in statute years ago, ARRC
was required every five years to present a request for proposal
(RFP), an appraisal, and three possible buyers. He added that
it had been reduced by the legislature to a yearly report, which
was neglected in past years and for that reason, he was unsure
what the value was. He believed that the railroad was not in
debt, making a cost neutral asset that was not hurting or
helping the state. He acknowledged that there was a history on
what ARRC was supposed to do in reference to looking for buyers.
1:53:59 PM
REPRESENTATIVE VANCE said she appreciated creativity for
business purposes and to ignite economic stability. Without
making it available, there was no way to know about potential
buyers. She said she was in favor of empowering the private
sector, adding that government needed to get out of the way.
She referenced the Kenai Peninsula and the bonding deal and
asked for the bill sponsor's vision for not losing the important
relationship with the tourism industry.
REPRESENTATIVE SUMNER responded that he did not want to lose the
profitable aspect of tourism. He welcomed additional bill
language from committee members.
REPRESENTATIVE VANCE sought to understand the makeup of
railroads across the nation and how they've been able to
increase economic development. She asked whether most were
private companies dealing in contracts, or state corporations.
1:57:13 PM
MR. BICKFORD offered to follow up with the requested
information.
REPRESENTATIVE SUMNER shared his belief that state-owned
corporations were not common.
1:57:52 PM
REPRESENTATIVE MCCABE offered his understanding that Amtrak was
the only government-owned railroad in the Lower 48, possibly the
only government-owned passenger railroad. He shared an anecdote
about interested buyers, which, he believed, should be explored.
1:58:56 PM
REPRESENTATIVE MINA asked how the sale of ARRC would impact the
long-term goal of the Alaska-Alberta Railway (A2A). She
acknowledged the longer-term goal of connecting Alaska to the
Lower 48.
REPRESENTATIVE SUMNER said he thought that was a nuanced
question, and he would look into it more.
2:00:12 PM
REPRESENTATIVE MINA reported that ARRC was the only state-owned
railroad. She asked what would happen to the land ARRC owns.
2:01:04 PM
CLARK HOPP, Chief Operating Officer, Alaska Railroad
Corporation, to Representative Mina stated that the loss of
revenue from nonoperational lands would be a concern in
privatizing the railroad.
REPRESENTATIVE MINA said she was trying to compare privatization
versus state owned. She inquired about the benefits of the
railroad being in coordination with the state.
MR. HOPP provided historical context, indicating that the goal
was to have a steady source of income. He declined to answer
how a private company would operate in Alaska.
REPRESENTATIVE MINA pointed out that many union workers are
employed by the railroad, and if there were a sale, she asked
what would happen with union contracts.
MR. HOPP responded that it was hard to answer that question, as
it is a long ways away.
2:04:33 PM
REPRESENTATIVE SUMNER directed attention to Section 1 of the
bill, indicating that the contracts would continue, as opposed
to liquidating railroad employees.
2:05:13 PM
CHAIR MCCABE expressed concern about the deep-draft port in Port
Mackenzie, Alaska, which was not connected by rails. He said
there were highly interested governments and many reasons to
complete the rail through Canada to the Lower 48, such as clean
Alaska coal to the power plant in North Dakota. He acknowledged
that the dream was big just like the state. He noted that the
Alaska Constitution required the development of resources for
maximum yield and sustainability, and he stressed that it cannot
be done without transportation.
2:07:04 PM
REPRESENTATIVE STUTES said this was a great encouragement for
development and commended the bill sponsor for the "wake up
call" to ARRC and to the legislators.
2:07:40 PM
REPRESENTATIVE VANCE questioned the opportunities for businesses
to partner with the railroad and asked how easy it would be.
She indicated that opportunities were being passed by for far
too long and she asked what else could be done.
CHAIR MCCABE said many entities are interested in Port
Mackenzie; however, they would not be realized without the rail.
He said once the railroad starts to earn revenue, the 84 miles
of the northern rail extension and the rail into Canada could be
furthered. He said there are many moving pieces that need the
railroad to be on board.
2:10:44 PM
REPRESENTATIVE MCKAY commented that considering the eight Arctic
nations, Russia had the most development in the Arctic. Should
there be advancement, he said rail to Prudhoe Bay could be
linked to Chicago. He encouraged not to let Russia get a
foothold and commended the forward thinking. He further
highlighted the importance of a strong foothold.
CHAIR MCCABE highlighted the significant pressure on roads and
concerns about the impact by big trucks. The railroad could be
a big mitigating factor, he said. He suggested that the
railroad could be a solution for hauling gold. He added that
Alaska was uniquely situated to help its Indo-Pacific Allies.
Alaska has the largest antimony deposit in the U.S., which could
be shipped to allies, he noted. He said resource development
creates new wealth and diversification.
2:15:22 PM
REPRESENTATIVE STUTES asked how much it costs to build one mile
of railroad track.
CHAIR MCCABE estimated $247 million for 32 miles, which could be
highly inflated. He said that according to a private company,
$400,000 per mile could be done, whereas another estimate was $1
million per mile.
2:16:54 PM
CHAIR MCCABE announced that HB 332 was held over.