Legislature(2013 - 2014)BARNES 124

03/04/2014 02:00 PM House TRANSPORTATION

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02:18:18 PM Start
02:18:29 PM HB271
03:03:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
           HB 271-APPROP: RAILROAD FEASIBILITY STUDY                                                                        
2:18:29 PM                                                                                                                    
CHAIR P. WILSON  announced that the only 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."                                                                                
2:19:39 PM                                                                                                                    
REPRESENTATIVE ISAACSON, prime sponsor  of HB 271, emphasized the                                                               
importance of  the rail  extension since  the rail  extension can                                                               
greatly   help  diversify   the   economy.     He  related   that                                                               
historically,  the railroad  has hauled  freight from  North Pole                                                               
and  the  impending closure  of  Flint  Hills Resources  refinery                                                               
diminishes the  freight from  55 percent  of the  Alaska Railroad                                                               
Corporation's revenue to 15 percent.   In fact, he was unsure how                                                               
much  revenue the  railroad  would receive  from  the North  Pole                                                               
Flint  Hills operations.   He  recalled  when he  was mayor,  Pat                                                               
Gamble,  who was  president of  the ARRC  stressed that  the ARRC                                                               
needed to  go north.  Today  he spoke to Mr.  Gamble who provided                                                               
reasons the  rail extension should  go north.  First,  this could                                                               
help  resource  development and  second,  it  would provide  year                                                               
round passenger  rail service.  Mr.  Gamble additionally recalled                                                               
the  president  of  ConocoPhillips  Alaska,  Inc.  indicated  the                                                               
company  expected  to  spend  $105 billion  more  of  capital  to                                                               
extract oil on the North Slope  as compared to the $5 billion the                                                               
railroad extension was expected to cost.                                                                                        
2:22:08 PM                                                                                                                    
REPRESENTATIVE  ISAACSON pointed  out Dr.  Metz will  explain how                                                               
the $5 billion  investment will lower the  cost of transportation                                                               
in multiple  industries.  He  recalled an earlier  question about                                                               
this  project   and  whether   it  would   be  "welfare   to  the                                                               
university."   He  emphasized Dr.  Metz's experience  in multiple                                                               
projects that  have become operational, including  the university                                                               
studies that led to the Tanana  Bridge, the Port MacKenzie rail -                                                               
which is three-fifth completed - and  the G7G effort to bring the                                                               
rail from  Alberta to Delta Junction.   Thus, Dr. Metz  has "real                                                               
world" experience in research for rail and other projects.                                                                      
2:23:56 PM                                                                                                                    
PAUL   METZ,   Ph.D.,   Professor  of   Geological   Engineering,                                                               
Department  of  Mining  &   Geological  Engineering,  College  of                                                               
Engineering  and Mines,  University of  Alaska Fairbanks,  stated                                                               
that the UAF  has been involved in a series  of studies beginning                                                               
in 2000,  which are not  academic exercises.   In the  context of                                                               
all the  other rail investigations,  rail extensions have  had an                                                               
immediate effect on  Alaska's economy.  First, the  study for the                                                               
rail link  from Eielson Air  Force Base  to Delta Junction  was a                                                               
joint effort with Lockheed Martin  and several engineering firms.                                                               
Second,  the Alaska  Canada rail  study  released in  2007 was  a                                                               
joint  effort  with  Lockheed Martin  and  HDR  Engineering,  the                                                               
largest  railroad engineering  firm  in the  U.S.,  and Van  Horn                                                               
Institute  at  the  University  of  Calgary,  an  industry-funded                                                               
applied  research group,  and not  part of  the university.   The                                                               
purpose  of U.S.  Senator Frank  Murkowski's  original "rails  to                                                               
resources" legislation, signed  into law in 2000,  was to examine                                                               
the impact  of a rail  extension on  the North Slope  natural gas                                                               
2:26:11 PM                                                                                                                    
DR.  METZ stated  that  the first  few  commissions studied  rail                                                               
extensions  to   the  east  and   south;  however,   the  federal                                                               
government is  now going back to  its original basis in  its most                                                               
recent  national-level  discussions.    He  then  turned  to  his                                                               
presentation  entitled "Economic  Impact  of a  North Slope  Rail                                                               
Extension  on Future  Northern  Energy  and Mineral  Development"                                                               
dated August 7,  2013.  He provided two quotes,  one from William                                                               
Shakespeare, "What  is yet  to come is  still uncertain"  and the                                                               
other from  Yogi Berra,  "The future  ain't what  it used  to be"                                                               
[page  1].   He acknowledged  that  the future  is uncertain  and                                                               
projections  made today  change over  time.   For example,  forty                                                               
years ago  the state couldn't  predict the  Trans-Alaska Pipeline                                                               
System (TAPS)  would be  built more  quickly than  anticipated or                                                               
that it  wouldn't last forever.   This shouldn't prevent  us from                                                               
looking forward.                                                                                                                
2:27:49 PM                                                                                                                    
DR. METZ suggested that Alaska's future  is tied to the oil patch                                                               
and it will continue to be linked  to the oil industry for a very                                                               
long time.   The major sources  of oil revenue began  in 1977 and                                                               
oil  revenue is  dwindling; however,  the North  Slope still  has                                                               
enormous  oil  resources, which  he  estimated  in excess  of  40                                                               
billion barrels  of additional  oil that is  yet to  be produced.                                                               
He surmised  an additional 100 billion  barrels of unconventional                                                               
oil exists.   Petroleum resources  and reserves are  two concepts                                                               
often  confused.   Petroleum resources  represent  a quantity  of                                                               
petroleum  that  can  be  potentially  useful,  but  a  petroleum                                                               
reserve is  one that can be  currently produced at a  profit from                                                               
existing  technology  at  current  costs  of  production  and  at                                                               
current  market prices  for petroleum.   He  stated that  a large                                                               
portion of the resources on the  North Slope are resources and to                                                               
convert them  to reserves will  entail large  capital investments                                                               
by the private sector.  He  offered his belief that a competitive                                                               
economic climate is necessary to produce those resources.                                                                       
2:29:37 PM                                                                                                                    
DR. METZ  pointed to  the huge surge  of petroleum  production in                                                               
the  continental states  since 2011  although hydro-fracking  was                                                               
first patented  in 1947 [page  2].  This process  entails pumping                                                               
fluids  into  the  ground,  breaking  rock,  and  increasing  the                                                               
porosity of  the oil and gas  formation.  He reported  the Bakken                                                               
in North Dakota and Montana and  Eagle Ford in Texas are projects                                                               
that have been producing large  quantities of oil.  Additionally,                                                               
large  quantities  of  natural  gas are  being  produced  in  the                                                               
Eastern states in Marcellus shale and other units.                                                                              
2:30:13 PM                                                                                                                    
DR.  METZ related  that  the West  Texas  oilfield that  produced                                                               
about 35 billion barrels of oil  had been estimated by the Carter                                                               
administration  of having  the potential  to produce  100 million                                                               
barrels from  the source  beds.  He  estimated these  source beds                                                               
would cover 10,000  square miles.  The Shublik  formation, one of                                                               
the  source   beds  in  the   North  Slope,  underlies   an  area                                                               
approximately 30,000  square miles  or a  size equivalent  to the                                                               
size of Ireland, which is three  times larger than the West Texas                                                               
oil  field.   He  concluded  the  North Slope  resources  offered                                                               
tremendous  potential  resources that  need  to  be changed  into                                                               
2:30:52 PM                                                                                                                    
DR.  METZ  reported  that  hydraulic  fracturing  has  only  been                                                               
conducted  on the  North  Slope in  relatively  small levels  for                                                               
investigative purposes.   This method of extraction  has not been                                                               
used for production  due to the high cost operation  on the North                                                               
Slope.  Additionally,  wells produced by fracking  shale units do                                                               
not  have the  same levels  of productivity  as conventional  oil                                                               
reservoirs,  plus  this  method  has higher  costs.    Thus,  the                                                               
margins are much narrower [page 3].                                                                                             
2:31:27 PM                                                                                                                    
CHAIR P. WILSON asked whether  one additionally reason production                                                               
hasn't occurred was due to the high tax rates [in Alaska].                                                                      
DR. METZ  interjected that  one reason is  due to  the "historic"                                                               
tax  rates.   In  further  response  to  Chair Wilson,  Dr.  Metz                                                               
offered his belief  that SB 21 is absolutely  essential to reduce                                                               
taxes.  He concluded there has  been no "surge" in oil production                                                               
as  a  consequence  of  fracking.   Winston  Churchill  said,  "A                                                               
pessimist sees  the difficulty in every  opportunity; an optimist                                                               
sees  the opportunity  in every  difficulty."   He stressed  that                                                               
Alaska has to be optimistic about its future.                                                                                   
2:32:44 PM                                                                                                                    
DR. METZ turned  to "An Arctic Oil Bonanza [that]  Never Was (see                                                               
Miller,   2010)"   [page   3].     He   highlighted   that   many                                                               
misconceptions  exist,  one of  which  is  that the  North  Slope                                                               
investment resulted in  huge rates of return for the  oil and gas                                                               
industry.   He  referred to  a 2010  John Miller  discussion that                                                               
demonstrated  the   Atlantic  Richfield  Company   (ARCO),  which                                                               
discovered oil on the North Slope,  could have made a higher rate                                                               
of return by putting its money  in federal bonds than it did from                                                               
operating on the North  Slope.  He said this was  due to the high                                                               
cost  of  operations and  the  extensive  delays in  obtaining  a                                                               
permit for Trans-Alaska Pipeline System (TAPS).                                                                                 
2:33:49 PM                                                                                                                    
DR. METZ  discussed "Constraints on Northern  Alaska Oil, Natural                                                               
Gas,  and Mineral  Development"  [page  4].   The  high costs  of                                                               
operations on  the North Slope  have been well documented  by the                                                               
Department  of Defense  (DOD).   He  related that  he served  six                                                               
years  with the  U.S.  Air Force  and  his job  was  to cost  out                                                               
projects in Alaska, Greenland, and  elsewhere.  He said that what                                                               
the  USAF discovered  was that  the  cost indexes  for the  North                                                               
Slope  were  extremely high  due  to  long supply  lines,  remote                                                               
areas, and  extreme environmental conditions.   Additionally, the                                                               
USAF  found Alaska  had  high  tax burdens  relative  to the  tax                                                               
burdens occurring in other jurisdictions.   He said the state has                                                               
created a "huge economic hurdle"  that has been difficult for oil                                                               
companies to overcome.                                                                                                          
DR. METZ  explained that reducing  oil taxes is an  essential and                                                               
necessary  first   step  to  enhance  the   competitive  economic                                                               
environment in  Alaska [page  4].  Developing  a railroad  to the                                                               
North   Slope,  which   could  handle   large  volumes   of  bulk                                                               
commodities and  low unit  cost material  could have  an enormous                                                               
impact on  the cost differential  on the North Slope  as compared                                                               
to  other areas.   He  emphasized this  is especially  true since                                                               
rail would  provide backhaul capabilities for  low-cost transport                                                               
of mineral commodities  south to tidewater.  He  reported that he                                                               
developed  an RTS  forecast system  that  provides a  fundamental                                                               
exercise to determine costs.                                                                                                    
2:36:14 PM                                                                                                                    
DR. METZ reported  that all of the studies  considered the impact                                                               
of  mineral  resources  within 50  miles  of  the  transportation                                                               
corridor.  He  envisioned that mine owners would  fund rail spurs                                                               
or road  connections to the  rail corridor to  transport material                                                               
out  and  resupply in.    For  example,  over 600  known  mineral                                                               
occurrences have been identified from  Nenana to Prudhoe Bay.  He                                                               
indicated that  a rail system  would create a huge  incentive for                                                               
exploration and  hence, mineral  occurrences would  be identified                                                               
if the railroad system existed today.                                                                                           
2:37:00 PM                                                                                                                    
DR.  METZ  discussed figures  based  on  the U.S.  Department  of                                                               
Defense (DOD), which  have changed very little from  the 1960s to                                                               
the present [page 5].  The  historic cost factors for North Slope                                                               
DOD  facilities in  the  Aleutians  were about  the  same as  the                                                               
Alaska North Slope operations.   These operational costs run 4 to                                                               
4.5  times more  than continental  U.S. costs.   He  reported the                                                               
index was based  on an average of all  DOD construction contracts                                                               
in Lower 48.  He stated that  the cost of operations on the North                                                               
Slope as  compared to fracking  costs occurring in East  Texas is                                                               
about 6.5  times as  costly, or  about 5 times  as costly  to the                                                               
average cost  in Texas.   He highlighted  that these  figures are                                                               
not  percentages but  represent the  factors that  are huge  cost                                                               
2:38:09 PM                                                                                                                    
DR. METZ turned to the benefits  and costs of the rail extensions                                                               
page 6].   He  reported that Great  Bear Petroleum  announced the                                                               
company  would like  to drill  200 wells  per year  on the  North                                                               
Slope  using horizontal  drilling and  hydro-fracking to  produce                                                               
oil  from the  Shublik formation  and  other source  beds on  the                                                               
North Slope.   He estimated  that the  200 wells would  result in                                                               
2.4 million  tons of freight  per year  based on 12,000  tons per                                                               
well, which is 2.5 times the  concentrates that are hauled out of                                                               
Red Dog  mine per year.   He represents a huge  amount of freight                                                               
["frac"  sand, drilling  steel, drilling  fluids, cement,  diesel                                                               
fuel,  and other  equipment] that  would need  to be  sent north,                                                               
equivalent  to 500  car trains,  carrying 10,000  tons per  train                                                               
five times  a week.   He compared  the potential rail  freight to                                                               
trucking, which  would require 168 18-wheelers  necessary to haul                                                               
40  tons  one-way.   This  would  represent enormous  volumes  of                                                               
freight  being  hauled  on  the Dalton  Highway  yet  it  doesn't                                                               
include  the  additional  backhaul  that  might  occur  with  the                                                               
development of other mineral resources.                                                                                         
DR.  METZ referred  to the  map to  remind members  of the  other                                                               
large oil  resources to the  east at  the in the  MacKenzie River                                                               
Delta and  Northwest offshore  resources, as  well as  very large                                                               
coal resources  on the  North Slope that  would all  benefit from                                                               
the proposed railroad extension [page 6].                                                                                       
2:40:54 PM                                                                                                                    
REPRESENTATIVE  ISAACSON recalled  a  prior  question was  raised                                                               
with respect  to an  alternate rail route  from Deadhorse  to the                                                               
Brooks  Range instead  of from  Nenana  or Fairbanks.   He  asked                                                               
whether it could  be done and if it would  still achieve the same                                                               
DR. METZ explained the overall  plan is to eventually connect the                                                               
railroad to Huntsville,  Alabama.  For example, once  the rail is                                                               
completed,  steel  could be  placed  on  a rail  and  transported                                                               
across the country to a  rail-barge system in Southcentral Alaska                                                               
and be delivered to the North  Slope.  He acknowledged one option                                                               
would avoid building  a tunnel through Atigun Pass,  but doing so                                                               
would require offloading the material,  which would mean handling                                                               
the material again  to truck it.  He offered  his belief that the                                                               
tunnel wouldn't be  a daunting task.  In response  to a question,                                                               
he identified  the location of  Atigun pass  on the map  as being                                                               
the number "3" between Coldfoot and Deadhorse.                                                                                  
2:42:34 PM                                                                                                                    
CHAIR P. WILSON  asked whether the mineral  corridor would extend                                                               
50 miles each side of the proposed railroad extension.                                                                          
DR. METZ acknowledged that the  mineral corridor was an arbitrary                                                               
estimate based  on the cost  a moderate  size mine could  bear to                                                               
build a road or rail.   He indicated that a utility corridor lies                                                               
north of the Yukon River that  has been set aside as federal land                                                               
designated as  a transportation  corridor.   He reported  that he                                                               
did an  assessment for  the Bureau  of Mines  of all  the mineral                                                               
resources in the aforementioned corridor  that were known in 1975                                                               
through 1977.  He recalled that the corridor is 18 miles wide.                                                                  
2:43:43 PM                                                                                                                    
DR.  METZ  highlighted  some  photographs  that  demonstrate  the                                                               
terrain in the proposed rail  extension project [pages 7-9].  One                                                               
shows a  stretch of  road north  of Livengood  in the  Hess Creek                                                               
area, which has  challenging permafrost conditions [page  7].  He                                                               
described the  road system in the  early days of the  pipeline as                                                               
being  "very  tough."    He indicated  the  extreme  grades  that                                                               
illustrate the extreme grades over Atigun Pass on [pages 8-9.                                                                   
REPRESENTATIVE P. WILSON remarked  [traveling over Atigun Pass by                                                               
truck] can be pretty scary.                                                                                                     
DR.  METZ explained  that  the proposed  route  uses the  braided                                                               
stream valleys  to the greatest  extent possible and to  keep the                                                               
alignment at a 1 percent horizontal grade.                                                                                      
2:45:25 PM                                                                                                                    
DR. METZ compared  the rail versus truck freight  costs for North                                                               
Slope shale oil  logistics [page 10].  He  estimated the trucking                                                               
cost from Fairbanks to Prudhoe Bay  based on 13,000 tons per well                                                               
for the  470 miles at a  transportation cost of $1  per ton would                                                               
add  about $5.5  million  per well.   From  Dunbar  or Nenana  to                                                               
Prudhoe  Bay represents  450 rail  miles  at $.10  per ton  mile,                                                               
which would cost  $550,000.  He commented that  the cost analysis                                                               
isn't  from   the  oil  industry  perspective   or  the  trucking                                                               
industry, but  from the  state's perspective.   He  stressed that                                                               
the project cost and revenues need  to be considered.  He offered                                                               
his belief  that huge benefits  would accrue to the  oil industry                                                               
in reduced freight costs, and it  would result in more revenue to                                                               
trucking since a lot more freight would be shipped elsewhere.                                                                   
2:47:44 PM                                                                                                                    
DR.  METZ explained  the capital  cost of  the proposed  railroad                                                               
extension to  Prudhoe Bay  based on the  unit cost  from previous                                                               
studies at  $6 million per  mile for 450  miles.  The  unit costs                                                               
were based  on a long,  deep tunnel in  the Alps at  $2.5 million                                                               
per mile  [page 10].   However, the  Atigun Pass tunnel  would be                                                               
4.5  miles  in length  whereas  the  tunnel  in  the Alps  is  57                                                               
kilometers long  and 1,000  meters deep.   Therefore,  it follows                                                               
that the tunneling  project, even at Atigun pass would  be a much                                                               
easier tunneling  project than the  one in  the Alps.   The Yukon                                                               
River  Bridge costs  are estimated  at $500  million, noting  the                                                               
original bridge cost $31 million.   He concluded the overall cost                                                               
estimate  is   very  conservative   at  $5.2   billion  including                                                               
provisions for a terminal on the North Slope.                                                                                   
2:49:09 PM                                                                                                                    
DR. METZ discussed  the proposed benefits to the  State of Alaska                                                               
based  on one-eighth  royalty  on  the 200  proposed  wells.   He                                                               
projected that  at $85  per barrel it  would generate  about $1.5                                                               
billion per year [page 11].   Further, this oil would fill up the                                                               
pipeline  and fill  the treasury  with  the resource  potentially                                                               
lasting a very long time.                                                                                                       
DR. METZ discussed  the benefit cost analysis and  rate of return                                                               
on investment analyses [page 11].   He predicted the cost-benefit                                                               
analysis would be 2.5, assuming  royalty oil as the only benefit.                                                               
He  estimated an  adjusted rate  of  return on  investment at  30                                                               
percent.   For comparison, he  mentioned that when  Warren Buffet                                                               
bought  the Burlington  Northern  Santa Fe  Railroad (BNSF),  the                                                               
transportation  index went  up 30  percent.   Thus, the  proposed                                                               
rate of  return projection for  this project is  not astronomical                                                               
given what  is happening in the  contiguous states.  In  fact, 60                                                               
percent of the  oil from the Bakken is being  transported by rail                                                               
and overall  huge amounts of  oil are being transported  by rail,                                                               
which was not even considered in this analysis.                                                                                 
2:50:49 PM                                                                                                                    
DR. METZ  explained proposed project  funding by  Alaska Railroad                                                               
Corporation Bonds  [page 12].   He suggested the state  could use                                                               
the bonding authority of the  Alaska Railroad Corporation to sell                                                               
non-recourse tax exempt revenue bonds.   This brings to light the                                                               
"wake up"  call on the  need to make  a decision on  the project.                                                               
The revenue bonds can  only be sold if the state  or the ARRC can                                                               
sign  long-term contracts  guaranteeing revenue  stream to  repay                                                               
the bonds.   He characterized this as a "go"  or "no go" decision                                                               
point.   In order to reach  this stage the state  must complete a                                                               
business  case for  the financial  community to  defend the  $5.2                                                               
billion capital estimate.   The proposed $2  million [fiscal note                                                               
for  HB 271]  would provide  funding to  do so.   The  state must                                                               
provide  a  business  case  the  federal  Surface  Transportation                                                               
Board,  which  is  the  agency  of  authority  for  all  railroad                                                               
extensions in  the U.S.   He  compared the  fiscal note  costs to                                                               
other  feasibility studies,  such  as the  Quartz Hill's  project                                                               
feasibility cost of $100 million  or for the feasibility study to                                                               
reopen the  A-J mile  by Echo  Bay mines,  also at  $100 million.                                                               
These projects  are all large  capital intensive  projects, which                                                               
require detailed  engineering studies to justify  the long future                                                               
projections  on the  revenue sources,  to address  uncertainties,                                                               
and  to ensure  that today's  prediction will  have a  reasonable                                                               
DR.  METZ highlighted  other benefits  for  the Northern  Mineral                                                               
Development [page  12].  He  explained that the cost  of trucking                                                               
mineral  concentrates from  the Brooks  Range or  other low  unit                                                               
value commodities  from the  North Slope is  too high  to justify                                                               
the development  of the projects.   The  only way the  base metal                                                               
occurrences, such as  the copper in the Ambler  district or other                                                               
lead zinc  deposits will happen is  if the rail extension  on the                                                               
North Slope also occurs.                                                                                                        
2:54:30 PM                                                                                                                    
DR. METZ presented  challenges and logistics for  the North Slope                                                               
which can be addressed, in  part, by the railroad.  Additionally,                                                               
the    proposed   rail    project   would    provide   year-round                                                               
transportation access  to the state's  major asset  although this                                                               
large project  would not  happen immediately.   For  example, the                                                               
railroad extension from Eielson Air  Force Base to Delta Junction                                                               
also took  considerable time.   The aforementioned  project began                                                               
in  2003 and  took 10  years to  complete.   He urged  members to                                                               
start this project  now so it would be completed  in time to haul                                                               
pipe and  help develop  the gas  fields on the  North Slope.   He                                                               
noted  it  is also  possible  to  bring  gas liquids  from  Point                                                               
Thomson south,  which is not  included in these projections.   He                                                               
predicted that without  a rail extension to the  North Slope that                                                               
it would  is very  unlikely shale gas  development will  occur on                                                               
the North Slope.                                                                                                                
2:56:01 PM                                                                                                                    
REPRESENTATIVE ISAACSON summarized the  mechanics of the proposed                                                               
project.  The feasibility study  or business concept would be the                                                               
first step,  followed by seeking  environmental study  funds from                                                               
the  National  Transportation  Surface  Board (NTSB).    At  that                                                               
point, it would be the  state's responsibility to see the project                                                               
DR.  METZ answered  the  NTSB would  not  fund the  environmental                                                               
impact study (EIS).  He suggested  that once the business case is                                                               
made, the NTSB  would take it over; however, someone  has to fund                                                               
the EIS.  He  recalled the EIS for the Eielson  Air Force Base to                                                               
Delta Junction project  cost $ 20 million.   U.S. Senator Stevens                                                               
obtained first  $15 million.   Typically, EIS costs range  from 2                                                               
to  3 percent  of  the capital  cost.   He  reported that  Norway                                                               
approaches oil  and gas develop  in a  novel way.   First, Norway                                                               
performs the  preliminary science by funding  seismic surveys and                                                               
the  EIS and  then parcels  it  out to  the private  sector.   He                                                               
suggested  that  something  similar   could  be  done  with  this                                                               
project.  For  example, it might be possible to  include the cost                                                               
of  the EIS  in the  bonding.   The caveat  would be  uncertainty                                                               
since the project could be delayed and the costs would escalate.                                                                
2:58:47 PM                                                                                                                    
CHAIR P. WILSON  suggested it would be easier for  a country like                                                               
Norway to accomplish  this than a state since  Alaska must obtain                                                               
permission from the federal government.                                                                                         
DR. METZ acknowledged the difference.                                                                                           
2:59:14 PM                                                                                                                    
REPRESENTATIVE  ISAACSON suggested  that  the state  needs to  be                                                               
optimistic and start this now.   He asked Dr. Metz to discuss the                                                               
downsides.   He suggested  that the  business case  would include                                                               
holding  discussions with  the Generating  for Seven  Generations                                                               
(G7G)   mineral  interests   including   Great  Bear   Petroleum,                                                               
ConocoPhillips Alaska,  Inc., and  Nova Copper,  Inc.   The state                                                               
could  invite them  to participate  and  share the  expense.   He                                                               
asked whether he was correct.                                                                                                   
DR.  METZ answered  yes.   He  suggested that  all the  potential                                                               
freight haulers and customers should be contacted.                                                                              
3:00:50 PM                                                                                                                    
REPRESENTATIVE  ISAACSON  suggested  the  bill  may  need  to  be                                                               
changed a bit.   He urged the committee to support  HB 271 due to                                                               
the implication for  jobs and to provide  transportation of goods                                                               
and services at a much reduced rate for decades to come.                                                                        
3:01:28 PM                                                                                                                    
CHAIR P. WILSON  asked whether the G7G group  interest means that                                                               
perhaps other countries could help Alaska.                                                                                      
DR.  METZ agreed.    He  explained that  the  G7G discussion  was                                                               
initiated  by the  Alberta government  in Canada.   The  Van Horn                                                               
Institute, at the  University of Calgary was one  of the partners                                                               
of  the 2007  study  and  the institute  is  the managing  entity                                                               
responsible for the $1.8 million  that the Alberta government put                                                               
forward for the oil sands feasibility study.                                                                                    
CHAIR  P.  WILSON  acknowledged   that  the  Van  Horn  Institute                                                               
approached  the   Alaska  delegates  at  the   Pacific  NorthWest                                                               
Economic  Region   meeting  and  this  is   still  something  the                                                               
institute is very interested in, she said.                                                                                      
DR.  METZ agreed,  noting the  UAF has  a small  portion of  that                                                               
[HB 271 was held over.]                                                                                                         

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