Legislature(2011 - 2012)BARNES 124
03/31/2011 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Port Mackenzie Rail Extension Project | |
| Presentation: Alaska's Role in the Global Marketplace | |
| Presentation: Coastal Villages Cdq Fleet Homeport Move from Seattle to Seward | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
March 31, 2011
8:13 a.m.
MEMBERS PRESENT
HOUSE COMMUNITY AND REGIONAL AFFAIRS
Representative Neal Foster, Vice Chair
Representative Alan Austerman
Representative Alan Dick
Representative Sharon Cissna
Representative Berta Gardner
HOUSE ECONOMIC DEVELOPMENT, INTERNATIONAL TRADE AND TOURISM
Representative Bob Herron, Chair
Representative Neal Foster
Representative Steve Thompson
Representative Berta Gardner
Representative Chris Tuck
MEMBERS ABSENT
HOUSE COMMUNITY AND REGIONAL AFFAIRS
Representative Cathy Engstrom Munoz, Chair
Representative Dan Saddler
HOUSE ECONOMIC DEVELOPMENT, INTERNATIONAL TRADE AND TOURISM
Representative Kurt Olson, Vice Chair
Representative Reggie Joule
Representative Wes Keller
Representative Cathy Engstrom Munoz
OTHER LEGISLATORS PRESENT
Representative Bill Stoltze
Senator Linda Menard
COMMITTEE CALENDAR
PRESENTATION: PORT MACKENZIE RAIL EXTENSION PROJECT
- HEARD
PRESENTATION: ALASKA'S ROLE IN THE GLOBAL MARKETPLACE
- HEARD
PRESENTATION: COASTAL VILLAGES CDQ FLEET HOMEPORT MOVE FROM
SEATTLE TO SEWARD
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LARRY DE VILBISS, Mayor
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Provided introductory remarks regarding the
Port MacKenzie Rail Extension Project.
RICK MYSTROM, Project Consultant
Matanuska-Susitna Borough
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation regarding the Port
MacKenzie Rail Extension Project.
ELIZABETH GRAY, Acting Borough Manager
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Provided remarks regarding the Port
MacKenzie Rail Extension Project.
GREG WOLF, Executive Director
World Trade Center Alaska;
Consultant, U.S. Department of Commerce
Anchorage, Alaska
POSITION STATEMENT: Provided a presentation regarding Alaska's
role in the global marketplace.
WILLARD DUNHAM, Mayor
City of Seward
Seward, Alaska
POSITION STATEMENT: Provided introductory remarks to the
presentation of the request to move the home ports of the CDQ
fishing fleets from Seattle to Alaska.
PHILLIP OATES, City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Provided a presentation of the request to
move the home ports of the CDQ fishing fleets from Seattle to
Alaska.
DAWSON HOOVER, Program Manager
Coastal Villages Region Fund
Seattle, Washington
POSITION STATEMENT: Indicated CVRF's desire to keep its shallow
and deep water fleets in Alaska.
ACTION NARRATIVE
8:13:44 AM
CHAIR BOB HERRON called the joint meeting of the House Community
and Regional Affairs Standing Committee and the House Special
Committee on Economic Development, International Trade and
Tourism to order at 8:13 a.m. Representatives Austerman,
Foster, Dick, Thompson, Cissna (via teleconference), Gardner,
Tuck, and Herron were present at the call to order. Also in
attendance were Representative Stoltze and Senator Menard.
^Presentation: Port MacKenzie Rail Extension Project
Presentation: Port MacKenzie Rail Extension Project
8:14:21 AM
CHAIR HERRON announced that the first order of business would be
a presentation regarding the Port MacKenzie Rail Extension
Project.
8:15:24 AM
LARRY DE VILBISS, Mayor, Matanuska-Susitna Borough, began by
relating that it's an exciting time in the Matanuska-Susitna
Borough as many projects that have been in the works for some
time are coming to fruition. He recalled that over 10 years ago
the concept of a deep water port to be served by a bulk
commodity rail extension tied into the existing [rail] system
was conceived. The system was to serve the entire Interior
region of the state. He then thanked [the legislature and the
governor] for their support of the aforementioned project.
Currently, the ground work for the portion of the rail and road
system that's in the port is being performed. The conveyor and
loading system at the dock is in place. In fact, Cape-sized
vessels have already been loaded out of the dock.
8:17:29 AM
RICK MYSTROM, Project Consultant, Matanuska-Susitna Borough,
thanked the House and Senate members for their support [of the
Port MacKenzie Rail Extension] project last year, particularly
the support from the House members who really made the project
happen. Drawing from his 30 years of experience with purchasing
real estate in Alaska, he characterized the Port MacKenzie Rail
Extension as an economic development project that will open the
Interior to resource development. Mr. Mystrom then turned to
the presentation entitled "Port MacKenzie Rail Extension -
Economic Benefits to the Alaska Economy." He directed attention
to slide 2 entitled "Alaska's Uncertain Economy," which relates
that there is uncertainty about the gasline construction, energy
availability and costs, the Trans-Alaska Pipeline System (TAPS),
and Small Business Administration contracting program for Native
business. There is also uncertainty about the exploration
permits for the Chukchi and Beaufort Seas. Shell has been
stopped over seven different times over the course of three
years, although it has invested $3.5 billion in exploring in the
Beaufort and Chukchi Seas. He then emphasized that there is
certainty with regard to a lack of diversification of Alaska's
economy and a lack of transportation infrastructure to promote
economic development. The Port MacKenzie Rail Extension is a
major solution to the aforementioned problems. He then directed
attention to slide 6, which illustrates the recently selected
route of the extension along which are found some of the largest
deposits of various resources as illustrated on slide 7. For
example, in Livengood there is a limestone deposit that would
provide 15 percent of America's cement for 200 years. However,
at this point it can't reach the market. Therefore, the goal is
to take the [various resources] from the Interior along the rail
line down to Port MacKenzie. He then directed attention to
slide 8, which denotes the various prospects along the proposed
railway. Moving on to slide 9 entitled "What the Rail Extension
means to Alaska's economy," he reiterated that the Rail
Extension would open the Interior to resource development. He
related that he has been told by many in China that they would
buy Alaska's resources if they could be transported to them.
Simultaneously, the Rail Extension would create a development
corridor along the Railbelt for exploration and extraction of
the strategic minerals of lead, zinc, copper, molybdenum, and
silver. Molybdenum is the main component of steel made from
iron ore. The Rail Extension would also facilitate the
development of a world class limestone deposit between Livengood
and Fairbanks. As mentioned earlier, that deposit can produce
enough limestone for 15 percent of America's cement needs for
the next 200 years plus all the cement necessary for the Susitna
Dam. The construction of the Susitna Dam requires access to
that cement. The Rail Extension facilitates the development of
a cement production facility in or near Fairbanks. Moreover,
the Rail Extension dramatically improves the world
competitiveness of Alaska coal. He noted that for exports
transportation is very important as evidenced at a recent
seminar where it was highlighted that "exports are
transportation, transportation is exports." The Rail Extension
would also significantly reduce transportation and staging costs
for the Alaska Gas Pipeline construction. Exxon met with
Matanuska-Susitna Borough staff and has related that an
estimated $100 million would be saved in the construction costs
of the gasline, if the Rail Extension to Port MacKenzie was
constructed. Furthermore, the Rail Extension would dramatically
increase employment in the Matanuska-Susitna Borough, the Denali
Borough, the Fairbanks North Star Borough, and Anchorage.
8:25:52 AM
MR. MYSTROM, referring to slide 11 entitled "Port MacKenzie and
the Rail Extension working together," informed the committee
that Port MacKenzie is a bulk commodities port for the export of
minerals, cement, and coal. The port also provides for the
import, storage, and staging of bulk fuel and pipe as well as
all the product necessary for the Susitna Dam project.
Therefore, if the Susitna Dam project moves forward the [port]
would provide the cement and the heavy equipment necessary for
the Susitna Dam project. He then emphasized that Port MacKenzie
is not a consumer goods or container port like the Port of
Anchorage, rather it's an aggregate port. Port MacKenzie is a
deep water port with a 60-foot mean low tide as opposed to the
39-foot mean low tide for the Port of Anchorage. A deeper port
is necessary for larger vessels, such as Panamax and Cape-size
vessels, that can't enter the Port of Anchorage. Panamax
vessels are the largest vessels that can fit through the Panama
Canal whereas the Cape-size vessels are too large to fit through
the Panama Canal and thus must travel around the Cape of Good
Hope or Cape Horn. He related that the vessel JP Azure was
loaded in Seward, at 90 percent capacity, and then sailed into
Port MacKenzie, took on the last 10 percent of capacity, and
sailed out with no problems. Referring to the map on slide 13,
he highlighted that surrounding Port MacKenzie there are 14
square miles of industrial land that is owned by the Matanuska-
Susitna Borough, save one parcel owned by the University of
Alaska Trust that wants the same development as the borough.
That land is the industrial future of Southcentral and to some
degree the southern part of the Interior of Alaska. Slide 14 is
a photograph of the barge dock that was finished this summer as
well as the ferry terminal for the ferry that will hopefully run
between Port MacKenzie and Anchorage, Port MacKenzie and Kenai,
and Port MacKenzie and Tyonek. He noted that [the dock] can
hold about 40 Sport Utility Vehicles (SUVs) and it has been
approved for expansion. The key part of the port is the rail
loop, which is illustrated on slide 15. The proposed rail loop
is a 110 car rail loop, which allows unloading at Port MacKenzie
without uncoupling/unhitching or backing up. There will be a
conveyor belt from the rail loop to the dock, and therefore it's
a very efficient setup. Referring to slides 16-18, he reviewed
the work going on the barge dock. He then turned to the work on
the road beds, which is where most of the work is being done.
He noted that most of the contracts are coming in under bid
because of the economy. Furthermore, the project is on schedule
and under budget. Referring to slide 20, he informed the
committees that the first thing to be built in railroads is the
road bed. In this case, the road bed is for both rail and truck
and it connects to the main highway. He highlighted how large
the rail bed is by showing a full-size semi-truck driving on it.
8:32:50 AM
MR. MYSTROM moving on to slide 21 entitled "Advantages of Rail
to Part Mac," related the following advantages:
· Shorter rail distance to tidewater for mineral exports
· Only Alaska port with 100 rail car loop
· Efficient product transfer from train to ship
· Avoids most congested portion of the Alaska RR
mainline
· Deep draft port that operates year-round
· 14 square miles of industrial area
· Will make Alaska's minerals more competitive on the
world market (molybdenum, copper, lead, zinc, coal)
· Port MacKenzie Rail Extension is a great opportunity
to grow our export economy
MR. MYSTROM noted that the Alaska Railroad and Usibelli
have said that both the Port of Seward and Point MacKenzie
are necessary and will support each other. The Point
MacKenzie Rail Extension provides a great opportunity to
grow Alaska's export economy. Referring to the graph on
slide 24, he highlighted that in 2009 Alaska's export
economy was $3.3 billion while it rose to $4.1 billion in
2010. The decrease in Alaska's total exports in 2008 and
2009 is a reflection of the world economy. He then
referred to the pie chart on slide 25 that relates what
materials the state exports and the percentage that
material is of the state's total exports. He highlighted
that 50 percent of the state's total exports are seafood,
but also pointed out that the area of seafood doesn't have
the ability to expand dramatically. However, minerals,
which make up 26 percent of the state's total exports, have
the most ability to dramatically expand. The state's
largest customer is Japan; 55 percent of what Japan buys
from Alaska is seafood. Although only 14 percent of
Alaska's exports to Japan are minerals, he expected Japan
will buy more as it's a resource poor country. Alaska's
second largest customer, soon to be the state's largest
customer, is China. The largest Alaska export to China is
seafood, while only 15 percent of Alaska's exports to China
are minerals. Although China has the resources, much of
the interior of China is undeveloped and it's much cheaper
for China to buy Alaska's minerals rather than develop
their interior. The state's third largest customer is
Korea with 35 percent of its exports from Alaska being
minerals. Still, Korea has a continuing need for mineral
exports. He then directed attention to the map on slide
29, which illustrates that the closest port to the
aforementioned countries is Point MacKenzie. If Alaska is
able to build Point MacKenzie, the Western U.S. can't
compete in terms of selling the aforementioned [exports] to
the countries mentioned. He then referred to slide 31,
which again points out the various mineral deposits along
the path to Port MacKenzie that can then be moved to the
foreign ports.
8:39:41 AM
MR. MYSTROM, referring to slide 33, informed the committee that
the rail extension and Port MacKenzie expansion would create an
estimated 3,000 direct, indirect, and induced jobs from
construction during the construction phase. The aforementioned
estimate is based on studies by HDR and the Institute for Social
& Economic Research (ISER). More importantly, they estimate
there will be 4,000 long-term, permanent jobs created by private
development. He clarified that the long-term jobs estimate is
for jobs that will be around 15 years from now. Furthermore,
the industrial development of Port MacKenzie will result in an
estimated 3,500 jobs. Regarding the rail extension, he moved on
to slide 35 and informed the committee that the environmental
impact study (EIS), at a cost of $10 million, was recently
completed. The construction of the truck route and rail loop,
funding for which - $17 million - was approved by the House two
years ago, is occurring. The beginning construction of the rail
extension, $35 million, was just approved and thus the road bed
will be continued. The aforementioned funding was approved by
the House. He reminded the committees that [last year] the
House approved $57 million of which the governor vetoed $22
million. Therefore, the project had $35 million left, which
will be used to keep the project moving forward this summer.
This year, the desire is to continue construction of the rail
extension, which amounts to $55 million. Those funds will be
for the work to be performed the summer after this upcoming
summer. Once the funds are approved, bids will be let with an
estimated completion by the summer of 2012. The railbed to the
Alaska mainline is desired to be complete by 2013 at a cost of
$63 million while laying the rail and completing the rail
extension by 2014 would cost about $43 million. In conclusion,
Mr. Mystrom thanked the legislature [funding/supporting] all the
work on the Point MacKenzie Rail Extension Project to reach the
point at which it is now.
8:42:51 AM
ELIZABETH GRAY, Acting Borough Manager, Matanuska-Susitna
Borough, also thanked the legislature for its past and continued
support of this project. As illustrated [by the prior
testimony], the Port MacKenzie Rail Extension Project will be a
tremendous economic development impact to the Matanuska-Susitna
Borough as well as statewide. Since the EIS has been finalized,
the project can proceed forward. Of interest, Ms. Gray informed
the committees that the Alaska State Chamber of Commerce lists
this project as the state's top infrastructure priority.
According to ISER, nearly $1 billion over 100 years will be the
value of the mineral production. Furthermore, the state
revenues are estimated to reach $300 million annually in taxes,
royalties, and fees.
8:44:19 AM
SENATOR MENARD echoed earlier testimony regarding the need to
remember that this project is for the entire state, not just the
Matanuska-Susitna Borough. She characterized the project as a
legacy for the state.
8:45:10 AM
REPRESENTATIVE AUSTERMAN asked if the Alaska Industrial
Development and Export Authority (AIDEA) is involved in this
project.
MR. MYSTROM replied no. He explained that AIDEA can become
involved when there is a single large customer that can pay off
a bond from AIDEA. The aforementioned isn't the case with this
project, which he likened to the construction of the Parks
Highway. Therefore, it's a project that has to be done by the
government to allow/facilitate private sector development and
economic development.
8:46:39 AM
CHAIR HERRON noted that HB 119, which is under consideration in
the Senate, may allow AIDEA to be a partial funding source for
the project.
8:46:53 AM
REPRESENTATIVE TUCK opined that the funding provided for the
project will greatly benefit the state, not just the Matanuska-
Susitna Borough. He related that he has always promoted Point
MacKenzie as the future industrial park of Alaska. However, he
said he didn't believe 14 square miles is enough. He opined
that the largest facilities should be built next to the port.
In fact, he suggested that the large rail crane buildings should
be built [on the site] in order to be able to manufacture what's
desired. Water, he pointed out, is still the cheapest mode of
transportation with rail following just behind. Therefore, the
project offers the best of both. He recalled when he was on the
Ted Stevens Anchorage International Airport Planning Commission
Point MacKenzie was considered because the airport has no room
for expansion for air freight. He then suggested that at the
port there should be more industry, manufacturing, and value-
added activities. Representative Tuck related his belief that
Port MacKenzie is the future port of Alaska. He then asked if
there has been any discussion of a joint port authority so that
planning occurs in terms of what's best for the state overall.
MR. MYSTROM related his vision that Port MacKenzie and the Port
of Anchorage should be sister ports, and perhaps even be
operated by one port commission.
MAYOR DEVILBISS interjected that the notion is that the Port
MacKenzie commission will grow into a port authority, at which
time the aforementioned could be considered.
8:50:37 AM
REPRESENTATIVE GARDNER inquired as to how the state's seafood
exports would work in terms of competition between the two
ports.
MR. MYSTROM offered his belief that there are no plans for Port
MacKenzie to be used for seafood exports.
8:51:17 AM
The committee took an at-ease from 8:51 a.m. to 8:55 a.m.
^Presentation: Alaska's Role in the Global Marketplace
Presentation: Alaska's Role in the Global Marketplace
8:55:06 AM
CHAIR HERRON announced that the next order of business would be
a presentation regarding Alaska's role in the global
marketplace.
8:55:08 AM
GREG WOLF, Executive Director, World Trade Center Alaska;
Consultant, U.S. Department of Commerce, began by informing the
committees that the earlier mentioned export industries bring
about $6 billion worth of economic value to Alaska and account
for about 25,000 direct and indirect jobs. Therefore,
international trade is big business for Alaska. For 2009, the
annual worldwide exports totaled $3.3 billion, which was down
slightly due to the economic recession globally. Still, that
represents 8-10 percent of Alaska's gross state product (GSP),
which he likened to the gross domestic product (GDP) for the
nation. The GSP is the sum of all goods and services produced
in a state in a given year. Mr. Wolf emphasized that exports
are important because they bring new money into the economy.
The overall result of exports for Alaska is a stronger and more
diversified economy. Referring to the slide entitled "Why Trade
Matters?", Mr. Wolf emphasized that the export total doesn't
include the export of services from Alaska, such as
construction, engineering, oil and gas field services,
environmental, and transportation. The numbers presented today
only account for commodity exports because the U.S. Department
of Commerce hasn't yet developed a system for tracking and
recording export services. However, for Alaska and other states
it's a rapidly growing part of the economy and could be as much
as an additional $1 billion in service exports. He related that
exports bring in about $4 billion of new money into Alaska's
economy. A recent study by Northern Economics estimates export
industries generate nearly $2 billion in induced and indirect
economic benefits. Therefore, the export industry generates
about $6 billion in economic value in Alaska. Furthermore,
export jobs are relatively high paying jobs with their typical
pay being 13-16 percent more than jobs tied solely to the
domestic economy. Moreover, exports allow companies to become
larger through expanded markets and customer base. With a
population of only 700,000 in Alaska, companies seeking growth
have to seek it from markets outside of Alaska, including the
Lower 48 and/or overseas. Moving on to the slide entitled "How
We Rank?", Mr. Wolf informed the committee that overall Alaska
ranks about 40th as an export state. That ranking isn't bad
when one considers that the exports are being generated by
700,000 people. However, the charts on the aforementioned slide
illustrate that exports are more important for Alaska than other
states. For example, Alaska ranks 27th in terms of exports as a
percentage of the GSP while the state ranks 6th in the nation in
terms of exports on a per capita basis. Therefore, exports mean
more to the everyday Alaskan than they would to the residents of
other states. Still, during the global decline in exports,
Alaska fared well in comparison to other states. Alaska's
export value dropped an average of 8.8 percent, while the
average state experienced a decrease of 18 percent. Alaska was
more resilient, which he attributed partially to the state's
commodity exports.
9:00:49 AM
MR. WOLF then directed attention to the slide entitled
"Highlights from The Economic Impact of International Trade
Exports on the Alaskan Economy prepared by Northern Economics
(July 2010)". He reviewed the following highlights:
· In 2009, Alaska's exports to overseas markets totaled $3.3
billion.
· In 2009, Alaska ranked sixth in the nation by value of
exports on a per capita basis.
· Exports represented 7.4 percent of the state's economy in
2008.
· Although exports suffered nationwide in the recent
recession, Alaska's exports value dropped by only 8.8
percent from 2008-2009, beating the national average by 10
percent.
· Exports supported nearly 15,000 direct and 9,800 indirect
and induced jobs in Alaska in 2008.
· Alaska's exports sector generated more than $5.5 billion in
total economic output.
· Each year more than half of Alaskan seafood production is
sent overseas.
· Of Alaska's average coal production of 1.5 million tons per
year, approximately 40 percent was shipped to overseas
customers.
MR. WOLF then turned to the slide entitled "Alaska's Top Export
Commodities (January - October 2010)," which has a pie chart
that relates that seafood remains the state's single largest
commodity export. The state's second largest export is
minerals, which are lead and zinc that are mainly extracted from
the Red Dog Mine. The third largest export is energy, liquefied
natural gas (LNG) from Nikiski and coal exports from Usibelli.
Alaska's top export commodities illustrate that Alaska is a
resource driven export economy. Moving on to the slide entitled
"Alaska's Top Ten Export Markets," he echoed earlier statements
that Japan remains Alaska's single largest customer. However,
that's beginning to change as China replaces Korea as the
state's second largest export customer, and Korea becomes the
state's third largest export customer. Alaska's fourth largest
export customer is Canada. There is also a group of European
customers who tend to purchase a single commodity in comparison
to Asian customers who tend to purchase some of everything. For
example, Belgium purchases only zinc and lead from Alaska. He
continued with the slide entitled "Alaska Worldwide Exports,"
which presents a chart that relates Alaska's worldwide exports
from 1994 to 2010. The chart reveals that for almost a decade
Alaska was in the $2.5 billion to $2.7 billion range. However,
as natural resource prices increased, Alaska's worldwide exports
resulted in peaks of $4 billion in 2006 and 2007, decreased in
2008 and 2009 during the recession, and then increased to an
all-time record export year with $4.2 billion. He then directed
attention to the chart on the slide entitled "Alaska's Exports
to China," which illustrates about a 10-fold increase in exports
from Alaska to China. He emphasized that Alaska has never
experienced export market growth as rapidly as the China market
and he didn't see why it wouldn't continue to grow.
Furthermore, he predicted that Chinese companies will become
interested in becoming a partner in economic development and
resource development projects in Alaska by investing in those
projects. Several signs of this have occurred, including when a
China oil company made a bid to build the gas pipeline during
the Alaska Gasline Inducement Act (AGIA) process. More
recently, two years ago China Investment Corp invested in Tech
Resources, which is the operator of the Red Dog Mine in Alaska,
and has become a part owner in the project. Moreover, 50
percent of the output of the Kensington Mine is being sold to
China National Gold Corp. The aforementioned is the first ever
deal between an American precious metal company and a state-
owned Chinese company. Although neither of the aforementioned
are direct investments in Alaska, there is interest in
investment from China in the new Greenfield projects being
considered for Alaska.
9:08:33 AM
MR. WOLF, in response to Representative Austerman, clarified
that Alaska's single largest export to China is seafood, but
they are also a buyer of forest and mineral products.
9:09:15 AM
MR. WOLF, continuing his presentation, directed attention to the
slide entitled "Overarching Trends That Benefit Alaskan
Exports," which he identified as follows:
· Growth in emerging market consumer class
More people, with higher expectations, and more money to
spend (they want what we have) and increasingly have the
ability to obtain these things. According to Standard
Chartered, close to 5 billion people will live in cities by
2030, compared to 3.4 billion now. An equally significant
increase in the size of the global "middle class" will see
the number of these consumers growing from 1.8 billion
people today to about 5 billion in 2030.
· Resource Scarcity
Growth in populations and wealth are outpacing development
of energy, food, and other vital staples of modern living.
Alaska is fortunate to be an exporter of natural resources
that the world needs for economic development.
· Decline of U.S. Dollar
Continuing dollar weakness translates into higher commodity
prices and the ability of our partners to buy more from us
(as their currencies strengthen). Alaska's export
industries benefit when our customers have strong economies
and strong currencies.
MR. WOLF moved on to the slide entitled "Why Emerging Markets?"
that provides a matrix put together by U.S. Global Investors.
Although the matrix was originally developed for investors, the
causes, effects, and ramifications apply to Alaska. He opined
that the trends with emerging markets will serve Alaska well
now and into the future. He then directed attention to the
chart on the slide entitled "'Chindia' Natural Gas
Consumption," which combines China and India's natural gas
consumption for the past 24 years. The chart relates a
continued increase in natural gas consumption of China and
India as there is tremendous demand in emerging markets for
natural gas. Referring to the slide entitled "China's Top
Energy Deals of 2010," he explained that the slide relates the
top energy investments of China in 2010. As the slide
illustrates, China is investing globally. He opined that
anywhere there is an abundance of natural resources, one will
find Chinese buyers and investors, including the U.S. The next
slide entitled "China Invests in Lower 48 Shale Gas" relates
the recent investments. In October 2010, the Chinese National
Offshore Oil Corporation (CNOOC) invested about $2.1 billion in
shale gas leases in Texas from Chesapeake Energy Corporation.
China, he noted, is also committing money for drilling and
completion. In January 2011, CNOOC made a further investment
with Chesapeake Energy Corporation in the amount of $1 billion
into the lease purchases as well as for the cost of drilling
and completion. He reminded the committees that in 1995
[CNOOC] attempted to purchase Unocal, but amidst a flurry of
protests and concern the purchase never went through. However,
so far China has invested almost $4 billion in natural gas in
the Lower 48.
9:14:40 AM
MR. WOLF informed the committees that at the World Trade Center
there are about five trade development programs, most of which
are focused on a particular country. There are programs that
focus on Japan, Korea, China, and Canada. There is also a
program known as "New Markets New Customers," which aims to
determine which countries will be Alaska's future markets. The
country of India has been identified as one of Alaska's future
markets. India has many of the characteristics that China had
20 years ago, including a large population, enormous
infrastructure needs, and a rapidly growing economy. A couple
of months ago the first Alaska trade mission to India occurred,
and the Alaskan group was well received. India has tremendous
needs in terms of energy and natural resources, in general.
9:16:36 AM
CHAIR HERRON interjected that many of the committee members
would like to help with all the overseas markets.
MR. WOLF said he feels it's important that public officials see
these markets for themselves and relate to others the
opportunities. Therefore, he encouraged committee members to
join the World Trade Center efforts in the year ahead.
9:17:20 AM
REPRESENTATIVE AUSTERMAN, referring to the earlier pie chart
that related Alaska's top export commodity is seafood at 44
percent, inquired as to how that percentage was derived.
MR. WOLF answered that the numbers come from the U.S. Census
Bureau, U.S. Department of Commerce. He explained that for
export commodities there are export declarations from the
exporter who declares the value of the exports. The seafood
numbers for Alaska have likely been underreported because a
sizable amount of seafood caught in Alaska is immediately
shipped to Seattle and then it's ultimately counted as a
Washington State export rather than an Alaska export.
9:19:08 AM
MR. WOLF, concluding his presentation, referred to the slide
entitled "2011 Trade Outlook." He opined that the trade outlook
for 2011 will depend heavily on commodity prices as that what
Alaska exports. The increases in the export markets have, by
and large, been attributable to Alaska receiving more for the
export. However, he did acknowledge that there have been some
new exports. He mentioned that it's important to watch
inflation rates in markets where Alaska exports, such as China.
Since the governments of these countries may feel they're
growing too fast and experiencing inflation, they may try to
slow the growth by increasing the interest rates, changing the
lending requirements to make it more difficult to borrow. The
aforementioned may impact Alaska exports. For the trade
outlook, one always watches the dollar because a weaker dollar
makes U.S. exports relatively cheaper. Overall, he predicted
that at the year's end Alaska exports will be at the $4.2-$4.3
billion level, which will be at or near-record levels
historically.
9:21:24 AM
REPRESENTATIVE THOMPSON inquired as to the impact of the closure
of the LNG plant in Nikiski on exports.
MR. WOLF predicted that the state will lose several hundred
million in the LNG exports, which have been occurring since
1969. The aforementioned will be a significant impact.
9:22:19 AM
CHAIR HERRON and REPRESENTATIVE GARDNER thanked Mr. Wolf for his
work and presentation.
9:22:54 AM
MR. WOLF thanked the legislature for its strong support of
exports, the World Trade Center, and the international trade
community in general.
9:23:29 AM
The committee took an at-ease from 9:23 a.m. to 9:26 a.m.
^Presentation: Coastal Villages CDQ Fleet Homeport Move from
Seattle to Seward
Presentation: Coastal Villages CDQ Fleet Homeport Move from
Seattle to Seward
9:26:08 AM
CHAIR HERRON announced that the final order of business would be
the presentation regarding the coastal villages community
development quota (CDQ) fleet homeport move from Seattle to
Seward.
9:26:26 AM
WILLARD DUNHAM, Mayor, City of Seward, related that Seward has
received a request from the Coastal Villages Region Fund (CVRF)
to relocate the home ports of the CDQ fishing fleets from
Seattle to Alaska.
9:27:49 AM
CHAIR HERRON noted that he has distributed a draft resolution
from Representative Seaton, which he intends to sign on as a co-
sponsor.
9:28:17 AM
PHILLIP OATES, City Manager, City of Seward, showed a video put
together by CVRF regarding its request and support of the effort
to relocate the home ports of the CDQ fishing fleets from
Seattle to Alaska.
9:34:36 AM
CHAIR HERRON noted that he and Representative Foster represent
the impacted communities.
9:34:51 AM
MR. OATES characterized this request as a historic opportunity,
particularly since Alaska and its resources have long been taken
advantage of by those who aren't Alaskans and who have taken the
profits elsewhere. The Magnusson-Stevens Fisheries Conservation
and Management Act began to address the aforementioned as one of
its goals was to Americanize the U.S. fishing fleet that
heretofore had been dominated by foreign vessels. The
aforementioned began in 1970. Secondly, the Act gave some fish
quotas to the communities surrounding prime fishing areas, which
led in the 1990s to the establishment of the CDQ groups.
Another goal of the Act, he related, was to reinvest the
earnings back into the industry in that area of Alaska as well
as "Alaskanize" the fishing fleet. The later goal is the point
at which the Act is now and why this proposal is before the
committees.
MR. OATES informed the committees that CVRF is the largest of
the six CDQ groups, in terms of ownership of its fishing
vessels. The CVRF owns all of its vessels and last month
purchased six new vessels in cooperation with another CDQ group.
Mr. Oates informed the committees that prior to CVRF reaching
out to Seward, it performed a statewide search for locations
that could meet its needs. Those needs were for a year-round,
ice free, deep water port and for an area that had road, rail,
and air access. The location also needed to have major ship
repair capability and an existing maritime industry.
Furthermore, CVRF sought a location with room to grow, both on
the water and upland. Finally, CVRF hoped to find a location
with a maritime training and licensing capability, which Seward
has through the Alaska Vocational Technical Center (AVTEC). Mr.
Oates emphasized that every skill set used in the CDQ groups is
offered at AVTEC. The only place meeting all of the
aforementioned needs was Seward, which has led to the request to
legislature.
MR. OATES then turned to a slide presentation. He informed the
committees that Resurrection Bay is a year-round, ice free, deep
water port that has road, rail, and air access. Although Seward
already services a wide array of marine vessels home ported in
Seward, more room would be necessary to expand to meet the needs
of CVRF. He pointed out that Seward has a railroad dock that is
a major cruise ship port, a cold delivery terminal, as well as a
major freight dock that is large enough to dock the largest
millennium size cruise ships. He noted that about 60 cruise
ships visit Seward each year. Across the bay is the Seward
Marine Industrial Center (SMIC), which is within the city limits
of Seward and is connected to Seward by a major highway.
Furthermore, there's an extensive road network with about $70
million of existing infrastructure. He then shared a slide of
SMIC. Although SMIC has space for transient moorage, more space
is necessary for the CDQ groups. Seward also has a commercial
fishing presence. He informed the committees that the price of
fuel at the port of Seward is some of the cheapest fuel prices
in Alaska. Although the three major fish processing and packing
industries in Seward wouldn't meet the needs of the CDQ groups,
it illustrates the area's familiarity with the fishing industry.
As mentioned earlier, there is room to grow in the upland area
of SMIC. He highlighted that SMIC has a 250-ton marine travel
lift, which would serve about 50 percent of the CDQ fishing
fleets. There is also a large upland vessel storage area. Mr.
Oates then presented a slide that showed the SMIC Basin
Synchrolift, which lifts vessels up to 350 feet out of the water
to an elevator that then proceeds on a track system to the
maintenance facility. The Synchrolift, he noted, could be
expanded to handle two 350 foot vessels at once.
9:42:10 AM
MR. OATES reviewed what Seward has put forth. He acknowledged
that much of the $70 million in infrastructure of Seward that
came about in the 1980s was from a combination of federal and
state funding as well as revenue bonding at the city level. The
City of Seward has funded the initial economic analysis and
engineering analysis for the concept. He then pointed out that
the basin for Phase 1 will meet all the needs of CVRF. He
pointed out the extension of the dock area, which is a roll-on
and roll-off dock with crane capability. There is also to be a
breakwater across the entrance of the basin to provide a fully
protected basin. Ships can be moored on both the lower and
upper portions of the extended dock area and there will be slips
within the basin itself. There is also an area for a 600 ton
vessel travel lift. He explained that the aforementioned is
Phase 1 because it builds on existing infrastructure and is
easier to permit, which makes it less expensive. He then
highlighted the portion of the site where the uplands
development is possible. Phases 2 and 3 would become necessary
if the other CDQ groups decide to relocate to Seward. Just this
week, he met with the executive director and chairman of the
Western Alaska Community Development Association (WACDA), which
represents all six CDQ groups. The WACDA is presenting this
initiative to the other five CDQ groups during its next board
meeting. This concept, he related, was built with funding from
the City of Seward. He informed the committees that in the
fiscal year (FY) 2012 state capital budget, there is a $400,000
appropriation, which will allow completion of the engineering
and economic analyses as well as the geotechnical work, the
preparation of the permitting, and finalize the financing
options for this project. If the aforementioned funding is
available, the projected completion of the project could be
December 2014.
9:45:38 AM
MR. OATES then turned attention to the AVTEC maritime training
facility in Seward and noted the various training offered there.
He noted that some CDQ boats were already moored in Seward this
winter. Other areas of Seward that facilitate [the training]
requirement are the marine research performed by the Alaska Sea
Life Center and the $200 million marine research vessel being
built by the National Science Foundation that will be home
ported in Seward. Seward also has its own electric generation
capability. Although Seward purchases power from Chugach
Electric and Bradley Lake, Seward has the ability to purchase
all of its power in the case of a power outage. The
aforementioned, he opined, is very important for industry.
Therefore, Seward is an excellent choice for CVRF. He then
mentioned that there has been a preliminary finding from the
U.S. Army Corps of Engineers that this project is economic. He
explained that the successful CDQ groups don't pay for this
infrastructure because the legislation establishing the CDQ
groups mandates that their earnings be reinvested in the Bering
Sea area, although the Bering Sea area doesn't have the
capabilities necessary. Mr. Oates opined that this will
facilitate the movement of the other five CDQ groups to Alaska.
He noted that he has met with Alaska's Congressional delegation
of which all three are enthusiastic about this project and
willing to voice their support for the project. He further
noted that there have been meetings with the Office of the
Governor, the Office of the Lieutenant Governor, the director of
the Office of Management and Budget, the commissioners of the
Department of Natural Resources, Department of Transportation &
Public Facilities, Department of Commerce, Community & Economic
Development, and the Alaska Department of Fish & Game, all of
which have been enthusiastic. Moreover, discussions with the
[City of Seward's] legislators have been very positive. In
conclusion, he thanked the committees for their consideration
and for [Representative Seaton's] resolution of support for this
project.
9:50:00 AM
DAWSON HOOVER, Program Manager, Coastal Villages Region Fund,
began by informing the committee that he grew up in Western
Alaska and has been with CVRF for the past five-plus years.
Having worked for CVRF has helped him do what he intended with
his college degree, which is helping youth with opportunities
that wouldn't be available without CVRF and commercial fishing.
He opined that CVRF home porting its vessels makes sense and is
possible. He remarked that CVRF is willing to pay a bit more
for moorage, vendor support, and maintenance than it would in
Seattle. "We're willing to be a customer in Seward," he stated.
With regard to infrastructure costs, CVRF supports Seward's
efforts in Phase 1 to perform a feasibility study. He then
mentioned that CVRF is considering building a shallow dock in
Platinum for a small fleet, that is 135 feet and below. These
smaller vessels would likely be salmon and halibut vessels.
Since not much detail has gone into this shallow dock concept,
CVRF hasn't made a request. However, he emphasized that [the
goal] for CVRF is to keep its deep and shallow draft fleets in
Alaska.
9:52:49 AM
CHAIR HERRON encouraged Mr. Dawson to extend the committees'
appreciation to the CVRF Board, especially Morgan Crow, as they
have done a fantastic job for Western Alaska.
9:53:12 AM
REPRESENTATIVE FOSTER characterized this project as a no-
brainer. He then inquired as to the location and position on
this project from the other five CDQ groups.
MR. OATES related that one of the other five CDQ groups is fully
supportive. However, the presentation hasn't been made to the
remaining CDQ groups. The purpose of the meeting with WACDA is
to present the proposal to the other CDQ groups.
MR. HOOVER related his understanding that the ownership of the
vessels in the other CDQ groups is mainly in Seattle. He
offered to obtain more information from WADCA.
REPRESENTATIVE FOSTER commented that bringing jobs and industry
back to Alaska make for an easy [decision].
9:55:02 AM
REPRESENTATIVE TUCK inquired as to how the maintenance and major
ship repair capabilities [in Seward] differ from those provided
in Ketchikan.
MR. OATES related his understanding that the two are somewhat
similar and compete for many of the same projects. However,
Seward has a Synchrolift in which it can bring vessels up on a
rail system for maintenance and repair. Although Seward's
Synchrolift can only address one 350 foot vessel or smaller at a
time, uplands work can be performed. With regard to this
opportunity, the largest shortcoming in Ketchikan is the lack of
road and rail access. He also didn't know as to the ability of
Ketchikan for upland expansion. Also, Seward has the maritime
training and licensing at AVTEC. In summary, Mr. Oates opined
that if CVRF comes to Alaska, there will likely be more work for
all shipyards in Alaska.
MAYOR DUNHAM added that one of the key components in Seward is
that the yard is adjacent to the moorage area.
9:57:08 AM
REPRESENTATIVE GARDNER inquired as to whether AVTEC has
capacity, has the capacity to expand in terms of classrooms,
facilities, and housing.
MR. OATES recalled meeting with Commissioner Bishop regarding
whether AVTEC growth would be necessary if this project comes to
fruition. Currently, AVTEC has capacity for some additional
growth, but if all six CDQ groups came to Alaska AVTEC would
have to grow its programs.
MAYOR DUNHAM informed the committees that AVTEC trains 500-800
people a year, with some years as high as 1,100. He said that
there would be a growth and a needs factor [if this project were
to go forward].
9:58:57 AM
CHAIR HERRON extended thanks to CVRF in terms of using AVTEC.
He then noted that he and Mr. Oates worked on a project in
Bethel with a vocational education center in which CVRF was
involved. Chair Herron requested that Mr. Oates provide the
letters from Alaska's congressional delegation to Representative
Seaton's office for inclusion in the packet for the resolution.
MR. OATES said he would forward the letters once they have
received them. He related that Alaska's congressional
delegation intends to send the letter to the governor, the
President of the Senate, and the Speaker of the House.
10:00:27 AM
REPRESENTATIVE THOMPSON opined that this proposal is very
exciting as it brings jobs to Alaska and keeps money in the
state. He noted his appreciation for this presentation.
10:00:52 AM
CHAIR HERRON cautioned that this won't be the easiest move as
the CDQ fishing fleet is an important asset for its current
location. Still, he said he looked forward to working on this
proposal.
10:01:27 AM
ADJOURNMENT
There being no further business before the committees, the joint
meeting of the House Community and Regional Affairs Standing
Committee and House Special Committee on Economic Development,
International Trade and Tourism was adjourned at 10:01 a.m.
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