Legislature(2013 - 2014)BARNES 124
02/28/2013 11:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentations(s): Economic Benefits of Combining Industries | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE AND
TOURISM
February 28, 2013
11:19 a.m.
MEMBERS PRESENT
Representative Shelley Hughes, Chair
Representative Bob Herron
Representative Pete Higgins
Representative Lance Pruitt
Representative Geran Tarr
MEMBERS ABSENT
Representative Lynn Gattis
Representative Craig Johnson
Representative Kurt Olson
Representative Harriet Drummond
COMMITTEE CALENDAR
PRESENTATIONS(S): ECONOMIC BENEFITS OF COMBINING INDUSTRIES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LORALI SIMON, Vice President
External Affairs
Usibelli Coal Mine, Inc. (UCM)
Fairbanks, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "The Impact of Usibelli Coal Mine Inc. on Economic
Development, Trade, and Tourism."
TOM BROOKS, Vice President
Engineering
Alaska Railroad Corporation (ARRC)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "The Alaska Railroad 90 Years of Economic
Development."
DALE WADE, Vice President
Business Development
Alaska Railroad Corporation (ARRC)
Anchorage, Alaska
POSITION STATEMENT: Participated in the PowerPoint presentation
entitled, "The Alaska Railroad 90 Years of Economic
Development."
RALPH SAMUELS, Vice President
Community & Government Relations
Holland America Line (HAL)
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Overview on tourism & travel patterns for Alaska
State Legislature," dated 2/28/13.
ACTION NARRATIVE
11:19:58 AM
CHAIR SHELLEY HUGHES called the House Special Committee on
Economic Development, Trade and Tourism meeting to order at
11:19 a.m. Representatives Pruitt, Tarr, Herron, Higgins, and
Hughes were present at the call to order.
^PRESENTATIONS(s): ECONOMIC BENEFITS OF COMBINING INDUSTRIES
PRESENTATIONS(s): ECONOMIC BENEFITS OF COMBINING INDUSTRIES
11:20:43 AM
CHAIR HUGHES announced that the only order of business would be
presentations by representatives of the resource, tourism and
transportation industries, followed by a panel discussion of the
economic benefits of combining industries.
11:21:16 AM
LORALI SIMON, Vice President, External Affairs, Usibelli Coal
Mine, Inc., provided a brief history of Usibelli Coal Mine (UCM)
operations [slides 1 and 2]. She informed the committee that
the U.S. has 25 percent of the world's coal reserves, and Alaska
has 50 percent of the U.S. coal reserves, most of which are
located on the North Slope and the remainder close to existing
infrastructure. At the rate of current consumption by the
Railbelt, Alaska has about 1,000 years of coal reserves [slide
3]. Economic development is related to the price of energy, and
residents need to be able to pay for their energy costs at home
and for businesses, and she pointed out that Alaska is among the
highest ratepayers because it is one of the lowest users of
coal. However, rates in Wyoming and West Virginia are low
because they generate over 90 percent of their power with coal.
Ms. Simon urged the committee to remember that Alaska's coal is
abundant and affordable [slide 4].
11:24:58 AM
CHAIR HUGHES asked why Alaska is not using its coal resources.
MS. SIMON opined the availability of cheap natural gas from Cook
Inlet to the Southcentral population base precluded the
development of coal resources. She returned to the presentation
and said UCM has about 130 employees, 37 percent of which are
second, third, or fourth generation employees [slide 5]. The
positions available at UCM are varied, require different levels
of education and previous experience, and pay wages that can
support a family [slide 6]. Employment at UCM is year-around in
a non-camp environment, and Healy has the highest per-capita
income in the state; in fact, the average annual wage earned in
the mining industry in Alaska is $100,000 [slide 7]. Economic
development includes new development and UCM is working to
further develop the Wishbone Hill Mine located north of Palmer.
This could become the only operating mine in the region, which
is a traditional mining area. The project has been permitted
since the '90s and leases and permits are up-to-date [slide 8].
The Wishbone Hill project could provide 75 to 125 full-time jobs
in a community environment and bring work to local vendors and
contractors in Southcentral [slide 9].
11:29:49 AM
CHAIR HUGHES asked whether there are any hurdles to overcome for
the Wishbone Hill project, and if common misconceptions about a
coal mining project interfere.
MS. SIMON advised that UCM is in the process of renewing a
mining permit through the Department of Natural Resources (DNR).
She said UCM is "following the law" and DNR has requested
additional items - thus the timeline is uncertain - but the
renewal could be issued this spring or summer. Regarding
misconceptions, she opined residents in Southcentral are
unfamiliar with an active mine and environmentalist groups
spread fear and anxiety in the community. Healy has the only
operating coal mine in the state and it is an excellent example
of how state laws and regulations protect public health and the
environment. Although the mining operations would differ, UCM
has an excellent reputation in the state. The coal industry has
a positive economic impact on the state's economy and 408 jobs
are a direct result of UCM operations [slide 10]. Looking at
trade and exports, UCM produces about two million tons of coal
each year and about one million tons are exported to Chile,
South Korea, and Japan. This amount is expected to continue to
decline due to the availability of low-cost natural gas and
cheaper coal from elsewhere [slide 11].
11:34:17 AM
CHAIR HUGHES asked for the value of the exported coal.
MS. SIMON said sales contracts vary and she will provide the
amount of taxes and royalties UCM pays to the state. One
million tons of coal remains in the state and she noted that the
new combined heat and power plant at the University of Alaska
Fairbanks (UAF) will take advantage of least-cost fuel sources
and will help reduce problems with air quality standards. The
Healy Clean Coal Project (HCCP) will be a new customer within
the next few years [slide 12]. Chile is the largest export
customer followed by South Korea and Japan [slide 13]. Photos
of the Seward Coal Terminal depicted the ship loading system
adjacent to the cruise ship terminal [slides 14 and 15]. She
pointed out the proximity of cruise ships, a small boat harbor,
and campground facilities. Turning to tourism, Ms. Simon
reminded the committee UCM has operated for 70 years at the edge
of Denali National Park & Preserve along with other businesses,
and she invited the committee to join a legislative tour of the
mine this summer [slide 16].
CHAIR HUGHES encouraged members to tour the facility.
11:40:13 AM
TOM BROOKS, Vice President, Engineering, Alaska Railroad
Corporation (ARRC), said ARRC has 625 year-around employees
represented by five unions, and about 415,000 passengers were
transported last year [slide 2].
11:41:20 AM
DALE WADE, Vice President, Business Development, Alaska Railroad
Corporation (ARRC), informed the committee revenue from freight
in 2013 is projected to be $92 million, comprising 67 percent of
total revenue. Passenger business represents 18 percent of
revenue, and real estate revenue is almost $17 million, or 12
percent of total revenue [slide 3].
MR. BROOKS provided a short history, noting that the Alaska
Railroad was established in 1914 - construction was completed in
1923 - for the purpose of economic development. The railroad
authority operated independently within the federal government
until 1985 when it was purchased by the state for $22.3 million.
At that time there was an influx of state funds for operating
capital, but since then ARRC has operated without any further
state funding [slide 4 and 5].
11:45:12 AM
MR. WADE explained freight services transport oilfield supplies
to Prudhoe Bay through Fairbanks; ship petroleum products north
and south from the North Pole Refinery; ship military goods to
and from Alaska; and ship coal daily out of the Usibelli Coal
Mine, Inc. north and south from Healy. Other freight services
utilize the Trailers on Flat Car (TOFC) system which is the
ability to move goods on fully loaded trailers that are lifted
onto the railcars and travel from Anchorage to Fairbanks. This
system saves an enormous amount of truck traffic, fuel, and
cost, and is the only economical way to move massive volumes.
Containers on Flat Car (COFC) is the system to move containers
off of barges and then by rail. In addition, about 2 million
tons of gravel is moved for the mining industry from the
[Matanuska-Susitna (Mat-Su) Valley] to road projects [slide 6].
11:47:04 AM
MR. WADE further explained that shipping bulk petroleum from the
Flint Hills refinery is declining, shipping local coal is
increasing slightly, shipping coal for export is declining, and
shipping gravel is declining [slide 7]. Freight Facts for 2012:
57,250 railcars moved 5.6 million tons and accounted for 67
percent of revenue. He pointed out that by ARRC's connection to
the Lower 48 a railcar can be loaded in Florida and moved to
Fairbanks without further handling. This is a through-system
involving Lower 48, railroads, barge service from Seattle to
Whittier, and rail further north on ARRC [slide 8]. Intrastate
business largely consists of scrap material, jet fuel, and
construction materials [slide 9]. Alaska Railbelt Marine is a
unique connection with Alaska Marine Lines that uses highly
efficient barges to transport railcars and containers [slide
10]. There is also an international freight connection with the
Canadian National Railroad to transport goods from the central
U.S. or across Canada to Prince Rupert, British Columbia, and
then by barge to Whittier for the connection to ARRC [slide 11].
Passenger services run daily May through September and weekends
in winter [slide 12]. Regularly scheduled year-around service
is also important to rural communities [slide 13]. The summer
tourism business is very important: ARRC transports visitors to
Denali National Park & Preserve, south on the Glacier Discovery
to Whittier, and on the Coastal Classic from Anchorage to Seward
[slide 14]. A partnership with the U.S. Forest Service allows
ARRC to provide service from Anchorage into the Chugach National
Forest [slide 15]. Passenger volumes are increasing by about 7
percent per year [slide 16]. Finally, real estate is an aspect
of ARRC that is critical to other businesses in the state. The
corporation owns about 36,000 acres, much of which is highly-
valued land in Anchorage, Fairbanks, and Seward, used to support
transportation services [slide 17].
11:53:05 AM
MR. BROOKS stated that ARRC is working with the Department of
Transportation & Public Facilities and others on the Alaska
State Rail Plan, which is due to be completed this year, and is
interested in the Alaska Transportation Infrastructure Fund.
Last year ARRC was authorized to extend its real estate lease
period to 95 years which will be beneficial in the long-term
[slide 18]. In response to Chair Hughes, he said the rail plan
extends 20 years. Regarding federal issues, Mr. Brooks relayed
ARRC's struggle to maintain formula funds from the Federal
Transit Administration, U.S. Department of Transportation; in
fact, funds were reduced from $36 million to $27 million. In
addition, a deadline is approaching for an unfunded federal
mandate for Positive Train Control (PTC), which is an overriding
safety system to reduce the possibility of human error. This
system is an improvement in safety, but an expense that ARRC
cannot afford [slide 19].
11:55:13
CHAIR HUGHES asked how the PTC system works.
MR. BROOKS explained that a computer system automatically slows
the train if the engineer makes an untoward action.
11:55:59 AM
REPRESENTATIVE PRUITT observed PTC is estimated to cost $5
million per year in maintenance. He asked about the gap between
the deadline, the construction costs of $15 million, and
implementation.
MR. BROOKS said using a combination of internally-generated
funds and Federal Transit Administration funds, ARRC is
beginning improvements in its dispatch system and in telemetry
between remote locations and the dispatch office. The system is
expected to be completed in 2018. In further response to
Representative Pruitt, he said the industry expects an extension
of the deadline to 2018; however, possible penalties would be
financial and operating reductions.
11:58:12 AM
MR. WADE, in response to Representative Pruitt, said it is
essential that ARRC meet the federal mandate because the
corporation is charged to support the people of Alaska and that
includes passenger service. In addition, passenger service for
tourism is a very significant economic driver for the state, and
discontinuation of passenger service does not make financial
sense. Therefore, ARRC will proceed with PTC compliance.
MR. BROOKS turned attention to projects funded by the
legislature. The Northern Rail Extension project proposes to
extend ARRC one-third of the distance from Fairbanks to Delta
Junction. The project is divided into four phases, and partial
funding has been authorized for Phase 1, which is a bridge at
Salcha over the Tanana River with access to military training
areas. Completion of the bridge is expected in mid-summer 2014.
Phase 2 extends the railroad to the bridge [slides 21 and 22].
In response to Chair Hughes, he explained the bridge will
provide rail and vehicle access.
REPRESENTATIVE HIGGINS expressed his interest in eventually
obtaining public access across the bridge.
REPRESENTATIVE PRUITT observed the project received funding from
the military thus there may be an expectation of exclusivity.
12:02:36 PM
MR. BROOKS, in response to Representative Higgins, said the U.S.
Department of Defense contributed $104.2 million and the state
contributed $84 million to the project [slide 23]. He cautioned
that the military is very concerned about civilian access across
the bridge to its training area. Through efforts by ARRC to
employ local labor, the project is 70 percent Alaskan hire
[slide 24]. The Port MacKenzie Rail Extension is underway, and
segments of the project are out to bid with funding from the
state through the Mat-Su Borough [slide 25]. Port MacKenzie
will be the fourth port served by ARRC and will provide a large
staging area [slide 26]. Further, the large staging area allows
for an industrial loop for the trains which will move bulk
commodities more efficiently [slide 27].
12:04:19
REPRESENTATIVE TARR surmised after construction of the extension
to Port MacKenzie it would become the shipping facility for coal
from the north. She asked whether that would affect the
existing facility at Seward, especially with the reduction in
coal exports.
MR. WADE understood coal exports will increase. The intent is
to serve the businesses of Alaska, and in the future both ports
will be needed.
REPRESENTATIVE TARR asked whether the port at Seward will suffer
economic losses as a result of this project.
MR. WADE deferred the question to UCM.
12:06:13 PM
MR. BROOKS stated ARRC is often questioned about new lines east
to Canada, west to Nome, and north to Prudhoe Bay.
REPRESENTATIVE HIGGINS recalled in 2005 the Alaska Canada Rail
Link was begun. He asked about its recent activities.
MR. BROOKS said ARRC has a strategic planner engaged in talks
with Canadian counterparts.
MR. WADE added that G Seven Generations Ltd. (G7G), Vancouver,
British Columbia, has requested funds for a feasibility study on
a railroad to deliver oil from tar sands to the Trans-Alaska
Pipeline System (TAPS) at Delta Junction. A railway across
Canada would be a very expensive project. In response to
Representative Higgins, it would be a distance of 300 miles for
ARRC and 1,200 miles for the Canadian railroad.
MR. BROOKS, in further response to Representative Higgins, said
the rail gauge is the same. Returning attention to the
presentation, his experience is that it is very difficult to
assemble a corridor for transportation, and he urged for work to
be done on corridors through the state rail plan. Also, it is
important that existing corridors for highway and rail are
preserved and protected [slide 28].
12:09:49 PM
MR. WADE advised ARRC works closely with intermodal, interstate
and international business in support of economic development.
Proposals to move natural gas, liquefied natural gas (LNG), and
refined and crude oil, in addition to the proposed Susitna-
Watana Hydro project are under discussion. Two recently
completed wind power projects provided major work for ARRC.
Anticipated this summer is the Matanuska Electric Association
Inc. (MEA) project which will entail moving "ten of the largest
engines that we will ever carry on the railroad to date" [slide
29]. He concluded that ARRC is expert at moving mega, heavy-
lift projects.
REPRESENTATIVE TARR requested updates on the flooding near
Talkeetna and on plans for commuter rail.
MR. WADE acknowledged the interest in commuter rail for many
reasons; however, the depot in Anchorage is not a good drop-off
location. He suggested a transit authority is needed to develop
complete connections for commuter traffic between Anchorage and
the [Mat-Su Valley].
CHAIR HUGHES asked whether a commuter rail line would be
economic.
MR. WADE said a transit authority could receive subsidies.
12:14:17 PM
RALPH SAMUELS, Vice President, Community & Government Relations,
Holland America Line (HAL), informed the committee his comments
will only address the travel patterns along the Railbelt, as
travel patterns in Southeast are completely different.
Typically, a ship will disembark at Seward or Whittier, and
passengers travel by coach or rail to Anchorage, Talkeetna, or
Fairbanks to fly in or out, or connect with other transportation
[slide 1]. About 60 percent of summer visitors arrive by ship,
most others arrive by air, and a very small percentage drive.
After arrival, travel vacation packages are available to
purchase, as well as car and motorhome rentals, or outgoing
flights [slide 2]. Holland America Line (HAL) owns coaches,
lodging, and railcars, and supports local products for food and
beverages; in fact, in addition to produce, HAL purchased
265,000 pounds of silver salmon, 123,000 pounds of king salmon,
113,000 pounds of halibut, and 226,000 pounds of king crab and
other seafood [slide 3]. Marketing data has shown that visitors
want to see wildlife, glaciers, and Mt. McKinley [slide 4].
Although purported to own all kinds of tourism businesses, Mr.
Samuels stressed that HAL is a transportation company that owns
coaches, railcars, and ships and - with the exception of Dawson
- local vendors provide tour activities [slide 5]. The economic
impact of tourism to the state is almost $4 billion, and 8
percent or 9 percent of jobs in the state are directly related
to the tourist industry [slide 6]. An example of the revenue to
local governments is that bed taxes collected during the season
pay for three-quarters of services in the Denali Borough [slide
7]. He offered to provide further details on revenue to local
governments paid by the tour industry. Total revenue paid to
the state in 2011-12 was $107 million [slide 8].
12:23:30 PM
CHAIR HUGHES questioned the figures paid for corporate income
tax between 2008-09 and 2011-12 that were shown on slide 8.
MR. SAMUELS will confirm the accuracy of these figures. In
further response to Chair Hughes, he said he could not speak to
changes in Alaska Marine Highway System (AMHS) traffic. Various
partnerships are part of the tourism business and HAL partners
with the national parks, state parks, and cultural organizations
for informational programs for visitors and employee training
[slide 9]. Turning to visitor flow, he advised that 150,000 of
HAL guests ride the railroad at some point. In addition, HAL
has 260 coaches on the road, owns 20 railcars, and has 10 more
railcars available for use. Most railcars hold between 72 and
88 people, and it would take more than 50 coaches to take the
place of the railcars [slide 11]. Mr. Samuels encouraged the
committee to take a tour to Talkeetna and Denali this summer.
12:31:23 PM
REPRESENTATIVE HIGGINS asked whether the bed tax is a deterrent
to tourism.
MR. SAMUELS cautioned against targeted taxes that drive up the
cost of doing business. To answer the question of what
government can do for business, he pointed out that ships and
airlines can change locations easily unless there is an
investment in infrastructure. Holland America Line has about
$500 million in assets in Alaska, and policies of the state that
encourage land assets are advisable.
CHAIR HUGHES asked whether ARRC, UCM, and HAL have formal
contacts on a regular basis.
12:34:56 PM
MR. SAMUELS assured the committee HAL and ARRC have day-to-day
contact and a great relationship. Also, HAL has an employee
facility in Healy so there is interaction with the local
company.
12:35:57 PM
MR. WADE agreed that ARRC, HAL, and UCM are interwoven because
of operational issues.
CHAIR HUGHES specified her question on contact between the
companies was directed to whether they share long-term planning.
MR. WADE said yes. Many contracts have 10-year terms.
CHAIR HUGHES returned to the subject of a commuter line that
could bring tourists to Palmer; she pointed out that the tracks
to Palmer were removed.
MR. WADE stated that the Fair Train fills up quickly, thus there
is demand for transportation from Anchorage to the Mat-Su
Valley.
REPRESENTATIVE HERRON expressed his interest in an
infrastructure tour from Seward to Healy.
12:39:29 PM
CHAIR HUGHES asked about the value of a rail line to the
proposed Wishbone Hill Mine project.
MS. SIMON observed that there is not an existing track to that
area and UCM chose the trucking option, the most viable option
in the near term, to transport coal out to Port MacKenzie. In
response to an earlier question from Representative Tarr, she
said UCM will not abandon its Seward coal facility, but will use
Port MacKenzie as a supplemental port if the rail line is
completed.
12:41:41 PM
REPRESENTATIVE TARR questioned whether developing Port MacKenzie
is a good use of state funds when there are existing facilities
at Seward.
MS. SIMON, speaking as a Matanuska-Susitna Valley resident,
opined that state investment in Port MacKenzie is "key." From a
business perspective, she said UCM already supplies 100 percent
of Alaska's need for coal, thus the only way to expand its
business is to increase exports, but the facility at Seward is
already near capacity. International coal markets are expected
to increase and lead to an increase in exports.
12:43:24 PM
CHAIR HUGHES inquired as to what actions the committee should
take to benefit industry.
MS. SIMON urged for a stable regulatory environment; constant
changes in regulations create difficulties for business.
MR. WADE relayed two items: ARRC requires state support for the
growth and health of its customers and financial support for the
difficulties ahead in 2013 and 2014.
MR. SAMUELS encouraged more infrastructure development, such as
the South Denali Visitor Center. He cautioned again against
targeted taxes, and urged the committee to be aware of the
upcoming PTC issue for ARRC.
MR. BROOKS restated the importance of preserving existing
transportation corridors.
12:46:42 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, Trade and Tourism
meeting was adjourned at 12:46 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AKRR House EDTT presentation revised.pdf |
HEDT 2/28/2013 11:15:00 AM |
|
| HAL Overview on tourism travel patterns - Feb 2013 - for AK Legis.pdf |
HEDT 2/28/2013 11:15:00 AM |
|
| UCM at HEDTT 022813.pdf |
HEDT 2/28/2013 11:15:00 AM |