Legislature(2013 - 2014)BARNES 124

02/20/2014 11:15 AM House ECON. DEV., TRADE & TOURISM


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11:19:12 AM Start
11:20:02 AM Presentation(s): Center of International Governance Innovation; Carleton University
12:01:46 PM Presentation: Marine Exchange of Alaska
12:31:22 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentations: TELECONFERENCED
- "North America & the New Arctic" by John
Higginbotham, Head of Arctic Program, Center
of International Governance Innovation,
Carleton University, Ottawa Canada
- "Alaska & the Future of the Northern Sea Route"
by Paul Fuhs & Ed Page, Marine Exchange of Alaska
                    ALASKA STATE LEGISLATURE                                                                                  
  HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE, AND                                                                 
                            TOURISM                                                                                           
                       February 20, 2014                                                                                        
                           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                                                                                                            
                                                                                                                                
PRESENTATION:  CENTER OF INTERNATIONAL GOVERNANCE INNOVATION~                                                                   
CARLETON UNIVERSITY~ OTTAWA~ CANADA                                                                                             
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PRESENTATION:  MARINE EXCHANGE OF ALASKA                                                                                        
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOHN HIGGINBOTHAM, Senior Distinguished Fellow                                                                                  
Carleton University                                                                                                             
Ottawa, Ontario, Canada;                                                                                                        
Senior Fellow, Centre for International Governance Innovation                                                                   
Waterloo, Ontario, Canada                                                                                                       
POSITION STATEMENT:  Provided a presentation on North America                                                                 
and the Arctic region.                                                                                                          
                                                                                                                                
PAUL FUHS, President                                                                                                            
Board of Directors                                                                                                              
Marine Exchange of Alaska                                                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Provided an  overview of the Marine Exchange                                                             
of Alaska.                                                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
11:19:12 AM                                                                                                                   
                                                                                                                                
CHAIR  SHELLEY  HUGHES  called the  House  Special  Committee  on                                                             
Economic  Development, Trade,  and  Tourism meeting  to order  at                                                               
11:19  a.m.   Representatives  Herron, Higgins,  and Hughes  were                                                               
present at  the call to  order.  Representatives Pruitt  and Tarr                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
^PRESENTATION(S):       CENTER   OF    INTERNATIONAL   GOVERNANCE                                                               
INNOVATION; CARLETON UNIVERSITY                                                                                                 
      PRESENTATION(S):  CENTER OF INTERNATIONAL GOVERNANCE                                                                  
                INNOVATION; CARLETON UNIVERSITY                                                                             
                                                                                                                                
11:20:02 AM                                                                                                                   
                                                                                                                                
CHAIR HUGHES announced that the  first order of business would be                                                               
a  presentation  by  John Higginbotham  of  Carleton  University,                                                               
Ottawa,  Ontario,  Canada,  and   the  Centre  for  International                                                               
Governance Innovation, Waterloo, Ontario, Canada.                                                                               
                                                                                                                                
11:20:09 AM                                                                                                                   
                                                                                                                                
JOHN   HIGGINBOTHAM,   Senior  Distinguished   Fellow,   Carleton                                                               
University,   and  Senior   Fellow,   Centre  for   International                                                               
Governance Innovation,  gave a brief  history of  his background.                                                               
Mr. Higginbotham stated  that he brings to Arctic  issues a sense                                                               
of urgency,  which is based on  30 years of diplomatic  and other                                                               
experiences.    This sense  of  urgency  is  related to  the  gap                                                               
between international  pressures and  [the lack of]  regional and                                                               
federal  resources applied  to the  future  of the  Arctic.   Mr.                                                               
Higginbotham  directed attention  to the  PowerPoint presentation                                                               
entitled, "North America and the New  Arctic."  He and others are                                                               
drawn to  this issue by  the dramatic  melting of the  Arctic ice                                                               
cap  that  has  taken  place  over  the  past  30  years.    This                                                               
phenomenon is  not well  understood, but it  is evident  that the                                                               
ice is melting in the Arctic  and having an effect on permafrost,                                                               
on  communities,   and  on   geopolitical  issues   and  economic                                                               
activities.   He said he would  not explore the causes  of global                                                               
warming,  but there  is  a dramatic  trend,  and individuals  and                                                               
governments  must think  about the  near future.   The  projected                                                               
reduction in  the size  of the  summer ice cap  over the  next 50                                                               
years is  important for Canada and  Alaska with respect to:   the                                                               
accessibility  of  communities;   fisherman;  tourists;  resource                                                               
exploration; and shipping routes throughout the world [slide 1].                                                                
                                                                                                                                
11:25:43 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HIGGINS referred  to the map on slide  1 and asked                                                               
for clarification.                                                                                                              
                                                                                                                                
MR. HIGGINBOTHAM  explained that the  red area on the  map marked                                                               
"2007" is  an indication of the  ice coverage in the  summer.  In                                                               
further  response to  Representative Higgins,  he confirmed  that                                                               
the Northwest Passage (NWP) is only  open for two months per year                                                               
- and a short time longer  with the use of icebreakers - although                                                               
"some people are suggesting" that  the center of the Arctic Ocean                                                               
will be ice-free  in September and October.  Slide  2 was a rough                                                               
chart  of the  extensive petrochemical  and mineral  resources in                                                               
the Arctic  Ocean that have  not been exploited because  doing so                                                               
is dark,  cold, dangerous, and  very expensive.   He acknowledged                                                               
that the  Arctic remains  an attractive  place to  invest without                                                               
regard to its constraints.   Slide 3 entitled, "Arctic Boundaries                                                               
Claims" illustrated the legal claims  by different countries over                                                               
the Arctic  Ocean; this  is an  important issue  as uncertainties                                                               
over boundaries  have caused centuries  of war.  For  the moment,                                                               
the United  Nations Convention  on the Law  of the  Sea (UNCLOS),                                                               
Commission on  the Limits  of the  Continental Shelf  process has                                                               
the  issue  under  control between  the  various  Arctic  coastal                                                               
states;  in fact,  there is  an agreement  by the  Arctic coastal                                                               
states to reach bilateral agreements  where there are territorial                                                               
disputes.   For  example, the  Russians and  the Norwegians  have                                                               
unexpectedly reached a territorial  agreement in the Barents Sea.                                                               
Mr.  Higginbotham  characterized this  commitment  to  come to  a                                                               
peaceful settlement of boundary issues  as "quite promising."  On                                                               
the other  hand, there is  an ongoing Canada/U.S. dispute  over a                                                               
portion of  the Beaufort Sea,  the U.S. has not  ratified UNCLOS,                                                               
and there are questions on  the issue of innocent passage through                                                               
the waters of the Canadian Arctic Archipelago.                                                                                  
                                                                                                                                
11:31:51 AM                                                                                                                   
                                                                                                                                
MR. HIGGINBOTHAM continued to slide  4 entitled, "Arctic Shipping                                                               
Routes."   He said his  interest in shipping routes  was inspired                                                               
by the search for NWP, and  the relative lack of attention to its                                                               
development  by Canada.   There  is  a long  history of  maritime                                                               
commerce  through NWP,  most of  a destinational  nature for  the                                                               
purpose  of servicing  communities.   Four routes  were shown  on                                                               
slide  4:   the Canadian  NWP; the  central Transpolar  Sea Route                                                               
(TSR), which can  be used in the summer with  the assistance of a                                                               
large icebreaker; the  Russian Northern Sea Route  (NSR); and the                                                               
Arctic  Bridge  Route (ABR).    He  advised  that Russia  is  the                                                               
commercial leader in the Arctic  because it has invested billions                                                               
of  dollars  in  fleets  of nuclear  icebreakers,  has  developed                                                               
offshore  oil  and   gas  facilities,  and  has   created  a  NSR                                                               
administration to  encourage paying traffic from  Europe to Asia,                                                               
as this is  a much shorter route compared to  transit through the                                                               
Panama Canal.                                                                                                                   
                                                                                                                                
11:35:11 AM                                                                                                                   
                                                                                                                                
CHAIR HUGHES asked whether the  increase in activity along NSR is                                                               
because  of  retreating  ice,  or because  Russia  is  active  in                                                               
encouraging  its  use.    Also,  how  do  shipping  opportunities                                                               
compare between NSR and NWP.                                                                                                    
                                                                                                                                
11:36:00 AM                                                                                                                   
                                                                                                                                
MR.  HIGGINBOTHAM  said it  is  a  combination of  both  factors.                                                               
Geographically,  NSR  is  more  ice-free   in  July,  August,  or                                                               
September because  the straits  in NWP clog  up with  moving ice.                                                               
Also,  the  Russians  have developed  a  system  of  icebreakers,                                                               
convoys, and ice pilots; for  example, just one ship went through                                                               
NWP from Vancouver to Finland  without icebreaker assistance last                                                               
summer.   In  contrast, hundreds  of ships  went through  NSR and                                                               
there were  between twenty-five and sixty  international transits                                                               
of  major ships.   Russia  has made  the "return  to the  Russian                                                               
Arctic" a  major priority in  order to serve energy  projects and                                                               
transit traffic.  The development  of Russian deep-water ports is                                                               
broadly  integrated with  defense and  security efforts  as well,                                                               
although this  aspect is tempered  by its need  for international                                                               
capital to  develop oil  and gas resources  in Siberia  and along                                                               
the Arctic  coast.  Mr.  Higgenbotham opined Canada and  the U.S.                                                               
are  the  least  developed,  with   respect  to  Arctic  maritime                                                               
development, of all of the  Arctic states.  He directed attention                                                               
to slide  5 entitled, "Icebreakers  of the World  (Source: USCG)"                                                               
which illustrated the investment that  has been made by Russia in                                                               
state-owned  equipment  and  infrastructure to  promote  economic                                                               
development in the Arctic.  Norway  is also very advanced - it is                                                               
probably the  world leader  in Arctic oil  and gas  development -                                                               
and  all  of the  Scandinavian  countries  cooperate with  Russia                                                               
through the Barents Euro-Arctic Council.                                                                                        
                                                                                                                                
11:41:47 AM                                                                                                                   
                                                                                                                                
MR.  HIGGINBOTHAM  turned  to slide  6  entitled,  "Northern  Sea                                                               
Route."  He pointed out there  are search and rescue stations all                                                               
along the  route, and  Russia maintains a  high level  of mapping                                                               
and control in the area,  charging countries fees for transiting.                                                               
Access is limited  and ships are monitored by  electronics and by                                                               
Russia's fleet of icebreakers.  The  traffic is now a fraction of                                                               
world trade compared to that of  the Suez Canal, which has 18,000                                                               
transits per year, but it is  the beginning of an important trend                                                               
in light of  the changing ice and the coming  of global commerce.                                                               
Mr.  Higginbotham   cautioned  that   granting  the   Russians  a                                                               
commercial monopoly  over transpolar travel and  marine transport                                                               
in the Arctic is a mistake for North America.                                                                                   
                                                                                                                                
REPRESENTATIVE  HIGGINS  asked  whether transit  through  NSR  is                                                               
restricted to summer use.                                                                                                       
                                                                                                                                
MR.  HIGGINBOTHAM   estimated  that  it   is  open  to   use  for                                                               
approximately   four   months.       In   further   response   to                                                               
Representative Higgins, Mr. Higginbotham  said it is possible for                                                               
the ice to return but that is  unknown.  The evidence of the last                                                               
30-40 years shows the retreating  ice is a steady trend, although                                                               
there are many different explanations for climate patterns.                                                                     
                                                                                                                                
11:46:43 AM                                                                                                                   
                                                                                                                                
CHAIR  HUGHES  asked how  many  transits  are attributed  to  the                                                               
Panama Canal.                                                                                                                   
                                                                                                                                
MR. HIGGINBOTHAM  responded about  10,000 per  year.   In further                                                               
response  to Chair  Hughes, he  said passage  through the  Arctic                                                               
saves about a week of sailing  time for ships from Japan or Korea                                                               
that  would otherwise  travel through  the Suez  Canal.   He then                                                               
turned  to  Canada's "Northern  Strategy,"  which  is a  document                                                               
outlining Canada's unique concern  about sovereignty, its concern                                                               
about economic and  social development, and its  attention to the                                                               
environment.     Regarding  governance,   Canada  has   seen  the                                                               
devolution  of federal  powers to  the northern  territories; for                                                               
example, Yukon has  a level of governance not far  from that of a                                                               
Canadian  province.   Recently  the  federal  government and  the                                                               
Northwest Territories  have reached  agreement on the  control of                                                               
natural resources.   Nunavut,  a large  area populated  mostly by                                                               
Inuit,  is  the  least  developed  area  and  is  governed  by  a                                                               
combination  of  territorial  government and  a  quasi-government                                                               
formed by the  Inuit population.  However,  all three territories                                                               
remain  largely  dependent  on the  federal  government  for  the                                                               
funding of  education and  health systems [slide  7].   He opined                                                               
the Canadian  government has not carried  its full responsibility                                                               
for national  development in the Arctic  to the degree it  has in                                                               
the  South.     Slide  8   displayed  "Canada's   Arctic  Council                                                               
Priorities 2013-2015."   He noted that Canada  is currently chair                                                               
of the Arctic Council, which  influences peaceful development and                                                               
cooperation  in  the  region.    As chair,  Canada  has  set  the                                                               
following  priorities:   Resource  development in  the Arctic  to                                                               
meet the  interests of Northerners;  safe Arctic  shipping, which                                                               
is  a  deviation from  previous  priorities  directed toward  the                                                               
environment    and   science;    and   sustainable    circumpolar                                                               
communities.      Slide  9   was   a   map  entitled,   "Northern                                                               
Transportation  System and  Northern  Projects Management  Office                                                               
Projects."   Mr.  Higginbotham  pointed  out there  is  a lot  of                                                               
traffic from Montreal and Baffin  Island; there is an Arctic port                                                               
at Churchill;  there is a  route from Alberta down  the Mackenzie                                                               
River; and Yukon  has access to Skagway and south.   The Canadian                                                               
Arctic is in  acute need of greater attention to  small and large                                                               
ports, aids  to navigation, charting, and  better communications;                                                               
in  fact,  the Canadian  Coast  Guard  and Transport  Canada  are                                                               
considering a  policy framework for  marine corridors.   Slide 10                                                               
was a map of the  Nordic Orion's profitable voyage from Vancouver                                                             
to Norway through NWP.   Finally, he displayed slide 11 entitled,                                                               
"The  North American  Arctic Marine  Highway."   Mr. Higginbotham                                                               
said his years of experience in  Washington D.C. leads him to say                                                               
sufficient dialogue between Canada and  the U.S. on Arctic issues                                                               
"is not really happening."                                                                                                      
                                                                                                                                
11:57:21 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HERRON inquired  as to  on what  the U.S.  should                                                               
concentrate during its chairmanship of the Arctic Council.                                                                      
                                                                                                                                
MR.  HIGGINBOTHAM expressed  his belief  that the  Arctic Council                                                               
"tries to  do everything," and  needs to turn away  from research                                                               
and stewardship  - [although they]  are important - and  put more                                                               
focus on  marine transportation and closer  cooperation among the                                                               
coastal Arctic states.  Also, he  urged for an examination of how                                                               
working  groups are  constituted,  and  especially important  for                                                               
Canada   and  the   U.S.,  are   how  regional   governments  are                                                               
represented, because Canadian territories  and Alaska should have                                                               
their own voice  outside of federal authority.   He observed work                                                               
should focus on  bilateral relations between Canada  and the U.S.                                                               
and  on triangular  cooperation between  Russia, Canada,  and the                                                               
U.S.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  HERRON said  he  would  contact Mr.  Higginbotham                                                               
directly with  other questions and  share his responses  with the                                                               
committee.                                                                                                                      
                                                                                                                                
CHAIR HUGHES urged for proactive work on Arctic issues.                                                                         
                                                                                                                                
12:00:57 PM                                                                                                                   
                                                                                                                                
^PRESENTATION:  MARINE EXCHANGE OF ALASKA                                                                                       
            PRESENTATION:  MARINE EXCHANGE OF ALASKA                                                                        
                                                                                                                                
12:01:46 PM                                                                                                                   
                                                                                                                                
CHAIR HUGHES announced that the  final order of business would be                                                               
a presentation by the Marine Exchange of Alaska.                                                                                
                                                                                                                                
12:01:56 PM                                                                                                                   
                                                                                                                                
PAUL  FUHS, President,  Board of  Directors,  Marine Exchange  of                                                               
Alaska (Exchange), informed the committee  the Exchange is a non-                                                               
profit organization that  set up a vessel  tracking and emergency                                                               
response  system.   The Exchange  has  also been  working on  the                                                               
Northern Sea  Route (NSR) for about  20 years.  He  observed that                                                               
global warming has accelerated  [Arctic shipping], but regardless                                                               
of the  changing climate, the Arctic  "is open."  He  displayed a                                                               
map of  four Arctic  shipping routes and  advised that  there has                                                               
been  an increase  in transpolar  shipping [slide  3].   Although                                                               
there  is less  ice, the  ice moves  around and  still creates  a                                                               
challenge  to shipping.   In  2013, about  400 vessels  transited                                                               
through  the  Bering  Strait  -   of  which  71  were  transpolar                                                               
shipments  across NSR  -, 17,000  vessels  transited through  the                                                               
Suez  Canal,  and 14,000  vessels  transited  through the  Panama                                                               
Canal  [slide  4].    Vessel  traffic  [through  the  Arctic]  is                                                               
increasing  by 50  percent per  year  and estimates  are by  2030                                                               
there will be  about 2,000 vessels per year.   Mr. Fuhs explained                                                               
his  data  comes  from  automated  identification  systems  (AIS)                                                               
stations  around the  Arctic.   Vessels over  a certain  size are                                                               
required  to indicate  their destination;  AIS  stations pick  up                                                               
their  signals  every six  seconds  that  are accurate  to  three                                                               
meters [slide 5].   Also recorded is the name  of the vessel, its                                                               
owner, the cargo,  and fuel type.  He advised  that almost all of                                                               
the  shipping  through  NSR  has been  bulk  ore  and  petroleum;                                                               
however, a great  amount of container shipping  travels the Great                                                               
Circle Route  between Asia  and the  U.S., and  with icebreakers,                                                               
container ships on  NSR can connect at Adak or  Dutch Harbor with                                                               
the container ships on  their way to the U.S [slide  6].  Slide 7                                                               
depicted vessel  traffic on  the Great  Circle Route  on 1/22/14,                                                               
and Mr.  Fuhs noted that this  route carries about 80  percent of                                                               
its capacity of container vessels.                                                                                              
                                                                                                                                
12:05:43 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HERRON suggested  that  anticipated new  Canadian                                                               
shipping  may double  the existing  traffic  through Unimak  Pass                                                               
within 10-15 years.                                                                                                             
                                                                                                                                
MR. FUHS  agreed and added  that the aforementioned  new shipping                                                               
would consist of tanker cargoes  of crude oil, increasing concern                                                               
about environmental  issues.  He  noted that  further information                                                               
on this  matter can be found  in the draft Aleutian  Islands Risk                                                               
Assessment, and  recommended that a similar  assessment is needed                                                               
of  the Bering  Strait.   Slide 8  showed NSR,  the Great  Circle                                                               
Route, and  shipping routes through  the Panama and  Suez Canals.                                                               
Use of  NSR from the  U.S. West Coast  saves about ten  days when                                                               
compared to the  route through the Panama Canal,  and saves about                                                               
twenty days  when compared to  the route through the  Suez Canal.                                                               
Although an  icebreaker is  needed for  transit through  NSR, the                                                               
cost of  a Russian icebreaker is  a little less than  the cost of                                                               
the anti-piracy insurance  required to ship around  Cape Horn and                                                               
along the  coast of Africa.   Thus, shipping  on NSR is  not more                                                               
expensive, from  an administrative  view.   In response  to Chair                                                               
Hughes, Mr.  Fuhs further  explained that if  a shipper  owns the                                                               
vessel, and the cost of  anti-piracy insurance equals the cost of                                                               
icebreaker fees,  all of  the cost  of the fuel  used for  ten or                                                               
twenty extra  days of sailing  is saved.   Slide 9  illustrated a                                                               
South Korean design for an  icebreaking containership, powered by                                                               
liquefied  natural gas  [LNG], and  dedicated to  run on  NSR and                                                               
connect to other  ships on the Great Circle Route.   Black carbon                                                               
[emission]  is an  issue of  debate in  the Arctic,  and an  LNG-                                                               
powered vessel avoids  that issue.  In response  to Chair Hughes,                                                               
he said the South  Korean ship is in the design  stage.  Slide 10                                                               
illustrated   different  Russian   diesel-  and   nuclear-powered                                                               
icebreakers.   Icebreakers  with a  shaft power  of 25  megawatts                                                               
(MW) are  in existence today.   Three Russian icebreakers  with a                                                               
shaft power  of 60  MW will  be built  by 2020,  and two  more by                                                               
2030.   He compared the power  of one 60  MW ship to that  of the                                                               
power  of  Bradley Lake  Hydro,  which  produces  45 MW.    These                                                               
icebreakers will  extend the  shipping window  on NSR  from about                                                               
five months  to about  seven months  out of the  year.   A future                                                               
Russian icebreaker of 110-130 MW  will be operational year-round,                                                               
and will  travel at  12 knots  through 3.5  meters of  ice [slide                                                               
11].   He  said, "This  ship  has not  been built  yet, but  this                                                               
changes everything right here."                                                                                                 
                                                                                                                                
12:11:08 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE PRUITT asked for further details.                                                                                
                                                                                                                                
12:11:19 PM                                                                                                                   
                                                                                                                                
MR. FUHS  said the icebreakers  do not  hold cargo, but  lead the                                                               
cargo ships  in a  convoy.   Slide 12 was  an illustration  of an                                                               
icebreaker with shaft power of 110  MW, length of 600 feet, width                                                               
of 100  feet, and  draft of  11-13 meters.   He pointed  out that                                                               
vessels of  this size  require about  35 feet  of depth  in port,                                                               
thus  Arctic  ports  need  to   be  designed  at  this  depth  to                                                               
accommodate icebreakers and  U.S. Coast Guard (USCG)  ships.  Two                                                               
potential deep-water ports  that can achieve this  depth are Nome                                                               
and  Port Clarence.   Slide  13 was  an illustration  of a  South                                                               
Korean LNG vessel  that is 900 feet long and  travels through the                                                               
Suez Canal to Asia for seven  months of the year, and through NSR                                                               
for five  months of  the year.   Two of  these vessels  have been                                                               
built  and  fourteen  more  are under  construction.    Slide  14                                                               
illustrated  the  route  taken  by  the  Chinese  icebreaker  Xue                                                             
through  U.S. waters.   Because  the  U.S. has  not ratified  the                                                               
United Nations Convention  on the Law of the Sea  (UNCLOS), U. S.                                                               
sovereignty  has not  been established.   Mr.  Fuhs advised  that                                                               
there  is  potential opportunity  and  risk  associated with  the                                                               
opening  of NSR.   Some  of the  risk is  presented by  crude oil                                                               
tankers.   Slide 16  pictured a crude  oil tanker  transiting the                                                               
Bering  Strait, and  he noted  that the  total cargo  through the                                                               
Bering  Strait in  2013 was  1.3  million tons,  800,000 tons  of                                                               
which were  petroleum products.   He cautioned  that the  U.S. is                                                               
unprepared for an  incident in that area  because the circulation                                                               
patterns in the  Arctic indicate that if there is  an incident in                                                               
Bering Strait, the spill will come  straight to the west coast of                                                               
Alaska [slide  17].  He  stressed that Alaska needs  Arctic ports                                                               
to establish  response capability.   Slide  18 identified  all of                                                               
the Arctic  oil developments leased  by Russia,  Iceland, Canada,                                                               
and Greenland [slide  18].  He expressed his  frustration in that                                                               
U.S. offshore  development has been  "shut down" in  U.S. waters,                                                               
but  oil development  continues in  the Arctic,  therefore Alaska                                                               
holds  "...  zero  percent  of the  opportunity  and  almost  100                                                               
percent  of the  risk."   The  Exchange and  USCG  are trying  to                                                               
determine  the response  capabilities of  ports along  NSR [slide                                                               
19].   There  are  some joint  response  agreements with  Russia;                                                               
however,  the  responses need  to  be  drilled and  exercised  to                                                               
determine  prevention  and  response   capabilities.    Mr.  Fuhs                                                               
restated  the  importance  of  establishing  ports  and  response                                                               
centers  at  Nome and  Port  Clarence.    Although USCG  and  the                                                               
Department of Defense (DoD) have  "weighed-in now," there has not                                                               
been concrete  federal action  or investment.   Mr.  Fuhs closed,                                                               
saying the  Arctic is  a high-risk  area and  a U.S.  presence is                                                               
needed to  ensure actions  taken there are  right each  and every                                                               
time.   He thanked Representative  Herron for his  leadership and                                                               
urged  for  the passage  of  legislation  on the  development  of                                                               
Arctic infrastructure.                                                                                                          
                                                                                                                                
12:18:02 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HERRON  added that  the Bering  Strait is  a sieve                                                               
and pressure from  the warm water going north and  the cold water                                                               
going south brings  the current to Alaska's  coastline from above                                                               
or below the strait, making Alaska a victim by its geography.                                                                   
                                                                                                                                
CHAIR HUGHES observed that Russia is  ahead of the U.S. in Arctic                                                               
activity and  asked whether Russia  is taking liability  for [the                                                               
Arctic's] protection.                                                                                                           
                                                                                                                                
MR.  FUHS  said  no.    He recalled  at  a  recent  international                                                               
conference in  Norway the chain  of liability was  discussed, but                                                               
the answer remains  unknown.  He expressed his  hope that working                                                               
with the Russians on a local  level may be effective, as was done                                                               
in the resolution  of the Barents Sea dispute  between Russia and                                                               
Norway.                                                                                                                         
                                                                                                                                
CHAIR HUGHES asked  whether the Arctic Council is  the best venue                                                               
for working on an agreement.                                                                                                    
                                                                                                                                
MR.  FUHS  acknowledged  that  at  some  of  the  Arctic  Council                                                               
meetings  the Russians  seemed  interested  in establishing  real                                                               
criteria and policies.  Part of  the problem is that the U.S. has                                                               
been a  defender of  worldwide innocent  passage because  it does                                                               
not want  any restrictions on  its vessels.  Therefore,  the U.S.                                                               
has   little   ability   to  regulate   vessels   transiting   in                                                               
international trade because  of the U.S. Department  of State and                                                               
DoD policies.   However,  if following  these policies,  Mr. Fuhs                                                               
warned the federal government needs  to provide assets to protect                                                               
its coastline such as icebreakers,  a deep-water Arctic port, and                                                               
clean-up   facilities.      He  opined   Alaska's   Congressional                                                               
Delegation  does  not  have sufficient  "traction"  to  influence                                                               
federal policy.                                                                                                                 
                                                                                                                                
REPRESENTATIVE HERRON  advised the Barents Regional  [Council] is                                                               
a  good  model,  as  is the  Pacific  Northwest  Economic  Region                                                               
(PNWER) Arctic  Caucus.   He  advised that Alaska needs  to reach                                                               
out  to Canada  and  Russia  in a  grassroots  effort to  develop                                                               
subnational  agreements  that  are  then  presented  to  national                                                               
governments.    There will  be  more  success with  multinational                                                               
negotiations if subnational governments  have worked out regional                                                               
projects  in  subnational  jurisdictions;  for  example,  Alaska,                                                               
Yukon,  and Northwest  Territories  have the  Beaufort  Sea as  a                                                               
common denominator.                                                                                                             
                                                                                                                                
12:23:25 PM                                                                                                                   
                                                                                                                                
MR. FUHS  related the Exchange  approached the  Canadian national                                                               
government  and  offered to  install  receiving  stations in  two                                                               
villages and share  the resulting information, but  the offer was                                                               
refused  pending  a  new  Canadian  administration.    He  opined                                                               
international politics  interfered, even  in the issue  of marine                                                               
domain   awareness;  however,   a  commercial   path  using   the                                                               
protections required by insurance companies may force the issue.                                                                
                                                                                                                                
REPRESENTATIVE  PRUITT asked  for the  impact the  proposed canal                                                               
through Nicaragua -  funded by China - will have  on the shipping                                                               
traffic  through NWP,  especially  if China  steers its  shipping                                                               
traffic through Nicaragua because of its investment therein.                                                                    
                                                                                                                                
MR. FUHS said he met  with Chinese delegates at the international                                                               
conference in  Tromso, Norway, and  they were very  aggressive on                                                               
NSR regardless of the Panama Canal.   The expansion of the Panama                                                               
Canal is  so larger vessels can  transit at the same  cost, which                                                               
allows individual  companies an advantage.   However, it  is more                                                               
of an advantage  to save shipping time, depending  on whether the                                                               
cargo is  perishable.   He said  the Chinese have  done a  lot of                                                               
economic analysis on shipping from China to Europe.                                                                             
                                                                                                                                
12:27:14 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  PRUITT  restated  his observation  about  China's                                                               
investment in Nicaragua.                                                                                                        
                                                                                                                                
MR.  FUHS referred  to the  map and  pointed out  that even  with                                                               
passage  through Nicaragua,  "that's a  lot of  distance to  make                                                               
up."                                                                                                                            
                                                                                                                                
REPRESENTATIVE TARR inquired  as to whether cost  overruns on the                                                               
Panama  Canal expansion  affect the  attractiveness of  the canal                                                               
route.                                                                                                                          
                                                                                                                                
MR. FUHS  explained that  the expansion of  the Panama  Canal has                                                               
about a  $1.6 billion cost overrun  which must be built  into its                                                               
economic  model.   Although larger  ships  will be  able to  pass                                                               
through, it will not be any cheaper.                                                                                            
                                                                                                                                
(Indisc.)                                                                                                                       
                                                                                                                                
12:28:38 PM                                                                                                                   
                                                                                                                                
CHAIR HUGHES noted the canal  in Nicaragua may have environmental                                                               
impacts.                                                                                                                        
                                                                                                                                
MR. FUHS  assured the committee  that the Exchange  will continue                                                               
monitoring, and  has the  diagnostic tools  to track  every ship.                                                               
Because of federal regulations  regarding non-tank vessels within                                                               
50  miles  of  shore,  the Exchange  has  established  additional                                                               
emergency  and  oil  spill  response  capability  to  provide  an                                                               
additional 1,000  vessels in response.   However,  about one-half                                                               
of the vessels in innocent passage  on the Great Circle Route are                                                               
still missed.   In addition,  the Exchange seeks to  partner with                                                               
other  oil  spill  response  organizations   in  order  to  cover                                                               
Alaska's  30,000 miles  of coastline.   Mr.  Fuhs cautioned  that                                                               
there  are limitations  on  response vessels  due  to policy  and                                                               
ownership issues that affect contingency  plans, and there remain                                                               
several overlapping jurisdictions on  spill response that need to                                                               
be addressed.   Oil spill response  coverage is funded by  a toll                                                               
paid  by each  vessel, except  for those  transiting in  innocent                                                               
passage.                                                                                                                        
                                                                                                                                
12:31:22 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee on  Economic Development,  Trade, and  Tourism                                                               
meeting was adjourned at [12:31] p.m.                                                                                           

Document Name Date/Time Subjects
JH Alaska House Feb20-2014.pdf HEDT 2/20/2014 11:15:00 AM
arctic encounter 2.pdf HEDT 2/20/2014 11:15:00 AM
Arctic policy