Legislature(2009 - 2010)CAPITOL 106
02/09/2010 05:15 PM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Port Mackenzie Railroad Extension | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL
TRADE AND TOURISM
February 9, 2010
5:19 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Chair
Representative Mark Neuman
Representative Chris Tuck
MEMBERS ABSENT
Representative Mike Chenault
Representative Nancy Dahlstrom
Representative Kyle Johansen
Representative Reggie Joule
Representative Harry Crawford
Representative Lindsey Holmes
OTHER LEGISLATORS PRESENT
Senator Linda Menard
Representative Bill Stoltze
COMMITTEE CALENDAR
PRESENTATION: PORT MACKENZIE RAILROAD EXTENSION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
RICK MYSTROM, Economic Development Advisor
Matanuska-Susitna Borough; Consultant
Alaska Railroad Corporation (ARR)
American Multiplex
Anchorage, Alaska
POSITION STATEMENT: Gave a presentation on the Rail Extension
Project.
PAT GAMBLE, President and CEO
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Assisted with the Rail Extension Project
presentation and answered questions.
JOHN DUFFY, Borough Manager
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Gave a presentation on the Southcentral
Rail Extension Project and discussed growth in the Matanuska-
Susitna Borough.
PAUL METZ PhD, DIC, P.G., Director
Mineral Industry Research Laboratory
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Gave a presentation titled "Mineral
Occurrences and Potential Sources of Freight for the Alaska
Railroad Extensions - Port MacKenzie to the Canadian Border."
STEVE COLT, Associate Professor of Economics
University of Alaska Anchorage (UAA) Institute of Social and
Economic Research (ISER)
Anchorage, Alaska
POSITION STATEMENT: Gave a presentation titled, "Benefit-Cost
Assessment of the Port MacKenzie Rail Extension."
JOE PERKINS
Perkins Consulting
Douglas, Alaska
POSITION STATEMENT: Testified in support of the Pail Extension
Project.
DAVE TALERICO, Mayor
Denali Borough
Healy, Alaska
POSITION STATEMENT: Testified in support of the Rail Extension
Project.
BOB LACKER, Vice President
Business Development
CH2MHILL
Anchorage, Alaska
POSITION STATEMENT: Testified in support of the Rail Extension
Project.
ACTION NARRATIVE
CHAIR JAY RAMRAS called the House Special Committee on Economic
Development, International Trade and Tourism meeting to order at
5:19 p.m. Present at the call to order was Chair Ramras.
Representatives Tuck and Neuman arrived as the meeting was in
progress. Also present were Senator Menard and Representative
Stoltze.
5:20:00 PM
^Presentation: Port MacKenzie Railroad Extension
Presentation: Port MacKenzie Railroad Extension
5:20:31 PM
REPRESENTATIVE RAMRAS announced the first order of business
would be a presentation on the Port MacKenzie Rail Extension
project by Rick Mystrom, the former mayor of Anchorage, and Pat
Gamble.
5:20:49 PM
RICK MYSTROM, Economic Development Advisor, Matanuska-Susitna
Borough; Consultant, Alaska Railroad Corporation (ARR), informed
the committee he is working on behalf of the Matanuska-Susitna
Borough and the Alaska Railroad Corporation (ARR), co-sponsors
of the Port MacKenzie Railroad Extension project. He prefaced
his remarks by calling attention to the three times in the past
30 years of Alaska's history when state government and the
legislature have had the need, or the opportunity, to help the
economy. Firstly, in 1981, after the loss of jobs from
completion of the Trans-Alaska Pipeline System (TAPS), the
legislature and the Hammond Administration created a program
that gave $1,000 per citizen per year, for three years, to each
community for capital projects. Secondly, in 1986, the economy
was down again, but the state pulled back to save money thus
creating a depression, and right now is the "third opportunity,
or the third time of need." He opined the economy is starting
to go down; however, that is the time for the state to invest in
infrastructure and projects that create jobs. Mr. Mystrom then
began his presentation on the rail extension project and its
economic benefits to Anchorage, Mat-Su, Denali Borough, and
Fairbanks; he called this area the "central Alaska regional
economy." Because this is the time of economic uncertainty
about the economy, energy availability and costs, gas line
construction, the future of TAPS, the Small Business
Administration contracting program for Native business, and
explorations in the Chukchi and Beaufort Seas, it is also the
time for the state to think about infrastructure investment.
Known for certain are two things: Alaska's economy is not fully
diversified, and there is a lack of transportation
infrastructure that is needed to promote economic development.
Mr. Mystrom advised that the major solution to the
transportation infrastructure problem is the rail extension from
Port MacKenzie to the mainline of the ARR.
5:26:20 PM
MR. MYSTROM displayed slide 4 of the presentation titled "Rail
Extension Project: Economic Benefits to the Central Alaska
Regional Economy," that was a map of the three options for a
rail extension from Port MacKenzie to the mainline under
consideration by the U.S. Department of Transportation Surface
Transportation Board. The three options are: a line passing
near Big Lake; one of two lines to Houston; or a line to Willow.
A decision from the transportation board is due in March.
5:27:34 PM
REPRESENTATIVE STOLTZE asked which option was best.
5:27:51 PM
MR. MYSTOM opined the Houston option was best; however the
federal government will make the choice based on environmental
issues. He then itemized what the rail extension would mean to
the regional economy: (1) opens up the Interior to resource
development; (2) facilitates the development of a world class
limestone deposit in Livengood north of Fairbanks; (3)
facilitates the development of a cement production facility near
Fairbanks; (4) opens up a development corridor along the
Railbelt to the exploration and extraction of minerals; (5)
improves the transportation of lower-cost fuel to Interior and
Southwest Alaska; (6) improves the competitiveness of Alaska
coal and other aggregate minerals; (7) reduces transportation
and staging cost for construction of the gas pipeline; (8)
increases employment in the Mat-Su, Denali, and Fairbanks North
Star Boroughs, and Anchorage. Mr. Mystrom advised that the rail
extension will have the aforementioned impacts because it is
working together with Port MacKenzie. He explained that Port
MacKenzie is a bulk commodities port, not a consumer commodities
port like the Port of Anchorage; therefore, it complements,
instead of competing with, the Anchorage port because the
Anchorage port does not have sufficient space to stage aggregate
shipments. In fact, Port MacKenzie has 9,000 acres, or 14
square miles, of industrial zoned land that does not compete
with housing or commercial zoning. Slide 12 showed that Port
MacKenzie has a 60 foot mean low tide that can accommodate ships
that cannot get into the Port of Anchorage; furthermore, there
is no dredging required. In response to Representative Stoltze,
he estimated the dredging costs in Anchorage are $13 million per
year to the federal government.
5:32:31 PM
MR. MYSTROM advised although the Port of Anchorage will "always
be the most important port in Alaska," Port MacKenzie can handle
panamax vessels that traverse the Panama Canal, and capesize
vessels that are too big for the Panama Canal. In addition, the
port is designed to handle barges carrying bulk commodities such
as minerals, coal, and aggregate. Slide 15 displayed the
planned construction of the barge dock expansion area to be
completed this summer. Further work to accommodate tractor-
trailer truck loading and unloading is permitted and "ready-to-
go." Mr. Mystrom asked Pat Gamble to describe the function of
the rail loop displayed on Slide 17.
5:34:14 PM
PAT GAMBLE, President and CEO, Alaska Railroad Corporation,
explained that when the railroad is hauling bulk cargo like
gravel, the preferential way to approach the cargo and depart
the area "is to come in head-in, load, and head back out. We
don't do that in the Port of Anchorage, we break the train up."
Moving the train in parts and pieces is very inefficient; in
fact, with a loop track like the one designed for Port
MacKenzie, the entire train can off-load almost simultaneously.
5:35:20 PM
MR. MYSTROM encouraged the committee to think about how cost-
effective it would be to transport all of the minerals and
products from the Mat-Su, Denali, and Fairbanks North Star
Boroughs south and back. Slide 18 displayed the potential pipe
storage and staging area available to the Port. He described
the indirect shipping procedure for pipe currently going to the
Liberty Mine on the North Slope, and the potential for cost
savings by shipping pipe from Japan directly to Port MacKenzie.
Slides 19-21 displayed various construction projects in the
surrounding area. Slide 22 displayed the M/V Susitna that is a
new ice-breaking ferry currently under construction in
Ketchikan. He said the ferry will be christened in March and
in-service by April of 2011.
5:38:19 PM
REPRESENTATIVE RAMRAS announced the upcoming hearing with Alaska
Ship & Drydock, Inc. He described various aspects of the M/V
Susitna.
5:38:44 PM
REPRESENTATIVE STOLTZE expressed his trepidation over the
management of the ferry.
5:39:27 PM
MR. MYSTROM displayed slide 28 that showed the ferry route from
Kenai to Anchorage, Port MacKenzie, and Tyonek. Slide 29
displayed the recently constructed ferry terminal at Port
MacKenzie. Slide 33 displayed the estimated number of jobs that
would be created by the project: 3,000 construction related jobs
from 2010-2013; 500 Port MacKenzie construction related jobs
from 2010-2013; 4,000 private sector mining jobs along the rail
line; 3,500 industrial development jobs in Port MacKenzie. The
job estimates were provided by HDR, Inc. and the UAA Institute
for Social and Economic Research (ISER). Mr. Mystrom turned to
the status of the rail extension project and said that $10
million has been spent on the environmental impact study that
will be available in March. Presently, $17 million is being
spent on the construction of the loop; however, $57 million is
now needed from the state to keep the project going. Finally,
completion of the project will cost an additional $175 million,
for a total of $225 million.
5:41:56 PM
REPRESENTATIVE RAMRAS asked Representative Stoltze in his
capacity as a Co-Chair of the House Finance Committee, "What
could be more important to this region than including in the
state's capital budget, $57 million for this project?"
5:42:19 PM
REPRESENTATIVE STOLTZE suggested the administration should be
asked why this project was not included in the base of the
capital budget. He opined this project is unique, would
diversify the Mat-Su economy, and would tie the economic units
of the region together; in fact, support for this project even
comes from communities outside the region. He has heard that
the railroad sometimes has a loss of revenue, but that is the
only "negative." Representative Stoltze said he was "baffled"
that this project was excluded from the governor's capital
budget as the budget did include projects with less statewide
impact.
5:43:58 PM
REPRESENTATIVE RAMRAS asked Representative Neuman to address the
opportunities for resource development in the area.
5:44:14 PM
REPRESENTATIVE NEUMAN said the resource development
opportunities go to the export of coal and other minerals. The
expansion of the port itself could include gas-to-liquids
facilities and tank farms to help distribute Alaska resources
around the world. Port MacKenzie is a key component. He said
he would compare the cost of this project with other programs
that are spending money on capital projects, but the highest
priority is for capital projects that create further job
opportunities for Alaska.
5:45:52 PM
SENATOR MENARD asked whether this presentation has been brought
forward to the governor; actually, others may not be aware of
"how far this project has moved along."
5:46:45 PM
MR. MYSTROM advised the governor had seen the first stages of
the presentation. He said the governor had no objection to the
project; however, the capital budget was already going to the
legislature.
5:47:41 PM
REPRESENTATIVE STOLTZE observed the governor has suggested a
capacity of $100 million worth of add-ons from the legislature
and this project would be "a 60 percent bite for just the Mat-
Su."
5:47:48 PM
MR. MYSTROM acknowledged it is difficult to explain to someone
outside the region why it is best for this amount of money to go
to one region. He compared spending $225 million on this
project to an equal amount put in the Constitutional Budget
Reserve (CBR); the money put in this project could create 3,500
jobs beginning right away, but the same amount in the CBR "might
get an extra job and a half for an account ... money manager in
New York." He then asked, "Which is best for Alaska?"
5:49:26 PM
SENATOR MENARD encouraged the presenter to make this argument
before the governor.
5:50:00 PM
REPRESENTATIVE RAMRAS suggested that the presentation should be
put on the calendar again in early April when the final
decisions are being made.
5:51:24 PM
MR. GAMBLE turned to the subject of the operational cost of the
project. He stressed that once the track is built, unlike a
road, the state does not have to maintain it as ARR crews do the
maintenance on the infrastructure. The ARR has compared the
cost of a train going to Seward with one going to Port MacKenzie
with a specific load, but it did not include the analysis of the
volumes designed to move bulk minerals to large ships. These
products are purchased in bulk and "when you start adding that
bulk up, and the number of trains, and the cycle time
improvement that you get ... you're starting to talk some real
money." This would enable the railroad to turn that profit back
in as capital investment; in fact, the mission of the railroad
is economic development and he gave examples of capital
improvements in which the railroad has invested millions of
dollars. Mr. Gamble imagined the state and legislature would
look at this worthwhile project not as an expense, but as a
super-investment to get the kind of customers and business that
the state government wants.
5:53:45 PM
REPRESENTATIVE STOLTZE expressed his belief that opening this
area is also a benefit for other regions of the state.
5:54:57 PM
REPRESENTATIVE RAMRAS observed that the transportation committee
and the full Chamber of Commerce in Fairbanks have endorsed the
rail extension. He then asked Mr. Gamble for the impact on the
rail extension if the port is not completed.
5:55:38 PM
MR. GAMBLE opined this is an opportunity to design the area for
its potential customers and customize the approach, dock, and
off-load capability for handling Alaska's mineral products. He
remarked:
Driving down to the edge of the bluff and then not
being able to deliver it to that largest ship that you
saw ... wouldn't work.... It's a system, and that
part of the system being incomplete would ... be
problematic. You would still be able to move things,
but at very small volumes, and not at anywhere near
the potential."
5:57:53 PM
MR. GAMBLE, in response to Chair Ramras, assured the committee
that growing the port can improve Alaska's connection to the
rest of the Pacific Rim; however, when the port is marketed to
customers, it must be ready to produce huge volumes of Interior
resources for a foreign customer.
5:59:06 PM
JOHN DUFFY, Borough Manager, Matanuska-Susitna Borough,
displayed a map that illustrated the location of Port MacKenzie
in the Mat-Su Borough. He opined that although the Mat-Su
Borough covers 25,000 square miles, Anchorage and Mat-Su are in
one regional economy which is connected to the Interior. Mr.
Duffy informed the committee that the Mat-Su Borough is
exceeding forecasted high growth rates and displayed slides from
a presentation titled "Southcentral Rail [Extension] Project,"
that showed the changes brought about by adding transportation
infrastructure to various areas over a 20-year period. The
growth rate in the borough has been about 4 percent for the last
10 to 15 years, and is at 2.5 percent to 3 percent today. He
predicted that the population will double by 2019 and the
borough needs to have economic opportunities for everybody. Mr.
Duffy displayed slides of new schools and other capital projects
in the borough. In response to Senator Menard, he confirmed
that the schools shown are the first Leadership in Energy and
Environmental Design (LEED) high school and middle school in the
state, and both were built ahead of schedule and under budget.
6:02:59 PM
REPRESENTATIVE RAMRAS asked for the number of construction jobs
in the area and what percentage are local hire.
6:03:19 PM
MR. DUFFY said there are approximately 325 jobs and there is 98
percent local employment.
SENATOR MENARD expressed her appreciation for [Neeser
Construction, Inc.].
6:03:48 PM
REPRESENTATIVE RAMRAS agreed.
6:04:09 PM
MR. DUFFY then turned attention to the Southcentral Rail
Extension and explained that the rail extension will "work"
because it is connecting to the northern-most deep-draft dock in
North America. It is also the only place in Alaska with room
for a 100 car rail loop adjacent to tidewater deep enough for
capesize vessels. To expand on the previous presentation, he
noted that the land is zoned for commercial and industrial
development and the borough owns title to the tidelands.
Furthermore, the barge dock expansion to the deep-draft dock is
fully permitted and will be built with economic stimulus funds
beginning in March and completed in October; in fact, the dock
will operate year-around and ice is not a problem. Mr. Duffy
turned to the subject of the M/V Susitna and reminded the
committee that it was the Mat-Su Borough, one of the partners
building the ship along with the Office of Naval Research and
[Alaska Ship & Drydock], that required that the ferry was built
in Alaska. He displayed slides that showed the operation of the
car barge and said when the car barge is down, the vessel has a
draft of four feet which allows it to load on the beach. When
the car barge is up, the vessel operates as a catamaran and
travels at a speed of 35 knots. The M/V Susitna is the first
ice-breaking catamaran in the world. Mr. Duffy continued to the
discussion of the Southcentral Rail Extension and displayed a
slide that showed the Environmental Impact Statement (EIS)
corridors and repeated several slides that were shown earlier.
He pointed out the construction of the rail loop is in progress
because it is outside the boundaries of the EIS. Additional
slides displayed the borough's visions of off-loading coal from
a train to ships, and loading cement for export.
6:09:26 PM
REPRESENTATIVE STOLTZE asked for a description of how the cost
of cement can change the economics of construction.
6:10:07 PM
MR. DUFFY affirmed that cement has been imported into Port
MacKenzie from China and that has lowered the price of cement in
the market in Southcentral by "several million dollars."
6:10:30 PM
REPRESENTATIVE STOLTZE related some of the history of the
funding and support for the rail extension.
6:11:57 PM
MR. DUFFY continued to say that the rail extension also has
national security significance because the large lay-out areas
allow military equipment to be loaded onto ships very quickly
without lightering. He reviewed other benefits of the project:
$533 million in transportation savings to the state over 20
years; a benefit cost ratio of 1.9:1; benefits to the state from
new mines; and $6.3 billion in state revenue. Mr. Duffy said
the project is an answer to the dwindling oil fields on the
North Slope.
6:13:18 PM
REPRESENTATIVE RAMRAS asked for details on the estimated state
revenue and gross metal value.
6:13:43 PM
MR. DUFFY explained that the gross metal value is estimated over
a 30-year period and the state revenue estimate is based on
projected royalties, corporate income taxes, permit fees, and
permanent jobs. In response to Chair Ramras, he agreed that
this is the foundation necessary to build communities.
Additional benefits include: cost savings on the construction
of the natural gas pipeline and the benefit of $61 million to
$737 million per year for 100 years from the development of
Interior resources. Turning to the subject of rail project
scheduling, he said the project is almost complete with Phase 2,
and is need of $57 million to continue on with Phase 3. Mr.
Duffy concluded his presentation by noting that 2013 remains the
scheduled completion date for the project.
6:15:52 PM
REPRESENTATIVE RAMRAS praised the worthiness of the project.
6:16:03 PM
SENATOR MENARD thanked the presenter.
6:16:55 PM
REPRESENTATIVE TUCK observed that the two cheapest means of
transportation worldwide are water and rail. In fact, the
railroad is the veins and vessels of the U.S. economic system
and part of the reason the U.S. is a superpower. He opined that
Alaska needs to benefit from its resources; however, his
experience on the airport planning commission revealed that the
Ted Stevens Anchorage International Airport is out of room for
air freight, and expansion to Port MacKenzie for water
transportation and rail would complete the transportation
systems of water, rail, and air. Representative Tuck expressed
his enthusiasm for the project.
6:19:55 PM
PAUL METZ PhD, DIC, P.G., Director, Mineral Industry Research
Laboratory, University of Alaska Fairbanks, informed the
committee he was the principal investigator on the feasibility
studies for the rail extension from Eielson to Delta Junction,
and for the extension of the ARR to the Canadian rail system and
the contiguous states. Dr. Metz said he would emphasize two
points; an overview of how the mineral freight forecasts were
developed, and that this project is part of a large statewide
system and is not "simply a Mat-Su Borough project." An
examination of the extension must first determine what the
railroad will haul. Railroads carry heavy freight, minerals,
concentrates, grains, and heavy machinery, and Alaska has
enormous mineral and energy resources with the potential to
supply much of the mineral and energy needs of the U.S. and the
Pacific Rim. The vision of the rail extension is to tie
Fairbanks with the industrial center of North America; however,
to provide that system ARR must connect efficiently with the
deep water port at Port MacKenzie.
6:23:41 PM
DR. METZ presented slide 4 from a presentation titled "Mineral
Occurrences and Potential Sources of Freight for the Alaska
Railroad Extensions-Port MacKenzie to the Canadian Border," that
indicated every American born needs 3.7 million pounds of
minerals, metals, and fuels in their lifetime. He observed that
the primary benefit of resource development is the resources
consumed for survival; the secondary benefit is revenue.
Regarding the freight estimates on the rail connection from
Point MacKenzie to the ARR mainline and on through to the
Canadian border, he stated that the study is based on data that
has been compiled by the U.S. Geological Survey (USGS) and the
Department of Natural Resources (DNR) Division of Geological &
Geophysical Surveys. Furthermore, mineral deposit models used
for the freight forecasts are developed by the USGS with data
compiled from mineral occurrences worldwide. Mineral deposit
types were then examined for their economic feasibility in
Alaska under current price levels and the cost of production.
The USGS database includes about 7,500 mineral occurrences in
Alaska and a similar number in Yukon and British Columbia along
the proposed rail route. Dr. Metz opined that some of the
aforementioned resources would go to tidewater at Port
MacKenzie, to tidewater at Skagway, or to Chicago. The
discussion of mineral sources must include quality and quantity;
in fact, quality and quantity determine the economics, and the
price of production. Except for precious metals, the big cost
of production for most metals is transportation. Products
produced from mines are "low unit value products" that cannot be
hauled on trucks but have to go on rail to ships and then to
market as quickly as possible. For example, he displayed slides
7 and 8 that were data curves for the relationships of the
quality of resource for molybdenum deposits similar to the
molybdenum, copper, and gold deposits found at the proposed
Pebble Mine project. Dr. Metz stated that his report examined
the relationships between quantity and quality and looked at the
probabilities of the mineral occurrences being economic at
current price levels and under existing cost conditions. Slide
10 displayed the various cost parameters such as mine capital
and operating cost, infrastructure cost, and revenue estimates
based on a 10 percent rate of return on capital.
6:28:35 PM
REPRESENTATIVE STOLTZE asked whether the mineral occurrences are
located within reasonable distances from the proposed rail
corridor.
6:28:53 PM
DR. METZ stated that the occurrences are within a 100 mile wide
corridor of the proposed route, so some are distant. For
example, the Fort Knox deposit is right on the road system and
near a source of power. The Pogo Mine is further away from a
source of power, but it is a very high grade deposit; thus this
combination of quality and quantity of ore determines the
economics. He displayed slide 11 that indicated 887 known
mineral occurrences found along the proposed 100 mile corridor
between Port MacKenzie and the Canadian border. He opined that
because the report forecasts are made on the probability of
known occurrences, they are conservative.
6:30:54 PM
REPRESENTATIVE RAMRAS passed the gavel to Senator Menard.
6:31:10 PM
DR. METZ said the known occurrences in the corridor include
almost all of the mineral commodities consumed in the nation.
He pointed out the price data displayed on slide 15 is complied
as of January 2007; actually, price levels today average 20
percent higher. He anticipated that prices will continue to
rise with the rise of the economies of China and India, "way
beyond the price levels that we saw over the last several
years."
SENATOR MENARD returned the gavel to Chair Ramras.
6:33:18 PM
DR. METZ displayed slide 17 and stressed that his report also
used very conservative estimates of probability for the
development of known mineral occurrences. Slide 18 showed that
the expected tonnage at 50 percentile tonnage and grade is
11,000,000 tons per year for 100 years, and the expected tonnage
at 90 percentile tonnage and grade is 26,000,000 tons per year
for 100 years. He added that the expected gross metal value of
each is related to the contribution of resource development to
communities and to the state. For example, slide 19 showed that
the economic benefit of the Fort Knox Mine, in salaries,
supplies, secondary income effects, and taxes, was estimated to
be $100 million per year to the Fairbanks North Star Borough in
1999. Furthermore, over its 12-year expected life span, the
mine is returning to Fairbanks its entire gross metal value.
Dr. Metz concluded that his 2007 estimate for the gross metal
value of resource developments along the proposed rail route was
about $83 billion.
6:35:46 PM
CHAIR RAMRAS asked Dr. Metz to offer his presentation to the
resource committees of both legislative bodies, and highlighted
the statistics that indicate a 100 percent return on the value
of minerals.
6:36:58 PM
REPRESENTATIVE STOLTZE encouraged efforts to get information
from the presentation to the governor or his staff.
6:38:11 PM
STEVE COLT, Associate Professor of Economics, University of
Alaska Anchorage (UAA) Institute of Social and Economic Research
(ISER), emphasized that one of the main points of today's
presentations is that Alaska has an integrated regional economy
extending from throughout Southcentral, the Interior, and up to
Fairbanks. Dr. Colt pointed out one interesting benefit that
has not been presented previously is the estimation of the
reduction of the traffic in the Palmer Wasilla corridor. In
fact, 22,000 train crossings at Pittman Road and other roads
could be avoided by the extension, thereby saving motorists up
to 64,000 vehicle-hours of waiting time between now and 2061.
He reviewed other transportation benefits of the rail extension
to Port MacKenzie. Slide ES-2 from the presentation titled
"Benefit-Cost Assessment of the Port MacKenzie Rail Extension,"
revealed the diversity of the sources of the transportation
benefits, showing that the savings come not only from the
shipping of the gas pipeline pipe, but from savings on the
shipping of other materials. Dr. Colt said another point that
has not yet been emphasized is the increase in jobs from the
"build-out" of the industrial land at Port MacKenzie which, with
the ferry connection, allows Anchorage to share in the benefit
of jobs from that development.
6:43:46 PM
DR. COLT confirmed that the estimates for royalties, taxes, and
mining license fees are from Dr. Metz's detailed mine models,
including what would go to the state under existing statutory
formulas. He opined a great deal of work was done to get the
number "accurate and not be leading anybody on."
6:44:24 PM
CHAIR RAMRAS pointed out that the completion of the project in
2056 would almost coincide with Alaska's centennial.
6:45:18 PM
DR. COLT expressed his understanding that the analysis is cut
off at 2056 because that is the time the three mines examined
may cease operations. He then turned to the subject of the
location of the jobs resulting from the development of three
large mines and a cement and limestone operation. During the
initial development there would be billions of dollars going
into the economy and Dr. Colt's task was to determine where
those dollars would go, particularly in the Anchorage economy.
He pointed out that the jobs, not necessarily in Anchorage, but
likely held by Anchorage residents, would accrue to almost all
sectors of the economy, including direct jobs in mining, and
indirect jobs resulting from purchases of goods and services to
support the mining operations. Over time, the estimated number
of jobs grows to over 2,000 held by Anchorage residents;
moreover, many of the indirect jobs are in good paying sectors
such as information technology, law, banking, and other high
quality jobs that are associated with developing and running a
major world-class mineral deposit.
6:50:50 PM
JOE PERKINS informed the committee he is a former commissioner
of the Department of Transportation & Public Facilities (DOT&PF)
during the Knowles' Administration and is presently assisting
the Mat-Su Borough with the development of the rail extension
project. He described his early experience in Alaska and opined
that more than any other transportation capital project, the
construction of the George Parks Highway (Parks Highway)
contributed immensely to the economy of the Railbelt and the
state. Since that time, other transportation projects have had
an impact on local and regional economies, but not statewide.
He then spoke of the need to diversify the economy of the state
and noted that little has been done in this regard. Mr. Perkins
stated that economic development is dependent on a
transportation infrastructure being in place to support that
development. For example, a major cost to the Red Dog Mine is
transportation. He said the needed infrastructure in Alaska is
not in place to support economic development and to diversify
the economy, create jobs, and enhance economic development
opportunities, the state must participate in the process by
providing infrastructure to support development, particularly
resource development. A project that will provide great future
economic benefits is the rail extension from the ARR mainline to
Port MacKenzie. This extension would solve the economic
transportation problem and assist in resource development
throughout the Railbelt. Funded by legislative appropriations
totaling $27.5 million, the ARR and the Mat-Su Borough have
cooperated on this project for three years. Mr. Perkins listed
the accomplishments of the project to this date and noted that
if the funding request is granted, a construction contract for
the first ten miles of the extension could be bid late this
summer, and the design for the rest of the route could be
completed. Mr. Perkins summarized that the development of Port
MacKenzie would provide a large scale economic benefit to all of
Alaska; therefore, the state should make the funding available,
because as the opening of the Parks Highway supported the
construction of TAPS, the rail extension would support the
construction of a gas pipeline.
6:58:56 PM
REPRESENTATIVE STOLTZE expressed his appreciation to Mr. Perkins
for the work he has done for Alaska and the Mat-Su Borough.
7:00:25 PM
REPRESENTATIVE TUCK asked how former Governor Hickle's plan to
build a railroad to Russia would affect the economy of Alaska.
7:01:07 PM
MR. PERKINS observed a railroad would be good to have; however,
crossing the terrain would be very difficult.
7:01:23 PM
DAVE TALERICO, Mayor, Denali Borough, expressed his strong
support for the rail extension to Port MacKenzie. He opined the
project is one of the most important major long-term economic
benefits to pursue for the Mat-Su Borough, the Denali Borough,
all of the communities in the Interior, and the state. The
region's bulk natural resource development has an "incredible
future for us" and is important for the economy and the future.
He said he was calling from Healy and if the rail extension to
Port MacKenzie is completed, Healy would be about 225 miles away
from tidewater, about 253 miles away from Anchorage, and about
377 miles away from Seward. Mr. Talerico recalled his visit to
Port MacKenzie and spoke of the opportunities to move coal,
timber, gravel, limestone, oil, and gas that will open up the
Pacific Rim and serve Alaskan coastal communities as well. He
expressed his excitement at the potential for long-term, good
jobs for residents and was particularly interested in the
discussion about cement. He related that in 2008, the U.S.
imported more than 11 million metric tons of cement. On a
national scale, it is important for Alaska to provide products
for North America rather than imports from overseas. In
conclusion, he stated that the Denali Borough Assembly passed a
resolution in support of the project; in fact, this project
ranks in the top three of the infrastructure projects that
should be done.
7:05:01 PM
BOB LACKER, Vice President, Business Development, CH2MHILL,
informed the committee that the rail extension is of interest to
CH2MHILL because they are modular fabricators for large oil and
gas operations on the North Slope. CH2MHILL also builds modules
for mining projects around the state, most notably at the Red
Dog Mine where it built and installed nearly all of the modules.
Mr. Lacker explained that the fabrication shop in Anchorage
produces "truckable" modules that are between 20-115 tons and
that could be built at Port MacKenzie since the shortage of land
and high prices make Anchorage "a tougher place to do business."
He noted that as his company searches the state for locations to
build modules and service the oil industry, the availability of
labor eliminates possible locations such as Seward, Valdez, and
Kenai; however, Mat-Su and Anchorage are areas that could
provide the necessary labor. He said his company sees Port
MacKenzie as the only possible solution to a vigorous module
fabrication business for CH2MHILL as it could move modules to
the north and ship materials from Fairbanks; in fact, the rail
spur is the last piece missing from the infrastructure at Port
MacKenzie. Mr. Lacker called the project a tipping point for
companies that have current opportunities arising in the next 36
months.
7:09:39 PM
CHAIR RAMRAS encouraged members of the committee and other
legislators to continue reach out to other committees so these
presentations can get a second and third hearing. He also
encouraged the presenters to contact other committee chairs.
7:11:36 PM
SENATOR MENARD gave credit to Jody Simpson who was in attendance
representing Senator Charlie Huggins.
7:12:00 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, International Trade
and Tourism meeting was adjourned at 7:12 p.m.
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