Legislature(2013 - 2014)BARNES 124
02/25/2014 11:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Matanuska-susitna Borough | |
| 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, TRADE, AND
TOURISM
February 25, 2014
11:17 a.m.
MEMBERS PRESENT
Representative Shelley Hughes, Chair
Representative Lynn Gattis
Representative Bob Herron
Representative Pete Higgins
Representative Lance Pruitt
Representative Geran Tarr
MEMBERS ABSENT
Representative Craig Johnson
Representative Kurt Olson
Representative Harriet Drummond
COMMITTEE CALENDAR
PRESENTATION: MATANUSKA-SUSITNA BOROUGH
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LARRY DEVILBISS, Mayor
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Introduced a presentation on Point
MacKenzie and the Matanuska-Susitna Borough.
DONALD DYER, Director
Economic Development
Matanuska-Susitna Borough
Palmer, Alaska
POSITION STATEMENT: Provided a presentation on Point MacKenzie
and the Matanuska-Susitna Borough.
ACTION NARRATIVE
11:17:43 AM
CHAIR SHELLEY HUGHES called the House Special Committee on
Economic Development, Trade, and Tourism meeting to order at
11:17 a.m. Representatives Herron, Gattis, Higgins, and Hughes
were present at the call to order. Representatives Tarr and
Pruitt arrived as the meeting was in progress.
11:18:22 AM
^PRESENTATION: MATANUSKA-SUSITNA BOROUGH
PRESENTATION: MATANUSKA-SUSITNA BOROUGH
CHAIR HUGHES announced that the only order of business would be
a presentation by Don Dyer, Director, Economic Development, and
Larry Devilbiss, Mayor, Matanuska-Susitna Borough.
11:19:14 AM
LARRY DEVILBISS, Mayor, Matanuska-Susitna Borough, informed the
committee 2014 is the fiftieth anniversary of the Matanuska-
Susitna Borough (Mat-Su Borough). He said the following
presentation will reveal many new events underway at Point
MacKenzie and in the Mat-Su Borough.
11:20:28 AM
DONALD DYER, Director, Economic Development, Matanuska-Susitna
Borough, provided a PowerPoint presentation entitled; "Point
MacKenzie Enterprise Zone." He began with a quote from John
Schuetz, Principal, RSH Group, who said, "The Mat-Su Borough is
today what Orange County California was in the 1950's." He
reviewed the state's 2013 revenue sources, Alaska's dependence
on oil production and federal spending, and the decline of oil
production in Alaska. In general, the U.S. should be energy
independent by 2020; however, declining world demand will push
oil prices down. California has overtaken Alaska in oil
production, and other threats to Alaska's prosperity include
federal spending cuts and the downward pressure on the value of
the U.S. dollar. The danger for Alaska from the devaluation of
the dollar is that leaving Alaska's dollars sitting in the bank
will mean that when Alaska invests in its infrastructure, it
will pay a lot more, and therefore, the state should invest in
hard assets now. In addition, Mr. Dyer warned that interest
rates will rise.
11:24:53 AM
REPRESENTATIVE HIGGINS agreed with Mr. Dyer's lack of confidence
in the economy and asked for the time frame during which the
state should invest in infrastructure.
MR. DYER said, "The end of quantitative easing is being
scheduled now," which will lead to higher interest rates. The
devaluation of the dollar has been delayed because developing
economies and Europe had a debt crisis of their own which
weakened their currencies. The devaluation of the dollar began
in 2010-2011 with the possibility that oil prices would be re-
denominated in euros. In fact, others have predicted the rise
of the renminbi, which is the Chinese currency. Mr. Dyer
pointed out that regions of Alaska must unite and diversify
Alaska's economy away from oil and toward other sectors.
Alaska's first opportunity to do so is that customers desire the
products Alaska has to offer.
11:27:18 AM
A short video was shown.
11:28:10 AM
MR. DYER credited World Trade Center Alaska (WTCAK) for helping
the Mat-Su Borough contact potential overseas customers and
investors. He urged for changes to the Alaska economic model
from having Alaska as the customer model, because 726,000
Alaskans comprise a customer base that is too small for many
industries. Instead, Alaska should "think like a country" and
focus on Asia as a customer. In fact, security for a million
Alaskans could come from supplying food or goods to 50 million
Asian consumers while reserving 2 percent for Alaskans.
Aberdeen Asset Management provided a map which illustrated the
location of the 4.2 billion people living in Asia, showing that
1.3 billion live in China and 1.2 billion live in India.
Another chart indicated that there will be very little growth of
the middle class - defined as those who have between $10 and
$100 per day of disposable income - in North America and Europe
from 2009 to 2030. There will be moderate growth during that
time period in South America and Africa; however, in developing
Asia, growth in the middle class will be from 500 million in
2009 to 1.7 billion in 2020, and to 3.2 billion in 2030. Mr.
Dyer advised the growth of the middle class is driving
consumerism in Asia. Furthermore, in China, 400 million people
will move from rural areas to urban areas in the next 10 years.
Economic growth in Emerging Asia is 6.7 percent [per year], in
China it is 7.8 percent, in India it is 4.9 percent, in the U.S.
it is 2.7 percent, and in the Eurozone, it is a decline of minus
0.4 percent. He recommended that the committee review a
presentation available on the internet entitled, "The Merits of
Investing in Asia," ["Asia by the Numbers" by Aberdeen Asset
Management].
11:32:27 AM
MR. DYER directed attention to a graph provided by WTCAK which
indicated that Alaska's total exports in 2012 were almost $5
billion, with exports to China at $1.3 billion, making China
Alaska's number one trading partner, followed by Japan and South
Korea.
REPRESENTATIVE TARR asked what product is most exported.
MR. DYER answered that seafood is the highest export, followed
by natural resources. In further response to Representative
Tarr, he said a very few value-added food products and some
value-added forestry products are exported.
REPRESENTATIVE TARR referred to the natural gas pipeline
proposal and inquired about manufacturing and marketing
opportunities should Alaska have a long-term, low-cost fuel
source.
11:34:02 AM
MR. DYER noted that exports to China have increased since 2000,
which indicates that Alaska can invest in abundance because
Asian consumers are going to drive the future economy of the
world, and the population in Asia will consume and purchase
products from Alaska. To expand Alaska's connection to world
markets, Anchorage will host the International Economic
Development Council Annual Conference in 2015; 1,300 members and
300 site selectors will be in attendance. This is a special
event that will benefit all of Alaska and planning is already
underway. In response to Chair Hughes, he said there will be
statewide participation in the conference; for example, site
selectors will tour from Southeast to Nome and Prudhoe Bay.
Also, the Mat-Su Borough and WTCAK have been sponsoring
International Trade Bootcamps to prepare businesses for
international trade opportunities. Mr. Dyer turned attention to
Point MacKenzie and explained that at this time there are four
important economic drivers in the Port MacKenzie area of the
Mat-Su Borough: Port MacKenzie; Port MacKenzie Rail Extension;
Knik Arm Bridge (KABATA); and the Alaska Stand Alone Pipeline
(ASAP) project. The Port MacKenzie area is 14 square miles with
staging areas and lease lots available for large projects. It
is located across from the Port of Anchorage. The Port
MacKenzie dock is large enough and deep enough to accept Panamax
vessels, which are the largest vessels in the world. The port
is self-scouring, meaning that no dredging is necessary. In
response to Chair Hughes, he noted that the JP Azure, the
largest ship ever docked in Upper Cook Inlet, could not have
docked in the Port of Anchorage. Even at extreme low tides,
Port MacKenzie maintains 65 feet of draft.
11:39:52 AM
REPRESENTATIVE TARR inquired as to whether the Port of Anchorage
will have sufficient draft for large vessels after the port
project is completed.
MR. DYER responded that the Port of Anchorage will always have a
sedimentation issue because of the flow of Knik Arm waters.
MAYOR DEVILBISS pointed out that the Port of Anchorage will
always be the state's "goods intake," and Port MacKenzie will
primarily be a bulk export location.
REPRESENTATIVE PRUITT stressed that the two ports are not in
competition, but complement each other.
11:41:08 AM
A short video was shown.
MR. DYER related that in 2012, 8,000 tons of scrap metal were
shipped to South Korea. The port has the ability to bring in
large cargo to support projects throughout the state, such as
bulk imports of logs and bags of cement. Another advantage of
the port is that there are big "lease lots" available. He
informed the committee that Phase 3, which will add more
capacity to the port, is in the permitting stage. He then
directed attention to the Port MacKenzie Rail Extension, the
purpose of which is to link the main Alaska Railroad Corporation
(ARRC) line to tidewater in order to bring goods in and
commodities out. The permitting processes are complete, except
for one pending legal challenge, and the goal is to have the
project finished and run trains to the port by the fall of 2016.
11:45:05 AM
A short video was shown.
MR. DYER assured the committee that during construction salmon
migration, hiking trails, and forestry issues were all
accommodated. He projected a slide of rail being laid at
Houston which is at the northern end of the project. The
request for funding this year is for $60 million, and for $41
million in 2016, which will finish the project in time to import
the pipe needed for the ASAP pipeline project. He advised that
the rail expansion project has broad support across Alaska
because business and municipalities understand the importance of
the flow of goods from the Interior.
11:47:50 AM
A short video was shown.
MR. DYER gave many examples of the material and equipment that
must be imported to support a growing number of projects in the
state including roads to resources in Western Alaska, the
Susitna-Watana Hydro project, and the proposed gas pipelines. A
study in 2008 indicated that the cost savings related to use of
the Port MacKenzie Rail Extension to support gas pipeline
construction is estimated to be from $122 million to $176
million. Furthermore, after the infrastructure in the
Interior is built, the extraction and export of natural
resources can begin. He returned to the land area of the port,
and noted that there will be a 100-car rail loop which will
enable a train of coal from Healy to unload and return in one
day. Several companies have made commitments to, or have shown
interest in, shipping freight to Port MacKenzie. The Mat-Su
Borough, WTCAK, and ARRC are working together to market the port
and the opportunities created by the port along the rail line.
Although controversial, KATABA is a boon to economic development
throughout the state and would benefit Anchorage specifically by
transporting over 20,870 people to Anchorage from the Mat-Su
Borough per day to work. There are also commuters coming to the
Goose Creek Correctional Center, and the potential for 5,000
more new jobs at Port MacKenzie. After KABATA, consumer access
to Anchorage from Knik-Fairview, Big Lake, Houston, and Willow
will improve.
11:54:54 AM
MAYOR DEVILBISS added that the above mentioned towns are in the
fastest growing region of the Mat-Su Borough.
11:55:28 AM
A short video was shown.
MR. DYER related that the next project is the Alaska Gasline
Development Corporation (AGDC) ASAP which would terminate at the
Fairbanks Natural Gas (FNG) liquefied natural gas (LNG)
processing facility. At this facility, trucks are loaded with
LNG to supply Fairbanks and other pipelines that are, or will
be, in operation to supply natural gas to the Mat-Su Borough,
Anchorage, and the Matanuska Electric Association, Inc. power
plant. Mr. Dyer further explained that ASAP extends from the
North Slope to the LNG plant, which is 12 miles north of Port
MacKenzie, and the proposal has generated interest from a
Japanese company, Resources Energy Inc. (REI) which has entered
into agreements with AGDC regarding building LNG facilities at
Port MacKenzie and on the Kenai Peninsula. So, Port MacKenzie
could support the imported materials for pipeline construction.
By the rail extension, materials could be transported north, and
KABATA would supply transportation for the workforce to support
the projects and the industry that would follow. He stressed
that the value of all of the aforementioned components, when in
place, would exceed the value of each individual project; in
fact, if the Mat-Su has natural gas, it has low-cost energy and
can create low-cost electricity. He cautioned that long supply
chains block industry in Alaska, and the transportation link by
rail and bridge will collapse the supply chains, and along with
low-cost energy, will allow for an entire economy to be
encapsulated within 400 miles. Other highlights of the Mat-Su
Borough economy include the Goose Creek Correctional Facility,
with 1,500 inmates and 371 jobs, and the Alsop Town Site.
12:01:16 PM
MAYOR DEVILBISS informed the committee the Alsop Town Site is
borough-owned land adjacent to the port. The plot is five
square miles and its development into the infrastructure needed
for the correctional facility workers will begin this summer.
In response to Chair Hughes, he said the unofficial name of the
townsite came from the access road named after an early
homesteader.
REPRESENTATIVE PRUITT asked for the vision of a townsite sited
so close to the prison.
MAYOR DEVILBISS stated that as the transportation infrastructure
is developed, the prison will not be the primary entrance into
the community. Also, the developers want to see two connected
floatplane lakes create a seaplane base.
REPRESENTATIVE GATTIS recalled her experience on a citizen's
advisory group prior to the construction of the prison, and
noted that prisons can become anchors for future growth. For
example, Hiland Mountain Correctional Center has not had the
impact that the community expected, and she opined there have
been good relationships with the correctional farm as well.
12:05:15 PM
REPRESENTATIVE TARR surmised the original homestead will be
developed into multi-use areas, and asked if the development
will remain part of the Mat-Su Borough.
MAYOR DEVILBISS said he was unsure. It is anticipated that the
townsite will become an incorporated town at some point.
However, the land now belongs to the Mat-Su Borough with private
land and old homesteads nearby.
REPRESENTATIVE PRUITT anticipated there will be interest in
individual residential housing after KABATA.
MAYOR DEVILBISS confirmed that there is a lot of privately owned
land in the area and speculators have been buying land on Burma
Road at the end of the KABATA project. He cautioned that to
prevent the area from "turning into a strip mall," the Mat-Su
Borough created the townsite for higher density development.
CHAIR HUGHES questioned whether passenger rail service from the
townsite to Fairbanks is a possibility.
12:08:36 PM
MAYOR DEVILBISS affirmed that the Mat-Su Borough is working with
ARRC to initiate transit service on the rail from Wasilla to
Anchorage, thus after the rail link is finished that will be an
option from the port.
MR. DYER pointed out the townsite will create housing for the
employees at the prison; in addition, there are development
plans for the land near the prison and the wastewater treatment
plant under construction. In response to Chair Hughes, he said
the development plans are the tomato project.
MAYOR DEVILBISS added that the townsite already has water and
sewer infrastructure ready to build.
MR. DYER urged the committee to tour the wastewater treatment
plant. He returned attention to the FNG pipeline from Beluga
which supplies natural gas to Fairbanks and its take-off
pipeline that currently supplies the Mat-Su Borough and
Anchorage, and to the future MEA power plant. Central Alaska
Energy will be building a tank farm at Port MacKenzie to supply
low-cost fuel to the Interior. This project is being funded by
a loan from the Alaska Industrial Development and Export
Authority (AIDEA).
MAYOR DEVILBISS mentioned that Central Alaska Energy will be
importing low-sulfur fuel, and therefore is not in competition
with the Flint Hills Resources refinery.
12:12:02 PM
MR. DYER returned to the presentation, and said Chugach Electric
power lines supply electricity from the power plant by Beluga,
and a large intertie project is planned from [Bradley Lake
Hydro] in Homer, passing through Port MacKenzie to the intertie
and to Fairbanks. Not widely known is the Arctic fiber optic
project being built by Quintillion Networks and partly funded by
Futaris, Inc., [a subsidiary of Calista Corporation]. The
project will bring fiber optic cable from Tokyo through the
Arctic to Europe; this important project will bring state-of-
the-art fiber to Alaska with take-off points along Alaska's
northern coast, and provide competitive-speed internet
connections. In response to Chair Hughes, he clarified that the
fiber will travel through the Port MacKenzie area on its way to
Anchorage. Other companies that have locations at Port
MacKenzie include WestPac Logistics LLC, which provides freight-
forwarding, and Alutiiq, which manufactures homes in its factory
at Port MacKenzie and barges or trucks them to remote areas.
MAYOR DEVILBISS, as an aside, stated that manufacturing has been
ongoing for ten years. He related that the Point MacKenzie area
also has an agriculture area, which is 15,000 acres set aside by
the state in the '80s. Most of the land is in production; in
fact, the only hay reserves in the state are there, and
transportation to Port MacKenzie will bring products closer to
markets.
12:15:52 PM
MR. DYER further explained that another important project is to
create a processing center for agricultural goods from
throughout Alaska which could then be shipped to markets in Asia
or transported to Anchorage for flights to Asia. He then
directed attention to the possibilities for value-added
industries, and described the process for mining copper,
stressing that the mineral's value to the state comes from the
extraction taxes on concentrates that leave Alaska; however,
when the ore progresses through processing steps until it
becomes a choke, or a semiconductor, the value increases 800,000
percent. The value of the copper ore when it is shipped from
Alaska is $950 per metric ton (MT), in addition to the
transportation and mining payrolls. Mining and shipping
concentrates overseas has been the model for Alaska, because the
state has been prevented from processing its raw materials by
its distance from materials, its distance from markets, high
energy costs, and a weak workforce due to a shortage of
industry. Improved access to natural gas and transportation
links will collapse the supply chains and reduce the cost of
energy so that Alaska can compete. Rail transportation will
shorten the distance to materials and markets, allowing Alaska
to retain its youth for a workforce and capitalizing on the fact
that Asian markets are 30 percent closer to Alaska than to the
U.S. West Coast. Mr. Dyer stated that 2,400 cargo aircraft per
month refuel at Ted Stevens Anchorage International Airport and
return to Asia mostly empty. This is an opportunity for
industry to save on shipping, as the peony growers are doing.
In addition, 4,000 ships transit through the Aleutian Islands
each year. Mr. Dyer then presented a scenario in which copper
concentrates are not shipped out but are smelted into ingots in
Alaska. This raises the value of the copper from $950 to $3,500
per metric ton (MT), in addition to creating jobs, industry, and
infrastructure. Further, if the copper is refined in Alaska,
the value increases to $6,520 per MT. If the refined copper is
made into wire, the value increases to $40,093 per MT. If the
wire is made into chokes, the value increases to $8,401,606 per
MT. The final step would be building circuit boards and
installing them into devices, which would bring high tech
industry to Alaska, creating jobs and changing lives.
12:26:28 PM
MR. DYER concluded that there are many products made from copper
such as wind turbines and cable, and copper is just one example
of the many minerals that are produced in Alaska. His hope is
that the presentation has shown what can be done at Port
MacKenzie and in the Port MacKenzie Enterprise Zone that is
critical to creating wealth and prosperity in Alaska.
12:29:19 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, Trade, and Tourism
meeting was adjourned at 12:29 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Point MacKenzie Enterprise Zone Legislature 20140221.pdf |
HEDT 2/25/2014 11:15:00 AM |