Legislature(2023 - 2024)BARNES 124
02/08/2024 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): the Alaska Railroad: Investing in Alaska's Future | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE TRANSPORTATION STANDING COMMITTEE
February 8, 2024
1:02 p.m.
MEMBERS PRESENT
Representative Kevin McCabe, Chair
Representative Sarah Vance, Vice Chair
Representative Tom McKay
Representative Jesse Sumner
Representative Louise Stutes
Representative Genevieve Mina
MEMBERS ABSENT
Representative Craig Johnson
COMMITTEE CALENDAR
PRESENTATION(S): THE ALASKA RAILROAD: INVESTING IN ALASKA'S
FUTURE
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
BILL O'LEARY, President & CEO
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled "The
Alaska Railroad: Investing in Alaska's Future."
MEGHAN CLEMENS, External Affairs Director
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint, titled "The
Alaska Railroad: Investing in Alaska's Future."
BRIAN LINDAMOOD, Vice President Engineering
Alaska Railroad Corporation
Anchorage, Alaska
POSITION STATEMENT: Answered questions during a PowerPoint,
titled "The Alaska Railroad: Investing in Alaska's Future."
ACTION NARRATIVE
1:02:32 PM
CHAIR KEVIN MCCABE called the House Transportation Standing
Committee meeting to order at 1:02 p.m. Representatives McKay,
Vance, Mina, and McCabe were present at the call to order.
Representatives Stutes and Sumner arrived as the meeting was in
progress.
^PRESENTATION(S): The Alaska Railroad: Investing in Alaska's
Future
PRESENTATION(S): The Alaska Railroad: Investing in Alaska's
Future
1:03:10 PM
CHAIR MCCABE announced that the only order of business would be
the Alaska Railroad: Investing in Alaska's Future presentation.
1:04:23 PM
BILL O'LEARY, President & CEO, Alaska Railroad Corporation,
provided a brief introduction to the PowerPoint, titled "The
Alaska Railroad: Investing in Alaska's Future" [hard copy
included in the committee packet].
1:04:40 PM
The committee took a brief at-ease at 1:04 p.m.
1:05:00 PM
MR. O'LEARY proceeded to slide 3, titled "Mission Statement,"
where he explained it boiled down to three words: safety,
service, and profitability. He said that is the basis of what
the Alaska Railroad Corporation (ARRC) does and what drives it.
1:06:13 PM
MR. O'LEARY moved to slide 4, titled "Quick Facts," which read
as follows [original punctuation provided]:
Organization (following State purchase)
• Independent corporation owned by State
• Managed by a seven-member board of directors
appointed by Governor
• Mandated to be self-sustaining, responsible for
financial and legal obligations
Operating Data
• 656 Total miles of track
• 748 Freight cars (owned & leased)
• 45 Passenger cars
• 51 Locomotives
Operating Statistics
• Half a million+ passengers
• 3.5 million tons of freight (2023)
Employees (January 2024)
• 540 full-time year-round employees
• 15% registered 'Veteran' Status
• 2/3 are members of 5 unions
MR. O'LEARY noted that the number of employees swells up to
approximately 800 during summer months.
1:09:12 PM
REPRESENTATIVE MINA asked if any of the summer season employees
came to Alaska on a visa, and if so, whether they are also part
of the union.
MR. O'LEARY replied that ARRC did not directly hire many through
visa programs, and the majority of the 600 to 800 summer
seasonal staff are members of one of the five unions on ARRC's
property.
1:10:43 PM
MR. O'LEARY moved to slide 5, titled "Strategic Goals," and
expounded on the 5 points featured on the slide. He stressed
that the number one priority boiled down to safety, and a
successful railroad could not be run without it. Slide 5 read
as follows [original punctuation provided]:
1. Build a Proactive Culture of Safety and Engagement
2. Expand Business by Growing and Diversifying Revenue
3. Improve Profitability by Optimizing Cost Structure
4. Balance Capital Program to Optimize Safety,
Revenue, and Efficiency
5. Enhance Economic Development, Stewardship and
Stakeholder Relations
1:12:19 PM
MEGHAN CLEMENS, External Affairs Director, Alaska Railroad
Corporation, continued the PowerPoint on slides 6 and 7, titled
"Safety," and provided a quick overview. She emphasized the
points on slide 7, which read as follows [original punctuation
provided]:
Build a proactive culture of safety at the Railroad:
• Continued implementation of Incident Free Culture
program
• Public safety awareness campaigns
• Participation in emergency response training
exercises with local agencies
1:13:53 PM
MS. CLEMENS moved to slide 8, titled "Financial," with the
subtitles "Expand Business by Growing and Diversifying Revenue,"
and "Improve Profitability by Optimizing Cost Structure." She
quickly proceeded to slide 9, "Freight Service," which read as
follows [original punctuation provided]:
• Largest business line for Alaska Railroad
• Provides Alaska businesses most cost-efficient and
environmentally sustainable way to move heavy freight
and bulk commodities
• ARRC operates freight docks in Seward and Whittier,
and work closely with Port of Alaska to haul goods to
Interior
• Interline barge service provides seamless connection
with Lower 48 rail network
• Supports North Slope development, Alaska's energy
sector, military bases, Port of Alaska, ADOT&PF,
construction industry
• Partnerships with trucking industry relieve trucks
on highways and spare drivers for other routes
1:16:40 PM
MS. CLEMENS proceeded to slide 10, titled "Freight Operations:
2011-2023," which showed a snapshot of types of rail-hauled
cargo by volume, in thousands of tons. She pointed out the bar
chart started higher in 2011, and in some cases, ARRC is looking
for ways to accommodate more demand which would be covered more
during following slides.
1:17:39 PM
MS. CLEMENS continued to slide 11, titled "Passenger Service,"
which she stated ARRC is most known for. The slide read as
follows [original punctuation provided]:
• ARRC 0perates year-round, regularly scheduled
passenger rail service
• Ambassador for Alaska through passenger sales,
marketing and media outreach
• Partners with tour operators, local hotels and
excursion vendors to bring passengers to Railbelt
communities and provide access to public lands
• Connects thousands of visitors between Anchorage
Airport Depot and cruise ports
• Operates the nation's last Flagstop train as vital
service to Alaskans living off-grid
• Keeps an estimated 8,000 buses off Alaskan highways
each summer
1:19:36 PM
MS. CLEMENS moved to slide 12, titled "Passenger Operations."
The slide showed a snapshot of the performance on the passenger
side, with a bar chart from 2012 to 2023. She noted the
dramatic dip during the COVID-19 pandemic but said passenger
operations was now back and stronger than ever.
1:20:19 PM
MS. CLEMENS moved to slide 13, titled "Real Estate," which read
as follows [original punctuation provided]:
• ARRC is a steward of some of Alaska's most visited
and visible lands
• Some prime ARRC lands have significant untapped
potential, which the corporation seeks to demonstrate
to developers and the public
• Areas with exciting mixed development opportunities
at present include: Anchorage's Ship Creek; Fairbanks
Chena Landing's; the Seward waterfront; and land
adjacent to the Seward Airport
• As Alaska grows, ARRC seeks to attract the kind of
developers and business partners that will continue to
improve our economy, our visitor industry and our
communities' quality of life
1:22:13 PM
MS. CLEMENS proceeded to slide 14, titled "Real Estate Revenue,"
which showed revenue in dollars from 2013 to 2022. The bar
chart focused on lease and permits; Seward freight dock; Seward
passenger dock; and Whitter freight dock. She pointed out that
the bulk was from lease and permits and added that 2022 was
driven by the return of cruising to the Seward passenger dock.
1:23:47 PM
MS. CLEMENS moved to slide 15, titled "Net Income and Revenue
Sources." The slide showed ARRC's net income over the past
decade, in millions of dollars. She noted that if there are
grant opportunities out there, ARRC is actively pursuing
opportunities to bring those dollars into the state as well as
to seek new efficiencies.
1:25:53 PM
CHAIR MCCABE paused for questions from committee members.
1:26:04 PM
REPRESENTATIVE STUTES asked whether tensions with Anchorage had
been resolved in reference to property issues.
MR. O'LEARY replied it was his understanding that it was an
issue between ARRC and homeowners adjacent to the rail in South
Anchorage. He said the board of directors decided it was not
going be resolved in a productive fashion; therefore, the board
elected to it being settled by the courts and in 2019, ARRC
prevailed on the disagreement.
REPRESENTATIVE STUTES appreciated the fact that ARRC had reached
out to homeowners to accommodate them in some way instead of
"running over them."
1:30:11 PM
REPRESENTATIVE VANCE referred to slide 10 and asked for a better
picture of why there was an increase in gravel in 2017.
MR. O'LEARY provided an example of O'Malley Drive [in
Anchorage], and further explained that gravel hauls are
difficult to predict year after year, and in this particular
case, O'Malley Drive was very competitive for ARRC to be
involved.
REPRESENTATIVE VANCE noticed the red bar [signifying "Other"]
increasing and asked what the "other" category was.
MS. CLEMENS responded that "other" would speak to ARRC's trailer
on flat car business, containers hauled to the Interior, and
capturing military moves.
1:32:36 PM
REPRESENTATIVE SUMNER asked about the Seward dock improvements
and whether ARRC is projecting an increase in lease revenue net
of debt payment, and if so, what the amount would be.
MR. O'LEARY said there would not be an increase directly in
lease revenue, and the current model is to permit the area for a
short period of time.
REPRESENTATIVE SUMNER asked whether ARRC would own the asset
upon completion of the project and whether the railroad
anticipates lease revenue.
MR. O'LEARY responded that it would be the same lease revenue,
and he added that ARRC anticipates more passengers leading to
more dock revenue.
1:34:15 PM
REPRESENTATIVE STUTES asked how many board members there are and
who appoints them.
MS. CLEMENS said there are seven board members, and they serve
at the pleasure of the governor.
1:34:36 PM
MR. O'LEARY re-emphasized the banner at the bottom of slide 15,
which read, "All ARRC income is invested in capital program:
maintain and improve infrastructure and operations," and he
stated that was a key aspect of the whole model. He proceeded
to slide 17, titled "Robust 5-Year Capital Investment Plan,"
which read as follows [original punctuation provided]:
• Supports railroad facilities, infrastructure,
community developments and interactions
• Will use internal forces, along with contractors and
suppliers
• Over $100 million for 2024; nearly half-billion
dollars invested over 5 years
• May add funding sources as competitive federal
grants, partnerships, and other financial
opportunities become available for large projects
• May add debt financing for needs such as
replacing vehicles, equipment and railcars
• Numbers in below table do not include Seward
investments discussed later (previously approved)
MR. O'LEARY pointed out that it is a tremendously capital-
intensive industry, not made easier that it is being done in
Alaska. The slide also featured a chart with funding sources
from 2024 through 2028, with the last column showing a
calculated five-year total. He said the railroad came over from
federal ownership and had not been maintained appropriately, and
the focus of ARRC became to make the railroad safe and efficient
done through smart capital investment.
1:38:21 PM
MR. O'LEARY moved on to slide 18, titled "Competitive Grants:
2018-2023," that listed successfully received grants, as well as
showing the grants not awarded. He continued to slide 19,
titled "Competitive Grants: 2024 Plan." He said with the
infrastructure bill that came out of Washington, DC, there are
now a number of programs and opportunities for ARRC to pursue.
1:42:30 PM
MR. O'LEARY moved to slide 20, titled "Capital Investments:
Bridge & Track," which read as follows [original punctuation
provided]:
10-Year Bridge Plan
• Replace or rehab 50+ bridges over next decade
• Accomplished by internal forces and contractors
• Nearly $40 million budget in 2024
• Recently awarded competitive grants: Federal-State
Partnership (Bridge 190.5, Willow) and INFRA (Bridge
G3.3, Fairbanks)
Track Rehab Program
• 45,000 ties replaced in 2023
• 190 track miles of ballast surfacing
• Shoulder & embankment fortification
• Nearly $20 million budget in 2024
Funding Sources:
• FTA formula funds
• CRISI STC grants
• Competitive grants • ARRC internal funds
• Debt
1:44:53 PM
MR. O'LEARY advanced to slide 21, titled "Locomotives and Flat
Cars," which read as follows [original punctuation provided]:
January 2024, the ARRC Board authorized a $9.9 million
loan to purchase:
• Four used SD70Mac locomotives: Without additional
locomotives, ARRC is at capacity for summer operations
and cannot sustain 6-day-a-week freight service,
accommodate new train starts, or provide contingency
in event of locomotive issues.
• Thirty rail flat cars (approximately): A significant
portion of ARRC's fleet of 60-foot flat cars are aging
out. Ordering new flat cars now will allow ARRC to
better accommodate the surge in North Slope demand; by
the time the pipe shipments are predicted to subside,
the old cars will be retired and ARRC's fleet will be
renewed.
1:48:41 PM
MR. O'LEARY continued to slide 22, titled "ARRC Whittier
Terminal Master Planning," and he stressed that Whitter is where
the rail barge activity comes in, and that the area is very
constrained. The slide read as follows [original punctuation
provided]:
• Update / re-develop terminal master plan to prepare
for future and ensure state of good repair
• Purpose:
A) Identify terminal rehab projects
B) Configure upland and yard track to support
maintenance and ops
C) Determine efficiency, reliability, resiliency and
sustainability improvements terminal-wide
• Funding: $1.17 million: 80% by MARAD (US DOT -
Maritime Administration) and 20% by ARRC
• Timeline: Currently underway; expected complete
summer 2024.
1:49:30 PM
MR. O'LEARY moved to slides 23 and 24, titled "Seward Freight
Dock Expansion," and "Seward Passenger Dock Project," which
showed images of the extension plan. He pointed out that the
ARRC owns three docks in Seward. The Seward passenger dock
project is a "coming attraction," he said, and the dock
currently used is past its useful life. He added it is safe and
functional because ARRC will put over $2 million into the docks.
He stressed that a critical piece of infrastructure for the
visitor industry is rebuilding the dock, as it impacts many
regions.
1:54:34 PM
MR. O'LEARY said the goal is to build a facility that will be in
place for the next 50 years and can handle growth and larger
ships, projected for 2026.
1:54:59 PM
REPRESENTATIVE STUTES presumed that issues had been worked out
between Royal Caribbean Group and private property owners in
Seward. She expressed her hope that with the construction being
planned, the Royal Caribbean Group would do local hiring.
MR. O'LEARY replied the "threesome," being Royal Caribbean
Group, ARRC, and a developer called The Seward Company, would be
utilizing an Alaska firm that has extensive experience in dock
construction.
1:56:20 PM
REPRESENTATIVE VANCE opined that after seeing the conceptual
photo, it looks almost too efficient. She asked about the
motivation to encourage visitors to spend time in Seward to
stimulate the economy. She expressed her concern there may not
be much time to go into the community based upon how efficient
the design is.
MR. O'LEARY replied that it may be a better question to pose to
Royal Caribbean Group but said he would speak for Royal
Caribbean Group in that they are very excited about remaining in
Seward because of the community there and the experience for
their guests.
1:59:29 PM
REPRESENTATIVE STUTES noted that the Department of
Transportation & Public Facilities (DOT&PF) and Seward are both
interested as well, because tourists could have the opportunity
to take a ferry up [the Inside Passage] to [Seward] and then get
on the train [to the Interior].
2:00:02 PM
MR. O'LEARY moved quickly through slide 25, titled "Economic
Development," and slide 26, which showed a map of the Port
MacKenzie Rail Extension (PMRE). Slide 27 was immediately
shown, which focused on remaining construction estimated 3 years
to complete. He proceeded to slide 28, titled "Estimated Cost
to Complete PMRE (2023 Dollars, millions)," which featured
various types of construction needed to complete the rail
extension and the costs for each.
2:02:29 PM
CHAIR MCCABE referred back to previous comments regarding Alaska
Industrial Development and Export Authority (AIDEA) and its
interest.
MR. O'LEARY replied ARRC had discussion with AIDEA about rail
extensions and that from his perspective, AIDEA was supportive
and wanted to help ARRC work through some of the demand for the
completion of Port MacKenzie.
2:03:34 PM
REPRESENTATIVE STUTES spoke to the map on slide 26 and presumed
the extension would be strictly for freight.
MR. O'LEARY replied not really; it is the same track whether
used for freight or passenger.
2:04:23 PM
MR. O'LEARY moved to slide 29, titled "PMRE Funding Summary
(2023, Dollars, millions)." The slide showed three columns
featuring state funds and matching percentages of federal funds.
He said the chart was not designed to be definitive at this
point, but to show examples of how funding could work.
2:07:45 PM
CHAIR MCCABE recalled a discussion about federalizing a portion
of the railroad and said he was uncertain what that meant.
MR. O'LEARY said he would like to introduce a colleague who
could respond.
2:08:35 PM
BRIAN LINDAMOOD, Vice President Engineering, Alaska Railroad
Corporation, responded that the status of the project is that
all federal regulatory permits have been obtained, with the
exception of the license from the Surface Transportation Board.
He added that complications arise when federal money is
introduced, and the federal agency would have to do an
environmental analysis to take federal action. He said delays
could occur up to two years.
2:10:19 PM
REPRESENTATIVE VANCE inquired if there was a Southcentral port
authority that the railroad was a part of, whether ARRC would be
eligible for more grants to fill some of the federal matches.
MR. O'LEARY replied he did not think so.
REPRESENTATIVE VANCE commented further on other opportunities
there are for partnerships.
2:12:12 PM
CHAIR MCCABE asked Mr. Lindamood if there were a combined
Southcentral port authority whether it would open up a portion
of the railroad that is close to Port MacKenzie to a maritime
administration (MARAD) grant, and whether it would still require
an updated federal environmental impact statement (EIS).
MR. LINDAMOOD confirmed that is correct.
2:14:01 PM
MR. O'LEARY moved to slide 30, titled "Economic Development,"
which read as follows [original punctuation provided]:
Northern Rail Extension (NRE)
• 80+ miles North Pole to Delta Junction
• 4-phase project
Phase 1: completed in 2014 : Bridge over Tanana
River, road and levee near Salcha (pictured)
• Phase 2: 13 miles of rail, from Moose Creek /
Eielson AFB to Tanana River Crossing
• Phase 3: 30 miles of rail from Tanana River
Crossing to Donnelly Training Area
• Phase 4: 38 miles of rail, Donnelly to Delta
Junction
• NRE Cost and Funding:
• Original cost estimate was about $1 billion.
Estimate now $1.7 billion
• DOD was main funding source for initial
planning, environmental and Phase 1. Public-
private partnership explored as future funding
option
2:16:18 PM
MR. O'LEARY moved to slide 31, titled "Completing NRE," and he
said he would go directly to the dollars on slide 32, titled
"NRE Budgetary Estimate." Slide 32 read as follows [original
punctuation provided]:
2023 Cost Projections*
Phase 2 (Final Permitting, ROW, 13 Miles of
Construction): $205 million
• Phase 2a (Final Permitting & ROW only): $60 million
Phase 3 (30 Miles of Construction): $651 million
Phase 4 (38 Miles of Construction): $826 million
TOTAL: $1.7 billion
FUNDING STRATEGY: DOT - MPDG MEGA Grant
Expected open mid-2024; typical 60-day window
Minimum 20% non-federal match
2:19:18 PM
REPRESENTATIVE STUTES noticed the northern extension route
required the purchase of private land, and asked if that was the
case with Port MacKenzie as well.
MS. CLEMENS confirmed that is correct.
2:20:26 PM
REPRESENTATIVE VANCE asked for understanding why it is $22
million per mile.
MR. O'LEARY responded that rail by nature is very expensive.
MR. LINDAMOOD added that there are two primary reasons: a
significant amount of permafrost to deal with, and the
construction of about two miles of bridges that need to be
built.
2:24:03 PM
REPRESENTATIVE VANCE inquired how long before a return on
investment is seen.
MR. O'LEARY replied he could not answer; it is significant
infrastructure.
2:25:09 PM
CHAIR MCCABE opined that a lot of it depends on Canada. He said
he had discussions with Canadian Members of Legislative Assembly
(MLA) regarding building to their borders. He further mentioned
Papoose Twins Road [Big Lake, Alaska] to Mr. Lindamood, as it
was fairly well destroyed by the contractor that was putting in
the rails.
2:26:05 PM
MR. O'LEARY moved to slide 33, titled "Economic Development:
Need for Partnership," which read as follows [original
punctuation provided]:
These projects exceed to Alaska Railroad's ability to
accomplish alone: many partners may have a role to
play, including Congressional Delegation, State
Government, USDOT, AIDEA, Mining Industry, Military,
Canada and more
MR. O'LEARY stressed that ARRC is trying to understand how to
put together a coalition of stakeholders that understand the
benefit that these projects can bring to the state. He
reiterated the railroad cannot do it alone.
2:27:21 PM
CHAIR MCCABE offered a scenario of if Mr. O'Leary was headed to
Washington, D.C., how effective a letter from the legislature
would be that stated support for the project and electing Mr.
O'Leary to be its leader.
MR. O'LEARY responded he did not know if it was the right time.
2:29:38 PM
MS. CLEMENS re-joined the presentation on slide 34, titled
"Public Engagement," which read as follows [original punctuation
provided]:
Strive to be a good neighbor to our Railbelt
communities
• Attend local Council and Assembly meetings
• Meetings with Mayors
• ARRC Board of Directors External Issues Review
Committee
• School partnership program
• Community Open Houses
• Customer events
• Partnership with U.S. Forest Service
• Participate in Transportation Fairs
• Project public engagement plans
• Charitable donations
• Economic development projects
In 1985, the State of Alaska bought the Alaska
Railroad for $22 million, becoming the railroad's
official owner, and remaining so to this day.
MS. CLEMENS drew attention to the ARRC Mission Statement and how
the railroad would continue to engage the public.
2:32:55 PM
MR. O'LEARY concluded on slide 35, titled "How can the Alaska
Railroad support Alaska's next 100 years?," which read as
follows [original punctuation provided]:
• The Railroad is a critical piece of transportation
infrastructure
• Must balance growth with essential maintenance of
existing assets
• Partnership is key in ensuring success for economic
development mission
MR. O'LEARY reiterated that the railroad is looking for
stakeholders and partners to join their mission. The railroad,
he said, is good for the state and he appreciated the
committee's time and attention.
2:34:33 PM
CHAIR MCCABE stated there cannot be resource development without
transportation and ARRC is a big part of that. He offered his
assistance to publish a five-year plan, similar to a business
plan, for the railroad.
2:36:03 PM
ADJOURNMENT
There being no further business before the committee, the House
Transportation Standing Committee meeting was adjourned at 2:36
p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 2024.AlaskaRailroad.HTRA.Presentation.2.7.24.pdf |
HTRA 2/8/2024 1:00:00 PM |
Investing in Alaska's Future |