Legislature(1995 - 1996)
03/23/1995 05:10 PM House WTR
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON WORLD
TRADE AND STATE/FEDERAL RELATIONS
March 23, 1995
5:10 p.m.
MEMBERS PRESENT
Representative Ramona Barnes, Chairman
Representative Gail Phillips, Vice Chairman
Representative Eldon Mulder
Representative Gary Davis
Representative Bill Williams
MEMBERS ABSENT
Representative Jerry Mackie
Representative Gene Kubina
OTHER HOUSE MEMBERS PRESENT
Representative Eileen MacLean
Representative Carl E. Moses
COMMITTEE CALENDAR
Presentation: Northern Sea Route by Dr. Orson P. Smith, U.S. Army
Corps of Engineers; Alan F. Walker, Arctic Associates
International; Dr. William Sackinger, Professor Emeritus,
University of Alaska Fairbanks; David Orr, Northern Sea Route
Coordinator, Department of Commerce and Economic Development;
Drs. Andrey and Tatiana Proshutinsky, Russian meteorologists.
WITNESS REGISTER
ORSON P. SMITH, PE, PhD.
Coastal Engineer/Oceanographer
Civil Works Branch
United States Army Corps of Engineers
Post Office Box 898
Anchorage, Alaska 99506-0898
Telephone: 753-2632
POSITION STATEMENT: Presenter, Northern Sea Route
ALAN WALKER
Arctic Associates International
3437 Meander Way
Juneau, Alaska 99801
Telephone: 790-3636
POSITION STATEMENT: Presenter, Northern Sea Route
WILLIAM M. SACKINGER, PhD., P.E.
President and Chief Executive Officer
OBELISK Hydrocarbons (Alaska) Ltd.
Post Office Box 80591
Fairbanks, Alaska 99708
Telephone: 479-6808
POSITION STATEMENT: Presenter, Northern Sea Route
DAVID ORR, Coordinator
Northern Sea Route
596 Northeast Amanda Place
Hillsboro, Oregon 97124
Telephone: (503) 693-8476
POSITION STATEMENT: Presenter, Northern Sea Route
ACTION NARRATIVE
TAPE 95-6 SIDE A
Number 000
The meeting of the House Special Committee on World Trade and
State/Federal Relations was called to order by Chairman Ramona
Barnes at 5:10 p.m. Members present at the call to order were
Representative Barnes, Phillips, Williams, and G. Davis. Members
absent were Representatives Mulder, Mackie and Kubina. The
meeting was teleconferenced to Anchorage and Oregon.
CHAIRMAN RAMONA BARNES stated there was a quorum present.
Number 035
Representative Mulder arrived at 5:12 p.m.
Number 040
DR. ORSON P. SMITH, Project Manager for the study of the Northern
Sea Route for the United States Army Corps of Engineers, stated
the route is a marine passage from the Atlantic to the Pacific
Oceans, via the Arctic Ocean north of Russia, the Bering Strait
and by various routes many along the coast of Russia with other
possibilities across the center of the Arctic Ocean. The route
offers distances between the Atlantic and the Pacific, 35 to 60
percent shorter than traditional routes through the Panama and
Suez Canals. The Northern Sea routes have been established since
the 1930s, but until recently Russia, whose territories border
the region, closely guarded it from foreign ships. Mikhail
Gorbachev, then General Secretary of the Soviet Union, signaled
Russia's willingness to open the route for international for
commercial shipping in 1987. Some international shipping has
taken place since, but the dream of a busy, new passage between
the markets of one basin and sources of supplies on the other
remain a goal for the future.
The Alaska Department of Commerce and Economic Development asked
the Corps of Engineers to investigate Alaskan port improvements
related to the state's strategic position on the Northern Sea
Route. The United States Congress appropriated $300,000 in 1993,
to begin the study and appropriated another $300,000 the next
year to complete the work.
Number 110
DR. SMITH added that the University of Alaska assisted with a
review of Russian capabilities to monitor and forecast Arctic
conditions and a summary of the highly variable climatological
factors which affect the cost of shipping. Two Russian
scientists, Drs. Andrey and Tatiana Proshutinsky, were
instrumental in this effort.
Number 130
DR. SMITH continued on to say preliminary forecasts indicate that
non-ferrous ores have the best prospects for Alaskan exports.
The ore terminal at Skagway has exported lead and zinc ore from a
mine in Faro, British Columbia, to Europe, in years past. That
terminal is owned by the state of Alaska. The efficiency of this
operation is constrained by the shallow approach to the terminal,
the presence of ice, and the concerns for whales' summer
migration along this coast. The Alaska District is in contact
with port operators at Skagway and the Red Dog Mine terminal and
with the Alaska Industrial Development and Export Authority to
investigate port improvements at these sites.
Number 170
DR. SMITH stated that preliminary forecasts for the entire
Pacific Rim indicate the possibility of a substantial increase in
commodity flow, via the Northern Sea Route in future decades.
The forecast will be tested by the ship transit simulation
program, but appears now to be large enough that shipments could
extend beyond the optimum climatic conditions of August and
September. Shipments beyond this best season are certain to
require ice-breaker escort along most of the route. Unalaska
appears to be a good port for marshaling east-bound Northern Sea
Route convoys.
DR. SMITH added that the Corps will publish its Northern Sea
Route Reconnaissance Report in June. The report will recommend
site-specific feasibility studies of port improvements that
appear economically justified. Anon-federal sponsor must agree
to provide the Corps with 50 percent of the cost for these
studies to proceed. The report will also recommend efforts by
others, which could enhance the commercial prospects for Alaskan
businesses. This study may lead Alaskan leaders to consider such
options as the following: 1) Augmenting relations with trading
partners in the Arctic and Europe, perhaps the programs of the
Alaska Department of Commerce and Economic Development, the
University of Alaska, and the Northern Forum; 2) Pursuing the
Federal interest, through cost-sharing port projects with the
Corps of Engineers; or 3) Stimulating applied research and
development, which might shift some of the present focus of the
United States Arctic Research on environmental concerns to
matters affecting the future of commercial shipping in the
Arctic, such as climatological factors affecting shipping cost,
the design of arctic cargo ships, and the design of shallow-draft
supply vessels to serve rural Alaskan communities.
Number 190
The Department of Environmental Conservation (DEC) has asked the
Corps study the possibility of extending the navigation season
along the Kuskokwim and Yukon Rivers, and has requested another
study on ways to improve the supply system for coastal
communities of arctic Alaska. The President's 1996 budget
includes funds to begin investigation of Kuskokwim River
navigation. Proposed studies of the Yukon River and the Arctic
Coast have not been funded.
Number 210
ALAN WALKER, Arctic Associates International, said a viable
shipping route through the Arctic has drawn the interest of
mariners and arctic nations for over 600 years. He said he would
like to address one point of view and offer a recommendation for
Alaska's role in development of commercial expansion into the
Russian Arctic. There is no question that the Northern Sea Route
offers distances between Pacific and European ports which are
significantly shorter than traditional routes. However, many
shippers may be reluctant to venture into full scale Northern Sea
Route operations until uncertainties regarding infrastructure
availability, pricing and contract enforcement, general business
practices within Russia, insurance costs and standardization of
vessel ice classification and inspection are addressed.
Number 219
MR. WALKER said he believes that Alaska should be involved or
risk being left behind when the market economies of this route
become a reality. Opening a year round transpolar route would be
extremely difficult and probably cost prohibitive at this time.
Last year, a Canadian and U.S. ice-breakers conducted a joint
scientific mission into the deep arctic. In the Fall, they
crossed the Arctic from the Bering Strait to 90 degrees N. and
finally existed via Fram Strait, east of Greenland. This was the
first surface vessel transit of the Arctic Basin from the west to
the east. Although successful, the difficulty in accomplishing
this transit should not be underestimated. Years of planning and
extensive ice management support throughout the voyage helped
these ships reach the deep arctic and safely return; these were
the two most powerful icebreakers in Canada and the U.S.
MR. WALKER said similarly, a more traditional coastal route from
the Pacific to Europe, on a year round basis, would take
significant infrastructure improvement. We have the technology
today to build icebreakers and cargo vessels capable of year
round transit, but at significant cost. Accepted estimates for
traditional designs range up to 150,000 SHP for icebreakers
capable of year-round commercial Northern Sea Route operation.
He said he doubts that any government will presently underwrite
such a venture, nor would corporate dollars be ventured on such
high risk project.
MR. WALKER noted that the ultimate goal should not be to design
larger and more powerful icebreakers and ice capable cargo
vessels, but to utilize technology to avoid as much ice as
possible. Given the vast natural resources available in Siberia
and the desire for western goods and technology, there should be
numerous opportunities to establish regional projects.
Number 290
MR. WALKER said he would propose a venture between Alaska and
regional governments in Eastern Russia for the shipment of raw
logs to Alaskan mills. Portions of Russia contain significant
forest reserves, far greater than exist in North America. Many
parts of Russia are in need of hard currency, western investment
and technology. Alaska with cooperation of the federal
government, can provide the necessary management and development
technology to utilize Russia's vast natural resources in an
environmentally sustainable manner.
MR. WALKER remarked that several issues would need resolution.
In the past, raw logs from most of Russia were prohibited from
import by the U.S. Department of Agriculture. The stated concern
was lack of pest control. This could be addressed by onsite
inspections in cooperation with U.S. Forest Service personnel or
other appropriate officials.
Number 320
MR. WALKER explained identification of shipments from Alaska or
the West Coast also play a key role. If desired cargo, such as
fish products, construction materials or manufactured goods were
identified, this would reduce shipping costs by eliminating
deadheading of vessels. Raw logs milled to finished lumber could
be utilized to construct modular arctic structures for use
throughout Alaska and Siberia. Certainly, Alaska companies would
be poised to take advantage of U.S. economic expansion into
Eastern Russia; a role that seems appropriate given our status as
the only arctic state in the nation.
Number 369
DR. WILLIAM SACKINGER, President and Chief Executive Officer,
OBELISK Hydrocarbons (Alaska) Ltd., commented that the Northern
Sea Route has seen limited usage by non-Russian vessels so far.
The alternative would be to consider a transpolar route rather
than the coastal route. The reason for considering both routes
is the distance. We know that the cost of shipping is really
depending on the number of days between the two ports involved.
The distance is shorter on the polar route, but delays caused by
ice can cost you more in the long run. The shortest distance is
the polar route.
Number 400
DR. SACKINGER stated that the practical methods for minimizing
the costs of the ice breaking transport include: 1) Operating in
convoys, with a large, high-horsepower icebreaker in the lead, a
convoy with perhaps ten ships, all of which are ice reinforced
but with medium-sized power plants; and 2) Choosing the shortest
possible route.
Number 430
DR. SACKINGER continued by saying in his opinion, the shipping to
and from Europe, over the Pole, using ice-strengthened ships, can
be a technological reality. The economics of shipping through
the existing canals would be affected, however, the rates and the
profitability of the existing shippers through the canals would
be reduced. And initially-favorable economics of trans-arctic
shipping could be negated if rates are reduced by the major
shippers through the canals. This is a complex economic
dynamics, and accurate advance predictions may be very difficult
to accomplish, until such economics is done. However, no one
will construct and operate a new, special-purpose shipping line
on the trans-arctic route, because of the undefinable economic
risk, and the high cost of economic failure.
Number 480
DR. SACKINGER concluded by inviting the committee to an
International Northern Sea Route Program (INSROP) based in Norway
and sponsored by Japanese, Norwegian and Russian interests. The
first three years of research will be presented at the INSROP
Symposium Tokyo 95, in October.
Number 494
DAVID ORR, formerly with the Alaska Department of Commerce and
Economic Development, said that Alaska took a leading role in
working with some the northern countries to try to expand the
commercial operations along the Northern Sea Route. Half of the
effort had already been accomplished on a year round basis. For
almost 15 years now, Russia has had the western half of the route
for the transport of metal ores and supplies. His goal was to
try to expand the commercial operation between the North Atlantic
Basin and the Pacific Basin. In just two years, they were able
to expand the operations to 11 months of the year and were on the
verge of announcing after centuries of trying that we could
operate the route year round. The state of Alaska also took the
lead in obtaining federal funding for reconnaissance studies by
the Corps of Engineers.
Number 570
MR. ORR strongly encouraged the committee to provide for funding
to keep things moving along the lines they had originally
intended. Mr. Orr said he believes the wood product sector has a
lot of merit.
TAPE 95-6 SIDE B
Number 014
MR. ORR commented that people in the Northwest, Alaska and Canada
are really ripe on being able to compete new transportation
routes. We have been too far away from markets outside the
Pacific Rim and that's the case for some of Alaska's minerals.
It's certainly the case for Alaska's fisheries. The first
$200,000 the Alaska Legislature appropriated, went to a very good
cause and a great deal of federal; money was brought in.
Number 052
REPRESENTATIVE EILEEN MACLEAN went on record as supporting the
Northern Sea Route. It's too expensive to transport materials
and goods from Seattle. So the Northern Region has started test
trial runs from Canada. We can transport fuel from Canada all
along the northern coast.
Number 091
REPRESENTATIVE GAIL PHILLIPS asked if Dr. Sackinger had made a
presentation to the Northern Forum.
DR. SACKINGER said he had not made a presentation recently, it
was about a year and half ago.
REPRESENTATIVE PHILLIPS said it was very important that the
Northern Forum be kept abreast on this. She asked Dr. Smith
about what kind of money would the state need to give the
Department of Transportation budget to match.
Number 110
DR. SMITH said the original budget was around $3.2 million and
its been reduced to $100,000, and this puts the number of
construction projects in jeopardy. Its not necessarily related
to the Northern Sea Route, but for port developments that are
scheduled for construction. The two projects in jeopardy are the
continuing construction of a breakwater at Kodiak and
erosion-control measures at Bethel.
REPRESENTATIVE PHILLIPS asked Mr. Walker about standardization of
vessel ice classification.
Number 125
MR. WALKER stated that currently there are various
classifications among countries around the world. that rate their
vessels on the strength of their vessels, their capabilities and
where it can safely operate to protect the environment, carry
certain cargoes. What this would do is facilitate transit of
foreign vessels through the Northern Sea Route through domestic
waters and coastal waters of Russia sop that they would accept
someone else's classification. Presently its a hodge podge.
Number 160
CHAIRMAN BARNES said that she had heard there is an excess of
icebreakers in Canada, that they are selling for shipping.
MR. WALKER answered that there are commercial ones. The Canadian
government has for years operated an extensive ice breaking fleet
for the re-supply and for convoy duties in Eastern Canada and for
re-supply of the Canadian arctic villages and the assistance to
commercial enterprise, much as we do in the Great Lakes. Our
fleet has dwindled down to two with a third one to be constructed
in the U.S. The Canadian fleet is about eight now of the
state-owned vessels. They are in a terrible financial situation
also and are looking to commercialize some of their operations.
Number 185
MR. WALKER said the United States has two icebreakers in its
entire fleet, both in the Coast Guard.
CHAIRMAN BARNES thanked the presenters. CHAIRMAN BARNES
introduced a resolution through the Rules Committee.
Number 230
ADJOURNMENT
There being no further business to come before the House Special
Committee on World Trade and State/Federal Relations, CHAIRMAN
BARNES adjourned the meeting at 6:12 p.m.
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