Legislature(2011 - 2012)SENATE FINANCE 532

03/31/2011 09:00 AM Senate FINANCE


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09:08:33 AM Start
09:10:03 AM Department of Transportation Overview: Roads to Resources
10:36:04 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Department of Transportation Overview: TELECONFERENCED
Roads to Resources (Postponed from 3/25/11)
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 31, 2011                                                                                            
                         9:08 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:08:33 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:08 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lesil McGuire, Vice-Chair                                                                                               
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Patrick  Kemp,  Deputy  Commissioner,  Highways  and  Public                                                                    
Facilities,   Department   of  Transportation   and   Public                                                                    
Facilities;    Laura    Baker,   Director,    Division    of                                                                    
Administrative  Services, Department  of Transportation  and                                                                    
Public  Facilities; Al  Clough,  Project  Manager, Roads  to                                                                    
Resources,   Department   of   Transportation   and   Public                                                                    
Facilities.                                                                                                                     
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
^Department of Transportation Overview: Roads to Resources                                                                      
                                                                                                                                
9:10:03 AM                                                                                                                    
                                                                                                                                
PATRICK  KEMP,  DEPUTY  COMMISSIONER,  HIGHWAYS  AND  PUBLIC                                                                    
FACILITIES,   DEPARTMENT   OF  TRANSPORTATION   AND   PUBLIC                                                                    
FACILITIES, expressed  that he felt that  Laura Baker should                                                                    
discuss the  capital budget requests, followed  by Al Clough                                                                    
present the need for the  funding for the Roads to Resources                                                                    
projects.                                                                                                                       
                                                                                                                                
9:10:41 AM                                                                                                                    
                                                                                                                                
LAURA BAKER, DIRECTOR,  DIVISION OF ADMINISTRATIVE SERVICES,                                                                    
DEPARTMENT OF  TRANSPORTATION AND PUBLIC  FACILITIES, stated                                                                    
that the Department of  Transportation and Public Facilities                                                                    
(DOT/PF) had three Roads to  Resources projects in the FY 12                                                                    
Capital Budget.                                                                                                                 
                                                                                                                                
9:11:22 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman stated  that there  was some  concern with                                                                    
too many  images in the  Power Point and stressed  the issue                                                                    
of focusing on financial concerns.                                                                                              
                                                                                                                                
Ms. Baker stated that there  was $10.5 million requested for                                                                    
the  Roads to  Resources. She  stressed that  funding-stream                                                                    
for the three requests were from AIDEA dividend fund.                                                                           
                                                                                                                                
Ms. Baker referred slide 12  of the PowerPoint presentation,                                                                    
and stated that  the reference number in  the capital budget                                                                    
was 50844. She explained that  the $8 million dollar request                                                                    
for Foothills West was continuation  funding and would allow                                                                    
the  construction from  the Dalton  Highway to  Umiat, which                                                                    
would continue  in the multi-phased approach  for the design                                                                    
and up-front process for the project.                                                                                           
                                                                                                                                
Senator  Ellis requested  information  about what  companies                                                                    
are  supporting these  projects. He  mentioned that  some of                                                                    
his  constituents called  this project  "Corporate Welfare."                                                                    
Ms.  Baker  replied  that  Mr.  Klaugh  would  provide  more                                                                    
information.                                                                                                                    
                                                                                                                                
9:14:04 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  recommended a specific explanation  of the                                                                    
Roads  to  Resources project.  Ms.  Baker  replied that  she                                                                    
would continue, and touch on some historical information.                                                                       
                                                                                                                                
Ms. Baker discussed  the Ambler mining district  on slide 14                                                                    
and slide  15, which  was a request  for $1.25  million. She                                                                    
stated that the purpose for  the project was to provide all-                                                                    
season access  for exploration and development  of potential                                                                    
resources. The requested funds would  help in the evaluation                                                                    
of  the  transportation  modes   in  that  area  to  provide                                                                    
additional roads to the resource areas.                                                                                         
                                                                                                                                
Ms.  Baker  discussed  the  Western  Access  Project:  $1.25                                                                    
million.  She explained  that the  funds would  continue the                                                                    
development of  the planning of the  transportation corridor                                                                    
connecting the existing road system  with the Nome-area road                                                                    
system. She                                                                                                                     
                                                                                                                                
Ms.  Baker  referred to  the  document  "Roads to  Resources                                                                    
Historical   Funding/Expenditures"  (copy   on  file).   She                                                                    
pointed  out  that in  FY  2004;  DOT/PF received  a  state-                                                                    
appropriation  of  $5  million  for  industrial  development                                                                    
roads, which had been spent  on a number of road development                                                                    
projects.  She  explained in  FY  2005,  DOT/PF received  an                                                                    
industrial road  program appropriation for $17  million. She                                                                    
pointed out that  only $8 million was  received, because the                                                                    
$9 million in  federal funds did not apply.  She stated that                                                                    
$8 million  had been spent on  many different transportation                                                                    
projects.                                                                                                                       
                                                                                                                                
Co-Chair  Stedman  wondered  if  the  $9  million  that  was                                                                    
included  in the  $17  million, simply  did  not exist.  Ms.                                                                    
Baker affirmed that the $9 million was not received.                                                                            
                                                                                                                                
Ms. Baker  looked at FY  2006, and pointed out  the language                                                                    
section of the bill allocated  a number of projects, but the                                                                    
industrial roads section identified  a $3 million allocation                                                                    
for  the industrial  roads,  and $4  million  for the  North                                                                    
Slope Foothills West  Road EIS. She furthered  that that the                                                                    
language section  also allowed for some  re-allocation among                                                                    
the  projects. She  stressed that  department  had spent  $6                                                                    
million, with $71,000 leftover.                                                                                                 
                                                                                                                                
9:18:26 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman requested  an estimate  of the  success of                                                                    
the  development  of  the projects  since  2003.  Ms.  Baker                                                                    
replied that Mr. Kemp could provide more information.                                                                           
                                                                                                                                
Co-Chair  Stedman stressed  that  there was  an issue  about                                                                    
whether the  Roads to Resources  program was  too shattered.                                                                    
He  felt  that  the  purpose  of  the  presentation  was  to                                                                    
determine  whether there  needed to  be a  greater focus  on                                                                    
important projects. Ms. Baker  remarked that in recent years                                                                    
there was  a focus on  individual projects, rather  than one                                                                    
appropriation going  to multiple  projects. She  pointed out                                                                    
that  some projects  were under  a prior  administration, so                                                                    
there had been a change in focus.                                                                                               
                                                                                                                                
Ms.  Baker  looked  at the  2008  legislative  session,  and                                                                    
stated that DOT/PF  received $3 million in  state funds, and                                                                    
there was  currently $1.9 million  left. She  explained that                                                                    
$1  million was  used  for the  Acutan  airport access  road                                                                    
project.                                                                                                                        
                                                                                                                                
Ms. Baker  referred to an  item from the 2010  session, with                                                                    
money for  the Ambler  Mining Project for  planning, design,                                                                    
and  engineering. She  continued to  discuss the  historical                                                                    
projects. She stated that the  bottom of the chart displayed                                                                    
the $10.5 million request for the FY 2012 budget.                                                                               
                                                                                                                                
9:22:42 AM                                                                                                                    
                                                                                                                                
Mr.  Kemp  wondered if  he  should  present details  of  the                                                                    
project requests.  Co-Chair Stedman  replied that  the focus                                                                    
should be  about the process,  selection, and total  cost of                                                                    
Roads to  Resources. He  wanted to  know the  integration of                                                                    
the industry on the projects.                                                                                                   
                                                                                                                                
Mr.  Kemp  explained that  he  had  done extensive  research                                                                    
about how the  money was requested, and his  position was to                                                                    
determine  whether the  projects were  appropriate. He  felt                                                                    
that the  history of capital  budget requests used  a region                                                                    
or  entity that  asked  certain funding  for  a project.  He                                                                    
stated that  projects usually took  a signature of  a deputy                                                                    
commissioner to approve that funding.  He felt most projects                                                                    
were worth-while, but DOT/PF did  not keep track of projects                                                                    
accurately. He  stressed that DOT/PF would  focus on capital                                                                    
projects and the Resources Road  Decision Matrix (slide 6 of                                                                    
the PowerPoint Presentation).                                                                                                   
                                                                                                                                
Co-Chair Stedman wondered  if there was a desire  to look at                                                                    
former projects. Mr. Kemp replied  that there probably would                                                                    
not be a revisiting of  past projects, but stressed that the                                                                    
three proposed projects are the most important.                                                                                 
                                                                                                                                
Co-Chair Stedman stressed that there  needed to be a focused                                                                    
conversation  about each  Road  to  Resources projects,  and                                                                    
whether  or not  they  were economic,  and  how the  funding                                                                    
would be used.  Mr. Kemp replied that DOT/F  was planning of                                                                    
focusing  on  the  cheapest  access   to  the  resource.  He                                                                    
stressed that the roadway would  be considered an industrial                                                                    
highway.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman wondered  at  what  point the  legislature                                                                    
would get  engaged to  determine the  impact on  the budget.                                                                    
Mr.  Kemp replied  that it  was the  intent to  evaluate the                                                                    
projects.  He  stressed  that  they   were  not  a  resource                                                                    
development agency.                                                                                                             
                                                                                                                                
9:29:50 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  felt there was  a challenge with  the road                                                                    
to Nome, and  mentioned that he felt the  overall cost might                                                                    
be $1  billion. Mr. Kemp  stated that they were  planning on                                                                    
using the  Alaska Highway  model, and hoped  to bring  up to                                                                    
standard over  the next 50 to  60 years. He stated  that the                                                                    
$1 billion referred to a complete finished highway.                                                                             
                                                                                                                                
Co-Chair Hoffman  looked at 2014  on page 11 of  the Project                                                                    
Review Listing of the FY  2012 Governor amended budget (copy                                                                    
on file). Mr. Kemp stressed that it was a work in progress.                                                                     
                                                                                                                                
Senator  Thomas  stressed that  he  supported  the Roads  to                                                                    
Resources, and mentioned that there  were possibly two roads                                                                    
to Nome considered. He pointed  that there were a variety of                                                                    
minerals,  and  felt  that  the  roads  should  be  directed                                                                    
towards  active  companies. He  felt  that  there were  many                                                                    
mining  companies  near  Fairbanks that  needed  roads,  and                                                                    
wondered  why  there was  not  a  focus on  those  operating                                                                    
successful business.                                                                                                            
                                                                                                                                
9:38:23 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  understood that  there  was  a change  in                                                                    
direction in  the administration,  so there  was a  shift in                                                                    
focus.                                                                                                                          
                                                                                                                                
AL CLOUGH,  PROJECT MANAGER, ROADS TO  RESOURCES, DEPARTMENT                                                                    
OF  TRANSPORTATION AND  PUBLIC FACILITIES,  answered Senator                                                                    
Thomas's  question, and  stressed  that  the developer  that                                                                    
refused involvement with the state.                                                                                             
                                                                                                                                
Co-Chair Hoffman  wondered if there  was any reason  why the                                                                    
Donlin Creek officials  did not want to work  with the state                                                                    
of Alaska. Mr.  Clough replied that their reason  was to not                                                                    
have government as a partner.                                                                                                   
                                                                                                                                
Co-Chair Hoffman wondered if there  was pool of reserves was                                                                    
estimated in Donlin  Creek and wondered if the  value was in                                                                    
the billions.  Mr. Clough replied  that he did not  know the                                                                    
value.                                                                                                                          
                                                                                                                                
Co-Chair Hoffman  stressed that  the knowledge of  the value                                                                    
of some of the proven  reserves was necessary in determining                                                                    
the impact of the projects.                                                                                                     
                                                                                                                                
Co-Chair  Stedman  stressed that  there  was  a struggle  in                                                                    
determining the  importance and  selection of  each project.                                                                    
Mr. Clough  agreed, and  reinforced that he  was new  at the                                                                    
job.                                                                                                                            
                                                                                                                                
9:44:12 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  He referred to  possible columns  added to                                                                    
the matrix  when determining the importance  of the proposed                                                                    
projects. Mr. Clough replied that  in the past, projects may                                                                    
have seemed  meritorious, but  it was  fundamentally unclear                                                                    
as to how they were derived  at. He stressed that the matrix                                                                    
was not  intended to  be the  definitive decision  tool, but                                                                    
merely  presented as  an example  that there  needs to  be a                                                                    
detailed decision process.                                                                                                      
                                                                                                                                
Co-Chair Stedman  stressed that it  was the interest  of the                                                                    
committee  to  determine  the  impact  over  so  many  years                                                                    
regarding the financial impact.  He stressed that there were                                                                    
several  billion dollars  of projects  outside the  Roads to                                                                    
Resources. He  referred to many very  expensive projects. He                                                                    
stressed  that   the  committee   was  very   cautious  when                                                                    
committing to large projects.                                                                                                   
                                                                                                                                
Mr.  Kemp stressed  that the  process and  the environmental                                                                    
impact  statement would  "flush out  the details"  of why  a                                                                    
road was built.  He mentioned that the roads  were not built                                                                    
without justification.                                                                                                          
                                                                                                                                
9:51:15 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman wondered  if they  were too  early in  the                                                                    
appropriation cycle to determine  the value of the projects.                                                                    
Mr. Kemp  responded that  he was  confident in  the request,                                                                    
and felt the requests were not made too early.                                                                                  
                                                                                                                                
Co-Chair Hoffman noticed that  was no delineation of private                                                                    
lands and considerations of native  programs. He queried how                                                                    
much  was allocated  for the  right-of-way acquisition.  Mr.                                                                    
Kemp agreed to provide that information.                                                                                        
                                                                                                                                
Co-Chair  Hoffman wondered  what  time of  process and  time                                                                    
frame  would  be needed  to  go  through fish  and  wildlife                                                                    
lands. Mr. Kemp  replied that the lead agency  was the Corps                                                                    
of Engineers,  and stressed that  their staff  could provide                                                                    
that information.                                                                                                               
                                                                                                                                
Co-Chair  Stedman stated  that  the concern  about fish  and                                                                    
wildlife lands was a concern for all roads.                                                                                     
                                                                                                                                
9:56:15 AM                                                                                                                    
                                                                                                                                
Senator  Thomas  referred to  the  Great  Bear project,  and                                                                    
noted that  their development  was right at  the end  of the                                                                    
haul-road on  leased land at  Prudhoe Bay. He  stressed that                                                                    
the legislature  could help them  by building a mile  or two                                                                    
more of road.  Mr. Kemp responded that any  project could be                                                                    
nominated.                                                                                                                      
                                                                                                                                
Mr. Clough  detailed the Ambler  mining district  project on                                                                    
pages 13 and  14 of the PowerPoint  Presentation. Mr. Clough                                                                    
stated  that  it was  a  project,  and  there needed  to  be                                                                    
underground arctic tunnels.                                                                                                     
                                                                                                                                
Co-Chair  Stedman stated  that the  Ambler project  would be                                                                    
$5.25 million after the current capital request.                                                                                
                                                                                                                                
10:06:32 AM                                                                                                                   
                                                                                                                                
Senator  Olson  mentioned  that there  was  a  multitude  of                                                                    
questions, and wondered if he should wait.                                                                                      
                                                                                                                                
Co-Chair Stedman encouraged the questions.                                                                                      
                                                                                                                                
Senator  Olson mentioned  that his  issues dealt  with Umiat                                                                    
and Nome road. Co-Chair Stedman encouraged the questions.                                                                       
                                                                                                                                
10:07:48 AM                                                                                                                   
                                                                                                                                
Senator  Olson wondered  how lease  issues would  be avoided                                                                    
when  developing  the roads.  Mr.  Kemp  replied that  those                                                                    
issues should be flushed out  when considering the projects.                                                                    
He stated that the  environmental impact study would provide                                                                    
more information.                                                                                                               
                                                                                                                                
Senator Olson felt  that the department was  not doing their                                                                    
homework when  determining the  perspective of  the boroughs                                                                    
Mr. Kemp  replied that  there had  been a  solicitation from                                                                    
communities of agencies.                                                                                                        
                                                                                                                                
10:15:54 AM                                                                                                                   
                                                                                                                                
Senator Olson wondered if the  projects would go through the                                                                    
project evaluation  board. Mr.  Kemp replied that  the Roads                                                                    
to  Resources  program did  not  have  a project  evaluation                                                                    
board.                                                                                                                          
                                                                                                                                
Senator  Olson requested  permission  to provide  a list  of                                                                    
questions to the committee.                                                                                                     
                                                                                                                                
10:17:29 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  noted  that   the  state  received  $29.7                                                                    
million in the  FY 2010 mining tax, which was  25 percent of                                                                    
DOT/PF's capital budget in FY  2012. He pointed out that the                                                                    
legislature  was facing  a conversation  regarding a  mining                                                                    
tax  adjustment. He  stressed  a  good working  relationship                                                                    
between the  industry and the  state to develop some  of the                                                                    
infrastructure.  He wondered  if DOT/PF  would come  forward                                                                    
with a  flushed out process  of the ranking and  analysis in                                                                    
December. Mr. Kemp replied that  DOT/PF could provide a list                                                                    
of future  potential projects  by the  following legislative                                                                    
session.                                                                                                                        
                                                                                                                                
10:19:19 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  stressed  that  there  would  be  further                                                                    
discussion  about the  projects  before  they move  forward.                                                                    
Senator  Olson stated  that hearings  needed to  be held  in                                                                    
those  communities   to  determine  their  desire   for  the                                                                    
projects.                                                                                                                       
                                                                                                                                
10:20:30 AM                                                                                                                   
                                                                                                                                
Mr. Kemp replied  that public meetings had been  held on the                                                                    
projects, and felt  that most of the  meetings were positive                                                                    
towards  road construction.  He mentioned  that the  support                                                                    
might be because of the state of the economy.                                                                                   
                                                                                                                                
Senator Olson  wondered if there  was a public  meeting held                                                                    
in  every possible  affected community.  Mr. Kemp  agreed to                                                                    
provide detailed information.                                                                                                   
                                                                                                                                
10:22:01 AM                                                                                                                   
                                                                                                                                
Senator Thomas referred to page  15 of the presentation, but                                                                    
questioned that there  could be too many  ambitions with one                                                                    
projects. He continued that there  should be a focus on what                                                                    
is  the  best  project.  He  encouraged  more  communication                                                                    
between DOT/PF and DNR.                                                                                                         
                                                                                                                                
Co-Chair  Stedman wondered  if  there were  any more  issues                                                                    
DOT/PF  would  like to  address  in  the meeting.  Mr.  Kemp                                                                    
clarified  that on  page 15  the routes  were corridors.  He                                                                    
stated that  the public involvement process  and preliminary                                                                    
engineering would determine that the alignment be route 2.                                                                      
                                                                                                                                
10:30:11 AM                                                                                                                   
                                                                                                                                
Mr. Clough continued to discuss the Umiat project.                                                                              
                                                                                                                                
Co-Chair Stedman wondered if there  would be an exclusion of                                                                    
some  of  the projects,  with  a  construction ranking.  Mr.                                                                    
Clough stated that there was  a gathering of information for                                                                    
potential  natural   resource  development   throughout  the                                                                    
state.  He  stated that  there  would  be internal  business                                                                    
done, to provide more detail.                                                                                                   
                                                                                                                                
10:34:03 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman referred  to the  pages on  the historical                                                                    
expenditures and  wondered how the amounts  were being spent                                                                    
that  was represented  as encumbered.  Mr.  Kemp replied  to                                                                    
provide that information.                                                                                                       
                                                                                                                                
Co-Chair  Stedman  requested  that information  be  provided                                                                    
expeditiously.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
10:36:04 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:36 AM.                                                                                          

Document Name Date/Time Subjects
2011 03 31 DOT - Roads To Resources.pdf SFIN 3/31/2011 9:00:00 AM
Overview: Roads To Resources
2011 03 31 CAP Roads to Resource Projects.pdf SFIN 3/31/2011 9:00:00 AM
Overviews: Roads To Resources
2011 03 31 Roads to Resources Summary.pdf SFIN 3/31/2011 9:00:00 AM
Overview: Roads to Resources
2011 03 31 - Roads to Resource Sen. Olson backup.pdf SFIN 3/31/2011 9:00:00 AM
Roads to Resources
2011 04 07 - 1 - Cover Letter to SFin re Roads to Resources.pdf SFIN 3/31/2011 9:00:00 AM
Overview: Roads to Resources
2011 04 07 - 2 - DOT&PF Response to SFin R2R Overview of 3-31-11_4_.pdf SFIN 3/31/2011 9:00:00 AM
Overviews: Roads to Resources
2011 05 07 - 3 - Attachment - Roads to Resources Summary.pdf SFIN 3/31/2011 9:00:00 AM
Overview: Roads to Resources