Legislature(2011 - 2012)SENATE FINANCE 532
02/17/2012 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Department of Transportation Overview: Roads to Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 17, 2012
9:01 a.m.
9:01:23 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 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, Department of
Transportation and Public Facilities; Senator Cathy
Giessel.
SUMMARY
BUDGET OVERVIEW:
Department Of Transportation: Roads to Resources
9:02:04 AM
Co-Chair Stedman notified the committee that the final
audit report for the Goose Creek Correction Center had been
released.
^DEPARTMENT OF TRANSPORTATION OVERVIEW: ROADS TO RESOURCES
9:02:40 AM
PATRICK KEMP, DEPUTY COMMISSIONER, DEPARTMENT OF
TRANSPORTATION AND PUBLIC FACILITIES (DOT), introduced
himself and Roads to Resources manager Joe Buck.
9:03:35 AM
Mr. Kemp provided a PowerPoint presentation titled "Alaska
Department of Transportation and Public Facilities Roads to
Resources." He began with an overview of projects included
in the governor's proposed FY 13 capital budget. The first
project listed on slide 2 was the Umiat road that would
provide access to the Foothills West area. The funding
requested for the current year was for completion of the
Environmental Impact Statement (EIS) and to begin the
procurement process. The second project was the Ambler Road
that would provide access to an area rich in mineral
deposits; $4 million would initiate the EIS process and
would start the beginning of NEPA [National Environmental
Policy Act].
Mr. Kemp relayed that the third project was a road
extension of the Tofty Road towards Tanana; it would reach
areas rich in minerals and some existing mines.
Additionally, the project would connect the Tanana
community to the state transportation system. The fourth
project was the Klondike Industry Use Highway (IUH); it was
the haul out of the Yukon Territory, which would help fund
the Roads to Resources projects. The fifth project was the
statewide Roads to Resources program, which would help the
department to evaluate potential projects, fund the
program, and to keep in touch with communities on potential
resource extraction areas and on any help they may need
related to resource development.
9:05:40 AM
Co-Chair Stedman asked for an explanation of the costs
listed on slide 2. Mr. Kemp replied that the numbers listed
on the slide represented millions. Costs included [but were
not limited to] $10 million for Umiat and $4 million for
Ambler.
Co-Chair Stedman asked whether the costs would see the
projects through to completion. Mr. Kemp replied he would
provide additional detail on each project later in the
presentation.
Mr. Kemp directed attention to a map of the Foothills West
area (slide 3). The Umiat road would provide access to the
region, which encompassed approximately 9,000 square miles
of known oil and gas deposits. A number of alternatives had
initially been considered by the department including its
preferred route from an economic standpoint based on known
access to resources along the way; the route was indicated
by a red line shown on slide 3 (Galbraith Lake to Umiat).
Other alternatives included a road from Pump Station 2 and
additional variations of the road from Galbraith. He
explained that during the scoping period DOT had been asked
by communities to consider a Meltwater route (shown in
green on the slide); the route would be reached by
traveling from Dalton to Deadhorse and using a number of
spine and winter roads to Meltwater, which would then be
extended southeast towards Umiat.
9:07:50 AM
Mr. Kemp turned to slide 4 titled "Road to Umiat -
Foothills West." He communicated that the area was rich in
petroleum; known resources included 200 to 300 million
barrels of oil and over 31 trillion cubic feet of gas. He
expounded that the gas was clean and compared to gas on the
North Slope less processing would be required. He added
that the oil was also a higher quality; he had heard
anecdotal stories that oil could be put in a diesel engine
directly from the ground. The project would be an
exploratory road, which would begin as an 18 foot-wide road
with inner-visible turnouts. The goal was to gain access to
the area as quickly as possible in order to reach deposits
and provide increased exploration. He noted the road may
need to be widened at a later date in order to accommodate
drill rigs or other industry needs. He relayed that a total
cost was difficult to ascertain given the multitude of
variables, but DOT believed the cost would be in the $200
million to $300 million range for construction. The draft
EIS was scheduled for December 2012. The department
believed the record of decision (ROD) may be changed from
mid-2013 to late 2014; however, DOT would follow up on the
issue with the Army Corps of Engineers.
9:09:57 AM
Senator Thomas asked whether (in conjunction with proposed
DNR projects) the road to Umiat was the number one project
necessary for the further development of the state's oil
and gas resources. Mr. Kemp believed the project was the
primary way the state could help industry. He furthered
that there was a lack of access to the resource rich areas
and he surmised that the project had a high benefit-cost
for the state.
Senator Thomas asked if the proposed route was the most
reasonable for gaining access to resources in Umiat and
other northern areas towards Prudhoe Bay compared to a
route where existing wells were located. Mr. Kemp believed
that the area south of Meltwater was not a good area for
additional oil and gas discovery. The route from Galbraith
had been deemed to have the best chance for additional
resource discovery. He pointed out that the road was
exploratory. He believed the Department of Natural
Resources (DNR) would be able to provide more in depth
detail on the issue.
9:12:28 AM
Senator Olson recalled that he had asked the previous year
whether there was any opposition to the project. He had
been told there was no opposition on record and wondered
whether that continued to be the stance of the department.
Mr. Kemp replied that the prior year he had only been on
the job about one month and had not heard of any opposition
at that time. Subsequently DOT had heard opposition to the
project by local communities. He shared that the scoping
report had been completed recently and contained all
comments made regarding the project.
Senator Olson believed others in the department had been
remiss given that they had not informed Mr. Kemp of the
issue. He stated that he had heard more opposition to the
Umiat road project than on any other road project in his 12
years on the finance committee. He opined that there was a
lack of attention being paid to people who had historically
worked for responsible development in the area; it was the
only project they had openly opposed. He pointed to a
letter from the North Slope Borough requesting the
department to look at alternative road routes. He reminded
DOT that the effects of the road would be present for
multiple generations in the future after resource reserves
had begun to dwindle. He did not see concern about how the
road would impact the area 100 years in the future.
9:15:26 AM
Co-Chair Stedman asked for the list of alternative route
options and for an overview of the public hearing process
that had taken place on the project.
Mr. Kemp responded that he had heard multiple times that
DOT was not listening to people. He stated that there was a
difference between the phrases "they aren't listening" and
"they're not doing what I want them to do." He emphasized
that DOT was listening. There had been a minimum of six
formal public meetings held on the issue in Anatuvuk. He
shared that DOT had dropped in on communities almost every
time it had conducted a field study and that it had hired
ten local people from the villages of Nisquit, Anatuvuk,
and Barrow to help with field subsistence studies.
Additionally, DOT had published a thorough report
addressing every comment that had been received.
Mr. Kemp reiterated that the department was listening. He
believed that the current NEPA process allowed for
opposition to be voiced before the full facts were in
place. He had told the residents of Anatuvuk that DOT was
only partway through the substantial process. The scoping
process had just been completed; the process entailed
asking the communities, agencies, and others about
potential concerns and what it should focus on in the NEPA
phase. Subsequently the information was brought in and a
scoping report and reasonable range of alternatives was
developed. He expounded that the Meltwater route had been
added during the scoping process and would be evaluated.
Moving forward the reasonable range of alternatives would
be developed and a matrix would be completed to evaluate
each alternative; the matrix would include items like
natural science of wetlands, caribou, road mileage, and
other parameters. The alternatives would be included in the
draft EIS, which would enable the particulars of the
process to be discussed.
Mr. Kemp emphasized that the department was not trying to
ignore public comments; it was working to follow the
process in order to disseminate the draft EIS in a rational
manner. He understood there were substantial emotions
involved in the project, but he believed there was always
safety in following the process. He opined that an
opposition strategy was to disrupt the process at an early
stage. He stated that it was the department's job to be
strong and stay within the bounds of the process in order
to make the information available and to ensure that
rational decisions could be made. He noted that the project
could be stopped at any time, but the facts should be known
before making a decision.
9:20:33 AM
Co-Chair Stedman referenced slide 3 and asked whether the
department was considering the routes shown in green,
yellow, blue, and red. Mr. Kemp replied that there were
other variations based on the Galbraith route. There were
five or six options included in the scoping report.
Senator McGuire requested a more detailed map of the
potential routes to Umiat including information on any
overlapping leases on mining, oil, and gas and on which
companies held the leases. Mr. Kemp pointed to a handout
showing the lease lots and the road system.
9:21:41 AM
AT EASE
9:21:57 AM
RECONVENED
Co-Chair Stedman directed the committee's attention to a
document in the packet and indicated to Senator McGuire
that if further information was required that DOT would
supply it.
Co-Chair Hoffman asked DOT to provide land ownership
information along the [proposed road to Umait] route and
how many miles were under different jurisdictions.
Senator Thomas asked DOT to incorporate DNR information in
regards to leases in the area north of Umiat. He believed
it would be helpful to expand the view included on the map
on slide 3.
Co-Chair Stedman stated that DOT could help with the
information. Mr. Kemp answered that the information would
be made available.
9:23:46 AM
Senator Ellis remarked that the project materials mentioned
Canadian mining interest and other corporate interests. He
stated that many of his constituents considered Roads to
Resources to be corporate welfare. He understood the
state's role and obligation related to transportation, but
the project at hand would be expensive and included local
opposition. He wondered whether DOT had a philosophy about
sharing the fiscal burden between the public and private
sectors. He questioned whether there was a private match
for a road that served a private interest. He was willing
to work on the issue in the interest of increasing revenue
to the state treasury and the state's obligation to have a
transportation system. He wondered where the private money
was that would help fund the expensive projects and related
upkeep.
Mr. Kemp replied that the projects proposed in the FY 13
capital budget were all unique and had their own unique
financing; specifics were only presently coming to the
forefront and were related to how gas tax credits and
deductions were included in state law. He shared that he
was not an expert on each of the projects listed on slide
2, but he knew a substantial amount about the industry use
highway. He deferred to DNR for more specific detail. He
provided an example related to Umiat. Currently when a
developer wanted to access a site in the Umiat area it had
to construct ice roads. Ice roads cost approximately
$100,000 per mile, there was a short winter window for
construction, and construction reduced the amount of on-
site time.
Mr. Kemp looked at a hypothetical 100-mile ice road that
would cost a developer $10 million. Approximately 40
percent of the $10 million would qualify for a tax credit
by the state; therefore, the state was essentially paying
for the road and if it was done multiple times over the
years the cost to the state could be $40 million. He shared
one theory that the state would eventually recoup the costs
if it paid for the construction of an all gravel road. An
alternative would be a P3 [Public-Private Partnership] that
would include a toll structure (he noted it would relate
back to the Klondike IUH). Under the P3 structure a bond
would be used and the debt would be retired through toll
payments. He reiterated that each project was unique and
that multiple financing strategies could be used. Currently
the Departments of Revenue and Law were looking Foothills
West case. He shared that more information should be
available throughout the process and he hoped to include a
financing plan in the draft EIS for each of the projects.
9:28:46 AM
Co-Chair Stedman opined that oil credits and deductions
needed to be included in order to show the whole picture.
He stated that if the state was reimbursing companies at 40
percent before the immediate deduction the money given to
companies would be substantially higher when factoring in
credits as well.
Senator Olson asked if he could get a copy of the packet
listing the department's response to people in opposition
of the road to Umiat. Additionally, he requested a copy of
any studies that may have been conducted that showed how
the road would impact subsistence. Mr. Kemp replied that
the information was available on the state website
[www.alaska.gov] or he could provide the committee with a
copy. He furthered that subsistence studies related to
caribou were ongoing; the NEPA process was an integrative
process. He stressed that the reports would be available
for the draft.
Senator McGuire clarified that she was interested in a map
that would show all mining, gas, and oil resources up to
Meltwater. She wanted to see the companies connected to
existing leases. She asked for the information to be
updated from June 2011 to reflect the most recent lease
sale.
Co-Chair Stedman asked the department to provide the
information to his office so he could distribute it to the
committee.
9:31:13 AM
Mr. Kemp directed attention to slide 5 titled "Ambler
Mining District Access." The project was an access road to
the Ambler mining district. He stated that the area was
rich with minerals. The map showed alternatives and a
number of different railroad and highway modes. The
department was working closely with the developer
NovaCopper Inc. on the project. The $4 million request in
the capital budget was to begin the EIS process; the first
step would include scoping.
Mr. Kemp addressed slide 6 titled: "Roads to Resources
Ambler Mining District Access." He shared that the project
would provide jobs in the area and that NovaCopper and Nana
Corporation had entered into an agreement to develop
resources. He communicated that a P3 financing arrangement
may be used for the project.
Co-Chair Stedman asked for a definition of the term "P3."
Mr. Kemp replied that a P3 is a Public-Private Partnership.
He furthered that NovaCopper had expressed a willingness to
participate in the project and had recently completed its
economic analysis of the mine, which was showing positive
results. He furthered that the P3 option would continue to
be looked at and that Alaska Industrial Development and
Export Authority (AIDEA) may take the lead on the project
due to its bonding capabilities.
9:33:25 AM
Senator Ellis asked who NovaCopper was. Mr. Kemp responded
that NovaCopper had recently split from NovaGold. He
believed the company also had the Rock Creek mine in Nome.
He deferred the question to DNR for additional detail.
Senator Ellis asked where the company was from. Mr. Kemp
believed the company was Canadian.
Senator Thomas observed that the project showed great
promise; however, he was concerned about how much the area
had been evaluated and the cost. He pointed to the
International Tower Hill project Livengood; the claims were
located next to the Elliott Highway; therefore, no
assistance had been provided to the company. He emphasized
the importance of identifying resources prior to
construction. He believed the most promising prospects
needed to be determined in conjunction with DNR. He did not
want the state to just spend money hoping for the best. He
understood that the projects had been evaluated, but he
wanted to ensure that the state looked at all resources
throughout Alaska to determine the most economical
approach.
9:36:00 AM
Senator Olson referenced the P3 financing approach and
asked whether AIDEA was involved in the Ambler or Umiat
road projects. Mr. Kemp answered that AIDEA was involved in
the Ambler project and may take the lead in the future due
to its bonding capabilities. Senator Olson asked about the
Umiat road. Mr. Kemp replied that AIDEA was not currently
involved in the Umiat project; the system was different due
to tax credits.
Senator Olson pointed to a concern related to asbestos in
the gravel in the Ambler area. He wondered how the state
would ensure that the road project would not cause the
asbestos to become airborne. Mr. Kemp believed that the
naturally occurring asbestos was primarily near the Ambler
airport. He communicated that DOT would test the material;
it was developing guidelines and working with
Representative Joule and others to come up with a system to
protect the health of anyone who may be exposed to the
gravel.
Mr. Kemp pointed to the Tanana access project on slides 7
and 8. The project was an extension of the Tofty Road that
headed west out of Manley. He relayed that the road would
provide better access to existing and future mines.
Additionally, DOT had received petitions from the community
for road access to Tanana and the state highway system. He
detailed that the plans did not include a bridge; the state
usually required an ice road in the winter and a ferry
service in the summer. The department hoped to obtain
permitting and to begin construction with the $10 million
request. The idea was new and the department would begin
looking at what it would take to construct a road in the
upcoming spring. He continued that the project would begin
with an 18 foot-wide road with turnouts. The department
hoped construction would begin as soon as permits were
obtained.
9:39:22 AM
Co-Chair Hoffman observed that the Tanana project location
included three separate areas of Native patented lands and
wondered whether DOT had heard anything from the Native
corporations related to the project. Mr. Kemp replied that
DOT had not reached that stage in the process and was still
working the issues out. He had seen some of the lots and
did not know whether the Native corporations would grant
the state an easement through the areas. The issue would be
looked at when the project began.
Co-Chair Hoffman stated that land ownership was critical;
the project would not be able to proceed if right-of-ways
were not permitted. He believed that determining the stance
of the landowners should be a high priority. He did not
believe it made sense to spend any money if there was vast
opposition to the project. Mr. Kemp replied that one of the
first things the department did on a project was to base-
map the corridor and determine land ownership along the
route.
Co-Chair Stedman stated that there was a concern that the
state should get a feel for the land ownership prior to
putting too much money into the process.
9:41:20 AM
Senator Thomas looked at the maps included on slides 5 and
7 and observed that DOR was proposing a connection to
Tanana from Tofty and a connection from Nenana up to the
road. He asked why the department believed it needed a
second connection. Mr. Kemp surmised that Senator Thomas
was referencing a road from Nenana to Tanana. Senator
Thomas replied in the affirmative. Mr. Kemp clarified that
the route was an alternative that would be evaluated during
the Ambler EIS process. The department had heard
anecdotally that access from Nenana would be significantly
more expensive than it would be from Manley. A reasonable
range of alternatives would be evaluated. He shared that
there was a potential Roads to Resources project in the
Nenana area heading west; the department would take it
under advisement and would look at all of the facts moving
forward.
Senator Egan observed that the Tanana road would be 54
miles and the current request was for $10 million. He
queried how much the total cost would be for the project.
Mr. Kemp replied that the road currently extended beyond
Tofty Road, but DOT did not know where it ended and
believed it extended upwards of 10 miles. He believed
construction on virgin lands would be approximately 30
miles. The department was hoping the $10 million would
cover clearing the corridor, mapping the right-of-way, and
providing access to enable DOT to evaluate future costs. He
pointed to the Alaska Highway as a model; a basic road had
been built and improvements had been made over
approximately 50 years. He surmised that a similar approach
would be used in the Tanana area. He added that the
approach would be determined and that much more information
would be learned during the NEPA process.
9:44:30 AM
Mr. Kemp discussed slides 9 and 10 titled: "Klondike
Industrial Use Highway (IUH)." The slides included
information on an upgrade to the Klondike Highway between
the U.S. border and Skagway. The map on slide 9 showed all
of the Yukon mineral claims. He stated that there was an
explosion of new developments in the Yukon area. The
department had struggled with how the heavy sulfide mines
would export the ore. He communicated that DOT staff had
recently attended a mineral conference in Vancouver,
British Columbia; they had learned that Skagway was the
common denominator for every mine shown on slide 9. He
elaborated that the ore terminal transfer facility in
Skagway would be the method of moving ore to other parts of
the world. He pointed to the Selwyn mine (located in the
far-east of the Yukon) that would truck the ore 700 miles
to Skagway and would then ship it 7,000 miles to China.
Mr. Kemp shared that for economy the mines would be
switching to much heavier 200,000 pound vehicles from
160,000 pound vehicles. He explained that Alaska's current
bridges could not accommodate the ore haul; there was a
very weak bridge on the Klondike Highway and the pavement
had reached its useful life as well. The project would
bring the highway back up to industry use standards and
would fall under industry use highway regulations. The
state had been charging tolls for permitted loads on the
Klondike Highway for the past 26 years; proceeds had been
reinvested in the highway for bridge and pavement upgrades
and to ensure that ore could be hauled in a cost efficient
manner.
Mr. Kemp reiterated that the bridge could not accommodate
200,000 pound vehicles. Tolls were based on 1985 rates and
would need to be updated. He relayed that the project would
pay for itself. The department had not checked with federal
highways recently, but in 1985 the federal agency would
provide funding to bring roads up to a regular traffic
standard; the IUH funding would increase the standard to
allow the industrial use. The department would check with
federal highways to determine whether they would
participate in the project funding. He shared that the
strategy could be employed in other areas around the state
(e.g. Ambler).
9:48:06 AM
Mr. Kemp turned to slide 11 that included a list of other
potential projects including rare earth, coal, gas, and
rock. A $2 million request in the proposed budget would
enable DOT to evaluate the projects and to present them to
the legislature to determine their feasibility.
Co-Chair Stedman relayed that he had asked Mr. Kemp to take
a look at some of the smaller projects (ranging from $10
million to $20 million) shown on slide 11. He pointed to
the Bokan Mountain Mine (rare earth) and Niblack Mine
access on Prince of Wales as examples. His office had
discussed the projects (including the Katlain Quarry) with
the U.S. Forest Service. He referred to letters of inquiry
from Native corporations with land in the areas that roads
would go through or connect to. He furthered that the
Katlain Quarry road had been initiated by a Native
corporation in Sitka. He had asked DOT to provide
additional detail on the Southeast projects.
9:50:02 AM
Co-Chair Hoffman stated that there were specific projects
with identified value including Donlin Creek, which had
proven reserves in excess of $30 billion. He was surprised
that a project of that size was not included on the
department's list of potential projects. He asked whether
the project was not significant enough to warrant
development. He surmised that the project would provide 400
to 500 jobs and would boost the economy in one area of the
state. He wondered why the project was not on the
department's list and believed it had been ignored.
Mr. Kemp replied that Donlin Creek is owned by NovaCopper.
He furthered that DOT had been told that the state's help
was not needed on the development. Additionally, the
department had been told recently that its help was not
needed on gasline construction at Beluga. The department
was aware of the projects, had asked if help was needed,
and would not get involved unless it was asked to.
Co-Chair Hoffman asked for a copy of the communications.
Senator McGuire asked for any information on potential
smaller road opportunities on the west side of Cook Inlet.
She was surprised that more discussion had not been
included related to the region.
Mr. Kemp responded that the list shown on slide 11 was only
an example of potential projects. He was uncertain about
other projects located in west Cook Inlet and would follow
up with DNR to provide additional information to the
committee.
9:52:59 AM
Senator Olson discussed his previously cited concerns
regarding opposition to proposed projects, specifically the
road to Umiat. He surmised that once millions of dollars
had been spent on a project it became more likely the
development would continue despite any opposition. He asked
about the average length of time it took for the NEPA
process to run its course and for final results to be
obtained.
Mr. Kemp responded that he was not very familiar with the
core NEPA process, which would be used. He shared that the
federal highway NEPA process took an average of 13 years
(taking lawsuits and studies into consideration).
Senator Olson stated that once more and more money had been
used on a project it would not be financially feasible to
consider an alternative route. He wondered about the
department's thoughts on the issue if significant
opposition was maintained. Mr. Kemp answered that DOT
believed the $10 million request for Umiat would be
sufficient for the NEPA process. He surmised that after the
NEPA process a legal process would probably occur if
opposition was maintained.
Senator Olson asked if he could be assured that the
following year there would be no additional funding
requests for the road to Umiat. Mr. Kemp replied that if
"by a miracle" the record of decision and permitting had
been obtained that DOT may request construction funding for
the project the following year. He added that the
likelihood was very low. Senator Olson did not believe that
would happen.
9:54:54 AM
Co-Chair Stedman stated that the success rate on major
access roads in the Southeast had been stalled for 30
years. He mentioned the road out of Juneau and others. He
thought 13 years [in relation to the federal highway NEPA
process] may be optimistic. He communicated that the
lengthy process was one of the reasons that smaller
projects had been looked at for the Southeast region,
specifically the Bokan Mountain Mine and Niblack Mine
access roads. He noted the projects were much smaller than
Donlin Creek.
Mr. Kemp believed it was evident that Alaska's economy was
based on resource extraction. He pointed to the map of the
Yukon (slide 9) and observed that the territory was far
ahead of Alaska due to its reliable, all season road
network that allowed it to access resources. Alaska was
limited to one long, skinny road from the Dalton Highway up
to the petroleum rich area in Prudhoe Bay; there were no
side roads or access to mineral and petroleum deposits. He
stated that Alaska was resource rich, but access poor. He
believed the governor's Road to Resources program was
intended to develop a well thought out surface
transportation network. He opined that it would create
jobs, a good economy, and would enhance the state's
economic viability for a significant period of time.
Co-Chair Stedman shared that the committee would look
forward to additional information from DOT related to
projects throughout the state; the committee would work
with the department over the next several years to move
towards completion on some of the projects. He believed the
entities would also be tasked with prioritizing projects
and locating funding.
Co-Chair Stedman discussed the schedule for the following
meeting.
ADJOURNMENT
9:57:50 AM
The meeting was adjourned at 9:57 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Roads to Resources Final 02.17.12.pdf |
SFIN 2/17/2012 9:00:00 AM |
DOT:Roads to Resources |