Legislature(2007 - 2008)BUTROVICH 205

03/27/2008 01:00 PM Senate TRANSPORTATION


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01:04:29 PM Start
01:08:51 PM Alaska Railroad Overview
02:50:36 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Alaska Railroad Corporation
Financial and Organizational Overview
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                         March 27, 2008                                                                                         
                           1:04 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Albert Kookesh, Chair                                                                                                   
Senator John Cowdery, Vice Chair                                                                                                
Senator Donald Olson                                                                                                            
Senator Bill Wielechowski                                                                                                       
Senator Gary Wilken                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
Alaska Railroad Overview                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to report                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
PAT GAMBEL, President and CEO                                                                                                   
Alaska Railroad Corporation (ARRC)                                                                                              
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Presented an overview of the Alaska                                                                       
Railroad.                                                                                                                       
                                                                                                                                
WENDY LINDSKOOG, Assistant Vice President                                                                                       
Corporate Affairs                                                                                                               
ARRC                                                                                                                            
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Answered question on the Alaska Railroad.                                                                 
                                                                                                                                
PHYLLIS JOHNSON, Vice President                                                                                                 
Legal and General Counsel                                                                                                       
Alaska Railroad Corporation                                                                                                     
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Answered question on the Alaska Railroad.                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR ALBERT  KOOKESH called  the Senate  Transportation Standing                                                             
Committee meeting to order at 1:04:29  PM. Present at the call to                                                             
order  were Senators  Cowdery,  Olson,  Wilken, Wielechowski  and                                                               
Kookesh.                                                                                                                        
                   ^ALASKA RAILROAD OVERVIEW                                                                                
                                                                                                                                
CHAIR KOOKESH announced an overview of the Alaska Railroad.                                                                     
                                                                                                                                
1:08:51 PM                                                                                                                    
PATRICK  GAMBEL President  and CEO,  Alaska Railroad  Corporation                                                               
(ARRC),  said  the  ARRC  was spun  off  as  a  quasi-independent                                                               
corporation through  the Alaska Railroad Transfer  Act (ARTA) and                                                               
its employees  get their  pay and benefits  from the  earnings of                                                               
the railroad,  not the  general fund. It  has dock  facilities in                                                               
Seward, Whittier, Anchorage and Seattle.                                                                                        
                                                                                                                                
MR.  GAMBEL  said  the  mission   of  the  railroad  is  economic                                                               
development  on  a  sustainable  basis. Page  6  of  his  handout                                                               
illustrated  the ways  the railroad  contributes  to the  state's                                                               
economy;  page 7  covered  the  sources of  revenue;  and page  8                                                               
indicated  train movements  and tonnage.  He said  that passenger                                                               
service was up to over 500,000  in 2007. Page 9 shows the freight                                                               
revenue mix.  The ARMS/CNR segment is  the railroad's ocean-going                                                               
barge  service between  Seattle and  Whittier and  Prince Rupert,                                                               
Canada. The export of coal as a revenue source has fluctuated.                                                                  
                                                                                                                                
Mr. GAMBEL said  page 11 showed how  the railroad's approximately                                                               
36,000 acres  is distributed. Approximately  half of  the acreage                                                               
could  be leased  to  generate  revenue although  some  of it  is                                                               
pretty remote.  An entire department  is responsible for  the use                                                               
of that property. Pages 12 and  13 demonstrated the flow of money                                                               
and how it works for the railroad.                                                                                              
                                                                                                                                
1:14:39 PM                                                                                                                    
He said  that federal funds  appropriated to the  Alaska Railroad                                                               
do  not affect  federal  funding for  other state  transportation                                                               
projects  and   that  ARRC  matches  federal   dollars  with  its                                                               
corporate earnings.  The railroad is  not part of  the Department                                                               
of  Transportation and  Public Facilities  (DOTPF)  or the  state                                                               
transportation  plan. The  total federal  grant expenditure  over                                                               
the last five years is approaching $0.5 billion.                                                                                
                                                                                                                                
MR. GAMBEL  said pages 14-15  show trends and patterns  from 2002                                                               
to 2007  and that the  railroad's capital investments  are robust                                                               
at about $1  billion. The number of employees  has not increased,                                                               
but they  are working  overtime, so figures  look like  more were                                                               
added.  The  fleet   has  50  percent  new   locomotives  and  an                                                               
increasing number of passenger coaches.                                                                                         
                                                                                                                                
Being a state railroad and  moving passengers makes ARRC eligible                                                               
for a variety of  funds, he said. It does not  rely on one single                                                               
source,   such   as   earmarks.  In   the   last   transportation                                                               
authorization  bill (Telecommunications  Industry  Liaison  Unit),                                                              
the railroad  worked hard to reduce  its match from 20  down to 9                                                               
percent.  It  then  got the  Federal  Transit  Administration  to                                                               
recognize that  the ARRC  passenger miles  were much  higher than                                                               
the  railroad  was  given  credit for.  This  gave  the  railroad                                                               
millions of dollars more per  year. He reported that the earmarks                                                               
were  lost  exactly  the  year predicted  and  the  railroad  had                                                               
already  transferred  over  to  the  federal  formula  system  of                                                               
entitlements given to  every railroad that moves  passengers on a                                                               
regular basis.                                                                                                                  
                                                                                                                                
1:21:56 PM                                                                                                                    
MR. GAMBEL  said pages  17-18 showed more  use of  railroad funds                                                               
including real  estate development,  renovations and  upgrades of                                                               
WWII buildings, parking lots, and  trail improvements. Page 19-20                                                               
showed the  state of the  benefit trusts funds  as of the  end of                                                               
2007; the  pension fund  is more  than fully  funded at  about $9                                                               
million and the retired medical  trust that was empty three years                                                               
ago  is  now 71  percent  funded.  Pages 21-22  demonstrated  the                                                               
safety  of the  railroad -  the best  year being  2006. A  lot of                                                               
energy and  dollars go into  maintaining safety. Part of  that is                                                               
maintaining a  healthy work force  that goes home every  night to                                                               
their families.                                                                                                                 
                                                                                                                                
MR.  GAMBEL  said  security  in  the  railroad  before  9/11  was                                                               
essentially the  railroad police looking for  vandals. After 9/11                                                               
security became a federal mandate  and the ARRC hired a full-time                                                               
security officer. It must have  tested and approved plans for all                                                               
places where  the Coast  Guard has  jurisdiction, but  it doesn't                                                               
yet have  sniffing dogs or  technology that can  detect molecules                                                               
that may indicate  problems. The railroad received  $1 million in                                                               
federal  grants  to  improve  security  with  things  like  smart                                                               
cameras, a track watch program, and cipher locks.                                                                               
                                                                                                                                
1:29:15 PM                                                                                                                    
Page  24 indicated  the second  five-year plan.  An audit  of the                                                               
railroad indicated that  costs should be controlled  so the board                                                               
looked at  every effort. Page  26 shows adjusted net  income from                                                               
operations.  Corporate  net income  was  good  and the  operating                                                               
ratio  was lower  than  the year  before. But  what  needs to  be                                                               
improved is  the core business  of operating trains.  Pages 28-29                                                               
had  a  re-forecast the  railroad's  budget.  In the  process  of                                                               
creating  a good  budget, the  railroad  found out  what kind  of                                                               
effort was needed to go after  improved numbers. As a result, the                                                               
adjusted net income  from operations took a  positive swing ($6.9                                                               
million) as  did the adjusted  operating ratio. The  expense side                                                               
went  down  $4.3 million  and  included  positions eliminated  by                                                               
attrition.  Three  management  positions were  reclassified  from                                                               
expense to  capital as well  and were  being paid out  of federal                                                               
project  funds.  One  assistant vice  presidential  position  was                                                               
downgraded  to director  and  another will  be  deleted when  the                                                               
holder leaves.                                                                                                                  
                                                                                                                                
MR.  GAMBEL said  page 31  showed management's  cost cutting  for                                                               
2008.                                                                                                                           
1:36:28 PM                                                                                                                    
Page 34  shows the 2008 capital  budget; the first two  months of                                                               
it are in  and shows that the railroad is  significantly ahead of                                                               
it.  The  track  rebuilding  program   is  designed  to  go  from                                                               
Anchorage  to  Fairbanks and  to  be  completed  in 2012.  It  is                                                               
already ahead of schedule in its third year.                                                                                    
                                                                                                                                
Page  35 had  the five-year  capital budget.  Projects include  a                                                               
Seward  freight  dock  expansion   and  passenger  dock  rebuild,                                                               
improved air quality  at the coal loading facility  and a rebuilt                                                               
wharf  at  Whittier's  intermodal  passenger  facility  that  can                                                               
handle  any ocean-going  ship. The  Chugach  Forest Whistle  Stop                                                               
Service will share new self-propelled  Diesel Multiple Unit (DMU)                                                               
cars  with the  Forest  Service. The  railroad  will have  summer                                                               
service to  the glacier and  other stops  for people who  want to                                                               
get  out  to  the  backcountry and  winter  service  through  the                                                               
Anchorage and Valley areas all the  way to Girdwood. The DMU cars                                                               
will be used  in the winter when the Forest  Service doesn't need                                                               
them and  run to  places like  Diamond Center  Airport, Girdwood,                                                               
and Palmer for State fair days.                                                                                                 
                                                                                                                                
Page  38 showed  Anchorage  projects  including refurbishing  the                                                               
depot and the track and utility  work which is already done. Page                                                               
39  showed MatSu  projects with  the rail  extension out  of Port                                                               
Mackenzie at  the top of the  list. The railroad is  a contractor                                                               
on that  project, but the  borough is the  owner and has  its own                                                               
project  manager. Legally  the railroad  deals  with the  Surface                                                               
Transportation Board that has to approve the extension.                                                                         
                                                                                                                                
MR.  GAMBEL  said page  40  listed  Fairbanks projects  and  that                                                               
included  blasting   around  tunnels  because  it   was  becoming                                                               
difficult  to  get the  taller  and  wider trains  through  their                                                               
clearances. One  tunnel partially  collapsed and an  employee was                                                               
injured.                                                                                                                        
                                                                                                                                
The railroad received  $44 million for the  Tanana Bridge project                                                               
south of  Fairbanks. It will  be Alaska's biggest bridge  and the                                                               
state  has not  had  to  use any  state  funds.  The railroad  is                                                               
working hard to get the initial  funds for the first phase of the                                                               
Fairbanks Freight  Rail Realignment. The Healy  Canyon repair and                                                               
line  rebuilding  has  been mostly  accomplished,  a  challenging                                                               
project with its loose rock.                                                                                                    
                                                                                                                                
MR. GAMBLE  said page  42 began the  delineation of  the benefits                                                               
package.                                                                                                                        
                                                                                                                                
1:44:02 PM                                                                                                                    
SENATOR WIELECHOWSKI  said he's  heard concerns about  being able                                                               
to cross tracks to get to fishing streams and hunting grounds.                                                                  
                                                                                                                                
MR. GAMBEL  replied that  it is  a tough  issue. As  people began                                                               
buying property  outside of towns,  in order  to get to  the road                                                               
they needed  to cross the  railroad tracks. Developers  have told                                                               
buyers that  it's not a  problem because the railroad  will build                                                               
them  a crossing,  but the  railroad never  had any  intention of                                                               
building even one.                                                                                                              
                                                                                                                                
Years ago  a committee was  established to look at  every request                                                               
on  a  case-by-case basis.  Nationally,  he  said, railroads  are                                                               
trying to  close crossing; for instance,  the Burlington Northern                                                               
closed over 400 crossings in  2007 because of accidents and risk.                                                               
A  crossing  needs  to  belong   to  an  entity  that  will  take                                                               
responsibility  for it  rather than  having an  "orphan crossing"                                                               
where  a road  has appeared  and crossed  the tracks  as happened                                                               
many  years ago.  It  costs about  $3,000 a  year  to maintain  a                                                               
normal   crossing  and   if   an  entity   like   a  town   takes                                                               
responsibility  for a  crossing  and funds  the maintenance,  the                                                               
railroad will permit it.                                                                                                        
                                                                                                                                
SENATOR OLSON  asked how many  crossings have been closed  in the                                                               
recent past.                                                                                                                    
                                                                                                                                
WENDY  LINDSKOOG, Assistant  Vice  President, Corporate  Affairs,                                                               
ARRC,  replied  that  maybe  two or  three  crossings  have  been                                                               
closed. She said she would get back with an exact number.                                                                       
                                                                                                                                
SENATOR OLSON asked when they were closed.                                                                                      
                                                                                                                                
MR. GAMBEL replied that one closed in Fairbanks last year.                                                                      
                                                                                                                                
MS. LINDSKOOG said one was in North Pole.                                                                                       
                                                                                                                                
SENATOR OLSON asked  what provisions are in place  for people who                                                               
own  property or  have  an  interest on  the  other  side of  the                                                               
tracks.                                                                                                                         
                                                                                                                                
MR. GAMBEL  replied the railroad  tries to work  with development                                                               
people,  but  it is  a  tough  problem  because they  want  their                                                               
crossing locations changed.                                                                                                     
                                                                                                                                
SENATOR OLSON asked about the Ruby  crossing. He said he was sure                                                               
that people  have some type of  investment on the other  side and                                                               
asked what provisions are in place if that's the case.                                                                          
                                                                                                                                
MR. GAMBEL replied that the  Ruby crossing was an orphan crossing                                                               
and was access to an  industrial area for one particular company.                                                               
The railroad  made a provision  to open  it if someone  needed to                                                               
bring a bulk item across, but for  the rest of the time it needed                                                               
to be closed.                                                                                                                   
                                                                                                                                
SENATOR OLSON  said that having  been in business himself,  if he                                                               
were fabricating something he would expect to have access.                                                                      
                                                                                                                                
MR. GAMBEL responded  that the company only  moves things through                                                               
there  two or  three  times a  year, and  the  railroad has  made                                                               
accommodations to allow for that.                                                                                               
                                                                                                                                
SENATOR OLSON asked  what the difference was between  a spur line                                                               
and a main line.                                                                                                                
                                                                                                                                
MR. GAMBEL replied that the  railroad doesn't own spur lines; the                                                               
customer  owns  the spur  line  and  usually contracts  with  the                                                               
railroad to  either maintain  it or even  build it.  The railroad                                                               
does own the mainline.                                                                                                          
                                                                                                                                
SENATOR OLSON asked if the real  estate is owned by the customer,                                                               
including the right-of-way.                                                                                                     
                                                                                                                                
MR. GAMBEL replied that's correct.  It's their property and their                                                               
responsibility  to  maintain  the   track  according  to  federal                                                               
standards provided by the railroad.                                                                                             
                                                                                                                                
1:52:52 PM                                                                                                                    
SENATOR WILKEN  asked in  reference to page  20 how  ARRC reached                                                               
the  decision in  2005 to  contribute to  retirement and  if that                                                               
would always be a line item in the budget.                                                                                      
                                                                                                                                
MR. GAMBEL  replied that  the obligation was  very small  in 1985                                                               
and in the early days  the railroad just "cash-flowed" anyone who                                                               
retired or  became ill. By  2005 the cash  flow began to  add up.                                                               
The railroad  made one contribution  of $600,000 or  $700,000 for                                                               
this purpose specifically between 1985 and  2005. It was not to a                                                               
federally-recognized account,  just a bank  account. By  2005 the                                                               
railroad was making  money and felt it had an  obligation to keep                                                               
its promise  to its employees so  it began putting money  in this                                                               
account  on a  regular basis  in order  to fully  fund it.  It is                                                               
currently at  71 percent  and will hopefully  be fully  funded in                                                               
the next three years.                                                                                                           
                                                                                                                                
SENATOR WILKEN  asked for confirmation  that this  would continue                                                               
to be a cost of doing business.                                                                                                 
                                                                                                                                
MR. GAMBEL replied  that the railroad would be able  to pull back                                                               
a little once it is fully funded.                                                                                               
                                                                                                                                
SENATOR WILKEN asked who is going  to build and pay for the MatSu                                                               
spur line.                                                                                                                      
                                                                                                                                
MR. GAMBEL  replied the railroad  would build it and  the borough                                                               
would identify  sources to  pay for  it. He  said there  was some                                                               
talk that the state might want to invest in it.                                                                                 
                                                                                                                                
SENATOR  WILKEN  asked if  the  product  to  be hauled  had  been                                                               
identified.                                                                                                                     
                                                                                                                                
MR. GAMBEL replied  that it's a project with a  lot of potential.                                                               
The  oil  companies  have  talked with  the  railroad  about  the                                                               
possibility  of  using  rail  at   Port  Mackenzie  but  in  very                                                               
preliminary   ways.  UAF   (University   of  Alaska,   Fairbanks)                                                               
published  a study  of Interior  development projects  that might                                                               
make use of it.                                                                                                                 
                                                                                                                                
SENATOR WILKEN  asked if the  railroad had decided  what products                                                               
it is going to haul or revenue  stream it will use to support any                                                               
debt. He  also mentioned a  presentation on the Knik  Arm Bridge.                                                               
According to  the presentation, the  railroad had no  interest in                                                               
participating because of the cost. He asked if it was true.                                                                     
                                                                                                                                
MR. GAMBEL replied that the  railroad had been very interested in                                                               
the Knik  Arm Bridge when it  was talked about as  a concept, but                                                               
when TILU was  in its final stages U.S.  Representative Don Young                                                               
called and  said the cost  of attaching rail  to it was  too much                                                               
and  would have  to  be  cut from  the  project.  That ended  the                                                               
railroad's interest.                                                                                                            
                                                                                                                                
SENATOR WILKEN  went to page  41 and said  he has been  told that                                                               
the  state would  have to  contribute around  $20 million  to $50                                                               
million to the Tanana Bridge.                                                                                                   
                                                                                                                                
MR. GAMBEL replied that the Tanana  Bridge was a component of the                                                               
original line  extension to Delta  Junction that has been  in the                                                               
works  for five  years.  The railroad  got  preapproval for  $500                                                               
million in  tax free  bonds to  finance the  project if  the Army                                                               
budget  could  pay  the  debt  service.  Then  a  lot  of  things                                                               
happened. After 9/11  the Army decided it could  no longer afford                                                               
it. The railroad decided that  the most important thing about the                                                               
project  was the  ability  to cross  the river  year  round on  a                                                               
predictable   basis.   The    railroad   had   already   received                                                               
Environmental Impact  Statement (EIS)  money for the  entire line                                                               
extension.  So it  looked good  and  once the  Army declared  the                                                               
bridge a requirement, the first  installment of the Department of                                                               
Defense (DOD) funding, approximately $44 million, was put forth.                                                                
                                                                                                                                
In  the meantime  the  railroad had  been  designing the  bridge.                                                               
Everybody  agreed  this was  going  to  be Alaska's  bridge  from                                                               
Canada to Fairbanks  and wherever. In order to do  that the 3,600                                                               
ft. bridge  design had to  retain the complexity for  the grades,                                                               
the approaches, as well as the strength to accommodate it all.                                                                  
                                                                                                                                
So  they  had  the  first  increment  and  about  that  time  our                                                               
Washington delegation started picking up  on the drumbeat that if                                                               
the state  contributed to some  of these  projects it would  be a                                                               
whole lot easier for it to get some federal money.                                                                              
                                                                                                                                
2:02:17 PM                                                                                                                    
MR. GAMBEL  speculated if the state  did kick in for  the bridge,                                                               
it still would require a lot of  DOD money and the rail line ends                                                               
up at Moose  Creek leaving 18 or  20 miles to get  to the bridge.                                                               
The state's  contribution could link the  end of the rail  to the                                                               
bridge and then  DOD could buy the bridge portion.  The DOD could                                                               
then use the  train to cross the river and  deposit troops on the                                                               
other side - it would be a  complete project. So it may be worthy                                                               
of a contribution from the state.                                                                                               
                                                                                                                                
SENATOR WILKEN said this bridge is more like an elevated road.                                                                  
                                                                                                                                
MR. GAMBEL added to keep the  bridge secure in a river that tries                                                               
to wander every year on its  own, the engineers do what is called                                                               
"training the  river." An Army Corps  of Engineers-approved sheet                                                               
pile project  would be installed  on both  sides of the  river to                                                               
freeze  the  sides  and  protect  against  erosion  and  changing                                                               
course. It  would also benefit the  people on the Salcha  side in                                                               
terms of flood control.                                                                                                         
                                                                                                                                
SENATOR COWDERY asked how much  revenue the airport rail facility                                                               
produces.                                                                                                                       
                                                                                                                                
MR.  GAMBEL  replied  that  it's  in the  hole  a  lot  with  the                                                               
utilities kept on all winter.                                                                                                   
                                                                                                                                
SENATOR COWDERY  said that has  caused a bit of  contention since                                                               
it  was built.  He asked  how  many vehicles  use the  railroad's                                                               
roads.                                                                                                                          
                                                                                                                                
MR. GAMBEL replied about 200.                                                                                                   
                                                                                                                                
SENATOR COWDERY asked if the railroad pays taxes.                                                                               
                                                                                                                                
MR. GAMBEL replied  the railroad does not pay tax  because it was                                                               
exempted as a state enterprise.                                                                                                 
                                                                                                                                
SENATOR COWDERY asked how many are  on the railroad board and who                                                               
they are.                                                                                                                       
                                                                                                                                
MR. GAMBEL  replied there are  seven board members. The  chair is                                                               
John  Binkley  and  the vice-chair  is  Governor  Sheffield.  The                                                               
others are  Mayor Menard from  MatSu, Commissioner Von  Shaven of                                                               
DOTPF,  Commissioner  Noti  from   the  Department  of  Commerce,                                                               
Community & Economic Development,  Jack Burton, and Ori Williams,                                                               
former president of Doyon.                                                                                                      
                                                                                                                                
SENATOR COWDERY  asked if the  railroad is  set up to  carry pipe                                                               
for the potential gas pipeline.                                                                                                 
                                                                                                                                
MR. GAMBEL  replied that the  route is  set up, but  the railroad                                                               
may  need  more equipment.  It  has  already straightened  track,                                                               
completed  resurfacing and  rebuilt  a lot  of  its 160  railroad                                                               
bridges. The principle focus is to be ready for a gas pipeline.                                                                 
                                                                                                                                
2:08:53 PM                                                                                                                    
SENATOR COWDERY  asked why  the railroad  isn't on  the executive                                                               
budget.                                                                                                                         
                                                                                                                                
MR. GAMBEL replied  that there were probably many  reasons in the                                                               
beginning, but from  his perspective the spin-off  from the state                                                               
that was done to make this  a business enterprise has worked well                                                               
since 1985. The legacy of  not being taxed ensured the railroad's                                                               
ability to  sustain itself as  well as having usable  real estate                                                               
and the  wherewithal to  be market  responsive and  flexible. The                                                               
idea was  that the  railroad would  make a  profit that  would be                                                               
rolled  back into  it and  the  state coffers  - as  well as  the                                                               
communities along the rail belt.                                                                                                
                                                                                                                                
SENATOR  COWDERY  asked  if  the  public  is  aware  of  all  the                                                               
railroad's  transactions and  the salaries  of its  employees. He                                                               
asked if it was available online.                                                                                               
                                                                                                                                
MR. GAMBEL  replied that  only his  salary was  available online.                                                               
Railroad employees are not state  employees. As a self-sufficient                                                               
business enterprise  of the  state, the  privacy of  employees is                                                               
respected.                                                                                                                      
                                                                                                                                
SENATOR COWDERY asked if Mr. Gambel negotiated contracts.                                                                       
                                                                                                                                
MR. GAMBEL replied  that the railroad was directed  to follow the                                                               
state procurement  and ethics rules  and put out an  RFP (Request                                                               
for Proposal) when seeking contractors.                                                                                         
                                                                                                                                
SENATOR WIELECHOWSKI asked if Mr.  Gambel had an opinion on using                                                               
the  railroad's right-of-way  to  build a  bullet  line from  the                                                               
North Slope to South Central.                                                                                                   
                                                                                                                                
MR. GAMBEL replied that the railroad  has a history of talking to                                                               
corporations  about it.  The  railroad is  an  instrument of  the                                                               
state in  terms of development and  this is right down  its alley                                                               
if it can offer a right-of-way in a productive and safe way.                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI asked the status  of the land that no longer                                                               
has railroad tracks on it.                                                                                                      
                                                                                                                                
MR.  GAMBEL replied  that  the railroad  works  out an  agreement                                                               
about  moving track  and an  exchange of  land if  property of  a                                                               
specific  entity   is  involved.   The  situation   becomes  more                                                               
difficult where track  has not been used for a  long time and the                                                               
right  of way  is  eroded and  has fallen  into  the river.  This                                                               
happened in Palmer  with the Matanuska River.  Another problem is                                                               
presented by Phase 1 of the  bypass in Fairbanks which goes right                                                               
through  the  center  of  the  North Pole.  Since  the  town  was                                                               
homesteaded even before  the railroad in 1914,  there were former                                                               
landowners.  When the  federal government  gave the  railroad its                                                               
exclusive right-of-way, it could use  it as a landowner, but once                                                               
it was  vacated, a provision in  the ARTA provides for  that land                                                               
to be reverted.                                                                                                                 
                                                                                                                                
2:16:06 PM                                                                                                                    
He explained that provision was  repealed because giving the land                                                               
back caused  some real problems.  Many people claimed  they owned                                                               
the land and fighting in court  could have gone on for years. For                                                               
instance,  the borough  wanted  to put  a  recreational trail  up                                                               
through  the old  right-of-way. The  railroad tried  to create  a                                                               
means whereby the railroad could give  the land back to the state                                                               
and  then the  state  could adjudicate  who  the former  adjacent                                                               
landowners were  and revert the  land back to them.  That process                                                               
is currently underway.  It is the railroad's  intention to return                                                               
unused property; it just needed to find a way to do it.                                                                         
                                                                                                                                
SENATOR OLSON asked if it's  now standard practice to request 200                                                               
feet of easement, 100 feet on either side of the railroad.                                                                      
                                                                                                                                
MR. GAMBEL replied that it is the standard right-of-way.                                                                        
                                                                                                                                
SENATOR OLSON asked how long it has been 200 feet.                                                                              
                                                                                                                                
MR. GAMBEL replied it has been  that way since it was deeded over                                                               
to the railroad.                                                                                                                
                                                                                                                                
SENATOR OLSON  asked if there  were areas  that did not  have 200                                                               
feet.                                                                                                                           
                                                                                                                                
MR. GAMBEL replied yes.                                                                                                         
                                                                                                                                
SENATOR OLSON asked where.                                                                                                      
                                                                                                                                
MR. GAMBEL called on Phyllis Johnson to answer.                                                                                 
                                                                                                                                
PHYLLIS  JOHNSON,  Vice  President, Legal  and  General  Counsel,                                                               
Alaska  Railroad  Corporation (ARRC),  replied  that  one of  the                                                               
military  bases up  north didn't  have  a 200-foot  right-of-way,                                                               
part of the Anchorage International  Airport and a stretch on the                                                               
outskirts  of downtown  Anchorage. She  said there  may be  a few                                                               
others areas.                                                                                                                   
                                                                                                                                
SENATOR OLSON asked if all land  given to the railroad was deeded                                                               
over from ARTA. He really wanted to  know if ARRC owns the two or                                                               
three railroads ran out of Nome  over 100 years ago and he wanted                                                               
to know if ARRC still owned that land.                                                                                          
                                                                                                                                
MR. GAMBEL replied no.                                                                                                          
                                                                                                                                
SENATOR  OLSON went  back  to the  reversionary  clause that  was                                                               
repealed and asked  if that meant the  governor could redesignate                                                               
who it belonged to or after a period  of time it would go back to                                                               
the adjacent owners or whoever owned it before.                                                                                 
                                                                                                                                
MR. GAMBLE responded  the period of time before  reversion was 18                                                               
years.                                                                                                                          
                                                                                                                                
SENATOR OLSON asked why that was repealed.                                                                                      
                                                                                                                                
MR. GAMBEL explained what brought it  to a head was that the City                                                               
of Palmer wanted to build  a recreational trail starting downtown                                                               
on  a median  park strip  that  was railroad  right-of-way -  but                                                               
trees were growing up where the  tracks used to be. The right-of-                                                               
way  used to  access a  coal  field. ARRC  asked the  City if  it                                                               
really wanted  80-car coal trains  running through the  middle of                                                               
the town like  the old days and they said  it would never happen.                                                               
This is  a good example  of the railroad  never needing to  use a                                                               
right-of-way again and  it had to decide the best  way to dispose                                                               
of  that  state  land.  The   ARTA  gave  the  railroad  specific                                                               
authority to deal it and  to have fiduciary responsibility - much                                                               
like Department of Natural Resources (DNR).                                                                                     
                                                                                                                                
2:21:23 PM                                                                                                                    
The  18-year mark  was approaching  and  the adjacent  landowners                                                               
were all lined up  to fight it out; it was  clear the borough and                                                               
the city  would never  get that property.  The reversion  act was                                                               
the  problem and  repealing it  created  time to  deal with  this                                                               
property  and  other similar  situations.  The  railroad got  the                                                               
federal  language changed  to delete  reversion  after 18  years.                                                               
Subsequently the property was turned over  to the city and it has                                                               
become a recreational route.                                                                                                    
                                                                                                                                
SENATOR  OLSON said  that sounds  like the  government has  taken                                                               
private property  and used it  for a railroad initially  and then                                                               
didn't want to  give it back to the people  that originally owned                                                               
it  and he  had  a  problem with  that.  It  sounds like  there's                                                               
collusion  between the  governments against  the landowners  that                                                               
used to own that area. He  asked if the railroad would be opposed                                                               
to putting the reversionary clause back in.                                                                                     
                                                                                                                                
MR. GAMBEL replied the federal  language would have to be changed                                                               
to do that.                                                                                                                     
                                                                                                                                
SENATOR OLSON  remarked that he  thought things could be  done on                                                               
the state  level to address some  of the problems, but  he didn't                                                               
see a mechanism to give property back to private landowners.                                                                    
                                                                                                                                
MR.  GAMBLE responded  the good  news is  that the  percentage of                                                               
land  being  discussed  is  very   small  and  clustered  in  the                                                               
Fairbanks area. The  railroad is trying to live up  to the spirit                                                               
and  intent  of  what  the  state had  intended  with  regard  to                                                               
reversion. If the railroad doesn't  need the property, it must be                                                               
disposed returned  to the state  or the landowners.  The railroad                                                               
didn't know  what the  state's position would  be in  North Pole.                                                               
The  best they  could figure  is to  revert the  property to  the                                                               
state  and then  it's the  state's responsibility  to figure  out                                                               
which landowner it eventually reverts to.                                                                                       
                                                                                                                                
SENATOR OLSON said  he could see problems with  people not having                                                               
access  to land  because of  no crossings,  but a  bigger problem                                                               
exists when  the railroad doesn't  provide access to  its outside                                                               
land.                                                                                                                           
                                                                                                                                
MR. GAMBEL  replied, "We  owe a  crossing in  that case"  and the                                                               
extension in MatSu  is a good example. If that  rail line was run                                                               
40  miles  north  without  any crossings,  it  would  create  the                                                               
situation  Senator Olson  was talking  about. In  that plan,  the                                                               
railroad would  have to  pay for those  crossings. They  would be                                                               
either "split-grade" or "at-grade"  depending on what the traffic                                                               
would   bear  and   what's  affordable.   The   railroad  has   a                                                               
responsibility  to allow  people  access to  their property.  The                                                               
problem arises when  the railroad was there first  and the people                                                               
came in  later, bought the  property on  the other side  and want                                                               
their own crossing but don't want to pay for it.                                                                                
                                                                                                                                
SENATOR OLSON asked how often  that has happened compared to when                                                               
people owned the land before the railroad.                                                                                      
                                                                                                                                
MR. GAMBEL  replied that  most of  the cases  they deal  with are                                                               
people wanting access after the railroad has been built.                                                                        
                                                                                                                                
SENATOR  OLSON asked  for an  overview of  safety and  the health                                                               
benefits plan,  and when the  last accident was that  resulted in                                                               
death or a serious problem.                                                                                                     
                                                                                                                                
MR. GAMBLE replied the last injury  in the past seven years since                                                               
he's been  with the  railroad was a  crushing injury  in Whittier                                                               
when rail cars were  being moved on and off the  barge and in the                                                               
mid-90s,  an employee  was  fatally  injured on  a  cat by  being                                                               
pushed into  Turnagain Arm by a  snow slide. He was  not aware of                                                               
any before that.                                                                                                                
                                                                                                                                
SENATOR OLSON asked what the railroad  has done to make sure this                                                               
doesn't happen again.                                                                                                           
                                                                                                                                
2:28:32 PM                                                                                                                    
MR. GAMBEL  replied the  railroad spends  a lot  of time  on risk                                                               
mitigation and  close-call analysis. The whole  safety culture of                                                               
the railroad is built around  prevention. It has cancelled trains                                                               
because the snowfall was unstable  and has an avalanche expert on                                                               
staff.  It  uses  acoustical  and  laser  censors  and  tries  to                                                               
determine here  the next big  problem might arise.  Whittier, for                                                               
example, is a  tough and dangerous place to operate  and the only                                                               
alternative  to  sometimes  stopping operations  entirely  is  to                                                               
reduce the  risk to  the greatest  extent possible.  The railroad                                                               
has  basically  eliminated all  serious  injuries  over the  past                                                               
several years.                                                                                                                  
                                                                                                                                
SENATOR OLSON commended the railroad  and said he assumed the man                                                               
involved in the  crushing accident and the family of  the man who                                                               
was killed were taken care of.                                                                                                  
                                                                                                                                
MR. GAMBEL replied  the state did the best it  could and followed                                                               
the  law, but  the crushed  victim would  never be  the same.  He                                                               
didn't know the man's insurance situation.                                                                                      
                                                                                                                                
CHAIR KOOKESH  asked what  happened to the  train master  who was                                                               
not  entirely  truthful  in  his  statement  after  the  Whittier                                                               
accident.                                                                                                                       
                                                                                                                                
MR. GAMBEL replied  that it was difficult to determine  if he was                                                               
truthful or  not. It was a  panic situation with a  lot of people                                                               
talking on the  radio and yelling and trying to  untangle who was                                                               
saying what was difficult.                                                                                                      
                                                                                                                                
CHAIR KOOKESH asked  Mr. Gambel what his conclusion  was since he                                                               
had been there.                                                                                                                 
                                                                                                                                
MR. GAMBEL replied the supervisor was disciplined.                                                                              
                                                                                                                                
CHAIR KOOKESH asked in what way.                                                                                                
                                                                                                                                
MR. GAMBEL replied that the man  was not a state employee and Mr.                                                               
Gambel would  rather not get  into the privacy of  how management                                                               
acted.                                                                                                                          
                                                                                                                                
CHAIR  KOOKESH said  he was  not talking  about a  name, just  an                                                               
incident.                                                                                                                       
                                                                                                                                
SENATOR OLSON said  the last thing he wanted was  to have someone                                                               
significantly  injured, and  judging from  what Mr.  Gambel said,                                                               
the injured  man is not satisfied  with what he got.  He asked if                                                               
all the supervisor got as a result was a reprimand.                                                                             
                                                                                                                                
MR.  GAMBEL  said  the  situation   was  quite  complicated.  The                                                               
supervisor was not reprimanded for  the crushing incident. He was                                                               
reprimanded  because the  employee committed  an unsafe  act five                                                               
minutes before the  accident and had he been  disciplined at that                                                               
moment, the  accident would  have been  avoided. The  manager did                                                               
not call  the employee  on his error  and the  employee committed                                                               
the  unsafe  act  a  second  time, which  is  when  the  accident                                                               
occurred. The  employee had stepped  between two cars,  a totally                                                               
unacceptable action. He continued:                                                                                              
                                                                                                                                
     The manger instead  said, I thought I saw  him do that,                                                                    
     I  wasn't real  sure so  I'm  going to  watch him  more                                                                    
     closely.  He  watched him.  They  got  into the  second                                                                    
     piece  of  this  thing.   The  incident  happened.  The                                                                    
     manager  was yelling.  There  was a  guy  on the  barge                                                                    
     yelling. They were  talking over the radio.  It was all                                                                    
     happening like that  and nobody knows who  said what to                                                                    
     who and whether or not  it would have happened. So it's                                                                    
     impossible  to  untangle  a  momentary  situation  like                                                                    
     that.  But it  was clear  that five  minutes before  we                                                                    
     could have  prevented that accident.  That is  what the                                                                    
     manager was disciplined for.                                                                                               
                                                                                                                                
2:34:50 PM                                                                                                                    
SENATOR WILKEN  mentioned that Ms. Walstead  who has reversionary                                                               
issues with the railroad was present  at the meeting. He said she                                                               
supplied 10  questions to the  committee. He asked  Chair Kookesh                                                               
if the committee could request  the answers to those questions in                                                               
writing.                                                                                                                        
                                                                                                                                
CHAIR KOOKESH agreed to do that.                                                                                                
                                                                                                                                
SENATOR  WILKEN said  he  thought the  answers  to the  questions                                                               
might facilitate understanding of this issue.                                                                                   
                                                                                                                                
MR.GAMBEL  said the  railroad has  had a  long dialogue  with Ms.                                                               
Walstead. He  said she's a good  example of what the  railroad is                                                               
trying  to do  in  terms of  reverting property  back  and he  is                                                               
hopeful  her family  will receive  the  satisfaction they  desire                                                               
regarding  this  issue. He  said  he'd  be  happy to  answer  the                                                               
questions she has provided.                                                                                                     
                                                                                                                                
CHAIR  KOOKESH asked  Mr. Gamble  to describe  the percentage  of                                                               
Alaska  hire  on the  railroad.  He  had  read  that one  of  the                                                               
requirements  for  railroad  employment   is  having  worked  for                                                               
another railroad before applying to  AARC and since there is only                                                               
one railroad in Alaska, he asked  how one gets experience if they                                                               
don't come from out of state.                                                                                                   
                                                                                                                                
MR. GAMBEL  replied that Alaska hire  for the past five  to seven                                                               
years has been at about  90 percent overall. Fifteen managers and                                                               
86 union  employees were hired in  2006; 2 in each  category were                                                               
from out of  state. In 2007, 8  of 16 managers and 7  of 70 union                                                               
members were hired from out of state.                                                                                           
                                                                                                                                
2:38:53 PM                                                                                                                    
One issue that  drives hiring from out of state  is the quest for                                                               
individuals who  have specific expertise  that is  unavailable in                                                               
Alaska. For example, the railroad  needed expertise in a piece of                                                               
technology that  will go into  all the railroad's  locomotives to                                                               
help make  them safer.  The railroad's  locomotives are  used all                                                               
over  the  country  and  sometimes it  requires  an  engineer  or                                                               
technologist who is exceptional in his knowledge of it.                                                                         
                                                                                                                                
However, Mr.  Gamble said  most hirings  are from  within Alaska.                                                               
Employees are brought in and trained  at what he calls "Choo Choo                                                               
U".  There   are  over  50   classes  including   leadership  and                                                               
management training  available to  over 2000 employees.  When the                                                               
railroad hires  employees who don't  have previous skills  in the                                                               
railroad business  they are  taught the  new skills  or sometimes                                                               
the railroad  may send them  out of state to  community colleges.                                                               
These colleges have  been contracted by other  railroads to teach                                                               
specific courses like how to become  a brakeman, a conductor or a                                                               
dispatcher.                                                                                                                     
                                                                                                                                
CHAIR KOOKESH asked what the  railroad's relationship is with the                                                               
union.                                                                                                                          
                                                                                                                                
MR. GAMBEL replied that it's  a pretty good relationship. He said                                                               
he's  been involved  in 11  negotiations  with the  union and  11                                                               
agreements have  been ratified without  having to go  to impasse.                                                               
His  personal   philosophy  supports  the  idea   that  continued                                                               
dialogue  facilitates  a   successful  relationship  between  the                                                               
railroad and the  unions.  A halt in dialogue  becomes a problem.                                                               
He  said that  is the  position the  railroad is  in now.  It has                                                               
received claims of unfair labor  practices. The issue is now with                                                               
the lawyers, but  he thinks the best  thing to do is  get back to                                                               
the table.                                                                                                                      
                                                                                                                                
CHAIR  KOOKESH asked  if  there are  currently  any unfair  labor                                                               
practices filed against the railroad.                                                                                           
                                                                                                                                
MR. GAMBEL replied there are currently  two on file. One has been                                                               
filed  against  the  railroad  and the  railroad  has  filed  one                                                               
against the  union for  a statement  it made in  a letter  to its                                                               
rank and file.                                                                                                                  
                                                                                                                                
CHAIR KOOKESH asked what the status of the claims is.                                                                           
                                                                                                                                
MR.  GAMBEL replied  they are  being adjudicated.  Unfortunately,                                                               
the union  and railroad  have stopped talking  to each  other. He                                                               
has hopes they will both agree to get back to dialoguing.                                                                       
                                                                                                                                
SENATOR OLSON  asked if  the 15  mangers hired  in 2006  were new                                                               
positions and how many mangers the railroad has in total.                                                                       
                                                                                                                                
MR. GAMBEL  replied that if an  employee is not in  the union, he                                                               
is  a  manager.  The  railroad  has 625  union  members  and  220                                                               
managers.  Ninety-one  managers  manage   a  project,  57  manage                                                               
managers, and 72 directly supervise laborers.                                                                                   
                                                                                                                                
SENATOR  OLSON  said it  seemed  odd  there  would be  that  many                                                               
managers in an operation with less than 1000 people.                                                                            
                                                                                                                                
MR. GAMBEL replied  that management is a  broad encompassing term                                                               
as  used by  the  railroad, and  that many  who  come under  that                                                               
category  aren't  supervising  anyone.   Often  they  are  budget                                                               
analysts or  schedulers for the maintenance  computer system. The                                                               
overall ratio of  those who directly manage someone  in the labor                                                               
force is about 1 supervisor for 9 employees.                                                                                    
                                                                                                                                
SENATOR COWDERY  asked what percentage  of the  railroad's income                                                               
comes from freight.                                                                                                             
                                                                                                                                
MR. GAMBEL  replied 70 percent  and that figure appeared  on page                                                               
7;  real  estate  provides  11   percent.  He  said  the  overall                                                               
percentages have  changed slightly. Passenger service  has picked                                                               
up a lot and freight is slightly down about 5 percent.                                                                          
                                                                                                                                
SENATOR OLSON  asked if anyone  outside the railroad  reviews the                                                               
budget.                                                                                                                         
                                                                                                                                
2:47:54 PM                                                                                                                    
MR. GAMBEL replied  the budget goes through  the railroad's board                                                               
first and then it must  be submitted annually to the legislature.                                                               
No one has ever commented on it.                                                                                                
                                                                                                                                
SENATOR OLSON asked if anyone approves it.                                                                                      
                                                                                                                                
MR. GAMBEL replied that no one approves it except the board.                                                                    
                                                                                                                                
CHAIR KOOKESH  said he  tried to  get an  overall picture  of the                                                               
railroad because he's from Southeast  Alaska. He wanted to invite                                                               
unions and employees to the committee  to get a broad overview so                                                               
he   contacted  the   other   unions   (that  weren't   currently                                                               
negotiating  with  the  railroad),  but  while  they  didn't  say                                                               
anything, he  felt there  was an intimidation  factor or  fear of                                                               
being retaliated against. He asked  if Mr. Gamble had any opinion                                                               
about that.                                                                                                                     
                                                                                                                                
MR.  GAMBEL replied  that if  he found  out that  someone in  his                                                               
organization was  doing that, it  would be a pass/fail  item with                                                               
him. As  much as he  has tried to put  his employees at  ease, he                                                               
said that when  he came on with the railroad  seven years ago, he                                                               
heard that story  a lot. He said his success  and his training in                                                               
the past  has been dependent  on taking  care of the  people that                                                               
are doing the  job they have been  asked to do. If  anyone in the                                                               
supervisory chain  tries to  stifle that,  he has  encouraged his                                                               
employees to  tell him.  The only  limit is if  Mr. Gambel  is in                                                               
negotiation  with  a  union  he's  not able  to  talk  about  the                                                               
negotiation at that particular time.  However, if it's other than                                                               
union business, his door is always open.                                                                                        
                                                                                                                                
CHAIR  KOOKESH said  he appreciated  having that  on the  record.                                                               
He'd  like to  be  able to  invite unions  and  employees to  any                                                               
future hearings.                                                                                                                
                                                                                                                                
MR. GAMBEL said he would encourage  the union to be as forthright                                                               
as he has been.                                                                                                                 
                                                                                                                                
CHAIR  KOOKESH  thanked everyone  for  their  comments and  there                                                               
being  no  further business  to  come  before the  committee,  he                                                               
adjourned the meeting at 2:50:36 PM.                                                                                          

Document Name Date/Time Subjects