Legislature(2011 - 2012)BARNES 124
01/27/2011 01:00 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Railroad Corporation | |
| Presentation: Port of Anchorage | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE TRANSPORTATION STANDING COMMITTEE
HOUSE TRANSPORTATION STANDING COMMITTEE
January 27, 2011
1:03 p.m.
MEMBERS PRESENT
SENATE TRANSPORTATION
Senator Albert Kookesh, Chair
Senator Joe Thomas, Vice Chair
Senator Dennis Egan
Senator Linda Menard
HOUSE TRANSPORTATION
Representative Peggy Wilson, Chair
Representative Lance Pruitt, Vice Chair
Representative Eric Feige
Representative Cathy Engstrom Munoz
Representative Max Gruenberg
Representative Pete Petersen
MEMBERS ABSENT
SENATE TRANSPORTATION
Senator Charlie Huggins
HOUSE TRANSPORTATION
Representative Craig Johnson
COMMITTEE CALENDAR
OVERVIEW: ALASKA RAILROAD CORPORATION
- HEARD
PRESENTATION: PORT OF ANCHORAGE
- HEARD
WITNESS REGISTER
CHRISTOPHER AADNESEN, President and CEO
Alaska Railroad Corporation
Anchorage, AK
POSITION STATEMENT: Delivered an overview of the Alaska Railroad
Corporation.
TOM BROOKS, Chief Engineer
Alaska Railroad Corporation
Anchorage, AK
POSITION STATEMENT: Provided information related to the Alaska
Railroad Corporation Overview.
GOVERNOR BILL SHEFFIELD, Director
Port of Anchorage
Anchorage, AK
POSITION STATEMENT: Delivered a presentation on the Port of
Anchorage.
PREVIOUS COMMITTEE ACTION
No previous action to record
ACTION NARRATIVE
1:03:15 PM
CHAIR PEGGY WILSON called the joint meeting of the House and
Senate Transportation Standing Committees to order at 1:03 p.m.
Present at the call to order were Senators Egan, Thomas, and
Kookesh; and Representatives Petersen, Gruenberg, Pruitt, and P.
Wilson.
^OVERVIEW: Alaska RAILROAD CORPORATION
1:05:38 PM
CHAIR PEGGY WILSON announced that the first order of business
would be to hear an overview from the Alaska Railroad
Corporation.
1:06:14 PM
CHRISTOPHER AADNESEN, President and CEO, Alaska Railroad
Corporation, introduced himself.
REPRESENTATIVE GRUENBERG asked if Mr. Aadnesen would tell the
committees about his extensive railroad background.
MR. AADNESEN stated he has thirty-eight years of railroad
experience, starting with a survey crew with Western Pacific in
1973, and working up to general superintendent of transportation
for that company before it became Union Pacific in 1980. He then
worked for Union Pacific as manager of the southern region until
1988. Subsequently, he opened a consulting firm and did the due
diligence for a corporation consortium that wanted to purchase
one of the privatized trunk lines in Mexico. In 1997 he retired
and in 2001 went back to work because of Enron. He became the
CEO of the Estonian Railway in Eastern Europe and ran it for
three years including helping the owners take it public. He then
returned to the U.S. and worked for a large engineering firm,
managing their rail practice before he applied for and got this
job.
1:09:10 PM
REPRESENTATIVE FEIGE joined the committee.
1:11:40 PM
REPRESENTATIVE MUÑOZ joined the committee.
1:12:05 PM
MR. AADNESEN began the presentation by introducing his team. He
then explained that construction on the Alaska Railroad began in
1914 and was finished in 1923. In January 1985 it was
transferred to the state. He noted that the architect for this
was Governor Sheffield. While the Alaska Railroad Corporation
(ARRC) is a state-owned corporation, it is self-supporting and
is a full-service railroad that serves ports and communities
from the Gulf to the Interior.
MR. AADNESEN also explained that the railroad is different from
other state agencies in that it is an independent agency, not
covered by the state's Executive Budget Act. The board of
directors has both financial and capital budget oversight, and
has the ultimate authority over land sales, although legislative
approval is required for certain corporate actions, such as sale
or transfer of the railroad's interest in land. They are
currently working on a land sale policy, which the board hopes
to approve in March. Procurement procedures are substantially
equivalent to state requirements, and they are also subject to
the Executive Ethics Code. ARRC submits an annual report with
audited financial statements to the state, and is required by
law to adopt a long-range capital improvement plan each year,
which it shares with the Legislature.
1:17:31 PM
MR. ADNESSEN further explained how the ARRC contributes to
health care, business services, and retail payrolls in Alaska,
as well as being the principle transport for heavy and/or bulk
commodities to tidewater. It is also a major mover of jet fuel
to the Ted Stevens Anchorage International Airport, a viable
passenger alternative to long-distance driving, and supports the
U.S. military with the transport of equipment to and from the
"DoD Strategic Port" of Anchorage. The ARRC also has the
potential to reduce pressure on the state road system, and to
contribute significantly to the Alaska natural gas pipeline. It
creates 3,000 jobs and $150 million in payroll statewide. A
break-down of ARRC revenue shows it is comprised of 67 percent
freight, 17 percent passenger, and 15 percent real estate.
1:18:18 PM
MR. ADNESSEN stated that ARRC moved 6.3 million tons of freight
in 2010 and they anticipate that to grow.
1:18:53 PM
CHAIR P. WILSON asked what the anticipated increase is for 2011.
MR. AADNESEN responded it is about 3.9 percent.
CHAIR P. WILSON asked if more shippers are using the railroad.
MR. AADNESEN replied the worldwide export coal market is very
hot, partly because of the flooding in Australia. Usibelli has
also identified that the demand for its coal will increase.
Growth is expected for the next several years after which the
price will probably drop, he said.
1:20:34 PM
SENATOR MENARD joined the committee.
MR. AADNESEN explained that slide 9 shows the mix of freight
revenue. Petroleum is 28 percent and coal is 12 percent for
export and 10 percent local. The ARRC also receives about 30
percent of its revenue from barge services with smaller
percentages in gravel at 9 percent and 8 percent in TOFC/COFC.
He explained that TOFC means trailers on flat cars, while COFC
refers to containers on flat cars.
MR. AADNESEN stated that passenger business is something ARRC is
proud of. Last year they moved 405,000 passengers compared to
471,000 in 2009. A 3.2 percent increase is anticipated in 2011.
1:23:25 PM
REPRESENTATIVE GRUENBERG asked if the ARRC has a plan for what
to do if cruise ships stop coming.
MR. AADNESEN said the board has had many strategy sessions about
that issue, but a plan has not yet been defined. He explained
that he elected to come to Alaska and become familiar with the
railroad, which he spent three months doing. Thus the planning
and strategy has been postponed until February. However, a key
strategy is to diversify income. If Flint Hills is lost it would
be serious. A similar strategy will be directed to passenger
service.
1:25:27 PM
Mr. AADNESEN explained that real estate is a very important part
of the ARRC. The department includes property development,
leases and permits, dockage and wharfage, facilities maintenance
and management. The important thing is that 69 percent of
corporate net income is derived from real estate.
In terms of capital funding sources, Mr. Aadnesen said that the
ARRC uses its own earnings, it matches federal funds, and it
funds federal aid improvements. Formula funds also come from the
USDOT/Federal Transit Administration; ARRC is a 60 percent
grantee. The federal funds that are allocated to ARRC do not
affect the federal funding for other state transportation
projects.
1:27:42 PM
In 2010, he stated, the railroad had a 4.3 million loss from
train operations, but this was less than anticipated.
CHAIR KOOKESH asked if the loss was due to decreased passenger
traffic.
MR. AADNESEN replied it was due to decreased passengers, as well
as a loss in petroleum shipping. He also explained that ARRC's
net earnings rely on real estate for stability and
sustainability. They also have a fragile financial situation
because they rely on a few large customers. Export of coal will
be important in 2011, he stated. He forecast moderate passenger
growth, as well as an increase in costs, especially in fuel and
benefits, and an earnings budget of 18.2 million. He noted they
do have contingency plans in case expected revenues do not
materialize.
MR. ANDRESSEN explained that the 2011 capital budget provides a
total of $63.4 million in new spending. ARRC's own earnings
account for $25 million, $24 million from FTA funds, and $13.6
million from FTA bond proceeds, and $4.3 million from small
grants. He noted the ARRC is currently in the sixth year of a
seven year accelerated-track rehabilitation program focused
between Anchorage and Fairbanks. Now it is focused on Anchorage
to Seward track rehabilitation. The railroad has an unfunded
federal mandate for Positive Train Control, he said. This is a
safe-gap electronic measure that allows the train to be taken
from the engineer's control if necessary.
1:34:30 PM
He then explained the ARRC routes and project reports He
highlighted the Northern Rail Extension, which is part of an
eighty-mile line from North Pole to Delta Junction, and will be
constructed in four phases. Phase one of four is a bridge at
Salcha, across the Tanana River. The project is currently
seeking approval from the Corps of Engineers, he said, and the
design is 90 percent complete. A construction management/general
contractor has been working with ARRC for about nine months to
ensure that the design is constructible. He further stated the
estimated cost of the bridge is about $1.85 million, and that
has escalated from the original estimate for a variety of
reasons. This past summer there was a lot of river erosion that
caused the river to move about 10-15 feet. Mr. Aadnesen stated
that current funding for the project is $44.2 million, but it
expires in 2013. He said that additional funding is needed
because the estimated shortfall is between $20 million and $60
million.
CHAIR P. WILSON asked what a side channel bridge is.
1:40:02 PM
TOM BROOKS, Chief Engineer, ARRC, explained that the Tanana
River has a main channel and multiple side channels, and that
the original design assumed they would span the main channel. He
further stated that after the EIS process, they identified the
side channels as being important locations for additional
bridges.
CHAIR P. WILSON commented that traveling from Tok to Fairbanks
was challenging, due to the braided river.
REPRESENTATIVE FEIGE asked which side of the river was being
discussed.
MR. BROOKS replied the two side channels being discussed are on
the south bank. These appear on a map on page 20 of the back-up
material.
1:42:23 PM
MR. BROOKS then explained the ARRC is currently dialoging with
the EPA to get wetlands permits and the Corps of Engineers has
asked ARRC to respond. He said the ARRC is working with the
military to see if it can put in the bridges. ARRC is taking a
strong stance to avoid subversion of the EIS process by the EPA.
Once permits are in hand the ARRC will go to the funding
agencies, in particular the Federal Railroad Administration
(FRA). The FRA wants to see a funding package to show the bridge
can be completed.
1:44:53 PM
MR. AADNESEN added that the funding is needed by the summer of
2011 or the construction will be delayed and the federal funding
will expire before the project is completed. This would force
the ARRC board to stop the project.
1:45:28 PM
MR. AADNESEN then discussed the Port McKenzie Rail Extension
Project, in which the ARRC is the project manager for
construction of a 30-45 mile rail line to connect the port to
the main line of the ARR. He explained that as port owner, the
MatSu Borough (MSB) is project "sponsor," and the operating
railroad, ARRC, is the project "applicant." In addition, he
stated the Surface Transportation Board (STB) is the federal
agency responsible for U.S. rail extensions, and it is working
on the EIS. The ARRC is hoping to receive a positive ruling on
that by the end of February. In addition, the STB has to approve
one of three options for the route. He noted that the
Legislature had previously appropriated funds for the EIS and to
begin design and construction. At this point the governor's
budget for the project is $20 million for this year.
CHAIR P. WILSON noted that the committee will hear a
presentation on the Port McKenzie project next week.
1:47:18 PM
REPRESENTATIVE GARA joined the committees via teleconference.
MR. AADNESEN then spoke about ARRC statewide issues, and defined
the continued existence of the North Pole Refinery as critical
to the state's energy picture and a mainstay of ARRC revenue.
MR. AANDRESEN went on to discuss issues relating to the the sale
of ARRC lands. He stated the board is in the process of
developing a Board Rule to guide its decisions regarding state
land sales. In compliance with HB 357 (passed in 2010), the
draft Board Rule is currently available for review and is on the
agenda for the February 16, 2011, ARRC board meeting. The ARRC
is collecting feedback from leaseholders for the board to
consider the rule and decide what to suggest to the Legislature
as ongoing policy.
CHAIR P. WILSON asked if the Legislature has to okay all land
sales by the ARRC.
MR. AADNESEN responded that the state land was transferred to
the ARRC in 1985, and any transfer or sale of the transferred
land goes to the Legislature for final disposition.
1:50:39 PM
Next Mr. Aadnesen discussed the Seward coal loading facility,
which is operated by Aurora, a subsidiary of Usibelli Coal. The
ARRC acquired the facility with federal funds in 2003, he said,
and since then ARRC has spent $1.34 million on safety,
efficiency and environmental improvements. He stated the ARRC is
continuing efforts toward mitigation of dust emissions; it is
currently a co-defendant with Usibelli Coal in a Clean Water Act
lawsuit, and if they lose the suit there will be no more export
of coal from Alaska.
1:52:32 PM
MR. AADNESEN explained that vegetation management is an ongoing
problem for the railroad. They have been unable to spray until
receiving a permit in 2010, when they sprayed from Seward to
Indian. He stated that the ARRC applied for a permit to include
the Anchorage rail yard. Because they were unable to spray in
the past, he said, the federal government fined ARRC about $.5
million in fines due to its lack of weed control. He explained
those fines are currently in abeyance because they are now
making progress on weed control.
1:54:17 PM
MR. AADNESEN made concluding remarks and asked for questions.
REPRESENTATIVE FEIGE mentioned Usibelli's desire to open a mine
in the Wishbone Hills area and that one impact of that would be
100 coal trucks per day along the highway. He asked if there is
a possibility to build a spur line following the existing ARRC
right-of-way.
MR. AADNESEN responded that the ARRC would like to do that, and
it does have the right-of-way. This would actually be two trains
per week rather than 100 trucks per day, but it's dependent on
the Usibelli analysis, which hasn't been forthcoming.
SENATOR THOMAS asked if the 15 percent revenue from real estate
(slide 7) is gross or net.
MR. AADNESEN responded it is net.
SENATOR THOMAS asked if the ARRC has a cost-benefit analysis of
building the Delta to MacKenzie project
MR. AADNESEN replied the Tanana River project has no benefit in
the near future. It's purely a cost project, but because of the
ARRC charter they are happy to participate.
1:58:55 PM
SENATOR THOMAS noted that the ARRC was a crucial link for the
state transportation system, but he would like to talk about
bridges that might be more cost effective.
MR. AADNESEN responded he would be happy to meet with the
Senator.
CHAIR P. WILSON called an at-ease from 2:02 p.m. to 2:07 p.m.
^PRESENTATION: PORT OF ANCHORAGE
2:07:23 PM
CHAIR PEGGY WILSON reconvened the hearing and announced the next
order of business would be to hear a presentation from the Port
of Anchorage.
GOVERNOR BILL SHEFFIELD, Director of the Port of Anchorage,
introduced himself.
CHAIR P. WILSON asked if he would go over the challenges facing
the expansion project.
MR. SHEFFIELD said yes.
MR. SHEFFIELD described the Port of Anchorage as vital to the
state's economy.
2:13:10 PM
He said that an average of 120,000 containers come into the port
annually, including food, automobiles, gasoline, and heating
oil. He noted that the port is about 4 percent busier this year
than last.
MR. SHEFFIELD reviewed the cargo received annually at the port,
which includes the following:
· Eleven million of barrels of fuel.
· Eighty percent of the jet fuel for the Ted Stevens
Anchorage International Airport.
· 100 percent of the jet fuel for Elmendorf Air Force Base.
· Ninety percent of the fuel used by vehicles, water craft
and general aviation in the Railbelt.
2:16:31 PM
MR. SHEFFIELD explained that the Port of Anchorage has been
designated by the Department of Defense (DoD) as a National
Strategic Seaport; only 19 ports in the U.S. have this
designation.
REPRESENTATIVE GRUENBERG asked what it means to be a National
Strategic Seaport.
MR. SHEFFIELD explained that 25 acres of the port are guaranteed
to be available to store military equipment and supplies. He
further noted that the port serves all five military bases in
Alaska.
2:20:21 PM
MR. SHEFFIELD gave a review of 2010 operations, as follows:
· The port received over 500 ship calls in 2010, which is a
30 percent increase from 2009.
· The port welcomed the first major cruise ship.
· Five hundred jobs were created that relate to the expansion
project.
· Port stakeholders and the expansion project spent $70
million on annual payroll.
MR. SHEFFIELD then discussed the Intermodal Expansion Project,
which adds 130 acres to the existing port. He showed pictures of
the project, including a corroded piling, which led to beginning
the project.
2:23:24 PM
He explained that phasing plan draft two shows the dry barge
berth, wet barge berth, the north extension of 23 acres and next
to it an extension of 12.8 acres. The present schedule calls for
lighting in 2015. It's built in phases to make it possible to
continue to operate during construction. He described it as
remodeling an old house while holding down a job and feeding a
family. When the project is complete, two fueling docks will be
able to serve more than one ship at a time. The entire project
is scheduled to be completed by 2015.
2:29:40 PM
MR. SHEFFIELD then reviewed agencies involved in the port
expansion project; because federal dollars are involved, the
U.S. DOT Maritime Administration (MARAD) is the lead federal
agency. The project manager is Integrated Concepts & Research
Corporation (ICRC), which is responsible for development,
project management, design, construction, and permitting. The
Port of Anchorage is the project owner; at present, the port
uses its revenue to cover operating costs and puts what is left
into the expansion project. To date they have received $279
million, most of which was spent on upgrades for the old port.
2:32:53 PM
He stated the expansion project cost is currently $1 billion,
which is much higher than originally estimated. Reasons for this
cost increase include:
· Design changes included increasing the tail wall length;
adding two facilities that will remain in operation
following an earthquake or other catastrophic event.
· The cost of using galvanized steel rather than regular
steel increased the cost by about 30 percent.
· Beluga Whale and Marine Mammal Mitigation. They have to
shut down the port for two hours before and after low tide,
and also when a whale gets within their zone, which is 1.25
miles from where they are working. The cost of mitigation
is about $10 million per year.
2:37:49 PM
MR. SHEFFIELD explained the expansion project is moving forward
with clear changes in place, as there was faulty work uncovered
from the past. The port requires a review of the new contract
between MARAD and ICRC, which must provide clear accountability
and absolute protection from faulty construction and oversight.
The port requires additional financial protection to assure the
work is completed on time with proper workmanship. He said the
port is developing an oversight committee consisting of the port
MARAD, ICRC, appointees from the city, and the U.S. Army Corps
of Engineers to allow the port to react quickly and
appropriately to issues as the project moves forward.
2:41:15 PM
In closing, Mr. Sheffield said if the gas line is built, it will
require support from the Port of Anchorage, at least in terms of
providing storage space for pipe.
REPRESENTATIVE PETERSEN asked if the port has found a solution
to the silting problems created by new piling.
MR. SHEFFIELD referred to the phasing map to describe why
silting occurred and what has been done to solve it, including
dredging 10 feet deeper than originally planned in the spot
where silt accumulates. He said that plan B is to use a tug to
shoot water down to move the silt.
REPRESENTATIVE FEIGE asked about the impact of the shoaling
issue.
MR. SHEFFIELD said the impact now is that the ships have had to
change course; they need 1.25 miles to turn, which isn't a
problem when there is no ice, but in winter it could be. The
shoal has been there for some time and the Corps says it's a $2
million study and they want a 50 percent share. Port MacKenzie
should share in that, he said. Every year the shoal is mapped to
monitor how much it's moving.
2:48:28 PM
REPRESENTATIVE FEIGE asked if it is true that the shoal is
wandering.
MR. SHEFFIELD responded that it is moving south. He noted that
he has committed $500,000 on behalf of the port for the impact
study.
REPRESENTATIVE MUÑOZ asked if the Municipality of Anchorage has
made a financial commitment to the Port of Anchorage project.
MR. SHEFFIELD referenced the funding slide, which shows Port of
Anchorage funds at $49 million, and a $75 million line of credit
which is supported by the Municipality of Anchorage.
2:51:01 PM
SENATOR MENARD asked Mr. Sheffield if he thought that Port
MacKenzie will complement the Port of Anchorage.
MR. SHEFFIELD replied Port MacKenzie isn't competition to the
Port of Anchorage, because it will be an export port and the
Port of Anchorage is an import port.
2:52:21 PM
There being no further business to come before the committees,
Chair Peggy Wilson adjourned the House and Senate Transportation
Committees at 2:52 p.m.
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