Legislature(2015 - 2016)SENATE FINANCE 532

01/22/2015 01:00 PM TRANSPORTATION


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01:07:37 PM Start
01:08:53 PM Overview: Alaska Marine Highway System (amhs) Report to the Legislature by Matt Mcclaren, Business Development and Enterprise Manager and Captain John Falvey, General Manager, Amhs
02:22:24 PM Discussion of Status of Projects: Road to Ambler Mining District, Juneau Access Road Project, Susitna Watana Hydro Project, Knik Arm Bridge, Alaska Stand Alone Pipeline Project, and the Kodiak Launch Complex
03:28:09 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Joint w/ House Transportation TELECONFERENCED
Overview of the Alaska Marine Highway System
(AMHS) Report to the Legislature Presented by
Matt McLaren, Business Development and Enterprise
Manager, AMHS and Captain Falvey,
General Manager, AMHS
+ Discussion on Status of Projects: TELECONFERENCED
- Road to Ambler Mining District
- Juneau Access Road
- The Susitna Watana Hydro Project
- Knik Arm Bridge
- The Alaska Stand Alone Pipeline
- The Kodiak Launch Complex
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
            HOUSE TRANSPORTATION STANDING COMMITTEE                                                                           
            SENATE TRANSPORTATION STANDING COMMITTEE                                                                          
                        January 22, 2015                                                                                        
                           1:07 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
HOUSE TRANSPORTATION                                                                                                            
                                                                                                                                
 Representative Neal Foster, Co-Chair                                                                                           
 Representative Shelley Hughes, Co-Chair                                                                                        
 Representative Charisse Millett                                                                                                
 Representative Benjamin Nageak                                                                                                 
 Representative Louise Stutes                                                                                                   
 Representative Matt Claman                                                                                                     
 Representative Dan Ortiz                                                                                                       
                                                                                                                                
SENATE TRANSPORTATION                                                                                                           
                                                                                                                                
 Senator Peter Micciche, Chair                                                                                                  
 Senator Click Bishop, Vice Chair                                                                                               
 Senator Mike Dunleavy                                                                                                          
 Senator Bert Stedman                                                                                                           
 Senator Dennis Egan                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Sam Kito                                                                                                         
Representative Cathy Tilton                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW:   ALASKA  MARINE HIGHWAY  SYSTEM (AMHS)  REPORT TO  THE                                                               
LEGISLATURE   BY   MATT   MCCLAREN~  BUSINESS   DEVELOPMENT   AND                                                               
ENTERPRISE  MANAGER AND  CAPTAIN  JOHN  FALVEY~ GENERAL  MANAGER~                                                               
AMHS                                                                                                                            
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
DISCUSSION OF STATUS OF PROJECTS: ROAD TO AMBLER MINING                                                                         
DISTRICT~ JUNEAU ACCESS ROAD~ SUSITNA-WATANA HYDRO PROJECT~ KNIK                                                                
ARM BRIDGE~ ALASKA STAND ALONE PIPELINE PROJECT~ AND THE KODIAK                                                                 
LAUNCH COMPLEX                                                                                                                  
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
CAPTAIN JOHN FALVEY, General Manager                                                                                            
Ketchikan Office                                                                                                                
Alaska Marine Highway System (AMHS)                                                                                             
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during a PowerPoint overview of                                                                
the AMHS.                                                                                                                       
                                                                                                                                
MATT McLAREN, Business Development & Enterprise Manager                                                                         
Alaska Marine Highway System (AMHS)                                                                                             
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during a PowerPoint overview of                                                                
the AMHS Tariff Study.                                                                                                          
                                                                                                                                
MARK R. DAVIS, Deputy Director                                                                                                  
Infrastructure Development                                                                                                      
Alaska Industrial Development and Export Authority (AIDEA)                                                                      
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented an overview of the status of the                                                               
discussion of the Road to Ambler Mining District.                                                                               
                                                                                                                                
JOHN BINDER, Acting Commissioner                                                                                                
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the Juneau Access Road                                                                  
project.                                                                                                                        
                                                                                                                                
KIM RICE, Deputy Commissioner                                                                                                   
Office of the Commissioner                                                                                                      
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented an overview of the status of the                                                               
Juneau Access Road project.                                                                                                     
                                                                                                                                
SARA FISHER-GOAD, Executive Director                                                                                            
Alaska Energy Authority (AEA)                                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented an overview of the  status of the                                                             
Susitna-Watana Hydro project.                                                                                                   
                                                                                                                                
WAYNE DYOK, Project Manager                                                                                                     
Susitna-Watana Hydro                                                                                                            
Alaska Energy Authority                                                                                                         
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during  the overview of the status                                                             
of the Susitna-Watana Hydro project.                                                                                            
                                                                                                                                
CRAIG CAMPBELL, President & Chief Executive Officer                                                                             
Alaska Aerospace Corporation (ACC)                                                                                              
Department of Military and Veterans Affairs                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented an overview of the  status of the                                                             
Kodiak Launch Project.                                                                                                          
                                                                                                                                
JOHN BINDER, Acting Commissioner                                                                                                
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented an overview of the  status of the                                                             
Knik Arm Crossing project.                                                                                                      
                                                                                                                                
KIM RICE, Deputy Commissioner                                                                                                   
Office of the Commissioner                                                                                                      
Department of Transportation & Public Facilities (DOT&PF)                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented an overview of the  status of the                                                             
Knik Arm Crossing project.                                                                                                      
                                                                                                                                
FRANK RICHARDS, Vice President                                                                                                  
Engineering and Program Management                                                                                              
Alaska Gasline Development Corporation (AGDC)                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented an overview of the  status of the                                                             
Alaska Stand Alone Pipeline (ASAP)  project and offered the spend                                                               
rate response to Administrative Order [AO] 271.                                                                                 
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:07:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEAL  FOSTER called the  joint meeting of the  House and                                                             
Senate Transportation  Standing Committees to order  at 1:07 p.m.                                                               
Present  at the  call  to order  from  the Senate  Transportation                                                               
Standing  Committee were  Senators  Bishop,  Egan, Dunleavy,  and                                                               
Micciche  and present  from  the  House Transportation  Committee                                                               
were Representatives Millett, Stutes,  Claman, Ortiz, Hughes, and                                                               
Foster.   Senator  Stedman and  Representative Nageak  arrived as                                                               
the meeting  was in  progress.   Representatives Kito  and Tilton                                                               
were also in attendance.                                                                                                        
                                                                                                                                
^OVERVIEW:   ALASKA MARINE  HIGHWAY SYSTEM  (AMHS) REPORT  TO THE                                                               
LEGISLATURE   BY   MATT   MCCLAREN,  BUSINESS   DEVELOPMENT   AND                                                               
ENTERPRISE  MANAGER AND  CAPTAIN  JOHN  FALVEY, GENERAL  MANAGER,                                                               
AMHS                                                                                                                            
  OVERVIEW:  ALASKA MARINE HIGHWAY SYSTEM (AMHS) REPORT TO THE                                                              
     LEGISLATURE BY MATT MCCLAREN, BUSINESS DEVELOPMENT AND                                                                 
ENTERPRISE MANAGER & CAPTAIN JOHN FALVEY, GENERAL MANAGER, AMHS                                                             
                                                                                                                              
1:08:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER announced that the  first order of business would                                                               
be an  Overview:  Alaska  Marine Highway System (AMHS)  Report to                                                               
the  legislature   by  Matt   McLaren,  Business   Development  &                                                               
Enterprise  Manager and  Captain  John  Falvey, General  Manager,                                                               
AMHS.                                                                                                                           
                                                                                                                                
1:10:03 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER  explained that the operating  budget passed last                                                               
year  required the  AMHS to  complete  a review  and analysis  of                                                               
current  passenger, vehicle,  and  cabin rate  structure for  the                                                               
system  and report  a modified  tariff  and fee  schedule to  the                                                               
legislature  no later  than February  1, 2015.  [House Bill  266,                                                               
Chapter 16, SLA 14].                                                                                                            
                                                                                                                                
1:10:52 PM                                                                                                                    
                                                                                                                                
CAPTAIN JOHN  FALVEY, General  Manager, Ketchikan  Office, Alaska                                                               
Marine  Highway System  (AMHS),  Department  of Transportation  &                                                               
Public Facilities (DOT&PF), related  he will provide a PowerPoint                                                               
focusing on a brief review of the AMHS.                                                                                         
                                                                                                                                
1:12:07 PM                                                                                                                    
                                                                                                                                
CAPTAIN  FALVEY referred  to the  "Organization/Leadership" chart                                                               
[slide 4].   At the  height of  the summertime traffic,  the AMHS                                                               
has  1,018 staff,  with  the majority  in  vessel operations,  he                                                               
said.    The  remaining employees  staff  shore-side  facilities,                                                               
marine  engineering,  reservations  and marketing  (Juneau),  and                                                               
administration.    He  reported  that   staffing  is  reduced  by                                                               
approximately  half during  the winter  when vessels  are reduced                                                               
from 11  ships to  5-6 ships.   In terms of  crews, it  takes 2.3                                                               
crews to  crew the  vessels, which allows  for crew  vacation and                                                               
shift changes.  Staff at terminals  is also reduced in the winter                                                               
with  the   AMHS  hiring  significant  seasonal   summer  on-call                                                               
employees.                                                                                                                      
                                                                                                                                
1:13:01 PM                                                                                                                    
                                                                                                                                
CAPTAIN  FALVEY directed  attention  to  the "Fleet  Composition"                                                               
[slide  5].    The  "mainliner" ferries  consist  of  the  [motor                                                               
vessel] MV  Malaspina, MV  Taku, MV  Matanuska, MV  Tustumena, MV                                                               
Columbia, and  MV Kennicott.   He noted  the slide  indicates the                                                               
date the  vessels were  built, which ranges  from 1963-1998.   He                                                               
reported the  next class  of vessels, the  235s, or  Aurora class                                                               
consist of  the MV  Aurora and  the MV LeConte.   The  MV LeConte                                                               
serves as  a day vessel  for the  panhandle and Lynn  Canal while                                                               
the MV Aurora  functions as a 24/7 vessel  serving Prince William                                                               
Sound.  The shuttle ferries consist  of two fast ferries, the FVF                                                               
[fast vessel ferries] Fairweather and  FVF Chenega as well as the                                                               
MV Lituya.   These  vessels operate  as day  boats and  return to                                                               
their home port each evening, he said.                                                                                          
                                                                                                                                
1:13:47 PM                                                                                                                    
                                                                                                                                
CAPTAIN  FALVEY   reviewed  the  ports  on   the  slide  entitled                                                               
"Terminal Composition" [slide 6].   He reported the AMHS consists                                                               
of  35  ports of  call  ranging  from  the southern  terminus  at                                                               
Bellingham, to the  northern terminus at Valdez,  and the western                                                               
terminus  at  Dutch Harbor.    Of  these  35  ports of  call,  17                                                               
facilities are  located in Southeast  Alaska and Canada,  with 18                                                               
located in  Southcentral Alaska and  Southwest Alaska.   The AMHS                                                               
manages  these ports  of calls  in a  variety of  ways, he  said,                                                               
noting the state owns and maintains  17 ports, with 12 manned and                                                               
5  unmanned  facilities.    He  described  manned  facilities  as                                                               
smaller  ports  with  crew loading  and  unloading  vehicles  and                                                               
issuing tickets  with the new  reservation system  anticipated to                                                               
streamline this  process.   Four leased  facilities -  located in                                                               
Bellingham,   Prince  Rupert,   Seldovia,   and   Kodiak  -   use                                                               
subcontractors   to   manage   vehicle  loading   and   passenger                                                               
ticketing.   The 14 privately-owned terminals,  primarily located                                                               
on the  Aleutian Chain,  consist of  city-owned docks  to cannery                                                               
docks,  with  most unmanned,  he  said.    The DOT&PF  in  Juneau                                                               
oversees  capital projects  and  any large  projects to  maintain                                                               
AMHS's facilities,  but the AMHS does  handle smaller maintenance                                                               
projects.                                                                                                                       
                                                                                                                                
1:15:29 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY  directed attention to the  "Route Summary" [slide                                                               
7].   The AMHS's system is  large, as depicted by  the overlay of                                                               
the State of Alaska  on a map of the Lower 48.   In addition, the                                                               
AMHS's system  is quite  different from  the three  largest ferry                                                               
systems in the  US, noting the AMHS's system consists  of a 3,500                                                               
mile  route that  carries  approximately  340,000 passengers  and                                                               
115,000 vehicles.   He contrasted  this to ferries  in Washington                                                               
and BC [British Columbia] with  much smaller routes but much high                                                               
passenger   volumes,  primarily   serving   commuters  and   some                                                               
tourists.   In  other words,  the AMHS  carries fewer  people and                                                               
vehicles over much longer distances, he said.                                                                                   
                                                                                                                                
1:16:32 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY  turned to the  "Monthly Traffic  Activity" [slide                                                               
8].   He  explained  that  traffic peaks  in  July, reaching  the                                                               
lowest point in  January and beginning to increase by  April.  He                                                               
noted the vehicle traffic has  less fluctuations although vehicle                                                               
traffic  does bottom  out a  bit in  the winter.   Thus,  vehicle                                                               
transport  figures  tend to  be  more  consistent than  passenger                                                               
ridership.                                                                                                                      
                                                                                                                                
1:17:14 PM                                                                                                                    
                                                                                                                                
CAPTAIN    FALVEY   directed    attention    to   the    "On-time                                                               
Departures/Customer Satisfaction"  [slide 9].  He  explained that                                                               
on-time departures is  gauged by ships sailing  within 30 minutes                                                               
of the  published departure  time and is  also based  on customer                                                               
satisfaction [feedback].   The AMHS keeps its  vessels moving and                                                               
ridership  has been  very happy,  he said.   The  new reservation                                                               
system [online automatic reservation  system (OARS)] will provide                                                               
significant data and  the AMHS will be able to  send customers an                                                               
e-mail questionnaire.  One advantage  of this is an e-mail allows                                                               
the survey to be changed more  readily than the current hard copy                                                               
survey  which  will   allow  the  AMHS  to   gain  more  customer                                                               
satisfaction information.   Since  the OARS system  was initiated                                                               
in 2005  - allowing  customers to book  their own  reservations -                                                               
the  AMHS has  seen  an increase  from 2005  to  2014 for  online                                                               
bookings from 18.5 percent to 41 percent.                                                                                       
                                                                                                                                
1:18:43 PM                                                                                                                    
                                                                                                                                
SENATOR  DUNLEAVY,  referring  back  to  the  graph  on  slide  8                                                               
[Monthly Traffic  Activity], asked whether the  same vessels with                                                               
the same capacity are being run during times of low volume.                                                                     
                                                                                                                                
CAPTAIN FALVEY  answered that ferry service  is generally reduced                                                               
during the  winter; for example, the  AMHS may not have  the same                                                               
two vessels running in Prince  William Sound during the winter as                                                               
they  do  in the  summer;  instead,  one vessel  provides  winter                                                               
service.   In further  response to  Senator Dunleavy,  he replied                                                               
that the  vessels have more  open [or vacant] passenger  seats in                                                               
the winter.                                                                                                                     
                                                                                                                                
SENATOR DUNLEAVY further asked whether  the AMHS attempts to sell                                                               
more open  seats at  a discount to  increase capacity  during the                                                               
winter.                                                                                                                         
                                                                                                                                
CAPTAIN FALVEY  answered that  the AMHS  has struggled  with that                                                               
concept, in part,  since the current reservation  system is aged.                                                               
He  said he  hopes to  address  increased capacity  once the  new                                                               
system  is implemented  in  the  fall since  the  OARS will  have                                                               
ability to offer discounted fares.                                                                                              
                                                                                                                                
1:20:50 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY  directed attention to the  "Operating Expenditure                                                               
Analysis FY  08-14" [slide 10].   He noted the bar  chart in blue                                                               
depicts GF [general fund] monies  and the green shows the revenue                                                               
generated.  Thus,  for example, the total cost in  FY 14 was $166                                                               
million, including  embedded fuel trigger monies.   These figures                                                               
do  not include  the state  general  fund capital  funds for  the                                                               
annual CIP  [Capital Improvement Project] overhauls.   During the                                                               
six  week vessel  overhaul, significant  equipment certifications                                                               
and  hull   inspections  required  by  federal   regulations  are                                                               
conducted, as well  as minor maintenance.   Major renovations for                                                               
federal  CIPs  are  also  separate;   for  example,  the  current                                                               
overhaul  for the  MV Kennicott  spanned two  years and  cost $14                                                               
million.                                                                                                                        
                                                                                                                                
1:22:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK asked  for the  major cost  driver of  the                                                               
operating expenditure analysis.                                                                                                 
                                                                                                                                
CAPTAIN FALVEY  directed attention to  the pie charts for  "FY 14                                                               
Revenues and Costs"  [slide 11] to the annual  operating costs of                                                               
$166 million.   He provided a  brief overview of the  two largest                                                               
cost drivers:  40 percent  for wages and  23 percent  for payroll                                                               
benefits.   In  addition,  other costs  include  2.8 percent  for                                                               
travel, which includes  crew travel for non-bid  jobs; 10 percent                                                               
for  services,  which  includes   approximately  $1  million  for                                                               
broadband fees, as  well as terminal contracts  and laundry costs                                                               
- provided  by the prison; 19  percent for fuel costs;  5 percent                                                               
for  commodities such  as  supplies; and  1  percent for  support                                                               
services  provided by  the  DOT&PF, such  as  human resources  or                                                               
attorney general  costs.  He  next directed attention to  the pie                                                               
chart  on the  left to  FY  14 revenue  sources.   The two  major                                                               
revenue drivers  are passenger ticket  sales and car  deck ticket                                                               
sales. He  said the 48 percent  of the AMHS's revenue  is derived                                                               
from the  car deck ticket  sales, 33 percent from  passengers, 10                                                               
percent for  stateroom sales, 8 percent  from passenger services,                                                               
and 1 percent from interest derived from fund investments.                                                                      
                                                                                                                                
1:25:12 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY  turned to the  next slide, entitled, "FY  15 Look                                                               
Forward" noting the AMHS strives  to manage within its budget and                                                               
has been  successful in doing  so [slide  12].  He  reported that                                                               
the overall  traffic figures  have improved by  7 percent  in the                                                               
past  year,  and  that  the   system  has  encountered  very  few                                                               
mechanical casualties  and few weather cancellations.   Given the                                                               
aging fleet, the system has been running well overall, he said.                                                                 
                                                                                                                                
CAPTAIN FALVEY said the AMHS  will implement a 4.5 percent tariff                                                               
increase,  which will  be discussed  in more  detail in  the next                                                               
presentation.   Briefly, [as  Co-Chair Foster  mentioned earlier]                                                               
intent  language  language  was  added to  the  operating  budget                                                               
during  the  last  legislature requesting  the  AMHS  reduce  its                                                               
general  funds  subsidy.   In  2008,  [Northern Economics,  Inc.]                                                               
completed a  rate study for the  AMHS.  Further, the  AMHS Tariff                                                               
Analysis [dated  January 2015] was  just completed.   The initial                                                               
study  provided information  on the  AMHS's approximate  tariffs,                                                               
numbering  about 20,000,  including combinations  for every  ship                                                               
and every  port, and  for vehicles ranging  from kayaks  to vans.                                                               
He   acknowledged   that   the  tariff   structure   had   become                                                               
unmanageable, especially  using the old reservation  system.  The                                                               
new  OARS reservation  system and  a new  tariff method  that Mr.                                                               
McLaren will  describe will make  significant improvements.   The                                                               
studies have identified the AMHS's  high tariffs and low tariffs.                                                               
Embedded in  the 4.5 percent  tariff increase, the  AMHS isolated                                                               
any  tariffs 25  percent higher  than  the norm  and have  frozen                                                               
them.  The AMHS  has been moving slowly in an  effort to even out                                                               
the tariffs, with an overarching  goal to have fair and equitable                                                               
tariffs  based on  vessel  miles.   Fares will  be  based on  the                                                               
number  of miles  traveled  and the  services  received.   Tariff                                                               
changes  are currently  underway and  should generate  about $1.8                                                               
million in savings in the current budget.                                                                                       
                                                                                                                                
1:27:56 PM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN, speaking  as a  frequent  AMHS traveler,  noted                                                               
that some of Alaska's ferries  travel directly between Petersburg                                                               
and  Sitka, but  others stop  in  Juneau before  traveling on  to                                                               
Sitka.   He asked how  the new  tariff structure will  handle the                                                               
added  miles for  passengers  who must  travel  to an  additional                                                               
port, not by choice.                                                                                                            
                                                                                                                                
1:28:51 PM                                                                                                                    
                                                                                                                                
MATT MCLAREN,  Business Development & Enterprise  Manager, Alaska                                                               
Marine  Highway System  (AMHS),  Department  of Transportation  &                                                               
Public  Facilities   (DOT&PF),  answered   that  this   has  been                                                               
considered.   In  the aforementioned  scenario,  the tariff  will                                                               
consider the beginning port of  Petersburg and the destination of                                                               
Sitka and  will not  penalize passengers  who are  routed through                                                               
Juneau.                                                                                                                         
                                                                                                                                
1:29:34 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN asked whether any data is available for non-                                                                    
revenue passengers.                                                                                                             
                                                                                                                                
CAPTAIN  FALVEY  answered that  the  AMHS  has discontinued  non-                                                               
revenue passes.                                                                                                                 
                                                                                                                                
1:30:35 PM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN  asked  for  efficiencies   that  the  AMHS  has                                                               
aggressively  pursued  to reduce  its  costs;  for example,  with                                                               
respect to  engines, propellers, and other  cost saving measures.                                                               
He  suggested   information  on  cost  savings   could  be  quite                                                               
important to new members who may  not be aware of ongoing efforts                                                               
the AMHS has made to control costs.                                                                                             
                                                                                                                                
CAPTAIN FALVEY  offered to  report on  cost reduction  efforts at                                                               
the end  of his presentation.   In response to  Senator Dunleavy,                                                               
he  confirmed  that   the  AMHS  has  been  in   the  process  of                                                               
identifying potential AMHS reductions for Governor Walker.                                                                      
                                                                                                                                
CAPTAIN  FALVEY reported  that the  4.5  percent tariff  increase                                                               
will generate $1.8 million in reduced general funds for FY 16.                                                                  
                                                                                                                                
1:32:18 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY  directed attention  to the next  slide, entitled,                                                               
"Dayboat  Alaska Class  Ferries" [slide  13].   Two Alaska  Class                                                               
ferries  are currently  being constructed  in  Ketchikan.   These                                                               
vessels will  be 280 feet in  length, seat up to  300 passengers,                                                               
and carry 53 Alaska standard  vehicles, approximately the size of                                                               
a Ford Expedition.   The vehicles will feature  very fast loading                                                               
and unloading bow and stern doors.   He anticipated the AMHS will                                                               
build a double  stern berth facility in Haines by  FY 17 with the                                                               
capability to  accommodate rapid movement of  vehicles.  Further,                                                               
the  new  ferries will  have  enclosed  car  decks, in  part,  in                                                               
response  to public  and  legislative  concerns about  protecting                                                               
vehicles against the  seas.  These vessels will  be equipped with                                                               
efficient  propellers   to  maximize  maneuverability   and  fuel                                                               
efficiency.   The vessels are slated  for a 2018 delivery  date -                                                               
with one delivered in the spring and  the other in the fall - and                                                               
will provide  shuttle service between  Juneau and Haines;  and on                                                               
to  Haines and  Skagway.    In addition,  the  AMHS  was able  to                                                               
purchase four  engines prior to  January 1 that allowed  Tier III                                                               
emission  engines  as opposed  to  Tier  IV engines,  which  will                                                               
result in significant cost savings over  time.  The AMHS was able                                                               
to meet  the Environmental  Protection Agency  (EPA) requirements                                                               
to  qualify and  the engines  have been  purchased and  stored in                                                               
Ketchikan.  He reported the project is on budget and on time.                                                                   
                                                                                                                                
1:34:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN  asked for  further clarification  on where                                                               
the Alaska Class ferries fit in the vessel category.                                                                            
                                                                                                                                
CAPTAIN  FALVEY  answered  that  the  Alaska  Class  ferries  are                                                               
considered day  vessels, which means  crew will return  to Juneau                                                               
and Skagway each evening.                                                                                                       
                                                                                                                                
1:34:52 PM                                                                                                                    
                                                                                                                                
SENATOR DUNLEAVY asked for total cost of each vessel.                                                                           
                                                                                                                                
CAPTAIN FALVEY  described the  cost process  of the  Alaska Class                                                               
ferry,  noting  initially  the  AMHS  budgeted  $120  million  to                                                               
construct one  350-foot vessel; however,  the process  was halted                                                               
after  realizing construction  costs would  exceed $120  million.                                                               
Although  $3.5 million  was  expended the  AMHS  owns the  design                                                               
work.   The  remaining $117.5  million will  provide the  design,                                                               
construction   engineering,    direct   cost    allocation,   and                                                               
construction  for  two Alaska  Class  ferries.   In  response  to                                                               
Senator Dunleavy,  he clarified the  $117.5 million is  the total                                                               
construction  cost  for two  vessels.    In response  to  Senator                                                               
Stedman, he offered to discuss  repowering the MV Columbia at the                                                               
end of his presentation.                                                                                                        
                                                                                                                                
1:36:39 PM                                                                                                                    
                                                                                                                                
CAPTAIN  FALVEY  turned  to   "Reservations  &  Manifest  System"                                                               
[slides  14-15].    The  new reservation  system  will  be  fully                                                               
available for public  use in October 2015, but  will run parallel                                                               
to  the old  system from  July to  October in  case any  glitches                                                               
arise.  Carus,  a Finnish company delivering the  system, is well                                                               
versed  in reservation  systems.   Carus  has experience  working                                                               
with  operators  in  the  Baltic   region,  the  United  Kingdom,                                                               
mainland   Europe,   Australia,  Africa,   and   the   US.     He                                                               
characterized  the  company  as  being  very  successful  and  he                                                               
expressed  confidence  the  new   system  [CarRes]  will  provide                                                               
efficiencies and be  more user friendly; for  example, the system                                                               
will  have the  capability  of using  smart  phones for  scanning                                                               
tickets.   Further, the CarRes  system will assist the  AMHS with                                                               
security by  tracking passengers  as well as  for outreach.   The                                                               
AMHS will eventually use kiosks like the airlines, he said.                                                                     
                                                                                                                                
1:38:38 PM                                                                                                                    
                                                                                                                                
CAPTAIN  FALVEY,   in  response  to  Senator   Stedman's  earlier                                                               
question about  cost savings, reported  that during the  past two                                                               
years  the AMHS  has  reduced its  costs by  $4.5  million.   For                                                               
example, the  AMHS reduced travel  agent commissions on  point to                                                               
point  in-state travel  resulting  in $450,000  in  savings.   In                                                               
addition,  the AMHS  reduced  the 30  percent  round trip  winter                                                               
discount  and discontinued  free  passes for  drivers during  the                                                               
summer, but  retained the winter  discount.  The AMHS  has closed                                                               
gift  shops on  the ships,  reassigned gift  shop personnel,  and                                                               
will hire fewer new employees  for the summer season resulting in                                                               
approximately  $1  million in  savings.    The AMHS  reduced  the                                                               
running time for  the MV Taku by a month  resulting in $1 million                                                               
in savings.   The MV  Lituya now  uses the Annette  Bay terminal,                                                               
cutting its run  time cut in half yet still  providing two runs a                                                               
day to serve Ketchikan, resulting in a $250,000 in savings.                                                                     
                                                                                                                                
1:41:01 PM                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY detailed other savings  including pushing back one                                                               
of the fast ferries by four  or five months resulting in $800,000                                                               
in savings.   The AMHS has also eliminated  outsourcing, has been                                                               
vigilant on shore  side and ship side staff,  and has facilitated                                                               
a stipend  plan with  AT&T saving  $40,000 on  cell phones.   The                                                               
cell phones are  integral to operations since the  AMHS runs 24/7                                                               
with shore side and ship side staff.                                                                                            
                                                                                                                                
CAPTAIN FALVEY  reported the MV  Columbia spent nine months  in a                                                               
Portland  shipyard  receiving new  engines  from  $32 million  in                                                               
federal funds,  which has saved  10 percent  in fuel costs.   The                                                               
FVF Fairweather now  has four new engines and  is running nicely,                                                               
also with a 10  percent savings in fuel costs.   As you may know,                                                               
the state  settled with the contractor  for approximately $30-$35                                                               
million  to replace  the fast  ferry engines  at no  cost to  the                                                               
state.   The AMHS also  purchased two spare swing  engines housed                                                               
in Ketchikan at  about half cost.  In addition,  the AMHS employs                                                               
fuel management systems on mainline  ships that result in about 5                                                               
percent fuel  savings.   In response to  an earlier  question, he                                                               
indicated that  the MV  Matanuska will be  repowered in  2016 and                                                               
2017, which should result in additional fuel savings.                                                                           
                                                                                                                                
1:43:12 PM                                                                                                                    
                                                                                                                                
SENATOR EGAN asked for an update on the Prince Rupert terminal.                                                                 
                                                                                                                                
CAPTAIN FALVEY  reported that the  effort to rebuild the  dock is                                                               
ongoing.   The dock  was condemned  about six  years ago  and the                                                               
AMHS worked  at that  time with the  BC [British  Columbia] ferry                                                               
system to dock AMHS's ships  using their terminals, but that dock                                                               
is no  longer available.   Two years ago  the state signed  a 50-                                                               
year lease  with the Canadian  government, including  providing a                                                               
$3.3  million down  payment  using federal  funds.   The  50-year                                                               
lease  essentially means  the  AMHS "owns"  the  terminal and  is                                                               
responsible for property taxes and  maintenance fees.  The intent                                                               
was to  spend approximately $11  to $20 million in  federal funds                                                               
to rebuild  the dock; however,  a dilemma  arose due to  the "Buy                                                               
American" rules,  which requires  purchasing American  steel when                                                               
federal monies  are involved in  a project.  Canada  objected and                                                               
invoked the  Foreign Extraterritorial  Measures Act,  which meant                                                               
that  Canadian firms  bidding on  the project  may be  subject to                                                               
potential fines.  Thus, the  state withdrew its bid yesterday, he                                                               
reported.                                                                                                                       
                                                                                                                                
1:46:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES commented that she  lived in Hoonah as a teenager                                                               
and   understands  how   important   the  ferries   are  to   the                                                               
communities.   The  AMHS has  been subsidized  by the  state; for                                                               
example, by approximately  $120 million in the  last fiscal year.                                                               
She asked for the administration's  long-term plans and vision to                                                               
reduce state  subsidies to the  ferry system, noting  that Norway                                                               
and Canada have  built tunnels, roads, and bridges  [to reduce or                                                               
eliminate runs].                                                                                                                
                                                                                                                                
CAPTAIN FALVEY,  referred back  to the chart  on slide  3, noting                                                               
the two  biggest cost drivers  for the  AMHS are wages  and fuel.                                                               
He highlighted  cost savings, noting  the department  strives for                                                               
efficiency with is marine contracts  while still maintaining fair                                                               
and equitable  contracts, that  the AMHS has  enjoyed about  a 10                                                               
percent reduction in fuel costs  attributable to the new engines.                                                               
The mainline ferries also employ fuel throttle systems, he said.                                                                
                                                                                                                                
CO-CHAIR  HUGHES  remarked  that  she  appreciated  the  DOT&PF's                                                               
efforts,  but encouraged  the department  to look  at what  other                                                               
countries have done to bring  in other modes of transportation to                                                               
lower ferry costs.                                                                                                              
                                                                                                                                
1:49:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES asked for a  report on the MV Tustumena and                                                               
the dock repairs  in Kodiak, which were hampered  by the presence                                                               
of sea  lions.  She further  wondered how this delay  will affect                                                               
the projected costs.                                                                                                            
                                                                                                                                
CAPTAIN FALVEY answered that the  design for the new MV Tustumena                                                               
is underway with  $10 million in design funds,  with an estimated                                                               
completion by  December or early  next spring.  Further,  not all                                                               
the design  monies will be necessary,  he said.  He  reported the                                                               
fund balance at $50 million.   He estimated construction costs to                                                               
build the  ship will be  $220 million.   In response to  the dock                                                               
repair, that  project is  being overseen  by the  DOT&PF regional                                                               
office.    He acknowledged  the  setback  in terms  of  [federal]                                                               
permitting  for  sea  lions, although  the  department  has  been                                                               
actively   working  to   obtain  the   permits  and   anticipates                                                               
construction   will   occur    thereafter,   dependent   on   the                                                               
construction window.                                                                                                            
                                                                                                                                
1:52:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   STUTES   asked   whether   the   department   is                                                               
"reinventing the wheel"  since the old MV  Tustumena has operated                                                               
for 50 years.                                                                                                                   
                                                                                                                                
CAPTAIN FALVEY emphasized the need  to be cognizant of the vessel                                                               
service life, which  he estimated at 10 years for  the current MV                                                               
Tustumena.  Ships are maintained  via the federally-sponsored CIP                                                               
[capital  improvement  program].  The MV  Tustumena  underwent  a                                                               
large project at the Seward  shipyard, but some issues arose with                                                               
the shipyard; however,  the ship had a good  overhaul and repairs                                                               
were made.   Nevertheless, it  would be  remiss not to  start the                                                               
process for  replacement so the  AMHS has been  proactively using                                                               
two processes:  state funds, federal  funds, or a  combination of                                                               
the two to plan for the MV Tustumena's replacement.                                                                             
                                                                                                                                
1:54:22 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN stated one radical measure  is to tie up ships to                                                               
the dock.  He asked whether doing  so would incur costs or if the                                                               
operating costs will be reduced to zero.                                                                                        
                                                                                                                                
CAPTAIN FALVEY  advised that  costs will not  be reduced  to zero                                                               
unless a  ship is  scrapped or  surplused and  some costs  due to                                                               
risk  management to  oversee the  vessel would  be incurred.   In                                                               
addition, certificates  must be  maintained to  keep the  ship in                                                               
ready  status, although  he said  he  did not  have the  specific                                                               
figures available today.                                                                                                        
                                                                                                                                
1:55:38 PM                                                                                                                    
                                                                                                                                
SENATOR  STEDMAN agreed  that it  wasn't  simple to  just tie  up                                                               
ships to bring down the subsidy  since the AMHS would still incur                                                               
costs.   In  addition, the  issue is  complex, he  offered, since                                                               
union agreements are  in place and the  state cannot unilaterally                                                               
make decisions.   He emphasized  that the AMHS  faces challenging                                                               
problems,  which is  one reason  why  pressure has  been made  to                                                               
increase efficiencies.                                                                                                          
                                                                                                                                
1:56:54 PM                                                                                                                    
                                                                                                                                
CHAIR  MICCICHE  said his  last  district  was dependent  on  the                                                               
services of the MV Tustumena.   He thanked Captain Falvey for his                                                               
management and the unprecedented safety  record.  In terms of the                                                               
governor's   request   for   budget  cuts,   he   asked   whether                                                               
efficiencies including rates,  schedules, and service adjustments                                                               
are also being considered.                                                                                                      
                                                                                                                                
CAPTAIN  FALVEY  agreed  that  the   AMHS  is  looking  at  those                                                               
considerations.                                                                                                                 
                                                                                                                                
1:57:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN,  in terms of  the design costs for  the MV                                                               
Tustumena,  recalled   the  auto  industry  often   faces  design                                                               
considerations.   He  wondered if  the AMHS  is seeking  a simple                                                               
design  or cutting  edge  design and  whether  some design  costs                                                               
could be eliminated by using  a standard design being effectively                                                               
used in other parts of the world.                                                                                               
                                                                                                                                
CAPTAIN  FALVEY replied  that some  of the  design considerations                                                               
are necessary because the MV  Tustumena's routes are unique.  For                                                               
example, the  state doesn't own  most of  the docks so  huge tide                                                               
differentials  exist that  requires vehicle  elevator use,  which                                                               
doesn't happen worldwide.  The  replacement ship must employ very                                                               
good design.   The naval  architectural firm has taken  the basic                                                               
design  and  is  building  in  efficiencies,  ranging  from  hull                                                               
efficiencies to propeller efficiencies.                                                                                         
                                                                                                                                
2:00:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN understood  this ship is a  unique ship and                                                               
the AMHS is starting with the existing MV Tustumena's design.                                                                   
                                                                                                                                
CAPTAIN FALVEY  agreed; noting the  AMHS met with  communities on                                                               
the replacement MV Tustumena and  has incorporated their feedback                                                               
into the design;  thus, the new ship will be  slightly bigger but                                                               
the AMHS is  cognizant of the size since it  must accommodate the                                                               
existing docks.                                                                                                                 
                                                                                                                                
REPRESENTATIVE CLAMAN acknowledged he had answered his question.                                                                
                                                                                                                                
2:02:10 PM                                                                                                                    
                                                                                                                                
MATT McLAREN  began his  PowerPoint on the  AMHS Tariff  Study by                                                               
reporting that Northern Economics,  Inc. completed the rate study                                                               
for the  DOT&PF in  2008.  Northern  Economics, Inc.  made tariff                                                               
recommendations  and  recommended   tariff  formulas,  which  the                                                               
briefing will  cover [slide 2].   He directed attention  to their                                                               
recommendations.    First,  the Northern  Economics,  Inc.  study                                                               
identified the state's current  tariffs for passengers, vehicles,                                                               
and cabins  ranged significantly.   In fact,  some fares  were 25                                                               
percent  above or  below the  average tariff  per nautical  mile.                                                               
The study  recommended the AMHS  freeze any tariffs that  were 25                                                               
percent  above   the  average  tariff.     Secondly,   the  study                                                               
recommended adopting a formula approach  to setting the tariff in                                                               
an  effort  to design  a  more  equitable tariff  throughout  the                                                               
system.   Third, the  study recommended the  AMHS set  a two-tier                                                               
tariff  approach with  some seasonal  adjustments to  accommodate                                                               
summer and  winter demands.   Further, they recommended  that the                                                               
overall tariffs be  increased from zero to 30  percent higher for                                                               
passengers and 30-40 percent higher  for vehicles.  He noted some                                                               
ridership  doesn't vary  much between  summer and  winter due  to                                                               
local traffic.  Third, the  study recommended fare recovery rates                                                               
between 39-65 percent  [slide 4.]  He reported that  the AMHS has                                                               
only  been recovering  approximately 31  percent of  the recovery                                                               
rates,   so  it   will  consider   some   increases,  either   by                                                               
incorporating  more efficiencies  to  reduce  costs or  combining                                                               
cost savings  with adjusted  tariffs to reach  the minimum  of 39                                                               
percent recovery.                                                                                                               
                                                                                                                                
2:05:39 PM                                                                                                                    
                                                                                                                                
MR.   McLAREN   reported   that  the   study   also   recommended                                                               
differentiating   between   commercial  and   passenger   vehicle                                                               
tariffs, noting the  current fares have been based  on the amount                                                               
of room  each vehicle  uses.   The commercial  transport industry                                                               
typically  has higher  fees  so the  study  recommended a  60-120                                                               
percent  increase   in  commercial  tariffs.     The  study  also                                                               
recommended  adopting  a  tariff  premium for  express  and  high                                                               
demand routes starting  with an increase of 10  percent for these                                                               
routes;  however, the  study also  recommended that  these tariff                                                               
adjustments be implemented gradually  over time to avoid shocking                                                               
the system.                                                                                                                     
                                                                                                                                
2:07:02 PM                                                                                                                    
                                                                                                                                
MR.  McLAREN directed  attention  to  "Passenger Tariff  Formula"                                                               
[slide  5],  to demonstrate  the  fee  structure.   The  Northern                                                               
Economics,  Inc. study  recommended  fixed  embark and  disembark                                                               
fees and adding a distance-based  fee, with a seasonal multiplier                                                               
and a route-type multiplier to arrive at the passenger tariff.                                                                  
                                                                                                                                
MR.  McLAREN  next  directed attention  to  the  "Vehicle  Tariff                                                               
Formula"  [slide  6].   This  formula  would  be similar  with  a                                                               
dimensional  adjustment   for  larger  vehicles  plus   adding  a                                                               
commercial fee.   He turned to the "Cabin  Tariff Formula" [slide                                                               
7] stating that the fee would be  based on the cabin type by size                                                               
and location plus a distance-based  fee with a seasonal and route                                                               
adjustment.  He next referred to  the sample table of the current                                                               
tariff plan  adjusted with the  new structure [slide 8].   Again,                                                               
tariffs  on routes  that were  greater than  25 percent  would be                                                               
frozen, he said.                                                                                                                
                                                                                                                                
2:09:43 PM                                                                                                                    
                                                                                                                                
MR. McLAREN  highlighted the plan  moving forward is to  keep the                                                               
high tariffs frozen  and adjust the lower fares  until the system                                                               
fares area fair and equitable [slide  9].  Thus far a 4.5 percent                                                               
across  the board  tariff increase  has been  implemented on  all                                                               
routes except the  high tariffs.  All routes will  be analyzed to                                                               
determine  the feasibility  of seasonal  adjustments.   A premium                                                               
tariff  will  be implemented  on  express,  dedicated and  highly                                                               
utilized  routes.     The  tariff  formulas   will  be  gradually                                                               
implemented over several years.                                                                                                 
                                                                                                                                
CAPTAIN  FALVEY said  the AMHS  is currently  working on  formula                                                               
changes to  calculate the tariffs.   He anticipated that  the new                                                               
tariffs will be  embedded in the system when  the new reservation                                                               
system is brought on next fall.                                                                                                 
                                                                                                                                
2:12:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN  said he's received some  feedback that the                                                               
ferry  system  may  be somewhat  inflexible  in  recognizing  and                                                               
serving communities  hosting events.   For example,  he suggested                                                               
the AMHS  might make  some small adjustments  to the  schedule to                                                               
serve the Kodiak Crab Festival.                                                                                                 
                                                                                                                                
CAPTAIN  FALVEY  answered that  AMHS  works  hard to  accommodate                                                               
local  communities, hold  a summer  and winter  teleconference to                                                               
facilitate events, and  has a comment period  prior to finalizing                                                               
the  schedules.   They have  a full-time  scheduler who  works to                                                               
make the very complex schedules  work and accept e-mail and phone                                                               
call comments.   He related that  the AMHS has a  list of special                                                               
events  ranging from  festivals  in Cordova  and  Haines to  kids                                                               
coming to Ketchikan  for the music festival.   He reiterated that                                                               
the  AMHS  attempts  to accommodate  communities,  although  some                                                               
issues can arise due to weather.                                                                                                
                                                                                                                                
2:14:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CLAMAN interjected  that he  has heard  of issues                                                               
arising in late spring or summer.                                                                                               
                                                                                                                                
CAPTAIN FALVEY  maintained the  AMHS accommodates  communities as                                                               
best as the system can.                                                                                                         
                                                                                                                                
2:14:52 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  mentioned that the  number of complaints  he has                                                               
received has been greatly reduced  since Captain Falvey has taken                                                               
charge.  In  fact, significant improvements have  occurred in the                                                               
AMHS  in the  past  several  years.   He  expressed concern  that                                                               
budget concerns will raise issues for the legislature.                                                                          
                                                                                                                                
CAPTAIN FALVEY characterized  his staff as hard  working and very                                                               
skilled, performing a large volume  of work, for example the crew                                                               
handle  15,000 dockings  and  undockings per  year  and based  on                                                               
customer satisfaction [surveys] provide good service.                                                                           
                                                                                                                                
2:16:16 PM                                                                                                                    
                                                                                                                                
CHAIR MICCICHE related the longer  distances for the AMHS and the                                                               
2014 highs  with about  350 percent differences  in tariffs.   He                                                               
understood the  tariff changes will be  implemented gradually and                                                               
asked for a definition of gradually.                                                                                            
                                                                                                                                
MR.  McLAREN related  the  AMHS's plan  to  implement the  tariff                                                               
changes over  a period of four  to five years, which  is somewhat                                                               
dependent  on the  route per  mile embarking  fees and  the route                                                               
costs per  mile.   Of course, freezing  the higher  tariffs while                                                               
raising the lower ones helps  bring the average tariff closer, he                                                               
said.  He estimated the fare  cost recovery rate will equate to a                                                               
$13 million difference from the  current structure, which will be                                                               
met   by  incorporating   efficiencies  or   increasing  revenue;                                                               
probably a combination  of the two.  However, some  areas may end                                                               
up paying twice their current fares,  for example, a $20 fare may                                                               
increase to $40,  which can be significant to  communities so the                                                               
AMHS would like avoid instituting big increases.                                                                                
                                                                                                                                
2:18:59 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP, referring to $2.4  million in support services on                                                               
the pie  chart [on  slide 11], indicated  his preference  to have                                                               
the department negotiate  down the internal rate  between the two                                                               
departments.                                                                                                                    
                                                                                                                                
CAPTAIN FALVEY acknowledged his concern.                                                                                        
                                                                                                                                
2:19:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FOSTER passed the gavel to Co-Chair Hughes.                                                                            
                                                                                                                                
The committee took at-ease from 2:19 p.m. to 2:21 p.m.                                                                          
                                                                                                                                
2:21:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES called the committees back to order.                                                                            
                                                                                                                                
^DISCUSSION  OF  STATUS  OF  PROJECTS:   ROAD  TO  AMBLER  MINING                                                               
DISTRICT,  JUNEAU  ACCESS  ROAD  PROJECT,  SUSITNA  WATANA  HYDRO                                                               
PROJECT, KNIK  ARM BRIDGE, ALASKA  STAND ALONE  PIPELINE PROJECT,                                                               
AND THE KODIAK LAUNCH COMPLEX                                                                                                   
    DISCUSSION OF STATUS OF PROJECTS: ROAD TO AMBLER MINING                                                                 
   DISTRICT, JUNEAU ACCESS ROAD PROJECT, SUSITNA WATANA HYDRO                                                               
 PROJECT, KNIK ARM BRIDGE, ALASKA STAND ALONE PIPELINE PROJECT,                                                             
                 AND THE KODIAK LAUNCH COMPLEX                                                                              
                                                                                                                              
2:22:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES announced that the  final order of business would                                                               
be  a discussion  of status  of projects:  Road to  Ambler Mining                                                               
District,  Juneau  Access  Road  Project,  Susitna  Watana  Hydro                                                               
Project, Knik  Arm Bridge, Alaska  Stand Alone  Pipeline Project,                                                               
and  the  Kodiak  Launch  Complex.     She  noted  that  she  has                                                               
previously referred to  these projects as mega  projects, but she                                                               
would  like  to   withdraw  that  designation.     She  said  she                                                               
recognizes that  they are important  and major projects,  but are                                                               
not on  the scale of mega  project.  She identified  the Knik Arm                                                               
Bridge Crossing project as one  of great interest to her district                                                               
projected  at $1  billion.   In terms  of cost,  she related  the                                                               
bridge between  Portland and  Vancouver is  a $3  billion bridge.                                                               
She expressed concern that labels  can create certain connotation                                                               
that can kill projects.                                                                                                         
                                                                                                                                
CO-CHAIR HUGHES  asked Mr.  Davis to provide  a status  report on                                                               
the next  project listed on  the Governor's  Administrative Order                                                               
(AO) 271, the Road to Ambler Mining District.                                                                                   
                                                                                                                                
2:25:16 PM                                                                                                                    
                                                                                                                                
MARK  R.  DAVIS,  Deputy  Director,  Infrastructure  Development,                                                               
Alaska  Industrial  Development  and  Export  Authority  (AIDEA),                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED), stated that  AIDEA has issued stop orders and  is in the                                                               
process  of paying  outstanding  invoices.   He further  reported                                                               
that AIDEA has  been working to stabilize the data  that has been                                                               
collected to  date, but not go  to a final report.   For example,                                                               
on the fisheries report the  AIDEA believes it can expend $20,000                                                               
on  a draft  report versus  issuing a  final report  for $70,000.                                                               
AIDEA  always  intended to  use  the  appropriated funds  for  an                                                               
environment impact  statement (EIS),  he said.   The appropriated                                                               
funds to  date total $9.7  million, with  an estimate of  $1.4 to                                                               
$1.6  million  necessary   to  shut  down  the   project  if  the                                                               
administration and legislature desire to do so.                                                                                 
                                                                                                                                
MR. DAVIS  indicated that AIDEA  has collected base data  and has                                                               
prepared a  draft application to  the US Army Corps  of Engineers                                                               
[USACE] and has  selected a third party contractor  to prepare an                                                               
EIS  if the  project  were  to move  forward.    He estimated  an                                                               
additional $6.8  to $7 million  will be necessary to  continue to                                                               
reach a record  of decision on the  EIS.  If the  project is shut                                                               
down, he estimated that AIDEA  could return approximately $7.6 to                                                               
$7.9 million to the legislature.   In response to Co-Chair Hughes                                                               
he reiterated  $1.4-$1.6 million  to shut  down and  preserve the                                                               
data, with $7.6-$7.9  in general fund monies  available to return                                                               
to  the  legislature.    Finally, it  would  cost  an  additional                                                               
estimated  $6.8  million  in  FY  17 to  move  forward  with  the                                                               
project, he said.                                                                                                               
                                                                                                                                
2:28:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES  asked for an  overview of  scope of the  Road to                                                               
Ambler Mining  District.  She understood  it would be a  220 mile                                                               
industrial road  - not paved  - but a  gravel road.   She further                                                               
asked for a timeline to move forward.                                                                                           
                                                                                                                                
MR.  DAVIS summarized  the Ambler  Mining District  Road project,                                                               
such that AIDEA  has been working to obtain a  record of decision                                                               
for the  EIS.  If  AIDEA were to  file for  an EIS it  would take                                                               
three to  four years to  obtain it.  If  the EIS were  granted by                                                               
the US Army  Corps of Engineers (USACE), the  AIDEA's board would                                                               
declare  the project  and would  undergo a  finance plan  to seek                                                               
private capital to  build a road estimated  at $200-$258 million,                                                               
according to  Dowl.  He  anticipated that the  construction would                                                               
take 3-4 years, with the final  process 8 years out.  In response                                                               
to Representative Ortiz, he reported  that the state has invested                                                               
about $20  million to date.   He  explained that some  funds were                                                               
spent by DOT&PF  and some by AIDEA.  He  noted AIDEA received two                                                               
appropriations  from the  legislature  with $9.3  million of  the                                                               
appropriation remaining.                                                                                                        
                                                                                                                                
2:29:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  NAGEAK  commented that  during  his  time in  the                                                               
legislature  he  has  often discussed  the  necessity  to  access                                                               
Alaska's resources.   The cost to do business in  rural Alaska is                                                               
very  high, largely  due to  transportation costs.   In  fact, he                                                               
lives 150  miles from the source  of the wealth of  the state yet                                                               
he still  pays $7 per  gallon for  gasoline.  Further,  the state                                                               
relies  on oil  and  gas  revenues, which  has  been driving  the                                                               
economy.   He emphasized  that natural  resources are  located in                                                               
rural Alaska and building infrastructure  such as ports and roads                                                               
are  necessary to  diversify the  economy.   He reminded  members                                                               
that today's  dollars are  cheaper than  tomorrow's dollars.   He                                                               
urged members to build the  infrastructure at today's costs since                                                               
the projects will cost significantly more in the future.                                                                        
                                                                                                                                
2:33:21 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN acknowledged that it  is difficult to represent a                                                               
region and see a project disappear.   He noted that the bridge to                                                               
Gravina  Island  funding  was   reappropriated  to  the  Railbelt                                                               
communities.  He emphasized that he  has long been a supporter of                                                               
the Ambler  Mining District  road project,  the Knik  Arm Bridge,                                                               
and the  Watana [Hydro project];  however, the state is  facing a                                                               
$4 billion  deficit.   He said  it will  be tough  to see  any of                                                               
these projects be shelved for some time.                                                                                        
                                                                                                                                
2:33:43 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP asked for the annual  dividend to the state on Red                                                               
Dog Mine port road and  the dividend to NANA Regional Corporation                                                               
(NANA).                                                                                                                         
                                                                                                                                
MR.  DAVIS offered  to provide  the information.   He  understood                                                               
that it is  significant revenue.  He offered his  belief that the                                                               
net present value  of the road would be about  $84 to $90 million                                                               
over a 30 year life of the project back to the developer.                                                                       
                                                                                                                                
2:35:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES  commented  that  [the  legislature]  wants  the                                                               
private sector to  be strong as the necessary  budget cuts occur.                                                               
She stated  that the governor's  [Administrative] order  [AO 271]                                                               
is to review the projects so  they can be prioritized.  She hoped                                                               
members  will  have  an  open mind  and  consider  the  statewide                                                               
perspective.                                                                                                                    
                                                                                                                                
2:36:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES turned next to the Juneau Access Road project.                                                                  
                                                                                                                                
2:36:36 PM                                                                                                                    
                                                                                                                                
JOHN BINDER, Acting Commissioner,  Department of Transportation &                                                               
Public Facilities  (DOT/PF), stated  that the Juneau  Access Road                                                               
project is a proposed Federal  Highways Administration (FHWA) and                                                               
DOT&PF  action  to improve  surface  transportation  to and  from                                                               
Juneau within  the Lynn  Canal Corridor.   This project  has been                                                               
under  consideration for  a long  time, he  said.   In 2006,  the                                                               
final EIS was issued that would  have allowed the project to move                                                               
forward  with  the  East  Lynn   Canal  Highway  alternative  for                                                               
construction.    Several  lawsuits  were filed  arguing  the  EIS                                                               
failed  to   consider  improved  ferry  service   could  be  made                                                               
available  using  current infrastructure.    After  many days  in                                                               
court the  lawsuit was upheld.   In January 2012,  a supplemental                                                               
EIS   process   was   initiated  to   consider   the   additional                                                               
alternative. In November  2014, a draft EIS  was issued regarding                                                               
that alternative.   Significant  public comment was  received and                                                               
the  contractor is  currently  responding to  the  comments.   He                                                               
anticipated  that a  draft  final  EIS will  be  available for  a                                                               
record of decision  in early 2016.  Thus a  significant amount of                                                               
time will be spent incorporating the comments into the EIS.                                                                     
                                                                                                                                
ACTING COMMISSIONER BINDER related  that the estimated total cost                                                               
for the  project in 2013 dollars  is $570 million.   Thus far $26                                                               
million  of federal  funds and  $20 million  of state  funds have                                                               
been expended or approximately $45 million total funds to date.                                                                 
                                                                                                                                
2:39:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES asked for further  clarification on the remaining                                                               
state general funds necessary for the Juneau Access project.                                                                    
                                                                                                                                
ACTING  COMMISSIONER BINDER  answered  that he  doesn't have  the                                                               
figures  broken out  between state  and federal  funds necessary,                                                               
but offered to provide it.                                                                                                      
                                                                                                                                
REPRESENTATIVE   HUGHES  understood   it  was   approximately  $9                                                               
million.                                                                                                                        
                                                                                                                                
2:39:32 PM                                                                                                                    
                                                                                                                                
KIM  RICE,  Deputy  Commissioner,  Office  of  the  Commissioner,                                                               
Department  of  Transportation   &  Public  Facilities  (DOT&PF),                                                               
stated that the  estimated cost is approximately  $523 million to                                                               
construct  the  roadway.    She   stated  that  the  federal  aid                                                               
typically comes in at ten  percent so it would cost approximately                                                               
$52 in [state funds].                                                                                                           
                                                                                                                                
2:39:57 PM                                                                                                                    
                                                                                                                                
SENATOR  EGAN, with  respect to  funding, asked  what happens  if                                                               
there are substantial delays to the EIS.                                                                                        
                                                                                                                                
ACTING  COMMISSIONER BINDER  answered that  this is  still to  be                                                               
sorted  out  with   the  FHWA.    He  anticipated   that  as  the                                                               
administration highlights its  vision that some of  it will flesh                                                               
out.  He said  he doesn't know the answer, but  in the worst case                                                               
scenario, the state  has expended $26 million  federal funds that                                                               
may  need to  be  reimbursed.   Again,  at  this  point, this  is                                                               
unknown.                                                                                                                        
                                                                                                                                
2:40:48 PM                                                                                                                    
                                                                                                                                
SENATOR EGAN  asked whether the  funds would need to  be returned                                                               
to the federal government.                                                                                                      
                                                                                                                                
MS.  RICE answered  that significant  debate has  occurred.   She                                                               
went  to the  source 23  CFR 630,  the federal  regulation.   She                                                               
offered her  interpretation, that  from the time  of the  EIS and                                                               
the right-of-way is  opened, the state has 20  years to complete.                                                               
If the project  is in preliminary engineering the state  has a 10                                                               
year deadline.   The end  of the  regulation says that  the state                                                               
may request  a time extension beyond  the 20 year limit,  with no                                                               
repayment of federal funds and  the FHWA may approve this request                                                               
if it  is considered reasonable.   She  reported this is  why the                                                               
DOT&PF  is  working closely  with  the  FHWA.   She  offered  two                                                               
examples, first, with the Tony  Knowles Coastal trail [extension]                                                               
project, the DOT&PF worked through an  EIS, got to the end of the                                                               
project, and the project was  either supported by Municipality of                                                               
Anchorage or the  state, but never supported by both  at the same                                                               
time.    Ultimately  the  decision  was made  not  to  build  the                                                               
project, and the DOT&PF did not repay.                                                                                          
                                                                                                                                
2:42:05 PM                                                                                                                    
                                                                                                                                
MS. RICE turned  to the second scenario in  which a controversial                                                               
Anchorage  highway-to-highway  project  was   halted.    In  that                                                               
instance the state  repaid the $10 million when  the decision was                                                               
made not to  move forward.  However, the federal  funding that is                                                               
returned  is put  on  another project;  thus,  the state  doesn't                                                               
really lose the federal funding,  although it returns any general                                                               
fund monies.   In  a sense, the  effect expands  the programming,                                                               
she said.                                                                                                                       
                                                                                                                                
2:42:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CLAMAN related that  the answers to Senator Egan's                                                               
questions sufficed.                                                                                                             
                                                                                                                                
2:42:50 PM                                                                                                                    
                                                                                                                                
SENATOR EGAN referred  to the Gravina Island  bridge funding that                                                               
was used elsewhere.   He asked for further  clarification on what                                                               
happens  to  all  the  money  that  has  been  appropriated;  for                                                               
example, another $35 million was  appropriated last year [for the                                                               
Juneau Access  project].   He expressed  concern about  the funds                                                               
going elsewhere.                                                                                                                
                                                                                                                                
MS.  RICE acknowledged  that Senator  Egan was  referring to  the                                                               
appropriated  money   but  she   offered  to  discuss   the  STIP                                                               
[Statewide Transportation Improvement Program] first.                                                                           
                                                                                                                                
SENATOR EGAN asked her to address the funding also.                                                                             
                                                                                                                                
MS. RICE  was unsure if  any federal earmarks have  been provided                                                               
for  the  Juneau  Access  project.   She  explained  the  program                                                               
process, such  that when  the STIP is  developed, AC  or advanced                                                               
construct  is built  into  the  program.   Thus,  the DOT&PF  can                                                               
advertise that  projects are  being worked on  that need  to move                                                               
forward, especially given  that projects take anywhere  from 5 to                                                               
10  years to  develop.   The STIP  covers three  years.   She was                                                               
unsure   whether  the   Juneau  Access   Road  project   has  any                                                               
"earmarks."  It's  essential that the DOT&PF  has the flexibility                                                               
to move  funding around for projects  that run into snags  and do                                                               
not move  forward.  Thus,  some AC  projects move forward  in the                                                               
program as regular construction projects.   She reported that the                                                               
DOT&PF  currently has  an amendment  to move  the [Juneau  Access                                                               
project] funding to future years.   This will be reflected in the                                                               
STIP  in future  years.   Typically, the  DOT&PF carries  forward                                                               
about  30 percent,  which  is the  national  average of  shuffled                                                               
projects.  She  offered her belief that  [Gravina Bridge project]                                                               
funds are dedicated to be used  in other Ketchikan projects.  She                                                               
cautioned that she  knows less about Southeast  Alaska than other                                                               
parts of  the state, but  she envisioned that some  funding could                                                               
be  reappropriated to  other projects,  noting the  decisions are                                                               
not totally within the DOT&PF's control.                                                                                        
                                                                                                                                
2:45:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES asked whether the  administration agrees that the                                                               
Juneau Access  Road project  would save  subsidies for  the ferry                                                               
system.    She asked  whether  Alaska  should move  forward  with                                                               
remedies taken in other parts of the world.                                                                                     
                                                                                                                                
MS.  RICE answered  that the  DOT&PF is  currently transitioning.                                                               
Historically,  in  recent  history,   the  draft  Southeast  Plan                                                               
identifies  quarters.    The federal  program  requires  planning                                                               
documents  that  have  "big  picture"  vision  and  projects  are                                                               
developed  for the  plan.    One project  in  the Southeast  Plan                                                               
[Southeast  Alaska  Transportation  Plan  (SATP)  is  the  Juneau                                                               
Access  Road  project; another  is  Sitka  to Warm  Springs  Bay.                                                               
Certainly, people will review the  plan from the perspective that                                                               
some  projects  are "pipe  dreams."    Other projects  may  upset                                                               
people since the projects represent  change.  She said she wasn't                                                               
advocating  either way;  however,  this is  the  process used  to                                                               
develop  projects.   Numerous  hearings were  held  on the  draft                                                               
plan, which has  been controversial.  Funding  changes and policy                                                               
direction also affect the transportation plans.                                                                                 
                                                                                                                                
2:47:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MILLETT related that  budget amendments are due to                                                               
the  legislature  on   February  18.    She   asked  for  further                                                               
clarification on when  the "go" or "no go" decision  will be made                                                               
on the  Juneau Access Road and  Knik Arm Crossing projects.   She                                                               
asked whether the legislature will get prior notification.                                                                      
                                                                                                                                
ACTING COMMISSIONER BINDER answered  that the DOT&PF is currently                                                               
holding discussions  with the governor's office.   He anticipated                                                               
that the decisions  would happen in the near future.   In further                                                               
response he replied that he hoped it would be by February 18.                                                                   
                                                                                                                                
2:48:34 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP said he still supports the [Juneau Access] road.                                                                 
                                                                                                                                
2:48:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   HUGHES  asked   whether  a   meeting  was   held  with                                                               
Commissioner Kemp  after the commissioner  issued the  memo [with                                                               
respect to the aforementioned project].                                                                                         
                                                                                                                                
ACTING  COMMISSIONER BINDER  answered  that he  was  unsure.   He                                                               
recalled  that  the  administrative  order  [AO  271]  issued  by                                                               
Governor  Walker  requested  an   assessment  on  each  of  these                                                               
projects and  the prior commissioner provided  the information to                                                               
the governor's office.                                                                                                          
                                                                                                                                
2:49:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES asked  which of  the six  projects are  the most                                                               
"shovel ready."                                                                                                                 
                                                                                                                                
MS. RICE  answered that she  and Acting Commissioner  Binder have                                                               
only been  involved recently in two  of the projects so  she said                                                               
they would decline to comment.                                                                                                  
                                                                                                                                
2:50:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES  further narrowed the aforementioned  question to                                                               
which  projects  under  the DOT&PF's  purview  are  most  "shovel                                                               
ready."                                                                                                                         
                                                                                                                                
MS.  RICE  speculated that  both  projects  are considerably  far                                                               
along in development.  The  Juneau Access Road project would have                                                               
gone  to construction  if it  had not  gone to  court, she  said.                                                               
Things  will need  to change;  however, she  couldn't predict  if                                                               
another court  case would arise.   The Knik Arm  Crossing project                                                               
has purchased 86  percent of the right-of-way.   In addition, the                                                               
whole KABATA funding structure changed last year.                                                                               
                                                                                                                                
2:51:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES turned to the Susitna-Watana Hydro project.                                                                     
                                                                                                                                
2:51:20 PM                                                                                                                    
                                                                                                                                
SARA  FISHER-GOAD, Executive  Director,  Alaska Energy  Authority                                                               
(AEA), Department  of Commerce, Community &  Economic Development                                                               
(DCCED), stated she would not  give the PowerPoint on the project                                                               
but  provide   an  update  on   the  Federal   Energy  Regulatory                                                               
Commission {FERC]  licensing process.  She  directed attention to                                                               
the  agency's response  to  Administrative Order  No.  271.   The                                                               
authorized funds  for the project  totals $192 million,  of which                                                               
$158  million  has been  expended  to  date.   Approximately  $20                                                               
million  has been  encumbered.   If  the project  is shelved,  it                                                               
would  require additional  work  to appropriately  shut down  the                                                               
project to retain the data collected  in a useful form for future                                                               
potential development.  She reported  that if the project is shut                                                               
down  that  the AEA  would  have  approximately $6.6  million  of                                                               
available funds from existing appropriations.                                                                                   
                                                                                                                                
2:52:45 PM                                                                                                                    
                                                                                                                                
MS.  FISHER-GOAD noted  some milestones  in 2014,  including that                                                               
the AEA filed  an initial study with FERC, which  is an extensive                                                               
report.   The AEA  has held several  stakeholder meetings  and of                                                               
the 58  studies, the agency  has completed data collection  on 13                                                               
studies.   She  pointed out  that  the AEA  submitted a  thorough                                                               
report to  the legislature  on January  20, 2015.   An  e-mail to                                                               
legislators links  to this report,  which provides a  full annual                                                               
update on the status of the Susitna-Watana Hydro project.                                                                       
                                                                                                                                
2:53:40 PM                                                                                                                    
SENATOR  BISHOP noted  he is  halfway through  the Susitna-Watana                                                               
Hydro report.   He  asked for further  clarification on  how much                                                               
more money is required to obtain a FERC license.                                                                                
                                                                                                                                
MS. FISHER-GOAD answered  that the AEA anticipates  that it would                                                               
require $102 million to get to the license.                                                                                     
                                                                                                                                
2:54:06 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP asked for a timeline.                                                                                            
                                                                                                                                
MS. FISHER-GOAD deferred to Mr. Dyok.                                                                                           
                                                                                                                                
2:54:20 PM                                                                                                                    
                                                                                                                                
WAYNE DYOK, Project Manager,  Susitna-Watana Hydro, Alaska Energy                                                               
Authority,   Department  of   Commerce,   Community  &   Economic                                                               
Development  (DCCED),  reviewed  the timeline  for  the  Susitna-                                                               
Watana  Hydro project  if $102  million [was  appropriated].   He                                                               
anticipated that the project would  file a license application to                                                               
FERC in  early 2017 with an  anticipated issuance by FERC  at the                                                               
end of 2018, with construction commencing in 2019.                                                                              
                                                                                                                                
2:55:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CLAMAN asked  for the  current estimated  cost of                                                               
construction  after  the $102  million  necessary  to obtain  the                                                               
permit.                                                                                                                         
                                                                                                                                
MS.  FISHER-GOAD  reported  the  current estimated  cost  of  the                                                               
project engineering  feasibility report  of $5.655 billion.   She                                                               
detailed that the agency has  had three tracks in the development                                                               
of  the project,  including  that a  significant  portion of  the                                                               
funds have gone to collect  environmental data to comply with the                                                               
study  plan  determination from  FERC.    The financing  estimate                                                               
would  encompass  reviewing various  ways  the  project could  be                                                               
financed.   There  has never  been an  assumption that  the state                                                               
would appropriate the  $5 billion to build  the project; instead,                                                               
it would be  a financing process, she said.   She elaborated that                                                               
the financing  would occur through  power sales agreements  and a                                                               
combination of loans and bonds.                                                                                                 
                                                                                                                                
2:55:59 PM                                                                                                                    
                                                                                                                                
CHAIR   MICCICHE   commented    that   the   best   organizations                                                               
periodically pause to  prioritize projects, which he  viewed as a                                                               
healthy  exercise.   He  has  been frustrated  with  the lack  of                                                               
infrastructure investment related to  access commerce and energy.                                                               
A   new   administration   should   reprioritize   and   evaluate                                                               
directions.   He  did  not  view this  process  as  one in  which                                                               
projects  are  eliminated  forever.   He  expressed  a  range  of                                                               
support for  the six projects  under consideration, noting  he is                                                               
very supportive of some and less supportive of others.                                                                          
                                                                                                                                
2:58:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES  acknowledged  that  she  received  a  range  of                                                               
feedback and support  for these projects.  She also  agreed it is                                                               
a good  exercise.   She asked  for the  best guess  on additional                                                               
costs  to ramp  up  the  Susitna-Watana Hydro  project  if it  is                                                               
shelved.                                                                                                                        
                                                                                                                                
MS.  FISHER-GOAD  answered  that  the  AEA  has  been  internally                                                               
struggling  with the  shelf life  of the  project.   She reminded                                                               
members this  project was  shelved in the  1980s after  the state                                                               
spent  $140  million.    The   information  to  show  trends  and                                                               
consistency with respect  to the data, noting the  1980s data was                                                               
very valuable,  the project  required a  complete new  study plan                                                               
determination  and  FERC  approval  to move  forward  on  the  58                                                               
studies.  At  this point, there are too many  factors to consider                                                               
to provide  much of  an estimate.   She felt it  was safe  to say                                                               
that the project would need  $102 million, plus additional funds.                                                               
She deferred to Mr. Dyok to weigh in.                                                                                           
                                                                                                                                
2:59:48 PM                                                                                                                    
                                                                                                                                
MR.  DYOK  replied  that  he  did not  have  an  educated  guess;                                                               
however, it would likely depend on  how long the project would be                                                               
shelved.  The  data probably would have a shelf  life of three to                                                               
four years,  but if that if  the project was shelved  beyond five                                                               
years the state  would likely need to start over.   Thus, between                                                               
zero and  five years, some  additional costs would  be necessary.                                                               
He  offered  to  provide  some scenarios  for  the  committee  to                                                               
consider.                                                                                                                       
                                                                                                                                
3:00:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES  referenced the next  project, the  Kodiak Launch                                                               
Complex.                                                                                                                        
                                                                                                                                
3:01:17 PM                                                                                                                    
                                                                                                                                
CRAIG  CAMPBELL,  President  & Chief  Executive  Officer,  Alaska                                                               
Aerospace Corporation (ACC), Department  of Military and Veterans                                                               
Affairs,  reported,   via  teleconference,   that  in   2012  the                                                               
legislature  approved  $25  million  in  capital  funds  for  the                                                               
development  of three  phases of  medium lift  out of  the Kodiak                                                               
Launch Complex.  Phase 1  was $3 million for design, engineering,                                                               
infrastructure  preparation, and  environmental work  which could                                                               
be accomplished right  away; Phase 2 was $10  million which could                                                               
not  be spent  without a  signed contract;  and Phase  3 for  $12                                                               
million  could  only  be  spent  once  the  necessary  additional                                                               
funding was  available to build a  full medium lift complex.   He                                                               
estimated  the  cost  at  that  time  to  be  approximately  $125                                                               
million.   Therefore,  it  was necessary  to  raise $100  million                                                               
against  the $25  million  to the  state to  be  able to  provide                                                               
medium lift.  Legislation was passed  for an Athena III rocket by                                                               
Lockheed Martin to  be built at Kodiak Launch  Complex for medium                                                               
lift.   Over the last  two years Lockheed  has only been  able to                                                               
build a  business case  for the  Athena II-S  which is  a smaller                                                               
rocket with lift  potential to do medium lift.   Alaska Aerospace                                                               
Corporation offered a Request for  Proposal [RFP] to the industry                                                               
as to whether  there was interest in medium lifts  in Alaska.  It                                                               
received  four proposals  and selected  Lockheed  Martin and  the                                                               
Athena  II-S to  proceed with  the medium  lift opportunities  at                                                               
Kodiak.                                                                                                                         
                                                                                                                                
MR. CAMPBELL said the uniqueness was  that for AAC to convert the                                                               
existing  launch facility  at Kodiak  to medium  lift would  only                                                               
require a $3-4 million investment,  not the $125 million required                                                               
for the  Athena III.   He  advised that a  contract has  not been                                                               
issued as  Governor Bill  Walker issued AO  271, and  therefore a                                                               
hold was put  on the project.  He said  that AAC advised Governor                                                               
Walker  that $22  million  of the  $25  million appropriation  is                                                               
available  to the  state and  AAC would  like the  remaining $2.3                                                               
million of the $3 million of  Phase 1 to complete medium lift for                                                               
Lockheed Martin's  Athena II-S at  Kodiak.  Currently,  he noted,                                                               
approximately $700  thousand has been  spent on design  and other                                                               
work,  but there  has been  no construction  toward medium  lift.                                                               
The  only outstanding  issue is  the  last phase  of the  Federal                                                               
Aviation  Administration (FAA)  environmental assessment  and, he                                                               
offered, that it should be completed within the next sixty days.                                                                
                                                                                                                                
3:04:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STUTES  questioned  if  the  launch  is  rebuilt,                                                               
whether launches were lined up.                                                                                                 
                                                                                                                                
MR. CAMPBELL responded  that AAC is in the  process of rebuilding                                                               
launch pad  1, which was  not impacted by AO  271 as it  is being                                                               
built  with insurance  monies.   He  said the  project should  be                                                               
completed by  October 2015  for "our customer  that had  the last                                                               
launch that is planning another launch in 2016."                                                                                
                                                                                                                                
3:05:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES questioned whether  the rebuilding was just                                                               
for small rocket launch or  whether there would be the capability                                                               
of both small and medium rocket launches.                                                                                       
                                                                                                                                
MR.  CAMPBELL responded  that  AAC is  rebuilding  to small  lift                                                               
under the  insurance monies.   He highlighted that should  AAC be                                                               
authorized to  move forward  with a  medium lift  it would  be an                                                               
additional  project  added  to the  current  project  to  provide                                                               
medium capability.                                                                                                              
                                                                                                                                
3:06:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES asked what the  additional cost would be to                                                               
allow medium lifts in the rebuilding process.                                                                                   
                                                                                                                                
MR.  CAMPBELL explained  that the  Athena II-S  is a  medium lift                                                               
rocket and is the size that  fits into AAC's current facility for                                                               
small lift as it  is not a tall rocket.   However, he offered, it                                                               
is  heavier  and  requires  a   new  stool,  different  umbilical                                                               
connections, and different paneling  allowing individuals to work                                                               
on the  rocket. He  noted that it  would cost  approximately $3-4                                                               
million  to  retrofit inside  the  existing  facility for  medium                                                               
lift.                                                                                                                           
                                                                                                                                
3:07:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES questioned  if insurance had covered  the cost of                                                               
repairs for the "mishap" this summer.                                                                                           
                                                                                                                                
MR. CAMPBELL advised that the  repairs have not been completed as                                                               
currently  there  is  a  demolition contract  in  place  and  the                                                               
insurance adjuster engineers are  assessing the work required for                                                               
a rebuild.   He  relayed that  the project  is estimated  to cost                                                               
approximately $29  million which will be  paid through insurance,                                                               
and reconstruction should  start in six weeks to  be completed by                                                               
October.                                                                                                                        
                                                                                                                                
3:08:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES moved to the Knik Arm Bridge Crossing.                                                                          
                                                                                                                                
3:08:23 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER  BINDER,   Department  of  Transportation  &                                                               
Public  Facilities  (DOT&PF),  stated  that the  purpose  of  the                                                               
project  is   to  improve  surface  transportation   between  the                                                               
Municipality  of Anchorage  and the  Matanuska-Susitna Valley  by                                                               
constructing  a bridge  across the  Knik Inlet.   He  noted there                                                               
were several pieces  currently in place, which  includes a Letter                                                               
of  Authorization required  from  the  National Marine  Fisheries                                                               
Service   for   the   interruption  of   Beluga   whales   during                                                               
construction due to the Marine  Mammals Protection Act.  He noted                                                               
the  letter  has  been  requested and  the  anticipated  time  is                                                               
approximately 11-13  months.  He  remarked that  approximately 86                                                               
percent of  right-of-way acquisitions have been  acquired and the                                                               
remaining  properties  are  primarily government  to  governments                                                               
which, he noted,  have been put on  pause as a result  of AO 271.                                                               
He  described  the   Transportation  Infrastructure  Finance  and                                                               
Innovation Act  (TIFIA) loan requirement  as the third  pillar of                                                               
the overall funding structure.   It includes a letter of interest                                                               
stage  in  which eligibility  is  determined  as well  as  credit                                                               
worthiness of the state, and  an application stage where the loan                                                               
strives  to   be  conditionally   approved  and   federal  budget                                                               
authority is  obligated at  that time, he  explained.   The total                                                               
process for  both stages is  anticipated to take 12-18  months or                                                               
longer.  He noted that a procurement piece has been put on hold.                                                              
                                                                                                                                
3:10:20 PM                                                                                                                    
                                                                                                                                
ACTING   COMMISSIONER   BINDER   advised  that   internally   the                                                               
contractors have been  obligated, but there is a  pause on those.                                                               
The  remaining  items yet  to  be  procured include  procuring  a                                                               
contractor to determine  who and what the design will  be - about                                                               
an 18-month process; an owners'  representative procurement for a                                                               
contractor  to assist  in  developing  the contractual  documents                                                               
required  and oversee  the administration  and  execution of  the                                                               
construction contract; to procure  a tolling contractor that will                                                               
both design  the tolling  system and  be responsible  for running                                                               
and  maintaining   it  after  construction;  and   to  procure  a                                                               
contractor to  perform the annual  audit required  by legislation                                                               
passed  last year,  he  explained.   He  further  noted that  the                                                               
project will cost  roughly $1 billion.   Currently, he indicated,                                                               
the project  has received and expended  approximately $73 million                                                               
in federal funding, approximately $6  million in state funds, and                                                               
other  general  fund  items  roughly  about  $5.5  million.    He                                                               
assessed that the  total monies expended so  far is approximately                                                               
$84.8 million.                                                                                                                  
                                                                                                                                
3:12:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES asked what additional  costs could be expected if                                                               
the state delays its TIFIA application.                                                                                         
                                                                                                                                
ACTING COMMISSIONER  BINDER responded that  it would not  be cost                                                               
as much as  how the delay would impact  certain pieces, including                                                               
whale permits,  EIS pieces, and  other pieces beyond  a two-three                                                               
year delay  in which  the pieces  begin expiring  and have  to be                                                               
redone.                                                                                                                         
                                                                                                                                
CO-CHAIR HUGHES questioned whether  the department had determined                                                               
the cost of redoing certain pieces due to a delay.                                                                              
                                                                                                                                
ACTING  COMMISSIONER BINDER  answered no;  and explained  that it                                                               
depends upon the length of the  delay in order to determine which                                                               
pieces must be redone.                                                                                                          
                                                                                                                                
3:13:25 PM                                                                                                                    
                                                                                                                                
KIM  RICE,  Deputy  Commissioner,  Office  of  the  Commissioner,                                                               
Department  of  Transportation   &  Public  Facilities  (DOT&PF),                                                               
stated  that  the Federal  Highway  Administration  (FHWA) has  a                                                               
"rule  of thumb"  of three  years  and then  requires a  document                                                               
being refreshed.   She noted that "that doesn't mean  you have to                                                               
redo everything but you have to  figure out if there are any laws                                                               
that  have  changed, any  impacts  have  changed."   During  this                                                               
project   Beluga  whales   were  listed   and  were   not  listed                                                               
previously,  she  observed.    If nothing  changes  in  terms  of                                                               
footprint, impacts, and laws do not  change, then "we" say it all                                                               
looks good, "it's just a review".                                                                                               
                                                                                                                                
3:14:10 PM                                                                                                                    
                                                                                                                                
SENATOR BISHOP  asked how long  the traffic count study  would be                                                               
relevant as it pertains to the TIFIA loan process.                                                                              
                                                                                                                                
MS.  RICE responded  that  she  would have  to  get  back to  the                                                               
committee, but  noted that a traffic  study is a model  and there                                                               
are  different inputs  depending  on planning.   Development  can                                                               
change according  to what is occurring  today and what is  on the                                                               
market, she explained.                                                                                                          
                                                                                                                                
3:14:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES pointed  out that  during previous  testimony it                                                               
was stated  that 86  percent of  right-of-way has  been purchased                                                               
and her understanding  is that all that is left  is government to                                                               
government.    She  asked  if  the  administration  supports  the                                                               
project as  a solution to the  growth in that area  or if funding                                                               
is the issue.                                                                                                                   
                                                                                                                                
3:15:05 PM                                                                                                                    
                                                                                                                                
ACTING  COMMISSIONER BINDER  responded  that  projects are  being                                                               
reviewed  by  the administration  as  to  whether priorities  are                                                               
correctly  aligned,  and offered  that  the  information will  be                                                               
revealed in the future.                                                                                                         
                                                                                                                                
3:16:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES  described a situation  wherein oil was  $130 per                                                               
barrel and asked if the governor  would support the project.  She                                                               
offered  that  possibly  Acting  Commissioner  Binder  could  not                                                               
answer at this time.                                                                                                            
                                                                                                                                
ACTING COMMISSIONER BINDER responded "that is correct."                                                                         
                                                                                                                                
3:17:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES  turned  to  the  Alaska  Stand  Alone  Pipeline                                                               
(ASAP).                                                                                                                         
                                                                                                                                
3:17:25 PM                                                                                                                    
                                                                                                                                
FRANK   RICHARDS,  Vice   President,   Engineering  and   Program                                                               
Management,  Alaska   Gasline  Development   Corporation  (AGDC),                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED),  referred to  a  slide  overview of  the  status of  the                                                               
project, and  spend rate  in response  to AO 271.   Slide  2, the                                                               
AGDC was charged  under AS 31.25, in House Bill  4, in developing                                                               
the Alaska Stand Alone Pipeline  Project (ASAP) to provide energy                                                               
relief for Alaskans.  The  Alaska Gasline Development Corporation                                                               
was granted $355  million to advance the ASAP  project through an                                                               
open season  and ultimately to  a project sanction decision.   He                                                               
offered that the class-3 estimate  and project execution plan has                                                               
been completed,  which would  have been  the precursors  to going                                                               
into  a  regulatory  filing with  the  Regulatory  Commission  of                                                               
Alaska and an open season.   However, he remarked, in response to                                                               
the  ultimate   signing  of  Senate   Bill  138,  and   with  the                                                               
involvement  of the  state in  the Alaska  Liquefied Natural  Gas                                                               
(LNG) project, the policy was  changed in regard to ASAP schedule                                                               
as  it must  align its  projects  to co-align  with the  decision                                                               
point within  Alaska LNG  as to  whether or  not to  proceed into                                                               
front-end engineering  and design  (FEED.)   With the  passage of                                                               
House Bill  138, ASAP initiated  an extensive review of  all work                                                               
activities going forward and  essentially re-aligned its schedule                                                               
to that  the 1Q  (first quarter) 2016  Alaska LNG  FEED decision.                                                               
Consequently,   ASAP  has   delayed   some   of  its   commercial                                                               
activities, which is  recourse filing and open season.   The ASAP                                                               
scaled its work  projects in order to maintain  the viability and                                                               
readiness of  the project.   This  includes performing  work that                                                               
would also be of value and  benefit to the Alaska LNG project and                                                               
approximately  98  percent of  ASAP's  center  line is  a  common                                                               
center  line alignment  between the  two projects,  he explained.                                                               
In essence, all of the work  ASAP is performing has value to both                                                               
projects.  The  Alaska Stand Alone Project  revised its 2015/2016                                                               
spend plan  which was  provided to the  Office of  Management and                                                               
Budget  and ASAP's  board  of  directors in  response  to AO  271                                                               
[slide 3].                                                                                                                      
                                                                                                                                
3:20:27 PM                                                                                                                    
                                                                                                                                
MR.  RICHARDS,  referring to  slide  3,  stated the  spend  curve                                                               
identifies the  original spend  plan to  get to  project sanction                                                               
which  totaled approximately  $150  million over  the next  15-16                                                               
months to  advance the  ASAP project.   However, ASAP  prepared a                                                               
new 2015/2016  work plan which reduced  approximately $90 million                                                               
in expenditures which is approximately  a 60 percent reduction in                                                               
anticipated costs.                                                                                                              
                                                                                                                                
MR.  RICHARDS pointed  to slide  4 [ASAP  Revised 2015/2016  Work                                                               
Plan] and  offered that ASAP  will be delaying or  deferring some                                                               
of  its activities,  such as  commercial  activities, and  design                                                               
efforts that it normally would  have proceeded with after an open                                                               
season  to  redesign  portions  of the  project  to  fit  shipper                                                               
commitments  as  it  depends  upon what  the  shippers  want  the                                                               
project to do and be.   The ASAP would then make modifications to                                                               
meet  their   expectations  which  could  potentially   mean  re-                                                               
designing the gas conditioning facility  to accommodate new Point                                                               
Thomson  gas   that  will  be   available  with   the  ExxonMobil                                                               
developments.  In reference  to potential intermediate compressor                                                               
stations there would be procurement  of long lead type items such                                                               
as equipment, pipe, and specifically  the major modules necessary                                                               
for a gas  conditioning facility.  He noted that  ASAP would have                                                               
started its  construction execution  contracting in advance  of a                                                               
major execution.   He estimated that to date ASAP  has spent $176                                                               
million following the legislature's intent under House Bill 4.                                                                  
                                                                                                                                
3:22:27 PM                                                                                                                    
                                                                                                                                
MR.  RICHARDS explained  that  slide  5 is  a  reflection of  the                                                               
revised  schedule as  an  outcome  of Senate  Bill  138, and  re-                                                               
alignment of the two projects.   He pointed to the one quarter of                                                               
2016 for an [Alaska LNG FEED]  decision to advance either with an                                                               
Alaska  LNG project  or continue  with ASAP  and do  the recourse                                                               
tariff  filing,  the  open season,  and  ultimately  the  project                                                               
sanction  and execution  with  first  gas showing  in  2024.   He                                                               
opined that  legislative intent was  for a backup project  to the                                                               
Alaska LNG,  which would  be ASAP.   The  funds from  the general                                                               
fund have been placed into  the Instate Natural Gas Pipeline Fund                                                               
created specifically for  use in advancement of  the ASAP project                                                               
and  no  federal  funds  are  being  used  on  this  project,  he                                                               
expressed.                                                                                                                      
                                                                                                                                
3:23:38 PM                                                                                                                    
                                                                                                                                
CHAIR MICCICHE advised the public  that Mr. Richards and the AGDC                                                               
team gave a thorough presentation  of ASAP during the January 25,                                                               
2015 Senate Resources meeting.                                                                                                  
                                                                                                                                
3:24:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES characterized  that much  of the  work ASAP  has                                                               
performed ties in and is helpful  and usable as far as the Alaska                                                               
LNG  project.   In  the event  the project  was  not halted,  she                                                               
questioned how  much overlap would there  be as far as  what ASAP                                                               
would spend that would still go  into the other project.  At some                                                               
point, monies ASAP  would be spending would not  be applicable to                                                               
the other project and, further  questioned, if there would be any                                                               
dollars going to the other project as well.                                                                                     
                                                                                                                                
3:24:47 PM                                                                                                                    
                                                                                                                                
MR.  RICHARDS, referring  to the  spend curve  shown on  slide 3,                                                               
said that ASAP  efforts were to continue work  efforts that would                                                               
have  transferability  and  durability   to  benefit  a  pipeline                                                               
project in Alaska.  For  instance, he offered, in benefiting both                                                               
projects ASAP is  currently performing winter field  work, and it                                                               
will continue  with its environmental  and regulatory work.   The                                                               
goal is to  align ASAP with the spend plan  that would have major                                                               
transferability.  He reiterated that ASAP has completed front-                                                                  
end  engineering and  design [FEED]  and are  essentially several                                                               
years ahead  of an advance in  its work as opposed  to the Alaska                                                               
LNG project which  is now in its pre-FEED efforts.   The ASAP has                                                               
performed  detailed engineering,  environmental work,  regulatory                                                               
work, that is of benefit to the Alaska LNG project.                                                                             
                                                                                                                                
3:26:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  HUGHES referred  to the  $60 million  Mr. Richards  had                                                               
discussed and questioned if ASAP  already has that money or would                                                               
it need to be appropriated.                                                                                                     
                                                                                                                                
MR. RICHARDS  answered that the  legislature "fronted"  ASAP with                                                               
the full $355 million in 2013,  and what is represented "here" is                                                               
money in the Instate Natural  Gas Pipeline Fund available for the                                                               
project and no new general funds are being requested.                                                                           
                                                                                                                                
3:27:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR HUGHES turned the gavel to Chair Micciche.                                                                             
                                                                                                                                
3:28:09 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business  before the committees, the joint                                                               
meeting  of   the  House   and  Senate   Transportation  Standing                                                               
Committees was adjourned at 3:28 p.m.                                                                                           
                                                                                                                                

Document Name Date/Time Subjects
Jan 22 AMHS Overview Senate House Transportation Committee.pdf STRA 1/22/2015 1:00:00 PM
AMHS Tariff Study Presentation.pdf STRA 1/22/2015 1:00:00 PM
AMHS Tariff Analysis - Final.pdf STRA 1/22/2015 1:00:00 PM
Admin Order 271 megaprojects.pdf STRA 1/22/2015 1:00:00 PM
Jan 22 Transportation Committees Susitna Watana Hydro.pdf STRA 1/22/2015 1:00:00 PM
Jan 22 AGDC Joint Transportation Committee.pdf STRA 1/22/2015 1:00:00 PM
DOT Response to Joint Transportation Meeting 1 22 15.pdf STRA 1/22/2015 1:00:00 PM