CS FOR SENATE BILL NO. 31(RES) "An Act relating to a transportation corridor for extension of the Alaska Railroad to Canada and to extension of the Alaska Railroad to connect with the North American railroad system." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken informed that this legislation "would authorize the Alaska Railroad Corporation to delineate a transportation and utility corridor from the Eielson Air Force Base near Fairbanks to the Alaska/Canada border." In addition, he noted that authorization would be provided to the Alaska Railroad to investigate an extension of the Railroad from the border to connect with the North American railway system. He specified that CS SB 31 (RES), Version 23-LS0336\U is before the Committee. RICHARD SCHMITZ, Staff to the bill's sponsor, Senator John Cowdery, reviewed the history of the Railroad and professed that "the dream" of connecting the Alaska Railroad to the rest of the North American rail system has existed since the 1870s. He stated that, while the majority of the bill addresses the extension of the railway system to the Canadian border, the bill would additionally allow the Alaska Railroad to investigate a rail connection to, for instance, Fort Nelson in British Columbia, Canada which would enable the Railroad to connect to the rest to the North American rail system. Mr. Schmitz informed that, as the bill progressed through the various legislative committees, language "was added to strengthen and qualify the bill to make certain that no natural gas pipeline or other use" of the delineated corridor would impact "Senator Cowdery's vision" of the bill. He specified that the transportation of materials on the extended rail line would allow the proposed gas pipeline to be more easily and less expensively constructed. He stated that the Alaska Railroad, the Department of Natural Resources, representatives of the oil and gas industry, representatives of Governor Murkowski's Administration, and Senator Cowdery have worked together to develop bill language that would accomplish the goal of the bill. He referred the Committee to a Sectional Analysis of CS SB 31 (RES) that has been provided by Senator Cowdery [copy on file] that further defines the bill. Co-Chair Wilken concluded that the bill would provide for a 500- foot corridor would be identified to run from the Eielson Air Force Base to the Canadian border. This corridor, he clarified, would be controlled by the Department of Natural Resources until such time as the Railroad begins to construct a railbed on a dedicated 200- foot swath within the 500-foot corridor. He stated that the question is whether the Alaska Railroad should be granted title to that 200-foot swath. Mr. Schmitz concurred. Co-chair Wilken reiterated that the primary issue before the Committee is whether or not to grant the Alaska Railroad title to the 200-foot corridor. He asked the Committee to voice other concerns that might result from the legislation. Senator Taylor stated that the legislation contains numerous issues such as the railroad funding mechanisms and Railroad sales to third parties. He asked that the term "railroad land" be further defined as the "language is very genetic." He furthered that, in addition to the 200-foot swath in the corridor, a 200-foot right-of-way might be required for areas around all selected railroad land including terminals, stations, maintenance yards, and switchyards. He specified that the railroad land issue is his biggest concern. He continued that the question is whether the State wishes to control access to the 500-foot right-of-way in order to consider its usage for such things as a fiber optic cable corridor. He voiced opposition to awarding a fee-simple title. Senator Bunde stated that while numerous separate discussions have addressed the issue of selling State land, this legislation "gives away" State land, albeit to the Alaska Railroad. He characterized the Railroad as "a quasi-State agency," rather than a State agency because he asserted that the State does not receive any dividends from it. He pointed out that "unless things have changed substantially recently," the money that the Alaska Railroad has made from its land holdings has allowed the Railroad to loose money in its "rolling stock operations by running lost leaders" in order to unfairly compete with private enterprise. Co-chair Wilken stated that this concern would be addressed. PHYLLIS JOHNSON, Vice President and General Counsel, Alaska Railroad Corporation, Department of Community and Economic Development, testified via teleconference from an offnet site in Anchorage to address Senator Taylor's concerns. Co-Chair Wilken interjected to inform that Senator Taylor has suggested changes to Version "U" to address his concerns. He asked that Ms. Johnson provide an opinion to those changes as they are presented. Ms. Johnson agreed. However, she reiterated that the bill was cooperatively developed by the aforementioned entities. Co-chair Wilken pointed out that discussions with the bill's sponsor would occur prior to changing the legislation and developing a new committee substitute. Senator Taylor communicated that while he "very strongly supports" the extension of the Railroad, regrettably, he has concerns that the Alaska Railroad's "push" is to get land on which to construct a railway but in order to also control "its use for other purposes." He stated that during other committees' discussions on this legislation, numerous questions arose about future uses of the corridor, such as who would control the land were "a pipeline to go down it, are fiber optics a concern," and who would control such things as subsurface mineral rights to the land were other considerations beyond building a railroad on the land identified. Other concerns, he voiced include whether to grant the Railroad the right of way to the land for free. Senator Taylor opined that were the Alaska Railroad a State agency and thereby abiding by such things as the State procurement code, his concern would be limited. However, he declared that, "they are not a State agency," and their independent actions "shock and surprise [the Legislature] by discovering that railroad terminals and tracks are being built places." Furthermore, he attested that "the only profit" the Alaska Railroad is making "is off their land." He stated that the Railroad "should operate as a railroad rather than a real estate operation." Senator Taylor reviewed that his drafting changes to the bill [copy on file] include; foremost, language specifying that rather than granting the Alaska Railroad right-of-way to the land, the language should specify that the Department of Natural Resources would lease the land to the Alaska Railroad Corporation. Furthermore, he specified that land selection and obligation provisions should be included, as well as language specifying that were a gas pipeline to use the corridor, "it would be within the province of the Department and the State of Alaska." Senator Taylor continued that clarifying language should be inserted in Section 1, subsection (c)(2) on page 3, line 1 to specify that the Department of Natural Resources shall "retain unfettered discretion regarding the use of these lands," rather than being "subservient to the railroad on all land use within the corridor" as "the land is developed and conveyance sought." He stated that these changes "would be a plus to the State's interest" as opposed to being "the only State interest remaining." He stated that the proposed language would read as follows. (2) the department shall continue to manage the land reserved under (1) if this subsection; the department shall retain unfettered discretion regarding the use of these lands, but will consult with the corporation before disposing of an interest in land within the transportation corridor and associated rail land; the department may condition authorization for activities on the reserved land to encourage the corporation to construct the railroad or other specific railroad uses identified for the land; Co-Chair Wilken clarified that Senator Taylor's suggestions apply to the Version "U" committee substitute. Senator Taylor reiterated that all references to the word "land" in Version "U" beginning with Section 1, subsection (e)(2) on page 4 should be changed to read "right-of-way or easements" in order to retain the State's interest in the land as opposed to conveying the land to the Alaska Railroad Corporation. Furthermore, he advised that Section 1, subsections (e)(3), (4), and (5) that read as follows, should be deleted. (3) the Department of Natural Resources shall assign any existing contracts within that segment of the transportation corridor and associated rail land to the corporation; the corporation may thereafter retain the revenue from the conveyed land; the department shall prorate revenue from contracts affecting both conveyed and un-conveyed land; (4) the remaining state land in a segment of the transportation corridor in which the corporation has received a conveyance under this section shall be managed by the Department of Natural Resources as a transportation corridor unless the department determines the land is no longer needed for that purpose; and (5) the remaining segments of the transportation corridor in which the corporation has not completed construction and any associated state land designated as rail land shall continue to be managed by the Department of Natural Resources as a transportation corridor and associated rail land under (c) and (d) of this section. Furthermore, Senator Taylor advised that language in Section 1, subsection (g) beginning on line 12, page 5 be omitted as "this is a totally different standard than is currently in effect" on any of the State's highways. He stated that "the inclusion of this language has no purpose in this legislation whatsoever" as actions by the Railroad for such things as a spill are currently categorized as "negligence." This language reads as follows. Neither the corporation nor the state is liable for claims arising from public use of the transportation corridor and associated rail land, except to the extent the claims arise from the gross negligence of the state, the corporation, their employees, or their contractors, respectively. In addition, Senator Taylor suggested that Section 1, subsection (j) on page 6, beginning on line 5 should be deleted as this language is not required "if the Department has already retained the land" and is only granting easements or right-of-ways in the corridor. This language reads as follows. (j) The Department of Natural Resources shall retain the classifications and reservations of land identified for use as a proposed utility corridor and railroad right-of-way under former AS 19.02.122 until the corporation informs the department in writing that the land is not needed by the corporation for a utility corridor. If, under (a) of this section, the corporation includes land identified under former AS 19.05.122 as part of the proposed transportation corridor, the department shall manage that land under provisions of this section. Senator Taylor voiced the desire to assist the Alaska Railroad in its endeavor to extend the rail line; and he attested that he has personally met with Canadians to further that end. He opined that the Canadians also support this effort. However, he professed that he could not support a fee simple conveyance of the land to the Alaska Railroad, as it could be detrimental to furthering other State projects in the corridor. Co-Chair Wilken asked Ms. Johnson to review Senator Taylor's suggestions. Additionally, he voiced that the proposed changes should be discussed with the bill's sponsor. Furthermore, he asked Railroad's representative whether a delay in action on this legislation would be acceptable. JOHN BINKLEY, Chairman of the Board, Alaska Railroad Corporation, Department of Community and Economic Development responded that addressing the issue further would be acceptable. He commented that Senator Taylor presents "some compelling arguments and observations." Furthermore, he suggested that because the land belongs to the State, the Department of Natural Resources rather than the Railroad should conduct the delineation work on the transportation corridor in order to avoid a perceived conflict of interest. Senator Taylor opined that the Alaska Railroad has "a monopoly" on the knowledge regarding how to lie out a transportation corridor for a rail line because of the longevity and institutional knowledge of the Alaska Railroad leadership. Therefore, he favored the Alaska Railroad maintaining the lead authority in the endeavor. Mr. Binkley informed the Committee that the prior year's Alaska Railroad net income was nine million dollars, with five million dollars resulting from real estate operations and four million resulting from railroad operations. He stated that it is a misconception to say that Railroad operations are unprofitable, and he stated that every year, with the exception of one, the Railroad operations "have made money." Senator Taylor clarified that he is "not totally married to the idea that the Alaska Railroad should receive no land out of this," but rather that the arrangement should be less extensive. He stated that the focus of the discussion should address how to further the building of the railroad as opposed to dwelling on how much land would be divvied out to various entities. Ms. Johnson voiced support of Mr. Binkley's comments. Additionally, she agreed that further clarifying language would be beneficial as she noted that it is understood that the remaining land within the 500-foot corridor could be used for other purposes. She corrected that the 200-foot Alaska Railroad corridor would not require any additional buffer zone; however, she verified that additional terminal and maintenance land would be required. Co-Chair Wilken voiced that Senator Taylor's suggestions would be used to develop another committee substitute. Senator B. Stevens asked the reason that Senator Taylor suggests deleting language in Sec. 1, subsection (j) on page six of the bill. Senator Taylor stated that the suggestion was made based on the termination that the State would be retaining the right to the land. He stated that he would provide further analysis to the Committee. Co-Chair Wilken ordered the bill HELD in Committee in order to develop a new committee substitute. SFC 03 # 81, Side A 06:56 PM