Legislature(2003 - 2004)

05/07/2003 09:01 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     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  pubic 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                                                                                                    

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