Legislature(2003 - 2004)
01/29/2004 09:03 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 second hearing for this bill in the Senate Finance Committee. Co-Chair Wilken explained that this bill would authorize the Alaska Railroad Corporation "to delineate a transportation utility corridor from Eielson Air Force Base" in Fairbanks to the Alaska/Canada border. He stated that the bill's sponsor, the Alaska Railroad Corporation, and the Department of Natural Resources would address issues and questions that were raised during the first hearing on this bill on May 7, 2003. In addition, he asked the bill's sponsor, Senator John Cowdery, to share with the Committee a synopsis of the recent railway conference he had organized. He also noted that interest in this legislation has "heightened" due to recent industry interest in furthering a gas pipeline. SENATOR JOHN COWDERY, sponsor of the bill, informed the Committee that the recent railway conference was well attended by Alaskan and Canadian representatives and that the consensus was that a railroad corridor would be required in both Canada and Alaska. Furthermore, he added, agreement was that, with the assistance of the infrastructure provided by the railroad, the gas pipeline would boost the economics of areas. He observed that building the Panama Canal today rather than in 1914, would cost $90 billion as compared to the gas pipeline's projected cost of $2.7 billion. Senator Cowdery opined that the need to build a gas pipeline is compounded by the concern that the Panama Canal could be targeted by terrorists, and, he continued, were that to occur, the consequences on the transportation needs of the world could be serious. He noted that there is strong support for the development of this railroad corridor, and he urged the Committee to further this bill. Co-Chair Wilken noted that he had also attended the railroad conference and that he was struck by the enthusiasm and energy of those in attendance, particularly the Canadians. Senator Cowdery concurred, and noted that interest has not waned in the time since the conference. SFC 04 # 3, Side B 09:50 AM Senator Cowdery distributed a booklet compiled by his staff, titled "Alaska-Canada Rail Connection, Information Profile on a Railroad and Transportation and Utility Corridor to Connect Alaska with the Rest of the North American Rail System" [copy on file]. He noted that in addition to government attendees, private companies such as the Canadian National (CN) Railroad are "very enthused" by the prospect of a corridor, and he declared that "the time has come" to develop the railroad corridor to the Canadian border. WENDY LINDSKOOG, Director of External Affairs, Alaska Railroad Corporations, Department of Community and Economic Development, referred the Committee to the Alaska Railroad handout, dated January 29, 2004 titled "Questions and Issues Explained, Subject: SB 31 establishing a transportation corridor to Canada" [copy on file] which, she noted, explains "in plain language" how the Senate Resources Committee bill before the Committee addresses issues and questions that have repeatedly surfaced over the years. Ms. Lindskoog read the handout's Summary Statement as follows. Summary statement: Under SB 31(RES), the Department of Natural Resources (DNR) will not convey all rights. It will reserve oil and gas mineral rights, the right to get people and commerce across the railroad, and the right to authorize a gas pipeline. DNR will have to consult with the Alaska Railroad Corporation (ARRC) on access issues to ensure applicable safety standards are met. Ms. Lindskoog read the handout's first question and answer as follows. Gas Pipeline Application: If the Railroad and gas pipeline are placed in the same corridor, which project is predominant? How will tariffs and crossing issues be handled? The gas pipeline project takes first priority. SB 31(RES) would require ARRC to coordinate with potential gas line developers to ensure optimal location for a pipeline. DNR will reserve the right to authorize the gas pipeline. DNR will also retain all tariffs and lease revenues related to the gas pipeline. The decision to cross the railroad right-of-way would be up to DNR but the crossing would have to comply with federal and other applicable safety standards. The crossing would have to maintain the integrity of the railroad and the crossing cost would have to be borne by the pipeline developers. Senator Olson asked how a railroad accident in the corridor might affect the pipeline. Senator Cowdery clarified that the proposed gas pipeline would be buried. He noted that safety measures would be implemented; however, he stated that no 100-percent safety guarantee could be assured. Senator Olson asked whether the pipeline would be buried along the entire route. Senator Cowdery responded, yes. Ms. Lindskoog read the second question and answer as follows. Surface vs. subsurface rights: Would the Railroad receive subsurface rights to resources under SB 31(RES)? Under SB 31(RES) ARRC would not receive subsurface rights other than sand and gravel. ARRC would receive these rights only to a 200-foot right-of-way within the larger 500-foot corridor. ARRC would also receive surface rights to additional rail lands needed to accommodate such needs as maintenance, yards, transfer facilities, crew housing, etc. Ms. Lindskoog read the third question and answer as follows. Easement vs. Fee Simple Title: Why does ARRC need fee simple title to the land? ARRC believes fee simple title to the lands it will receive is necessary for the following reasons: Safety/Control: Railroad exclusivity enhances safety to the required federal limits. Control of the land gives the Railroad the ability to properly establish crossings to account for safety, to protect interstate commerce, and to reduce risk. All these factors contribute to increased transit time. Revenue: Land revenue has been the key to the success of the Alaska Railroad. The revenue from real estate allows the Railroad to augment revenues from operations so the ARRC can support its operation and maintenance bills without having to seek state subsidies. Ms. Lindskoog noted that a Fee Simple Title would allow ARRC to generate revenue from, for instance, a fiber optic cable being buried in the 200-foot right-of-way. Senator Dyson commented that the ARRC has historically received more revenue from the leasing of its lands than from the revenue generated from transiting goods. Therefore, he asked whether ARRC is anticipating utilizing potential revenue from the leasing of portions of the right-of-way to fund its operations. Ms. Lindskoog agreed that the Railroad has successfully raised revenue through the leasing of its lands. Furthermore, she noted that this operational model has allowed the Railroad to be self- sufficient as attested by the fact that it has not required State subsidies. Therefore, she stated that the Railroad would argue that it should be provided more land than specified in this legislation. However, she noted that the Railroad has agreed to compromise on this issue provided that it receive Fee Simple Title to the 200- foot right-of-way and sufficient land to address operational and safety issues. She noted however, for the record, that, "the Railroad would love to see a larger land package go with the bill" so that the Railroad could generate lease revenues "to help offset the cost of operating and maintaining the Railroad." She communicated that $35,000 is required to maintain one mile of rail per year. Senator Bunde commented, in regard to the safety and control issue, that residents in the South Central region of the state are often ticketed for trespassing on the railroad right-of-way when trying to access backcountry areas of the State and that, in addition, numerous moose are killed on the railroad. Continuing, he stated that the proposed railroad corridor would transit prime bison hunting land and he asked how this issue would be addressed. Ms. Lindskoog responded that, while she is unsure of the answer to the bison question, protecting access for Alaskans is addressed in the handout. Senator Bunde reiterated that allowing access to hunting areas should be considered. Co-Chair Wilken affirmed. BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources, testified via teleconference from an offnet site to comment that the Fee Simple Title would be granted to the Railroad once the railroad is built. However, he assured that issues of economic importance to the State such as the ability to get across the railroad and the ability to authorize a gas pipeline would be reserved by the State. Co-Chair Green asked whether title to this land would be granted to another entity for free or whether other lease or sale options were explored with the Railroad. She also asked whether the Legislature's involvement in the creation of this issue entitles the Railroad to receive the land for free. Mr. Loeffler responded that the reason the land is being provided free to the Railroad is because the expense of constructing "a railroad like this is going to need all the financial help it gets in order to be built." He stated that to charge for the land would, in effect, "put a brake on its eventual construction." Co-Chair Green echoed sentiments voiced by Senator Bunde that perhaps the State should consider a Railroad Dividend or some other form of future benefit from that corridor. Senator B. Stevens asked whether the construction or gas pipeline operators would be required to purchase from the Railroad the sand and gravel that would be included in the subsurface sand and gravel rights provided to the Railroad. Mr. Loeffler responded that the Department of Natural Resources would be able to sell those corridor materials until the time that the Railroad was built. After that time, he continued, the title and the rights to sell that sand and gravel would be conveyed to the Railroad. Senator B. Stevens commented that the Railroad would have the right to choose the path of the corridor and would, due to the need to lay track on sand and gravel, choose the appropriate land. Mr. Loeffler replied that while the Railroad has the right to choose the corridor, the Department of Natural Resources must concur with the route with the best interests of the State and the "eventual construction" of a gas pipeline in mind. However, he "fundamentally" agreed with Senator B. Stevens's comment. Senator Cowdery declared, "that there is not a lot of gravel" in a 200-foot corridor. He determined, therefore, that the source of gravel for the railroad or other corridor needs would be from "another source near the right-of-way." Co-Chair Wilken noted that the Railroad's handout contains other issues that are self-explanatory. JEANNETTE JAMES, Former State Representative and Railroad Advisor to the Governor, testified via teleconference from Fairbanks and stated that she supports the Administration position on the Railroad. She additionally noted that Alaska must meet the Canadian railroad at the border in order to make this issue viable. She also suggested that public/private partnerships might be the funding answer to accomplishing this goal. She stated that quick action on this legislation could take advantage of opportunities that are currently available. Senator Olson asked whether the trucking industry has provided their perspective on this issue. Co-Chair Wilken replied in the negative. Co-Chair Wilken ordered the bill HELD in Committee.