Legislature(2003 - 2004)

01/29/2004 09:03 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 second  hearing for  this bill in  the Senate  Finance                                                            
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                                                            
     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                                                            
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                                                            
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.                                                                             

Document Name Date/Time Subjects