Legislature(2003 - 2004)

04/14/2003 03:32 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 31-RAILROAD UTILITY CORRIDOR TO & IN CANADA                                                                     
MR.  RICHARD   SCHMITZ,  staff  to  Senator   Cowdery,  gave  the                                                               
following explanation of SB 31.                                                                                                 
SB 31  allows the  Alaska Railroad  Corporation (ARRC)  to extend                                                               
its tracks  from Eielsen Air  Force Base to the  Canadian border.                                                               
It also allows  ARRC to explore the possibility  of extending its                                                               
tracks as  far as the  North American  rail system to  connect at                                                               
Fort  Nelson, British  Columbia. The  bill does  not provide  any                                                               
funding for this  project but it allows ARRC  to pursue financing                                                               
wherever  possible.  The state  land  for  the railroad  corridor                                                               
would  be granted  to ARRC,  fee simple  title, after  a specific                                                               
process is underway.                                                                                                            
Former Representative Jeanette James  introduced SB 31 last year.                                                               
It was  not enacted  because of concerns  about the  corridor and                                                               
the  natural  gas  pipeline.  Senator  Cowdery  reintroduced  the                                                               
identical  bill this  year and,  during  a Senate  Transportation                                                               
Committee hearing,  a discussion  took place  with Administration                                                               
officials and  ARRC officials about  the work  Governor Murkowski                                                               
did on  the Rails to  Resources Act when he  was a member  of the                                                               
U.S. Senate.  The goal [of  the discussion] was to  find language                                                               
that  everyone could  agree to  that addressed  the circumstances                                                               
under  which ARRC  would  get  land. Some  of  that language  was                                                               
incorporated  into a  Senate Transportation  Committee substitute                                                               
(CS) beginning on  page 2, line 4. That language  contains a list                                                               
of parameters.  He deferred  to ARRC staff  to explain  why those                                                               
parameters were chosen.                                                                                                         
MR.  SCHMITZ told  members he  provided  background material  for                                                               
members   that   contains   tourism  and   engineering   reports,                                                               
geological information,  and maps showing the  route from Eielson                                                               
Air Force  Base to the  Canadian border and to  British Columbia.                                                               
The actual gap  to be covered equals about  1,000 miles. Governor                                                               
Murkowski  and  Senator Cowdery  believe  in  order for  Alaska's                                                               
economy to  grow, better  transportation is  necessary. Railroads                                                               
can carry  heavy, bulk  items over  long distances  very cheaply.                                                               
Senator Cowdery also  believes it is important to  build the rail                                                               
connection because of the gas  pipeline. Trucks will be unable to                                                               
ship the  steel pipe  but rail  could. In  addition, it  might be                                                               
possible to build the railroad and pipeline simultaneously.                                                                     
MR. SCHMITZ  told members  the railroad  corridor covers  some of                                                               
the richest  mineral land  in Alaska and  the Yukon  Territory. A                                                               
geological formation,  the Tintina  Trench, is  particularly rich                                                               
in the platinum group of metals and gold.                                                                                       
CHAIR  OGAN   informed  members   that  Phyllis   Johnson,  Wendy                                                               
Lindskoog,  Pat  Gamble  and  James   Blasingame  of  the  Alaska                                                             
Railroad Corporation were available  via teleconference to answer                                                               
questions.  He then  announced that  Senators Dyson,  Lincoln and                                                               
Stevens joined  the committee a  while ago. He asked  Mr. Schmitz                                                               
to  review   the  changes  made  in   the  Senate  Transportation                                                               
Committee substitute for members.                                                                                               
MR.  SCHMITZ said  the original  bill would  have given  ARRC the                                                               
state land via fee simple  title. ARRC wanted a 500-foot corridor                                                               
for safety reasons; DNR was  concerned about locking up that much                                                               
land  unnecessarily. Also,  some practical  issues arose  about a                                                               
500-foot corridor in  communities such as Delta.  The CS provides                                                               
DNR with more flexibility when  the corridor is delineated.  ARRC                                                               
will have to follow a process  to obtain state land that requires                                                               
it to be in a position  to begin construction. Therefore, no land                                                               
would be transferred unless project financing was obtained.                                                                     
CHAIR OGAN  asked the  width of the  current right-of-way  on the                                                               
existing railroad corridor.                                                                                                     
MR. SCHMITZ said he believes it varies from 100 to 500 feet.                                                                    
MR.  PAT GAMBLE,  President of  the Alaska  Railroad Corporation,                                                               
informed  members  that Phyllis  Johnson,  Bob  Loeffler and  Joe                                                               
Joiner were also present to  answer questions. He told Chair Ogan                                                               
the current average right-of-way is 200 feet.                                                                                   
CHAIR OGAN asked why ARRC wants so much land.                                                                                   
MR. GAMBLE said  that was the nature of the  compromise when ARRC                                                               
talked to  DNR. The state  wanted a corridor  for transportation,                                                               
communications and a possible pipeline.  ARRC wanted an exclusive                                                               
right-of-way  for control  of the  rail line,  as it  has on  its                                                               
existing  rail line.  The  compromise was  to  survey a  500-foot                                                               
corridor for the  state and within it embed  a 200-foot right-of-                                                               
way for the railroad.                                                                                                           
CHAIR OGAN commented that SB 31 will give ARRC a 500-foot right-                                                                
of-way,  the rights  of eminent  domain,  and subsurface  rights,                                                               
which will have  a big impact on private landowners.  He asked if                                                               
any private landowners have voiced an opinion on this change.                                                                   
MR. GAMBLE clarified that ARRC will not have subsurface rights.                                                                 
CHAIR OGAN referred to  a provision in SB 31 on  page 3, line 26,                                                               
that says the  state shall convey the state's  entire interest in                                                               
the land. He assumed that would include subsurface rights.                                                                      
3:42 p.m.                                                                                                                     
MR. BOB  LOEFFLER, Director of  the Division of Mining,  Land and                                                               
Water, DNR,  explained that DNR  would convey the  state's entire                                                               
interest  except "(a)  the interest  required  by AS  38.05.125",                                                               
which is the subsurface interest.  So, in fact, DNR would reserve                                                               
oil  and  gas rights  and  the  other  things associated  with  a                                                               
mineral estate.                                                                                                                 
SENATOR  ELTON referred  to the  draft sectional  analysis, which                                                               
says that  DNR will retain any  revenues arising from use  of the                                                               
land. He  assumed any revenues  would also include  revenues from                                                               
fiber  optic cable  rights-of-way or  other things  that generate                                                               
revenue for ARRC.                                                                                                               
MR.  LOEFFLER explained  that  before the  railroad  is ready  to                                                               
construct, DNR  will remain  as the land  manager and  retain the                                                               
revenues. Once  the railroad is  ready to construct a  portion of                                                               
the rail line, ARRC will  get those revenues within its right-of-                                                               
way  on that  portion. Therefore,  DNR will  retain the  revenues                                                               
while it manages  the land and, when it  transfers the management                                                               
authority for each portion, the  revenue for that portion will be                                                               
transferred with it.                                                                                                            
SENATOR ELTON asked if that includes the subsurface rights.                                                                     
MR. LOEFFLER said DNR will retain the subsurface rights.                                                                        
SENATOR SEEKINS  asked what  safety issues  might be  involved in                                                               
putting a 54-inch  high-pressure gas pipeline within  300 feet of                                                               
a railroad.                                                                                                                     
MR. GAMBLE  said he is  not an expert  on the safety  radius from                                                               
the  pipeline but  that is  one  reason a  500-foot corridor  was                                                               
attractive. He  said more  work needs  to be  done as  the entire                                                               
route  is reviewed  to maintain  that safety  buffer. That  might                                                               
require   special   engineering   solutions  depending   on   the                                                               
CHAIR OGAN pointed out that language on page 4 reads:                                                                           
     If the [Alaska Railroad]  corporation provides a survey                                                                    
     alignment  to the  department, the  department may  not                                                                    
     authorize  construction  of  the natural  gas  pipeline                                                                    
     within a 200-foot-wide corridor  centered on the survey                                                                    
     alignment  unless  the  department   does  not  find  a                                                                    
     feasible and  prudent alternative for the  route of the                                                                    
He assumed that  language refers to safety issues.   He asked how                                                               
much of  an area a typical  train wreck covers and  whether it is                                                               
more than 200 feet.                                                                                                             
MR. GAMBLE said the wreckage can  cover more than 200 feet if the                                                               
train is moving fast. He said  it depends on several factors such                                                               
as speed, topography, train length and others.                                                                                  
CHAIR OGAN  commented that on a  visit to Florida two  years ago,                                                               
he was amazed to see how fast the trains travel through towns.                                                                  
SENATOR SEEKINS  said he assumes  the 200-foot  railroad corridor                                                               
would  be on  one  side or  the other  of  the 500-foot  corridor                                                               
rather than  down the middle.  He asked  if that is  addressed in                                                               
the bill.                                                                                                                       
MR.  LOEFFLER said  a 500-foot  corridor was  chosen for  several                                                               
reasons, one  to allow ARRC  to move  the railroad base  around a                                                               
little bit when it is ready  to begin construction and another to                                                               
allow DNR to retain additional  land as a transportation corridor                                                               
for  other complementary  uses. After  the construction  is done,                                                               
DNR  could  adjust  the corridor.  Any  unusable  remnants  would                                                               
probably be turned back to general domain state land.                                                                           
SENATOR  SEEKINS  said  his  concern  is  that  a  transportation                                                               
corridor that includes a natural  gas pipeline will need a safety                                                               
MR. LOEFFLER said he believes  the natural gas pipeline will have                                                               
a separate  right-of-way. The 500-foot  corridor is  not expected                                                               
to be  the only right-of-way for  both, but it doesn't  rule that                                                               
possibility out.                                                                                                                
SENATOR  LINCOLN  referred  to  the  provision  about  subsurface                                                               
rights in the  last paragraph of page 3, which  says, "subject to                                                               
the existing valid  rights."  She asked whether the  state or the                                                               
railroad  will reserve  the valid  existing subsurface  rights if                                                               
private lands are bought.                                                                                                       
MR. LOEFFLER  replied DNR cannot convey  what it does not  own so                                                               
the  state's conveyance  to  the railroad  will  not include  any                                                               
rights it does  not own. DNR will reserve  the subsurface rights.                                                               
Where  the subsurface  is owned  by the  state and  a corporation                                                               
might have a  surface right, one would assume they  would buy the                                                               
surface right. He  cannot imagine [the railroad]  having a reason                                                               
to  acquire the  subsurface  rights unless  it is  to  buy out  a                                                               
placer miner to get that person out of the way.                                                                                 
SENATOR LINCOLN said  she is specifically thinking  of the Native                                                               
corporations that  own surface and  subsurface rights.  She asked                                                               
Mr. Loeffler if  the state or railroad will have  no need for the                                                               
subsurface rights so  would only purchase the  surface rights and                                                               
leave the subsurface rights with the private owner.                                                                             
MR.  LOEFFLER said  that is  his expectation  but he  deferred to                                                               
ARRC representatives to answer for the railroad.                                                                                
CHAIR OGAN  suggested the  legislature does not  want ARRC  to do                                                               
any open  pit mining underneath  the railroad. He  then clarified                                                               
that the bill is silent on the issue of private property.                                                                       
SENATOR  LINCOLN said  that is  because it  applies to  the valid                                                               
existing rights.                                                                                                                
CHAIR OGAN pointed  out the subsurface rights  were conveyed with                                                               
the Native  lands. He asked  Mr. Loeffler whether  eminent domain                                                               
could  be used  to claim  only the  surface rights.  He commented                                                               
that if  he were a private  landowner, he would favor  a railroad                                                               
crossing his land as it would provide access to that land.                                                                      
SENATOR  ELTON said  a couple  of phrases,  beginning on  page 4,                                                               
line 20, suggest  to him the bill's first priority  is a railroad                                                               
and the second priority is a gas pipeline. That language reads:                                                                 
     If the  corporation provides a survey  alignment to the                                                                    
     department,   the   department    may   not   authorize                                                                    
     construction  of the  natural gas  pipeline within  the                                                                    
     200-foot   wide  corridor   centered   on  the   survey                                                                    
     alignment....  The department  shall  consult with  the                                                                    
     corporation  before   authorizing  construction   of  a                                                                    
     natural gas  pipeline in order  to minimize  effects on                                                                    
     the potential rail route....                                                                                               
He said  that language  could be problematic  if the  pipeline is                                                               
prioritized above a railroad extension, which he favors.                                                                        
MR. LOEFFLER  said [DNR] has  not prioritized a railroad  above a                                                               
gas pipeline  and that was not  the intent. He hopes  that is not                                                               
how  this section  operates.  DNR tried  to  include language  to                                                               
ensure complementary  action and  avoid a  conflict. The  bill is                                                               
not about the  pipeline; it's about the railroad  so all language                                                               
modifies [activities of] the railroad.                                                                                          
MR. LOEFFLER explained:                                                                                                         
     Here's how we  think it works. If there  is an existing                                                                    
     application or  right-of-way, that is a  valid existing                                                                    
     right that gets dropped from  - it doesn't get conveyed                                                                    
     to  the railroad.  If we've  already identified  a 500-                                                                    
     foot corridor  and a pipeline  says, gee,  we're really                                                                    
     ready to  go through there,  then what we say  is, well                                                                    
     the   pipeline   typically   -   railroads   are   more                                                                    
     topographically  limited. They  have  trouble going  up                                                                    
     hills and things like that  than in fact a pipeline. So                                                                    
     what we  do is  we say, look  railroad, we're  going to                                                                    
     give you  a chance  to stake  the centerline.  You know                                                                    
     where it's most  important for you and  then we'll make                                                                    
     that decision.  And we make  that decision in  the best                                                                    
     interest of  the state  and if we  can find  a feasible                                                                    
     and  prudent   alternative,  and  that   is  reasonably                                                                    
     general  language, which  gives us  the flexibility  to                                                                    
     take economics and the best  interest of the state into                                                                    
     account. Our expectation  is not to give  a priority to                                                                    
     the  railroad, but  it does  require consultation  with                                                                    
     the railroad.  And, of  course, the  consultation would                                                                    
     go the other  way as well with any  applicants but this                                                                    
      language was really directed to the railroad. I hope                                                                      
     that answers the question.                                                                                                 
SENATOR  ELTON said  it does.  He is  hearing that  is not  DNR's                                                               
expectation.  He  asked if  DNR  attorneys  have looked  at  that                                                               
MR. LOEFFLER said they have,  but not with that specific question                                                               
in mind.  He offered  to do  that and get  back to  Senator Elton                                                               
with a specific answer.                                                                                                         
CHAIR OGAN  said he  shares that  concern and  plans to  hold the                                                               
bill in committee today.                                                                                                        
SENATOR  WAGONER said  a primary  reason  given for  the need  to                                                               
build the railroad is that a  gas pipeline will be built with 80-                                                               
foot sections  of pipe. He said  he has talked to  several of the                                                               
major companies that  would be involved in the  construction of a                                                               
pipeline  who say  they would  use 40-foot  sections. They  asked                                                               
whether a  railroad will be  built to  the North Slope  to handle                                                               
80-foot sections there. He would like  to see a company that will                                                               
build this  pipeline verify what length  of pipe it will  use. He                                                               
surmised if the  pipe can be transported  via truck, transporting                                                               
the  pipe should  not  be  used as  justification  to build  this                                                               
MR. SCHMITZ  replied there  is no  guarantee that  80-foot joints                                                               
will  be  used but,  when  the  pipeline  is  built, it  will  be                                                               
competing with other natural gas  around the world. Using 80-foot                                                               
sections  will require  half  the number  of  welds than  40-foot                                                               
sections.  That cost  savings could  make the  difference in  the                                                               
project's feasibility.                                                                                                          
SENATOR WAGONER  said he  is not  aware of  any company  that can                                                               
roll an 80-foot length of pipe right now.                                                                                       
SENATOR  SEEKINS  said  he  was  in the  Interior  when  the  oil                                                               
pipeline was  built. At  that time,  40-foot joints  were brought                                                               
into  Fairbanks  by  truck  in   80-foot  lengths.  A  tremendous                                                               
additional cost was associated with  the double jointing process,                                                               
which also  caused safety  concerns. He said  he would  imagine a                                                               
company  hired  to build  2,000  miles  of  pipe could  find  the                                                               
technology.  He  favors a  railroad  extension  for a  number  of                                                               
reasons, one being commerce. Alaska should  do its best to try to                                                               
connect  to  the  Lower  48  states  by  railroad  for  commerce,                                                               
national defense,  and resource development. Building  an instate                                                               
railroad will  help but it  will not provide the  flexibility the                                                               
state needs.                                                                                                                    
CHAIR OGAN commented that the  state cannot wait until a railroad                                                               
is built to build a gas line.                                                                                                   
SENATOR SEEKINS agreed  but said the state needs  to move forward                                                               
with  the  right-of-way  and  work   with  the  Canadians  to  do                                                               
likewise.  He   said  he  supports   SB  31  regardless   of  the                                                               
SENATOR LINCOLN  asked if the Canadian  government has officially                                                               
supported the railroad extension.                                                                                               
MR. SCHMITZ said  that some of the Yukon  communities have passed                                                               
resolutions in support.                                                                                                         
SENATOR DYSON said he visited the  Yukon a week ago and found the                                                               
Yukoners to  be actively  in favor. That  is one  reason language                                                               
was  added to  the bill  to make  sure the  Canadian and  Alaskan                                                               
routes  come  together.  The huge  mineral  rich  trench  extends                                                               
across the Yukon  and British Columbia borders.  If necessary, he                                                               
could get resolutions from both governments.                                                                                    
CHAIR OGAN referred to a sentence on page 6, lines 9 through 12:                                                                
     A corporation may acquire land  or interests in land in                                                                    
     Canada  as the  corporation  considers appropriate  for                                                                    
     the  development,  construction  and  operation  of  an                                                                    
     extension of  the Alaska Railroad  to connect  with the                                                                    
     North American railroad system.                                                                                            
He questioned why ARRC would want  to acquire interest in land in                                                               
MR.  SCHMITZ said  when the  bill  was introduced  last year,  it                                                               
would have allowed the extension  of the railroad to the Canadian                                                               
border   and  stopped   there.   After   discussing  the   issue,                                                               
Representative James  decided to  authorize the railroad  to look                                                               
into  a further  extension  using bonds  or  an appropriation  to                                                               
purchase land  to connect  to an existing  rail line.  He pointed                                                               
out  the White  Pass Railroad  obtained a  right-of-way into  the                                                               
United States.                                                                                                                  
CHAIR OGAN  asked if Canadian  railways own rights-of-way  in the                                                               
United States and vice versa.                                                                                                   
MR.  SCHMITZ  said he  would  imagine  so.  He said  the  private                                                               
corporations do.                                                                                                                
CHAIR  OGAN asked  Mr. Gamble  if he  supports that  language and                                                               
anticipates acquiring land and interests  in Canada to expand the                                                               
MR. GAMBLE said he understood  that language to offer flexibility                                                               
to address the eventuality of having  to deal with the other side                                                               
of the  border in  unforeseen ways. However,  at this  time, ARRC                                                               
has no concrete  plans to acquire land  in Canada. Representative                                                               
James talked  to ARRC about  the flexibility that  language would                                                               
provide and ARRC acknowledges the purpose of that language.                                                                     
SENATOR SEEKINS said he could  envision many reasons the railroad                                                               
might want to  acquire land or interest in land  in Canada simply                                                               
in terms of  support. ARRC may need to have  office space for the                                                               
administration of  the railroad between  Alaska and the  Lower 48                                                               
states or for  housing and warehouse space. He thinks  it is wise                                                               
to include that language in  the bill even though the legislature                                                               
may have to address how ARRC  will get funds to acquire that land                                                               
CHAIR OGAN asked Mr. Loeffler if he wished to testify.                                                                          
MR. LOEFFLER said DNR supports the bill.                                                                                        
MR.  GAMBLE  said,  from  a   strategic  point  of  view,  ARRC's                                                               
perspective on  the extension  from Fairbanks  to the  Delta area                                                               
differs from its  perspective on the extension from  Delta to the                                                               
border.  The  first  leg  of  that  extension  could  provide  an                                                               
opportunity  to   look  at  how   to  fund  the   operations  and                                                               
maintenance of the  railroad by hooking up to  the requirement to                                                               
move goods and  services back and forth from  Fairbanks to Delta.                                                               
Beyond that,  this bill offers the  potential to get at  the kind                                                               
of plan the  current administration wants to pursue,  in terms of                                                               
development. Development  is within  ARRC's mission so  it stands                                                               
ready,  when the  time and  conditions  are right,  to make  this                                                               
project work.                                                                                                                   
CHAIR OGAN asked Senator Lincoln if  she is aware of the position                                                               
of the Native corporations.                                                                                                     
SENATOR LINCOLN said she spoke  with several individuals who felt                                                               
it  was a  little premature  to comment  on this  bill until  the                                                               
project has progressed  further - maybe when  the actual corridor                                                               
route is discussed.                                                                                                             
SENATOR ELTON asked if ARRC  pays property taxes to the organized                                                               
boroughs through which it passes.                                                                                               
CHAIR OGAN said ARRC is on government property.                                                                                 
SENATOR ELTON said he asked because  it has been suggested that a                                                               
portion of that area join an organized borough.                                                                                 
MR. SCHMITZ  commented the  Army surveyed  a right-of-way  in the                                                               
1940s for  a rail route  and a rail  corridor from the  border to                                                               
Fairbanks  is  in  statute.  Therefore,  regarding  questions  of                                                               
eminent  domain  and  private  property,  an  undefined  railroad                                                               
right-of-way does exist.                                                                                                        
CHAIR OGAN assumed an environmental  impact statement (EIS) would                                                               
have to be done. He then  announced he would await an answer from                                                               
DNR  to Senator  Elton's question  and planned  to move  the bill                                                               
from committee on Wednesday. He announced a brief at-ease.                                                                      

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