The price of oil briefly dipped below fifty dollars a barrel early this week, highlighting state budget concerns. Governor Bill Walker has issued a statement putting six major state – funded projects on hold.. among them, the Knik Arm Crossing and the Susitna- Watana Dam. Both those projects were slated for the Mat-Su. Missing from the governor’s hit list, however, is a state appropriation for the final phases of the Port MacKenzie rail spur linking the Port with Alaska Railroad’s main line in Houston.
John Moosey, Mat Su Borough manager, told a joint session of the Anchorage Assembly and the Borough Assembly on November 14 that it will take 120 million dollars to finish constructing the Port MacKenzie rail spur. Moosey told the panel that several investors are waiting, like California based WesPac, which is ready to build an LNG facility at the port, but the plan is contingent on rail link access.
“We need to have some funding to keep this in step. Because if the WesPac project goes, they will need rail service in two years. And we are also working with REI, which has a Japanese market. So, our problem with how the state has been dribbling out the money is that we can really not tell our customers when the rail will be complete. It has always been our top priority every year for the past seven years. The legislature has been good at getting us the funds.”
The legislative appropriation for the rail spur is at the top of the Borough’s wish list, approved by the Borough Assembly in the fall. The rail link between Houston and the port is necessary to make Port MacKenzie a viable economic engine for the Borough and the rest of the state, according to Moosey.
But the Borough’s priority list, and Moosey’s November comments, were made before oil prices went into freefall in December.
The total cost of the rail link is estimated to be 272 million dollars. Part of the spur has been completed, but the Borough needs the state to ante up more money to complete the job.
Within a month of his election, Governor Walker released a trimmed down version of the state budget that cuts spending by some 600 million dollars, with capital projects taking the brunt of the cuts.
But Moosey is not losing optimism concerning the rail spur appropriation, for several reasons.
“With this latest drop in oil prices.. we are very heavily dependent, as everybody knows, on state oil. By finishing up this rail project, it helps us to bring additional resources to the market to really give us a piece to help diversify the Alaska economy.So, with that, we think we have a great opportunity here.”
Moosey says the rail spur is 2/3rds complete, and he is meeting today [Friday ] with LNG producer WesPac. WesPac wants to build an LNG plant at Port MacKenzie to ship LNG to Fairbanks, possibly competing with a state plan to truck LNG from the North Slope. Moosey says the WesPac project would be funded entirely by private money, cutting state costs in the process.
“There has been a push and quite a bit of investment on energy and planning on bringing North Slope LNG down to Fairbanks. And that investment was going to be at least 300 million $ from the state. The WesPac project which will bring to the city gate cheaper product, does not have a single dollar investment from the state of Alaska. So that is one good point. ”
In December, Governor Walker announced a state agreement with Japan- based REI to construct an LNG export facility at Port Mac. The gas would come from Cook Inlet. Teddy Pease, a staffer at REI’s Anchorage office, says the shipments do not depend on rail access to the Port MacKenzie dock.
Construction of the rail spur has come under criticism by some conservation groups, notably Cook Inletkeeper, because of concerns about costs and about possible impact on salmon habitat.
In August of last year, Joe Perkins, the Borough’s executive for the rail extension project, told the Borough Assembly that the rail project is over budget and behind schedule. Work on the rail link started in 2008, but Perkins said that the way it had been funded, through yearly legislative appropriations, had not worked to keep costs down.
“We had intended to have the train running by now, had we received sufficient funding to do that. So, we have had some impacts from delays in funding. Our construction management people are having to stay a considerable number of years past what we have anticipated, same thing with our engineering people. So, again, the way this thing has been funded with eight different appropriations and some more to come, has certainly increased our costs.”
The rail spur construction was divided into six segments. Three are complete, and another near completion. Perkins said that a major cause of cost over-runs were delays spurred by litigation against the project filed by the Sierra Club and Cook Inletkeeper. The lawsuits caused stop work orders which lasted months. The Ninth Circuit Court of Appeals has since given the go ahead for the project.