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Initial study of the feasibility of purchasing the railroad from the federal government and railroad line expansion.
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ALASKA RAILROAD
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THE TRANSFER OF THE ALASKA RATLROAD A Commonwealth North Report First printing January 1982
935 West Third Avenue Anchorage, AK 99501
Except for reviews for the public press, this report may not be reproduced in whole or in part without written permission. For information, please write Commonwealth North, 935 West Third Avenue, Anchorage, Alaska 99501.
THE TRANSFER OF THE ALASKA RAILROAD
AN INTERIM REPORT BY THE COMMONWEALTH NORTH TRANSPORTATION COMMITTEE
January 1982
An efficient, improved and expanded Alaska Railroad is vitally important to the future of Alaska.
The federal government wants to dispose of the railroad; the state should and must accept it.
All 38,000 acres now controlled by the railroad should transfer to the state.
Disputes over some of that acreage by native corporations and others should not be resolved in the transfer legislation (S.1500) but should be handled through normal judicial means.
The most important issue in the transfer of the Alaska Railroad is whether or not the state, once it owns the line, is able to extend it. This issue includes two major questions:
The original Alaska Railroad Act of 1914 granted rights-of-way across private lands patented by the federal government. These so-called "floating easements" were successfully challenged in court by Alaska's native corporations in 1977. To attempt to resurrect them in S.1500 would be divisive and probably futile. The time has passed for the exercise of this sort of authority. When the state decides to extend the railroad, land acquisition should be implemented utilizing normal judicial due process, with fair compensation paid to the land owners.
Congress must include in S.1500 a "fast track" mechanism so that the state can move quickly through federal procedures to allow access across federal lands within the state. Current law, notably the Alaska National Interest Lands Conservation Act of 1980, makes such access a difficult, and perhaps impossible, undertaking (See Appendix, page 15).
The water-borne railroad car link that exists between the south 48 and Alaska provides an efficient means of transporting bulk materials. No amendment to S.1500 should be allowed that would disrupt or impair this type of service.
Alaska’s legislature should set up a Railroad
Authority independent of the Department of Transportation to receive the railroad from the federal government. Legislation establishing this authority should be moved to the top of the priority list for prompt attention in the coming legislative session.
The Alaska Railroad showed an operating profit for fiscal year 1981 of $3.3 million. The Federal Railroad Administration must use the period prior to the transfer to approve the investment of on-going profits in deferred maintenance and capital investments and not leave the railroad management in limbo at a time when it could be improving the economic picture of the line.
The Alaska Railroad Act of 1914 was, in a very real sense, visionary.
The Reagan Administration has announced its intention to dispose of the Alaska Railroad, preferably through a no-cost transfer to the State of Alaska. The idea of favor of state or private operation of the railroad is not new. For many years, such a transfer has been discussed in Washington.
Several presidents have endorsed the concept.
Now, however, the matter has proceeded beyond the talking stage. The Reagan Administration, through the Department of Transportation and the Federal Railroad Administration, has drafted transfer legislation ~ introduced in the Senate as S.1500 (co-sponsored by Alaska Senators Ted Stevens and Frank Murkowski) and in the House as HR.4278 (sponsored by Alaska Representative Don Young).
To emphasize its commitment to disposal of the railroad, the administration has firmly asserted that no appropriations for operating expenses will be sought beyond October 1, 1982.
The Alaska Railroad was created by a 1914 enabling act that was, in a very real sense, visionary. Among other things, that 67-year-old legislative act saw the railroad as an instrument that would play a vital role in opening up the vastness of Alaska's wilderness and permitting pioneers of a future day to tap the enormous mineral resources of the land.
In those intervening years, the railroad has played a vital role in the development of Alaska from a raw territory into a state with great, yet mostly unrealized, potential. Its presence, in years of peace and war, in years of depression and prosperity, has been a commanding one in Southcentral and Interior Alaska. Yet in only a few of those years--principally during that period known in Alaska as "the pipeline era"--has- the railroad operated in a profit position.
Many factors are involved in attempting to assess the railroad's economic successes and difficulties. One thing stands out, however. The railroad, for all of the impact it has had, never became what many had said it would. After the track was laid from Seward to Fairbanks, its expansion essentially stopped. The Enabling Act of 1914 held out the prospect of rights-of-way extending for 1,000 miles. The construction of the railroad began in 1915 and ended with 534 miles in place.
The Transportation Committee of Commonwealth North has met a minimum of once a week since its formation on July 21, 1981. Various subcommittees of the group have addressed in depth specific inquiries into the railroad transfer proposal. The committee's assignment covers the broad spectrum of the state's future transportation needs, but because of the introduction of $.1500 and the
For all its successes, the railroad has never become what many had said it would.
The government wants to dispose of the railroad; the state should and must accept it.
Disputes over railroad acreage should be resolved through normal judicial means.
apparent intention in Washington to press for passage of the measure, the major emphasis of the committee thus far has been on the railroad transfer proposal.
These studies have led the committee to the following conclusions:
First, and foremost, it is the committee's conviction that the railroad and the opportunity it presents to provide services needed by the people of Alaska is too important a matter to be left in the hands of the federal government and under the control of the bureaucrats in distant Washington. The government wants to dispose of the railroad; the state should and must accept it.
The terms and conditions of the transfer which are of particular concern to the state should be spelled out in amendments to §.1500, including a provision that all 38,000 acres now controlled by the railroad should transfer to the state. Disputes over some of that acreage, including certain gravel deposits and leased lands, should be resolved through normal judicial means.
The problems relating to employees involve such questions as preservation of existing salaries and protection of retirement benefits. The legislation proposes a one-year period in which employees can elect to remain with the railroad under state ownership or choose to shift to other federal programs. The potential liabilities for state assumption of employee retirement and benefit programs have not been determined. However, the basic rule of thumb should be that liabilities stemming from events prior to the transfer should remain with the federal government. The state should assume responsibility for all such liabilities after the date of transfer. The answers to these matters are technical in nature, involving actuarial studies and analysis of the applicable employment records, and should be worked out by those who are experts in this field.
With respect to access over private land and to land which already has been patented with provisions for railroad easements under the 1914 Enabling Act, further consideration of so-called "floating easements" should be set aside. The time has passed for exercise of this sort of authority.
For future access across private land to meet extension needs of the railroad, such acquisitions should be made subject to normal judicial due process, with an understanding there will be fair compensation paid to the owners.
To enable the railroad to have reasonable future access over federal lands, the most appealing approach is the so-called "fast track" concept being advanced by leaders of the state legislature. Rather than seek specific corridors now -~ a procedure which might produce unwarranted conflicts over issues which were part of the D-2 battle -~- S.1500 should provide the mechanism to allow the state to move quickly through federal regulations when the time comes to extend the railroad into a certain, specific area, based on demonstrated need.
When the transfer is effected, the railroad should be allowed to function under state ownership with the same freedoms now enjoyed by federal administraextend to tariffs, operating regu-
It is time to set aside any further consideration of socalled ‘‘floating easements.’’
It is essential to have a ‘‘fast track’’ amendment to §.1500 to expedite access across federal lands.
No amendment to §.1500 should block the water-borne link to the south 48,
The railroad is the best way to move resources out of the Interior while causing the least disruption of villages and wildlife.
The water-borne railroad car link that exists between the lower 48 states and Alaska provides an efficient means of transporting bulk materials. No amendment to S.1500 should be allowed that would disrupt or impair this type of service. Special interest amendments could cause inefficient materials and machinery, and thereby affect the viability of major development projects.
A great era of mineral exploration is dawning in Alaska. National considerations have made the search for these minerals a matter of great imperative, and the effort is spurred by the fact that Alaska is blessed by deposits the experts describe as immense.
To make it possible to meet national mineral production needs from Alaska deposits will require the development of surface transportation capabilities into the vast remote sections of the 49th State.
And that means extension of the Alaska Railroad.
Except for certain water links, the railroad is the most cost-effective means available to provide for the bulk transportation requirements that will come with mineral resource development.
Additionally, however, the railroad offers the best means to accomplish what is essential to national security while at the same time responding to true. social concerns by various Alaska native groups. These groups have expressed understandable opposition to free-wheeling development that will open traditional wildlife and public access.
Railroad extensions would be self-limiting from a public access standpoint, but nonetheless would allow access to and egress from resource areas.
The extension of the railroad also in time would serve a variety of human needs as well as economic development requirements of rural areas of the state, and almost surely would provide links with major water transportation systems utilizing the great Interior and Western rivers of Alaska.
Based on known mineral deposits and on current geological exploration activity, and utilizing previous transportation studies which have been matters of public record for many years, it is not difficult to identify the general areas which one day might’ be considered for railroad extensions.
These generalized routes, the result of several previous studies, are remarkably free of extensive conflicts with the so-called "national interest lands" that were specified in the Alaska Lands Act.
The following maps provide a visual, generalized presentation of the route studies which previously have been made, with the national interest lands marked to identify potential problem areas. These extensions are not being recommended by this committee of Commonwealth North but are presented to add to the information base of those planning the future of the railroad and the state.
Proposed railroad extensions are remarkably free of conflict with national interest lands.
EARLIER STUDIES OF OF THE ALAS Conflicts with national int
CAPE
MAP 1
woXOwens’ a STUDIES OF POSSIBLE: EXTENSIONS TO cal j AMBLER, THEN ON
Nenana to Ambler: Tudor, Kelly, Shannon, Alaska Transportation Corridor Study, 1972.
Ambler to Cape Lisburne: route reconnaissance by
Kobuk Valley
CAPE
MAP 2 STUDY OF POSSIBLE Shae wave EXTENSION WEST TO
Reconnaissance for Railroad or Highway West of Fairbanks, 1942.
POSSIBLE EXTENSIONS KA RAILROAD erest lands indicated in red.
CAPE
Prudhoe Bay
MAP 3
THREE ALTERNATIVE STUDIES OF EXTENSION NORTH
Tudor, Kelly, Shannon. Alaska Transportation Corridor Study, 1972.
Prudhoe Bay
CAPE
MAP 4
Alaska Department of Transportation, Alaska Railroad Extension Route Selection Project
Maps by Commonwealth North
What lies out there in Alaska's heartland to be tapped? What mineral resources exist that contribute to making the transfer of the railroad a compelling concept, provided that the mechanism for extending the line is assured?
"In the absence of extensive legislation or regulatory impediments to the development of mineral resources, a mining industry could develop by the 1990's that would:
MAP 5 COMPARISON OF EASTERN U.S.S.R., ALASKA AND WESTERN CANADA HARDROCK MINES AND DEVELOPMENTS
Arctic Ocean
CANADA
BERING SEA "a.
Source: The future of Alaska: For What and For Whom?, published by the American Mining Congress, Washington, D.C., and SRI.
"Provide the nation with substantial quantities of nonfuel minerals, including gold, silver, copper, nickel, asbestos, valued at between $900 million and $1 billion annually (1977 dollars).
"Provide the nation with jobs.
"Reduce the nation's balance of payments deficit by between $700 million and $1 billion annually (1977
The study goes on to recognize that the "very rich deposits discovered" were the result of the "relatively low level of exploration activity in Alaska to date."
This level of activity is illustrated by Map #5 comparing Alaskan mining activity to that in the U.S.S.R. and Canada immediately east and west of Alaska.
ECONOMICS
The actual financial status of the Alaska Railroad is now being reviewed by many authorities, with an effort made to measure operating costs, maintenance costs, deferred maintenance obligations, capital construction requirements, the value of federal subsidies, and so on. The state needs to know what it might be accepting in terms of future budgetary needs.
At the same time, pro forma
economic projections need to be developed--including consideration
Compared to Canada and the U.S.S.R., Alaska’s current mining activity is very low.
The legislature must set up a mechanism to provide for an of the actual cost of extending the railroad. Some estimates place the expense as high as $1.5 million to $2 million a mile. Whether that is too low, too high, or simply an educated guess has not been determined. Obviously, however, an answer must be obtained, lf only--at this stage--to try to measure the financial impact on the state government, whether that be negative or positive.
Finally, it is essential that the state government--early in the 1982 legislative session-~-enact legislation to provide for a mechanism through which Alaska can accept the railroad from the federal government and provide for an orderly transfer of administration and an on-going operation.
The generally accepted means to do this, from those who have been reviewing the matter on several fronts statewide, is through the creation of some kind of a Railroad Authority. Such an authority would be patterned on various others throughout the nation which have posted fine records over the years--the Seattle Port Authority and the New York Port Authority being two well known examples.
Legislation to accomplish this was introduced in the 1981 legislature, but never received further study. Clearly this legislation, S$B.212, needs to be moved to the top of the legislative priority list for quick attention in January.
There have been suggestions that state ownership of the railroad should be simply a temporary, transitory thing--a waypoint toward the time when the railroad is either placed under an operating contract by a= private company or actually sold to a private concern which would guarantee its operation in future years.
A decision on such matters, however, is not one that needs to be instantly made. Political and major public policy considerations are involved in making a determination on the future operation of the railroad, and those will take time to develop and mature.
In the meantime, however, it is the conclusion of this committee that the Alaska Railroad's future is vitally important to the future of the state.
As such, it is imperative that the state take now the opportunity to gain control over this enormously crucial transportation system, remove it from federal control, and exercise the responsibilities and provide the leadership required to allow it to realize its full potential.
the transfer must reflect state needs and concerns. Likewise, the state must have proper machinery in place to accept the railroad.
But the evidence at hand suggests this is the time to merge the desire cof the federal administration to rid itself of the railroad with the realization that the future transportation needs of Alaska demand state ownership of the Alaska Railroad -- pending a future determination of whether it should be placed in private hands, operated privately under contract with the state, or remain indefinitely under state control as a public utility enterprise.
The Alaska Railroad’s future is vitally important to the future of the state.
WHY 8.1500 NEEDS A ‘‘FAST TRACK’’ AMENDMENT.
S$.1500 needs a "fast track" amendment because of the current procedure required for access across federal lands in Alaska, especially the wilderness areas established by the Alaska National Interest Lands Conservation Act (ANILCA) of
The following is a summary of the steps required under ANILCA if the state of Alaska, or a private enterprise managing the railroad, wants to extend the Alaska Railroad across one of these restricted areas:
1. Applicant must file for access approval on the same day with "all appropriate federal agencies."
2. Within 60 days all such agencies must respond to the applicant saying that the application does or does not contain the information required.
3. Within nine months, the federal agency assigned lead responsibility for preparing an Environmental Impact Statement shall have a draft EIS completed. All federal agencies involved shall participate in the preparation of the EIS. The final EIS will be completed within one year of the original filing. (Note: these nine and twelve month deadlines can be extended by the lead agency if the applicant is
4. Public hearings must be held in both Washington, D.C. and Alaska on the EIS before it is finalized.
5. Within four months after the final EIS is complete, each federal agency is required to approve or disapprove the application. These decisions shall be based on the agencies' views of:
A. The need for and the economic feasibility of the transportation system.
B. Whether or not there are alternate routes or modes of transportation which would result in fewer or less severe adverse impacts upon the conservation system.
on The short and long term social, economic and environmental impacts on fish, wildlife, habitat and rural, traditional lifestyles.
D. Any impacts that would affect the purposes for which the federal unit was established.
iE. The short and long term "public values" which may be adversely affected.
If, because of the above, any one of the federal agencies involved decides to disapprove the application, it is denied.
The applicant may appeal a negative decision to the President of the United States.
Tf there is an appeal, within four months’ the President shall decide to approve or deny the application. To approve the application, the President must find that the proposed transportation system is
A. "compatible with the purposes for which the unit was established", and
B. there is no economically feasible alternative route.
If the President denies the application, the parties involved may appeal the decision to federal court.
If the President approves the application, but the conservation unit is part of the National Wilderness Preservation System, both the U.S. Senate and the House of Representatives must approve a joint resolution endorsing his decision within 120 calendar days of continuous session.
William J. Tobin, Chairman Associate Editor and General Manager, The Anchorage Times
Richard F. Barnes Vice President, Alaska Interstate
Bill Bittner Attorney, Birch, Horton, Bittner, Monroe, Pestinger & Anderson
Executive Secretary/Treasurer, Alaska State AFL-CIO
Former Commissioner of Public Works; President, Easley Construction Company
Perry Eaton President, Community Enterprise Development Corporation
Max Hodel Alaska Sales and Service
Sue Linford Former Board Member, RuralCAP; Co-owner, Linford of Alaska
President, Bell Plumbing and Heating
Robert B. Smith President and General Manager, Central Alaska Utilities, Inc.
Ray M. Waters Former Vice President, Western Airlines; President, Travel Center, Inc.
Paul S. Wilcox Attorney, Paul S. Wilcox Law Firm
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SOLUTIONS TO THE NATIONAL ENERGY CRISIS: WHY NOT ALASKA? Written by the Energy Committee, Bob Hartig, Chairman. Published November 1979.
NORTH SLOPE NATURAL GAS: TRANSPORTATION ALTERNATIVES AND THE PROMISE OF A WORLD SCALE PETROCHEMICAL INDUSTRY. Written by the Gas Pipeline Study Committee, Millett Keller, Chairman. Published March 1980.
ALASKA'S GOLDEN OPPORTUNITY: RESOURCE REVENUES AND STATI SPENDING. Written by the Resource Income Committee, Bill Sheffield, Chairman. Published December 1980.
THE PROMISE AND THE PITFALLS OF ALASKA'S STATE LOAN PROGRAMS. Written by the Banking and Loan Committee, Dave Chatfield, Chairman. Published May 1981.
INVESTING IN ALASKA'S FUTURE: THE CAPITAL INVESTMENT FUND. Written by the Capital Investment Fund Committee, Loren Lounsbury, Chairman. Published August 1981.
MOVING NORTH SLOPE NATURAL GAS TO MARKET: A POSITIVE ALTERNATIVE FOR THE NATION. Written by the Board of Directors, William A. Egan and Walter 3. Hickel,
Co-Chairmen. Published November 1981.
For copies of the above, please contact Commonwealth North, 935 West Third Avenue, Anchorage, Alaska 99501. These papers sell for $5 each, plus postage, except for "Investing in Alaska's Future: The Capital Investment Fund" which costs $l.