Port MacKenzie rail almost out of cash

The Port MacKenzie rail line extension is nearly two-thirds complete, but there is currently no funding for future work.

Matanuska-Susitna Borough Manager John Moosey said the borough has about $500,000 available for the approximately $303 million endeavor.

“Segment 5 is close to being complete, but essentially what we have for this next season is only money to not mothball the project,” Moosey said.

Construction of the 32-mile rail spur from Houston to Port MacKenzie began in 2013 and to date the borough has received about $183 million primarily from legislative appropriations, with a portion coming from voter-approved state general obligation bonds.

Construction delays from partial funding have already added about $20 million to the project cost; however, Moosey noted the $300 million-plus cost is in line with initial estimates, which were then lowered.

Getting the remaining $120 million sooner would be much better than later.

“The longer we wait the more (the cost) goes up,” Moosey said.

The eight-segment line is now about 65 percent after the summer construction season, he said.

But getting the money through capital funding is all but a lost cause given the state’s $3.5 billion annual deficit.

As it stands, embankment work is done on Segments 1, 3 and 6 — about 14.5 miles that is ready for track, according to Port MacKenzie Director Marc Van Dongen. Segments 4 and 5 are under construction and funding is needed for Segments 2, 7 and 8.

Mat-Su Borough officials have touted the capability of their deep-draft commodity port, but its success is dependent on the rail line being complete.

Plans for transporting liquefied natural gas from Port MacKenzie to the Interior are made much more feasible with direct rail access.

Van Dongen is always quick to note that having the ability to rail raw materials virtually to tidewater at the port would improve the viability of numerous resource extraction projects along the entirety of the Railbelt.

He said the borough is projecting one vessel per week would likely be moored at the 1,200-foot dock within five years of the rail line being complete. After that, the borough has plans for another large general commodity dock on the site. With another dock would come development of another 21.5 acres of gravel pad along the shore, Van Dongen said.

Unique shipments for special projects

In addition to exporting Alaska’s mineral and timber resources, Port MacKenzie has also been pegged as a site for LNG export facilities by Resources Energy Inc. and WesPac Midstream LLC.

Along with 14 square miles of uplands for lay down area and eventually mile-long rail loop, the port has the potential for up to four more dedicated LNG terminals, according to Van Dongen.

“Where else in the country do you have the opportunity to develop a deep-draft port a mile-and-a-half from the largest city in the state?” he said. “This is a unique opportunity. We’re still in the infancy of development.”

Port MacKenzie will be a “world-class port” with several million tons of cargo traversing its docks each year after the rail line is complete, Van Dongen predicted.

Before the potential of Port MacKenzie — across Knik Arm from Anchorage — can be realized, rail extension needs to be paid for and finished.

Moosey said the uncertainty regarding the rail extension has undoubtedly hurt business development at the port, with companies needing to know when a transportation link beyond the two-lane road to the port will be available.

If the funding were immediately secured, he said the project could be done in two years.

The Mat-Su Borough has been looking at every financing option available to complete the key piece of infrastructure, including Railroad Rehabilitation and Improvement Financing and Transportation Infrastructure Finance and Innovation Act loans through the federal Transportation Department, he said.

At the same time, the borough would likely have a hard time borrowing $120 million on its budget, according to Moosey.

“The challenge is as soon as the project is complete we will be turning it over to (the Alaska Railroad Corp.) so we will not earn any revenue off that,” Moosey said.

Further, the borough would have difficulty amortizing loans in the early years after the line is finished and before major development occurs even if some sort of revenue sharing agreement with the railroad could be reached, he noted.

Gov. Bill Walker understands the position the borough is in, and Moosey said he has had positive discussions with the state railroad and the administration in efforts to come up with a funding solution.

He added that Alaska Railroad CEO Bill O’Leary has been understandably conservative about the railroad’s ability to participate in financing the Port MacKenzie line.

Alaska Railroad spokesman Tim Sullivan said the unfunded federal Positive Train Control mandate has consumed the railroad’s ability to take on debt, leaving little ability to help finish the promising project.

Elwood Brehmer can be reached at [email protected].

11/24/2016 - 9:57am