Conditions attached to UA power plant, railroad funding


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A lift operator washes windows at the Alaska Native Science and Engineering Program building on the University of Alaska Anchorage campus with the new engineering building under construction in the background. The latest capital budget included a $45.6 million appropriation to complete the $123.2 million, 75,000-square foot building and 500-space parking garage.

Photo/Michael Dinneen/AJOC

With the promise of $182 million on the way, the University of Alaska Fairbanks is getting started on its new combined heat and power plant.

The Legislature approved the state-spend as part of the $2.1 billion fiscal 2015 capital budget passed April 25.

UAF spokeswoman Marmian Grimes said a request for proposal, or RFP, for coal-fired boilers is out on the street now.

“The design of the new section of the plant itself is dependent on what boilers are purchased,” Grimes said. “The plant has to be designed around those boilers, so that’s something we have to do first.”

The long-lead time items — boilers, turbines and the subsequent plant design, meant funding for the 2015 fiscal year was very important, she said. If the major parts of the plant can be procured by this fall, full construction of the plant can begin next spring, she said.

With $24.5 million of the $182 million coming from the general fund, the remaining $157.5 million will be bonded by the state.

The 17-megawatt plant has a $245 million price tag, but fuel savings from new high-efficiency boilers will allow the UAF to finance the remaining $50 million, according to the Board of Regents.

The Senate version of the budget passed April 11 appropriated $37.5 million in general fund money to the heat and power plant, but that was cut to the final $24.5 million in the House. The $13 million difference will likely be requested next session.

The new coal boilers would decrease most particulate and gas emissions by more than 50 percent, according to UAF.

Along with the plant funding, the Senate added language to the budget stating the university system should implement a utility surcharge or increase tuition up to $2 million annually to offset revenue bond debt service for the plant.

University of Alaska System spokeswoman Kate Ripley said it’s too early to tell what the system’s response to the intent language will be, but it will likely be discussed at the Board of Regents June meeting in Anchorage, she said.

The Board of Regents must approve any umbrella fee or tuition increase.

“A tuition increase for this project would be pretty challenging because you’d have non-Fairbanks students saying, ‘Why should we have to pay a fee or tuition for (the power plant)?’” Ripley said.

Such concerns have already been heard by the UA and are valid, she said.

Simply broken down among the roughly 17,000 full-time equivalent UA students, $2 million dollars averages out to just more than $117 per student.

However, a fee system could fund deferred facility maintenance statewide, Ripley said, with initial Fairbanks money going to the plant. Regular deferred maintenance funds — $30 million in the fiscal 2014 budget — were cut to about $22 million for 2015.

Funding nearly all of the power plant in one lump sum was unexpected, but university system leaders for years have emphasized the need to overhaul the 50-year-old, coal-fired plant at Fairbanks and prioritized that project over the funds needed to finish their engineering building now under construction.

The dual university engineering buildings at Fairbanks and Anchorage received differing fates in the Legislature.

In his budget proposal, Gov. Sean Parnell appropriated $10 million to the UAA engineering building, but the Legislature’s total $45.6 million appropriation should finish the $123.2 million, 75,000-square foot building and 500-space parking garage. The garage is required by Municipality of Anchorage zoning laws because the new building will eliminate current parking spaces.

A $10 million appropriation for the UAF engineering building in Parnell’s budget stayed in the final version. Grimes said the money would allow the university to enclose the structure and finish it when the power plant is done. Finishing the 119,000-square foot engineering building will mean putting $23.3 million towards it in future years.

Positive Train Control

The Legislature’s capital budget left the Alaska Railroad Corp. looking for $5 million to fund its work and gave it a tricky directive, too.

Before the legislative session began, railroad officials requested $20.2 million in fiscal year 2015 and $20.6 million in 2016 to implement Positive Train Control, the federally-mandated technologically advanced safety system designed to override human error and slow trains traveling at unsafe speeds. Alaska Railroad President and CEO Bill O’Leary said that request was revised to $20 million when it was quickly determined the request was too ambitious.

The Legislature gave the railroad $15 million, and intends the state railroad to implement a passenger fee to offset some of the cost of Positive Train Control — another challenge — according to O’Leary.

He said the railroad has “pull-service” contracts to pull passenger trains owned by tour companies with its locomotives and some of those contracts have rate agreements that extend out as far as 2023.

“The railroad cannot just unilaterally say ‘We’re changing the deal’ and put another fee on it,” O’Leary said.

Discussions with the tour companies are ongoing he said, but because thousands of tickets have been sold for 2014 and fares for 2015 are already being advertised he said it’s difficult to imagine a fee being added to ticket prices in the next couple years.

The passenger fee language was added to the capital bill in the Senate Finance Committee.

All told, Positive Train Control will likely cost the Alaska Railroad about $155 million, and it still needs about $55 million after fiscal 2015 to complete the project.

“There’s another legislative session coming up next year and we’ve been very clear the Alaska Railroad cannot handle this unfunded mandate on its own,” O’Leary said.

The $5 million difference will be requested next year, he said.

His team is trying to figure out how it can make ends meet on the project and keep on track for the current December 2015 federal deadline, O’Leary said. Realistically, that deadline is unattainable for most railroads across the country and he expects it to be extended, O’Leary has said.

Without installing Positive Train Control, the railroad could lose its ability offer passenger service under federal regulations.

Part of the cost to the railroad is simply the high cost of doing business in Alaska. The railroad must get power to sections of its track that are currently off the grid.

“How we get power to those switches, to those crossings out there is very expensive,” O’Leary said.

He said very small solar, wind and diesel options are all being investigated.

Other projects

The State Museum in Juneau, which closed in February for more than two years of renovation and will reopen as the State Library, Archives and Museum, received $37.5 million from the general fund. The Anchorage Museum was appropriated $5 million for a gallery redesign in the capital budget as well.

Statewide village water and wastewater projects received $51.5 million, of which $42.7 million is federal money. An additional $14.5 million went to municipal water and waste facilities grants — all general fund money.

The Alaska Energy Authority got $20 million for continued Susitna-Watana dam reconnaissance work and $22.8 million for its popular Renewable Energy Fund, more than Parnell’s recommendation.

If the controversial emergency access road from King Cove to Cold Bay on the Alaska Peninsula championed by Sen. Lisa Murkowski is ever approved by the federal government, the state will be ready to build it with a designation of $21 million from the federal State Transportation Improvement Program.

Marine infrastructure work in Seward, where the city is looking to complete its breakwater and develop additional marine infrastructure was awarded $5.9 million. The Legislature approved $3 million for similar work in Nome.

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