Anchorage, railroad have ties that bind

Photo/Alaska Railroad Collection/Anchorage Museum

Editor’s note: This is the third in a series of 10 articles by the Journal of Commerce recognizing the Anchorage Centennial and examining the events and the industries that have shaped Alaska’s largest city. The series will be released as a single special edition of the Journal in time for the Solstice celebrations June 20 and will be available at centennial events throughout the summer.

The Alaska Railroad is the tie that binds the state together.

It is the reason for Anchorage.

It exemplifies Alaska.

“To a large degree the railroad has mirrored, or led, depending on your perspective, the ups and downs of the state of Alaska. Everything from the impact of the 1964 earthquake to the tremendous growth when the pipeline came to pass, to even being a big part of the big drivers in Anchorage today,” Alaska Railroad Corp. CEO Bill O’Leary said. “A lot of the (Anchorage) airport’s growth was, pardon the pun, fueled by the ability of the railroad to move all that jet fuel down from the refinery in Fairbanks. It’s been a key participant in most of the larger events of the state.”

The Alaska Railroad’s story begins in earnest 101 years ago, a year before the founding of Anchorage.

President Woodrow Wilson signed the Alaska Railroad Act on March 12, 1914, which allowed him to task a group of engineers to investigate the prospect of building a rail line from Southcentral to the Interior. Those engineers mare up the Alaska Engineering Commission.

The act also approved $35 million for construction, a dollar figure that ballooned with inflation induced by World War I, according to Alaska Railroad historian Jim Blasingame, but was still 60 percent more than the State of Alaska paid for the railroad seven decades later.

There were two spur lines the commission could’ve chose to build off of in 1914: the Alaska Syndicate railroad in Cordova and Seward’s 71-mile Alaska Northern Railway.

Seward was chosen because of politics and the “other” black gold, Blasingame said.

The Alaska Syndicate was owned by the Guggenheims and J.P. Morgan, who also controlled the nearby Kennecott copper mine. They did not like idea of the government building a railroad in their territory and Wilson didn’t like them, he said.

“It took the federal government — with the U.S. Treasury — to put together the money to build the railroad because the private sector, all of them that were attempting to do it, were doing it to make a profit, which was difficult to do.” Blasingame said. “Congress was savvy enough to realize they needed to build a rail line to develop the territory. At the time that they decided to act their goal was to go for the black gold, which was coal.”

Blasingame retired from the Alaska Railroad Corp. in 2009 after a career that spanned five decades. He is currently researching a book detailing the complex history of the railroad’s transfer from the feds to the State of Alaska.

Despite the robust copper industry on the other end of Prince William Sound, the Alaska Engineering Commission ultimately recommended a route north from Seward because of the ability to reach coal near Healy and in the Matanuska Valley.

When construction began, so did Anchorage.

The July 10, 1915, Anchorage townsite auction formalized the tent city that formed at the mouth of Ship Creek, the area that remains the headquarters of the Alaska Railroad.

By the end of the year Anchorage had grown to 1,500 people and the rail stretched to Eagle River.

By the time President Warren Harding drove the Golden Spike near Nenana that completed construction on July 15, 1923, nearly $72 million had been spent building the Alaska Railroad, about 10 percent of the annual federal budget at that time.

The first sitting president to visit Alaska, Harding died from food poisoning Aug. 2 during a stop in San Francisco on his trip back from the territory.

After construction the railroad fell under the jurisdiction of the Department of the Interior.

Tourism, war, a great quake and oil

A marketing campaign promoting “African safari-like” adventures in Alaska via the railroad was quickly developed to drive business to the fledgling railroad, Blasingame said.

Brochures printed during the depths of the Great Depression touted the territories rugged scenery and untapped hunting and fishing opportunities.

The Alaska Railroad first turned a profit in 1938.

In 1943, two tunnels were blasted through the Chugach Mountains allowing rail access to Whittier, a military port during World War II.

For decades, the Downtown Anchorage Railroad Depot not only served as the executive offices for the railroad, but also housed the city’s phone system and morgue.

Competition from the brand new Seward Highway caused the railroad to cancel passenger service to Seward in 1953. The growth of the tourism industry ultimately led to the railroad reestablishing that service.

Barge service began out of Whittier in 1962, which allows the railroad to transport loaded railcars north from Seattle. It constitutes the longest rail line in America stretching from Fairbanks to Florida.

These days, the rail-barge service helps the railroad support North Slope oil and gas work by moving large quantities of pipe and other bulky construction modules as efficiently as possible, by rail.

The 1964 Good Friday Earthquake hit the Alaska Railroad with $30 million of damage, cut passenger service to Fairbanks for two weeks and freight service to Whittier for three.

The discovery of oil at Prudhoe Bay four years later was a boon to Alaska and the railroad was not left out.

During construction of the trans-Alaska Pipeline System the railroad’s workforce grew to more than 1,300 in the mid-1970s, according to former employees. It has about 590 full-time employees today.

Blasingame said federal procedures during the time of rapid expansion hinted at the need for a change of ownership.

“We were going like gangbusters and we couldn’t hire any permanent employees. We could hire temporaries, so we had probably 250 or so temps, but we would have to let them go before the last two weeks of the end of the calendar year and then hire them back after the first of the year,” he said.

“So we had to go through the federal policy exercise of terminating these temporary employees and then in another two weeks go through the federal process of hiring them back. It was all this paperwork; it was just unreal.”

Further, the Alaska Railroad had to keep federally adequate financial books because Congress appropriated its budget every year, while keeping a separate set of financials that met industry standards, according to Blasingame.

“Everything we did took twice as long,” he remarked.

Sale to the State

When it came time for the federal government to sell the Alaska Railroad, late Sen. Ted Stevens led they way. Stevens first tried to give the State of Alaska the railroad through legislation in 1980. At the same time the state was issuing the first Permanent Fund Dividend checks.

The act of philanthropy didn’t sit well with some in Congress.

“It was Sen. Howard Metzenbaum from Ohio that stood up on the floor of the U.S. Senate and said ‘If the State of Alaska can afford to give each of its citizens a $1,000 check then they can afford to pay for the railroad at market rate, whatever that is,’” Blasingame said. “Stevens called him a ‘pain in the ass’ on the Senate floor and its part of the Congressional record.”

A backlog of safety hazards and deferred maintenance cost the feds big time.

According to Blasingame, the fire-sale $22.3 million purchase price arrived at in 1983 came only after assessors deducted work that needed to be done to the railroad’s infrastructure and cut the market value of the Alaska Railroad from an initial estimate in the $250 million range.

Under federal ownership, which in 1967 shifted to the Department of Transportation, the Operational Safety and Health Administration had no jurisdiction over the Alaska Railroad and it showed.

When the State of Alaska officially took ownership on Jan. 5, 1985, it had plenty of work to do to bring its new toy up to code.

“At the time of transfer the federally-owned railroad had over 2,500 OSHA violations. Under the state we had five years to correct all that,” Blasingame said.

Since transitioning to a state corporation, the Alaska Railroad Corp. has operated as a for-profit business, a quasi-government entity that asks for money only when federal regulations require new and expensive equipment.

As its CEO Bill O’Leary said, the Alaska Railroad helped lay the foundation for business growth at Ted Stevens Anchorage International Airport, another government enterprise that supports 1 in 10 city jobs.

The railroad’s ability to cheaply ship jet fuel from the Flint Hills North Pole refinery to Anchorage helped support the logistical benefits inherent in Anchorage’s location and make the little city’s airport one of the busiest cargo hubs in the world.

Ultimately, the cost to run the refinery, which grew with oil prices, made it cheaper for airlines to buy their fuel elsewhere and have it shipped in to Anchorage and was the demise of the operation. However, at its peak, the Flint Hills Anchorage fuel terminal received 12,000 railcars per year, according to the company.

Last full-service railroad

Providing both freight and rail service under one roof is unique. The Alaska Railroad is the last full-service railroad in the United States. The railroad’s place in mainland Anchorage’s tourism industry has only grown over the years.

Since rebounding from the Great Recession, which hit the state’s tourist-centric businesses hard from 2009-11, the Alaska Railroad has hauled nearly 500,000 Alaskans and Outsiders annually.

“I don’t believe there is any other railroad in the country that has the same impact on its state as the Alaska Railroad,” O’Leary said. “We’re many things to many people here.”

Visit Anchorage President and CEO Julie Saupe said the railroad offers a simple, but important alternative to the Southcentral’s limited road system.

“If we didn’t have the railroad I’m not sure we’d be able to manage all the visitors that we currently get,” Saupe said.

It’s estimated each tourist spends more than $900 once they get to Alaska.

Saupe said the shorter itineraries the railroad now offers also give tourists easy options to see Alaska, and stay a night or two longer.

When Saupe talks of the benefit cruise ships have on Anchorage, she talks about ships docking in Seward and Whittier as well, because the cruisers will almost invariably make it to Anchorage on rail.

“The whole idea of the cruise tour was made more tangible in visitors’ eyes with the option of riding the railroad all the way into the Interior.

For more than 30 years, the railroad has partnered with the Anchorage School District’s King Career Center to train high school juniors and seniors for summer tour jobs.

“They have to learn the history of the railroad; they have to learn the history of Alaska; they have to know the flora, the fauna,” Blasingame said.

“It’s a wildly popular program.”

The program started in the last years of federal ownership and hesitation over hiring additional temporary employees forced the state Legislature to fund it for the first two years, according to Blasingame.

He said “Thank Yous” in the form of baked goods are periodically sent to the railroad’s offices — responses to the experiences passengers have had with their young tour guides.

Holland America Princess is one of the companies that offer cruise tour trips with the railroad. HAP currently manages 20 cars that are run by the railroad, 10 of which are the largest domed passenger cars in the world, according to the company.

HAP’s rail maintenance superintendent John Crews has worked on the fleet for more than 20 years. He said there have been frustrations stemming from differing operating styles on both sides of the relationship, but open lines of communication have kept the partnership healthy.

Employees regularly change jobs between HAP and the railroad, he said.

While HAP’s passengers book a ticket with the tour company, Crews said it’s understood why they visit Alaska.

“People want to come to Alaska and ride the historic Alaska Railroad,” he said. “They don’t come up here to ride the Holland America railroad or the Princess railroad. People ask us all the time about the Alaska Railroad.”

“We’re just providing the vessel for them to ride on the Alaska Railroad.”

Elwood Brehmer can be reached at [email protected].

11/20/2016 - 9:03am