The Surface Transportation Board, a federal agency that oversees expansions of the U.S. rail network, is managing an environmental impact statement for the project and has retained ICF International, a transportation consulting firm, to do the study.

Duffy said the Mat-Su Borough will soon issue a request for proposals for a contract to assist the borough in developing a strategy to finance the project, which is expected to cost between $210 million and $295 million. The cost will depend largely on which route is selected of three being studied, Duffy said.

The borough is also asking the state Legislature for a $67 million capital appropriation to begin initial engineering and right-of-way work if the results of the EIS are favorable. If the appropriation is made, the amount of money that will have to be raised through financing will be less by that amount.

The Legislature last year appropriated $10 million to pay for the EIS process that is now underway.

Meanwhile, a new study prepared for the borough by the Institute of Social and Economic Research at the University of Alaska Anchorage shows substantial economic benefits and savings in shipping costs.

In a report given to the borough March 10, ISER researchers Steve Colt and Nick Szymoniak estimated $648 million in economic benefits over 50 years. That includes a $101.4 million savings in shipping materials and equipment for natural gas pipeline construction.

Colt and Szymoniak calculated a benefit/cost ratio of 2.2 for the project, which means the rail extension would deliver more than double the economic benefits over time, adjusted for inflation, than the costs of building and maintaining the rail extension.

While the procedure is common with federal projects, most public projects in Alaska have not been subject to formal cost-benefit analysis, Colt and Szymoniak wrote in the ISER report.

Since the analysis was prepared, Agrium Corp. announced that it would not construct a large coal gasification project at its ammonia and urea fertilizer plant in Nikiski. Colt and Szymoniak had assumed that coal for the gasification project would be carried over the rail spur.

But even without the coal, the project still nets a benefit/cost ratio of 1.77, meaning it will generate substantially more benefits than costs over time.

This compares favorably with other major public infrastructure projects that have been built in Southcentral Alaska.

“By comparison, the Bradley Lake hydroelectric project now appears to have a benefit/cost ratio of less than 1.5, even when based on high and rising natural gas prices,” Colt and Szymoniak wrote.

Bradley Lake is a 250-megawatt hydro project built by the state in the 1980s on the Kenai Peninsula near Kachemak Bay. It was aimed at diversifying the sources of electrical generation for the Southcentral-Interior power grid, and today it is generally viewed as having been a sound investment.

The ISER analysis assumed a capital cost of $275 million for the spur line. Operations costs are assumed to be $1.5 million per year, and the assumption of time is 50 years, from the potential completion date of 2012 to 2061. The net present value of all costs, with a discount rate of 5 percent (which adjusts for inflation) is $301.1 million.

Compared to shipping supplies by rail to and from Seward, using a rail spur to Port MacKenzie would save 140.7 miles per one-way trip, for an average cost-savings of 6 cents per ton-mile, according to the report.

There are also avoided costs in the calculation for upgrades needed in the future for road crossings, bridges and ports if the rail spur is not built. That becomes more meaningful if construction of a gas pipeline occurs.

The benefits from reduced transportation and the avoided costs total $648 million, also discounted at 5 percent for inflation, which produces the 2.2 benefit/cost ratio calculated by Colt and Szymoniak.

Coal to Agrium amounted to $114.38 million of this savings, however (the alternative would be shipping coal to Agrium through the Port of Anchorage), and subtracting this results in total benefits being reduced to $533.7 million.

“The rail extension would provide two distinct types of benefits. First, it reduces the cost of rail transportation, and two, that it is likely to stimulate significant new mines and other major developments,” Colt and Szymoniak wrote in the ISER report. “A strength of the rail extension is that its economic viability does not depend on any one project.”

The Mat-Su Borough's request for a $67 million capital appropriation has brought support from the Fairbanks North Star and the Denali boroughs.

“The new track from the Alaska Railroad's main line to Port MacKenzie are clearly among the state's most promising economic development opportunities. Regionally, the extension will stimulate expansion of the mining industry, provide for less expensive fuel delivery and support creation of significant new industries,” Fairbanks North Star Borough Mayor Jim Whitaker and Denali Borough Mayor Dave Talerico wrote in a letter to state legislators that was also signed by Mat-Su Borough Mayor Curt Menard.

One potential new industry is cement production, which could result if limestone deposits in the Interior can be developed because of less expensive rail transportation.

“The (rail spur) project will enable the export of lime from a 1.6-billion-ton limestone deposit north of Fairbanks, providing the opportunity for cement production. Our nation currently imports cement,” Whitaker, Talerico and Menard wrote.