JUNEAU — The state Legislature has approved authorization for the state-owned Alaska Railroad Corp. to sell bonds for a 38-mile rail spur from near Willow to the Matanuska-Susitna Borough's Port MacKenzie, a bulk commodities port on Knik Arm, across from Anchorage.
Track-laying crews aren't about to start work, however. The railroad must first find a way to pay for the estimated $300 million cost of the spur line.
Still, the Mat-Su Borough is pushing ahead with the rail link, which it sees as a vital new transportation link between Southcentral and Interior Alaska. State lawmakers approved $12 million for preliminary environmental and engineering studies for the rail link in the state capital budget May 16. The work, which will be managed by the borough, includes a required federal environmental impact statement.
In presentations to legislators, borough officials have laid out an ambitious schedule for the project, with completion timed to coincide with a plan by Agrium U.S. Inc. to convert its fertilizer plant in Nikiski from natural gas to coal.
The borough plans design and environmental work to begin this year and be finished in 2009, and construction from 2009 to 2011. Agrium hopes to have its plant conversion done the same year.
The company plans to purchase coal from a coal mine in Healy operated by Usibelli Mine Inc. Agrium will need about 3 million tons of coal yearly for a coal gasification unit built at the fertilizer plant.
The company and the Alaska Railroad are now planning to ship the coal through the Port of Anchorage. Mat-Su officials want to see the coal shipped along the new rail spur to Port MacKenzie and loaded on barges there for transport across Cook Inlet to Agrium's plant near Kenai.
Mat-Su Borough Manager John Duffy said the rail extension to Port MacKenzie would cut 26.4 miles off the distance coal would be moved by train compared with shipping through Anchorage, resulting in a $5.21 million annual savings for Agrium.
The savings total $257 million over 30 years, almost enough to pay for the rail extension, Duffy said.
Additional benefits include less expensive shipping for Usibelli for coal it now exports to South Korea through Seward, involving a much longer rail shipment, and lowering the cost of shipping new resources that could be developed along the rail corridor to Interior Alaska.
Port MacKenzie has more than 9,000 acres of borough-owned upland and tideland acreage available for industrial use and storage compared with constricted space at the Port of Anchorage, Duffy said. The port can also load Cape- and Panamax-sized cargo vessels today with no dredging, he said.
The problem is financing the expansion itself, Alaska Railroad officials said. Revenue bonds sold by the railroad would have to be paid by additional fees tacked on to freight charges for moving coal or other cargo over the spur, railroad president Pat Gamble said.
Agrium has, so far, been reluctant to pay the additional costs. The track to the Port of Anchorage is paid for, although the distance is greater.
Gamble agreed that a rail extension to Port MacKenzie would be the most efficient long-term option for supplying coal to Agrium. The company and the railroad are proceeding with their current plan of shipping through Anchorage because of uncertainties on whether the rail extension can be completed in time, and on how the capital costs would be paid for.
Duffy said the rail extension is a matter of reducing congestion and public safety hazards within the borough as well as economic development.
“Moving 100-car-plus coal trains on the established tracks through the already-congested Wasilla-to-Anchorage corridor will cause serious auto and rail conflicts along numerous at-grade rail crossings in the borough,” he told the Senate Resources Committee in mid-April. The cost of alleviating safety problems at road-rail crossings total $140 million, which can be avoided with the alternative of a rail link to Port MacKenzie, Duffy said.
The congestion would further erode opportunities for commuter rail service between the Mat-Su and Anchorage, Duffy said.
Tim Bradner can be reached at tim.bradner@alaskajournal.com.
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