UAF plant estimate $50M over budget

The University of Alaska Fairbanks will likely have to wait a year longer to get its new heat and power plant up and running. Cost estimates available in February came in more than $50 million over budget for the coal-fired combined heat and power, or CHP, plant, according to university spokeswoman Marmian Grimes. University of Alaska President Pat Gamble told Senate Finance Committee members March 17 that the school “put the brakes on the project” and is now looking for ways to value-engineer the cost down. “We made the decision we could not come back to the Legislature and as for more money,” Gamble said to the committee. Revamping the design of the plant will push its completion date back from late fall 2018 to the last quarter of 2019, Grimes said. Last year, the Legislature approved a financing package to cover the cost of a new $245 million UAF plant, but the preliminary estimate for the new plant was around $300 million. The 2015 fiscal year financing included a $24.5 million direct general fund appropriation and significant bonding authority together totaling $182 million. University officials have said they could afford to bond debt up to about $50 million to help pay for the more efficient CHP plant on the back of annual fuel savings projected in the $4 million to $5 million range compared to current costs. The Atkinson Heat and Power Plant began service in 1964, meaning its two coal-fired boilers are already beyond expected 50-year operational life. Its two auxiliary boilers — one oil-fired and one compatible with both oil and natural gas — will be kept as backup for the new coal CHP plant. UAF demands a plant capable of producing about 17 megawatts of power and enough steam to heat the more than 3.1 million square feet of facilities that make up its main campus. Grimes said the plant design and construction team is focusing its efforts on cost savings derived from going from two circulating fluidized bed boilers to one large unit. The global engineering firm Stanley Consultants is leading design work and a joint team of Haskell Corp. and Davis Construction will handle construction duties. UAF chose the construction manager at risk, or CMAR, project management method for the plant as opposed to the more traditional design-bid-build, Grimes said. The university paid for a preliminary design upfront, where the $245 million estimate came from. Then the construction team was brought on for the detailed design phase so specific costs could be itemized as opposed to having one large bid and potential cost overruns. “It actually worked the way it was supposed to,” Grimes said. While the firms are fairly confident the needed savings can be realized, she said, going from two to one boiler has operational drawbacks. The university would have to completely switch to oil or gas when maintenance is done to the coal boiler, rather than being able to keep one coal boiler running, which would add somewhat to fuel costs. The boilers dictate the design of the rest of the plant; everything else is built up around them, Grimes has said. This year will probably be spent prepping the site for construction, when original plans called for pouring concrete, she said. UAF hopes to request approval for site work at the April UA Board of Regents meeting and have a new design ready by June, according to Grimes. The immediate delay is only a few months, but that will almost certainly result in a year delay for the overall project because of Alaska’s short construction season. Grimes added that the university is taking another look at adding natural gas-fired capacity as part of the redesign. However, early indications are that the availability and fuel cost issues that forced the idea to be nixed when UAF first looked at new CHP plant options are still there, despite a gas plant being cheaper to build, she said. Engineering building UAF’s capital request for construction of its piecemealed engineering building would allow the school to open about 25 percent of the facility, UA President Gamble told Senate Finance. “We could put part of the building to use if the total amount was $8 million applied to the building,” he said. Gamble said the $10 million the Legislature appropriated last year would last through about mid-August. Another $8 million would keep work going through mid-January and let the school open two classrooms, a lab and required associated amenities, such as restrooms at that time. The 119,000 square-foot facility is enclosed and warm, which allowed interior construction to continue during the winter, according to a UAF project update dated March 11. As it stands without that $8 million, UAF needs $31.3 million to finish the $108.6 million project, Gamble said. Gov. Bill Walker included an $8 million appropriation for the building in his capital budget, one of the few projects statewide that got a line item in the slim $150 million proposal. The Legislature fully-funded Anchorage’s $123.2 million engineering facility and parking garage with a $45.6 million appropriation last year. When asked about bonding for construction funds, he said the university bonded last year and is at capacity to repay the debt service. University capital fund Senator Pete Kelly, R-Fairbanks, introduced a bill March 20 that would allow the UA System to pay for capital projects by skimming from future state resource royalties in lieu of getting land the state schools are owed. Established as a land grant university, attempts in 1959 and 2009 to transfer up to 1 million acres of state land to the University of Alaska have been shot down by the Alaska Supreme Court as violations of the state Constitution. Kelly’s Senate Bill 81 would allow the state system to take 0.5 percent of state proceeds from land and mineral leases, royalties and federal mineral revenue sharing on leases, sales and contracts entered into after Jan. 1 2016. The University of Alaska currently owns approximately 147,000 acres across the state. Elwood Brehmer can be reached at [email protected]

Long-awaited Sealaska land transfer is complete

JUNEAU — It took 43 years, two months and 17 days since the passage of the Alaska Native Claims Settlement Act, but Sealaska Corp. is finally whole. The Southeast Alaska Native regional corporation officially took title of 70,075 acres of formerly federal land March 6 during a ceremony at the company’s headquarters in Juneau. Sealaska President and CEO Anthony Mallott said the land transfer provides a time to reflect on Alaska Native history and will be a major benefit to Sealaska, its shareholders and the entirety of Southeast Alaska for years to come. “This is a great way to frame how we expect to manage our land for the next 100 years,” Mallott said. More than 68,400 acres of the land — once Tongass National Forest — will be managed primarily for timber harvest and was selected with that purpose in mind, Sealaska leaders said. The remaining roughly 1,500 acres scattered in smaller parcels throughout Southeast were chosen for historical and cultural significance and economic development potential. Mallott and others from Sealaska repeatedly thanked the members of Alaska’s congressional delegation, including former Sen. Mark Begich, for their years of work to get the land transfer legislation passed. Sen. Lisa Murkowski was the lead sponsor of the latest iteration of the Sealaska lands legislation. Such land transfers to Alaska Native corporations are required by ANCSA. In total, Sealaska now holds 360,000 acres in Southeast Alaska. All of the selections were formerly Tongass National Forest parcels. At more than 17 million acres, the Tongass is roughly the size of West Virginia and is the largest federal forest in the country. Sealaska director and former board chair Albert Kookesh said the land conveyance was the result of more than 300 meetings held across the region by the corporation to reach myriad of compromises with concerned parties. “We were directed by Sen. Murkowski, who was the primary sponsor, to get rid of as much of the opposition as we could,” Kookesh said. Included in the legislation was a provision to “lock up” 150,000 acres of the Tongass National Forest from development. Kookesh said Sealaska spent nearly $10 million over the years to get what it was rightfully owed. “We’d spend another $10 million if we had to,” he said. The Southeast Alaska Native Land Entitlement Finalization and Jobs Protection Act was rolled into an omnibus lands package, which was part of the 2015 Defense Reauthorization Act signed by President Obama Dec. 19. Sealaska Vice President and General Counsel Jaeleen Araujo worked on the land transfer for more than 10 years. “This kind of event is a reward for a long road,” she said at the signing ceremony. Legislation involving public lands is always difficult to get agreement on, Araujo said in an interview. Further, she noted the Sealaska lands bill came up during a period when it is hard to move anything through Congress. To get it to move, a virtual consensus had to be reached. Araujo, an Alaska Native, said Sealaska came to learn how many groups from a myriad of backgrounds are concerned about the Tongass as much as the Native people are. She described the process as a continuous education to inform people that Sealaska was merely asking for it was owed. “At times it was frustrating when people were looking at this as a corporate giveaway or a land grab,” she said. “We were constantly reiterating the fact that this is an existing entitlement.” Easing those concerns meant concessions. That included the 150,000 acres of wilderness now permanently protected. About 26,000 acres of selections on northern Prince of Wales Island that were part of previous failed conveyance bills were omitted from the one that passed. Historical logging work on the island has developed a network of roads and there was an uneasiness about a private company benefitting from infrastructure installed at the Forest Service’s expense, Araujo said. In the end, Sealaska relinquished selection rights to 327,000 acres as part of the transfer. “(The Tongass) is similar to the Arctic National Wildlife Refuge — a prized jewel to so many people,” she said. “Of course, we live here and have lived here for thousands of years so we can appreciate the importance of the beauty and the bounty of this place.” Mark Kaelke, the Southeast Alaska project director for Trout Unlimited, an active conservation organization on Tongass issues, wrote a piece on the group’s website titled, “Controversial Sealaska bill contains a few Tongass gems,” shortly after Congress agreed to the terms of the omnibus lands bill. Bureau of Land Management Alaska Director Bud Cribley signed the conveyance paperwork for the federal government. He said he was honored to represent everyone in the government that worked on the settlement. Cribley said a provision in ANCSA allows for an interim land conveyance such as the one given to Sealaska. However, it required the transfer be signed within 60 days of enactment of the legislation, which left a lot of work for a short amount of time, he said. “Trying to accurately describe 70,000 acres in Southeast Alaska was nothing less than a challenge,” Cribley said. Over the next several years Sealaska and BLM will finish surveying and patenting the land. Sealaska will also have to apply for easements cemetery sites it wishes to designate in the coming years, according to BLM. Araujo said what happens to the small selections chosen for economic development near small Southeast towns would largely be up to what the people nearby want. Some were chosen for energy — hydropower — potential, but none will be logged or mined.  “There may be some communities that say, ‘We don’t want any development; we just like the fact that we have Native ownership near our community,’” Araujo said. “That’s fine too.” A timber future Not only does the deed transfer end Sealaska’s claims under ANCSA, it should help float the region’s drowning timber industry. Mallott said in an interview that the land would be the key to keeping Sealaska’s timber harvest sustainable at between 30 million and 50 million board feet per year from its lands. He sees timber harvest once again being the most significant business Sealaska has in Southeast. Sealaska’s timber operations hinged on getting the new forest land, and soon. “The consideration of what would have happened without the lands bill — it wasn’t even worth thinking about,” Mallott said. The corporation began scaling back its annual harvest of Sitka Spruce, Western Hemlock and cedar in 2006 to “bridge” its remaining timber resource until the lands bill passed. About a quarter of the 290,000 acres Sealaska owned prior to March 6 has been clear-cut at some point in the past. Now it’s being managed through calculated thinning to maximize its second-growth potential. Araujo said more than half of the newly acquired timber land is old growth and about a third is young timber. The remainder is non-harvest areas. Exactly what sustainable harvest can come from the total Sealaska forest still needs to be narrowed, but Mallott said it would almost certainly be no more than 50 million board feet per year. The larger Southeast industry has collapsed for a number of secondary reasons that all lead back to one: timber supply. Industry outside of Sealaska — reliant on Tongass timber sales — has succumbed to a shift in management practices by the Forest Service and a back-and-forth fight over the Roadless Rule. For more than two decades prior to enactment of the Roadless Rule in 2001, which restricts additional road development on nearly 60 million acres of national forest nationwide, the annual Tongass timber harvest averaged about 270 million board feet. That harvest has fallen to less than 100 million board feet per year since. In fiscal year 2012, it was 20.8 million board feet, according to a Forest Service report. The Forest Service under President George W. Bush exempted the Tongass from the Roadless Rule, but that exemption has since been overturned by a federal court and awaits a ruling from the entire 9th Circuit Court of Appeals. Alaska Forest Association Executive Director Owen Graham said the industry needs access to about 300 million board feet annually to be competitive on the global market. At the same time the Forest Service has shifted to management emphasizing young, or second growth, harvest. That has left some mills unprepared to handle the smaller timber. Graham said he supports the young-growth initiative, but it needs to be phased in over a longer period. “We need more acres and we need more time to let the trees mature,” he said. Peak production days meant Sealaska employed about 600 people for its timber-associated operations, Araujo said. That number had fallen by about half when the lands bill was introduced in early 2013, according to company leadership at the time. At times Sealaska has bid on Forest Service sales to keep up its supply up. Overall, the timber workforce was 4,000 to 5,000 strong during the industry’s heydays of the 1980s, Graham said. Today, about 300 people in Southeast Alaska make a living through timber harvest, according to the state Labor Department. There is one medium-sized mill, Viking Lumber in Craig, and numerous small, one- to five-person mills. Sealaska exports nearly all of the logs it harvests, with the small exceptions of “micro-sales” to small mills on Prince of Wales and in Hoonah. That keeps some value-added processing jobs out of Alaska. Mallott said the company is using the resource addition as an opportunity to study the economics of its entire timber business. “We’d love to figure out the domestic manufacturing feasibility gap,” he said. “What is it in the model that allows us to get a much better price exporting than within the domestic market?” Mallott sees Southeast timber more conservatively than Graham; he said the land conveyance could lead to a flat bottom for the industry, rather than a significant rebound or further fall. However, he and Araujo both noted that Sealaska will be working with anyone willing to provide stable, if modest, timber work. “I can’t even emphasize enough how important (the land transfer) is to allow us to have a sustainable program and timber industry in concert with the Forest Service,” Araujo said. Elwood Brehmer can be reached at [email protected]

Sealaska Corp. continues search for the right business fit

JUNEAU — Sealaska’s land acquisition will help its timber business and the Southeast Alaska Native corporation is looking to expand in other sectors as well. Sealaska Corp. President and CEO Anthony Mallott said in an interview that the corporation has a team continuing to pursue business purchase options, with the hope of announcing something significant within six to 12 months. The focus is first and foremost on industries Sealaska knows well, Mallott said. From there, an emphasis is being placed on operations with high cash flow and those that have ties to Alaska, or at least the Pacific Northwest. “If it’s not in the state, it should have an opportunity to reach to the state,” he said. Sealaska currently has four government services firms that specialize in the environmental, technical, IT and construction and project management sectors. Alaska Coastal Aggregates and Sealaksa Timber round out its natural resource subsidiaries. The acquisition team is working with patience and discipline Mallott said, meaning a new business purchase could take longer than a year. Mallott announced last year that his corporation would enter acquisition mode after selling off companies it owned based all over the Lower 48 and Mexico. Owning firms headquartered outside Alaska is common among the state’s 12 Native regional corporations. He noted that Sealaska is hunting for new business with significant capital on hand. At the end of 2013 the corporation held $80.2 million of cash and investments and had more than $121 million in liquid capital and credit, according to its annual financial report. Mallott stressed Sealaska will develop a “network of trust” to fully understand the risks in whatever venture it enters on his watch and avoid past mistakes. “Historically, we’ve purchased assets within industries that we didn’t have a full understanding of and it’s led to issues, so the learning and gaining experience and creating a network of folks that work within different industries, that’s going to be the key in getting a deal done sooner rather than later,” Mallott said. “And that’s what we’ve been doing the last year and a half.” The 2013 Sealaska Annual Report also detailed a very rough year. Sealaska posted a $35 million net loss that year. Without natural resource revenue sharing from the other Native regional corporations, the final losses would’ve been much worse — $52.2 million in operational losses. Chris McNeil Jr., president and CEO at the time, attributed the losses primarily to one of its construction firm’s losses that offset profits in other businesses. Combined with an internal restructuring that touches many branches of the corporation, Mallott said the acquisition, when it comes, will be a “turnaround moment” for Sealaska. “When you think about the want to be around 100 years from now, let alone 500 years from now — all those structural things you need to be sure of and we think now is the right time,” he said. “We’re doing both; we’re actively looking and we’re structurally improving Sealaska.” Elwood Brehmer can be reached at [email protected]

Corps has $210 million plan for Nome port expansion

An expansion plan for the Port of Nome is starting to take shape. The U.S. Army Corps of Engineers Alaska District released a draft feasibility report Feb. 20 that outlines what it sees as a reasonable Arctic deep-draft port. For an estimated $210 million, the Corps’ tentatively selected plan would dredge Nome’s outer harbor to a mean depth of 28 feet. It also calls for demolishing a small breakwater at the end of the existing causeway and extending the causeway 2,150 feet. A 450-foot large vessel dock would then be constructed at the end of the causeway in the newly protected area. The large eastern breakwater would remain in place and the extended causeway would wrap around the end of it to expand the harbor. The harbor currently has a maximum depth of about 22 feet. “It’s a good day for everybody — for the city, for the state,” Nome Mayor Denise Michels said when the report was released. The general proposal is similar to one the city drafted in the 1980s, she said, and much of what went into the current iteration came from Nome Port staff. Sen. Lisa Murkowski commended the Corps for their work on the project in a release from her office and said a larger Arctic port could mean job growth for the Seward Peninsula. “Though this is just one step, it is what I am looking for out of this administration to leverage our role and responsibility as an Arctic nation, and invest accordingly,” Murkowski said. “We know other countries are making plans to seize the opportunities presented in the Arctic, and we must do the same.” While Nome is not north of the Arctic Circle, a Western Alaska port would likely be a hub for research, oil and gas support and emergency response vessels working in the Arctic. The cost of the project would be shared, with the federal government picking up $97 million of the work that could have national economic development benefits. Local or state interests would fund the remaining $113 million. Michels said the city would probably look to private partners to help fund construction. The latest report further narrows the focus of a study the Corps and state Transportation Department released almost exactly two years ago that chose Nome and nearby Port Clarence as the two best port locations of 14 sites Western Alaska sites reviewed. Corps of Engineers Alaska Chief of the Civil Works Division Bruce Sexauer said in an interview that Nome was selected because Port Clarence, despite having naturally deep water, has no shore-side infrastructure. He said ships already seek shelter from storms in Port Clarence and lay up there to wait for ice to change, for instance; it serves its purpose. Michels said the City of Nome would request the Corps further investigate dredging the harbor to 35 feet for larger vessels in the comments it will submit on the draft plan. A 30-day public comment period is open through March 23 and Sexauer said the Corps is interested in getting as much feedback on the proposal as possible. He said the Corps determined 28 feet to be sufficient for the vast majority of the industry support and response vessels are expected to call on Nome in the future. Additionally, it would be deep enough to get larger fuel and supply shipments into the Nome that could help curb shipping costs on goods in the city. “There’s a certain break point — if you go down to a certain depth you’ll be able to accommodate a certain number of vessels, and if you go to the next depth you’ll be able to accommodate more vessels,” Sexauer said. “At some point if you go deeper there are not going to be very many more vessels that are going to need to be accommodated.” Sexauer also noted that the inner harbor would also be deepened to 22 feet. Dredging deeper also changes who pays for it. The feds typically pay 90 percent of the cost for deepening navigation features up to 20 feet. That match shifts to a 75 percent federal, 25 percent non-federal for 20 to 45 feet. Under the current plan for Nome, the non-federal sponsor would pay $1.5 million of the estimated $8.3 million dredging cost, according to the report. Because it is an expansion plan of existing infrastructure, Sexauer said the environmental assessment work already done should satisfy National Environmental Policy Act requirements and a full-fledged environmental impact statement likely won’t be needed. From here, the plan needs approval from Corps of Engineers leadership and funding authorization from Congress — how long that could take is unknown. Michels said increased ship traffic through the Bering Strait in recent years has upped the need for more maritime infrastructure. “The need is now, so the sooner the better we can do this the more the global shipping community can benefit from it,” she said. Elwood Brehmer can be reached at [email protected]

Construction forecast positive in short term with 3% dip

The state budget may be grim but Alaska’s construction industry as a whole should have another good year, according to a University of Alaska Anchorage Institute of Social and Economic Research forecast. The 2015 construction outlook predicts a total spend of more than $8.5 billion statewide. That would be a 3 percent decline from the revised 2014 projection of $8.8 billion worth of construction activity in Alaska. “Our short-term outlook is positive,” Associated General Contractors of Alaska Executive Director John MacKinnon said in a formal statement. “We’ve seen dips in the price of oil and dips in the economy before, and they both come back up. At this point in the cycle we don’t know what the bottom will be or how long before it trends up; it will go back up.” MacKinnon also noted that there is typically a lag between when public money is appropriated and when it actually “hits the street” in the form concrete being poured or buildings going up, so prior year bonds and capital spends will undoubtedly have an impact in 2015. ISER prepares the forecast for AGC of Alaska every year. Employment in the industry is expected to dip slightly from the 17,600 jobs last year, which was a 6 percent increase over 2013. Those projections do not include self-employed contractors in Alaska, estimated to number 9,000 in 2011. “Our annual forecast underscores the importance of the construction industry in Alaska. It’s not just about the jobs and the economic value of the current construction projects — the one-time expenditures,” MacKinnon said. “It’s really about how what we build becomes a part of the ongoing economy of Alaska for years and often, generations.” Private spending is expected to be more than $5.5 billion of the total and down about 6 percent. Leading the way per usual will be the oil and gas industry with about $3.8 billion of work, a slight decline from 2014. ConocoPhillips has several large oil projects on the Western North Slope and ExxonMobil is continuing work on its large Point Thomson gas development. Forecast authors Scott Goldsmith and Pamela Cravez wrote that low oil prices have a greater impact on how much producers have in the bank than what they want to do because projects are planned based on conservative price models. “Some of the largest operators in Alaska are quite strong financially, and others have funding sources not tied to the oil price. Furthermore, in Cook Inlet, activity is more sensitive to the price of natural gas than of oil, and the state, through its tax credit programs, has also provided a funding source not directly tied to the price of oil,” they wrote. “Finally, the industry is under political pressure to show that the new state production tax, SB 21, has stimulated new investment.” At $210 million, mining work is projected to be up 19 percent despite some lower metal prices. The state’s six major producing mines have larger capital expenditures planned for the year, according to the report. A subcategory that could go under public and private spending, utilities should spend about $680 million this year, down 20 percent. That is due mainly to the completion of Matanuska Electric Association’s Eklutna plant. The largest project left is Anchorage’s Municipal Light and Power $275 million replacement plant scheduled for completion in mid-2016. Health care spending will be pretty steady, at $240 million in the coming year, based on federally supported projects by Alaska Native health organizations. The Alaska Native Medical Center in Anchorage is building a 200-room patient housing facility. Public sector spending should be about flat, at more than $2.9 billion, according to Goldsmith and Cravez. Residential construction is pegged to be down 14 percent at $415 million. The activity continues to center on the Matanuska-Susitna Borough; however, land shortages in Anchorage, high heating costs in Fairbanks and overall stagnant economic and population growth will likely slow the construction segment. Public sector spending should be about flat, at more than $2.9 billion. Work on transportation infrastructure — highways, airports, ports, and railroad — should be up slightly and total more than $1.2 billion. Defense spending, which includes U.S. Army Corps of Engineers environmental work along with military construction, should be $435 million, up about 10 percent. Fort Greely is expected to get $50 million for its missile defense program, a recent addition to the federal budget, the authors wrote. Other federal spending, done largely by the Interior Department in Alaska, is expected to be off 15 percent to $255 million. Elwood Brehmer can be reached at [email protected]

Refurbished Port of Anchorage cost estimated at $485M

It will likely cost nearly another half a billion dollars to upgrade the Port of Anchorage according to the project managers. The Anchorage Port Modernization Project team revealed its concept design selection to Anchorage Assembly members at a Nov. 21 work session. “This is an out-the-door cost; it’s everything,” CH2M Hill project lead Lon Elledge told the Assembly. Selected by Mayor Dan Sullivan and the Assembly last spring, engineering and consulting giant CH2M Hill is the latest management firm for the port construction project. The U.S. Maritime Administration, or MARAD, led the previous iteration, the Port of Anchorage Intermodal Expansion Project, for nine years. The municipality cut ties with MARAD in 2012 after major construction damage was discovered. No significant work has been done to Alaska’s largest marine hub since 2010.  The group of CH2M Hill project and port leaders said the concept design was selected unanimously — one of four that came out of a weeklong design charette with stakeholders held in August. Done to high-level, 15 percent completion, the project team has a 60 percent confidence that the overall cost will come in under $461 million and is completely confident it can be done for less than $628 million, Elledge said. The cost estimates are based on construction beginning in 2016. With full funding it would be finished in 2022, he said, nearly 20 years after work began. Port Engineer Todd Cowles said the main goal of the new project is simple. “We’re focusing on our existing business and expansion of that business,” Cowles said. At more than 50 years old, the steel piles that support the dock structures are badly corroded. The port spends more than $1 million per year maintaining them. The latest design uses traditional pile-supported docks and eliminates the sheet pile used in the earlier design. At $485 million, the municipality would need to secure an additional $355 million; it has about $130 million remaining from prior funding. Since 2002, nearly $439 million of municipal, state and federal money has gone towards Port of Anchorage construction and a little more than $300 million of that has been spent. The State of Alaska contributed $220 million in bonds and direct appropriations through 2012. Sullivan said in an interview the state would be the focal point of the municipality’s hunt for additional funding, but also said federal transportation loans and the Defense Department could be other options. The Port of Anchorage is listed as a strategic port by the Department of Defense, a factor that has played into some design considerations. He noted that the port benefits all of Alaska — roughly 85 percent of goods to the state enter through the Port of Anchorage — and that the municipality has already financed $80 million of work. As oil prices fall and the state budget situation worsens, Sullivan said he is aware large direct appropriations will be hard to come by. “Remember, the state and the municipality still have AAA bond ratings,” he said. Incoming Gov. Bill Walker has said repeatedly he would focus on finishing important infrastructure projects across the state rather than starting new ones. If there is one that needs to be finished, it’s the Port of Anchorage. All of the designs remove nearly half of the 35-acre North Extension backlands created during construction of the earlier, discontinued project. Cutting back the filled area will allow for more direct current flow past the existing and future port terminals and subsequently improve scouring, which would reduce some of the need for dredging. The U.S. Army Corps of Engineers spends up to $10 million per year to dredge the area around the Port of Anchorage. After cutting the North Extension, Phase 1 of the project entails demolishing the port administration building, which currently sits near the water and the main terminals, and building a new one near the security office. It also includes construction of a new point of loading, or POL, dock at the southern end of the port near the cement area. Phase 2 would involve filling a small area behind Terminal 1 and moving Terminal 1 out to where a depth of 45 feet can be achieved. The current dock is at roughly 35 feet. During phases three through five terminals two and three would be demolished and subsequently pushed out 100 feet or more to be in line with Terminal 1. The port’s main tenants, Totem Ocean Trailer Express and Horizon Lines, would be moved just once under the concept, a big advantage to it, the team members said. “(The concept) gets a thumbs up from us,” TOTE Alaska Director George Lowery said. In the final phase, existing POL 2 would be pushed out to be in congruence with the other terminals. When CH2M Hill was selected as project manager Sullivan said the company would not be involved in new designs. CH2M Hill, which conducted the study that found the sheet pile design unsuitable for the port and led to lawsuits against former project players, will lead design to the 35 percent level. That work should be done by May 2015. From there a design-build team will be secured over the summer and the final design elements will be developed. CH2M Hill will not be the designer of record, Sullivan said. Environmental permits from the previous project will have expired by the time construction starts and will have to be secured as well. Elwood Brehmer can be reached at [email protected]

Breakwater next step in Seward marine development

The City of Seward is ready to jumpstart development that has been decades in the making. When Gov. Sean Parnell signed the fiscal year 2015 capital budget May 28, Seward was officially awarded $5.9 million from the state to complete its breakwater and begin full-scale work on what the city calls the Seward Marine Industrial Center. Total, the city has gathered $25.9 million for the breakwater, to be built in front of Seward Ship’s Drydock. The money came in three chunks: $10 million as part of the $453 million bond package approved by voters in 2012; $10 million in the fiscal year 2014 capital budget; and most recently the $5.9 million approved by Parnell. At 1,200 feet long when finished, the breakwater will all but enclose roughly 15 acres of water behind it, Seward Community Development Director Ron Long said. That space will be available to anyone wishing to lease it, Long said. While it may not be momentous or even overly exciting, getting a breakwater in place is the lynchpin to developing the industrial center. The breakwater will shelter the shipyard’s waterfront and the city’s adjacent cargo dock from the battering Gulf of Alaska waves that periodically make their way up Resurrection Bay. “The cargo dock never really got any traction because the breakwater was never completed,” he said. Parties from numerous user groups including oil and gas support companies, barge services and the Western Alaska Community Development Quota, or CDQ, fishing fleets have expressed interest in using the industrial harbor when the breakwater is standing, he said. All of the CDQ groups currently homeport in Seattle and travel to the Bering Sea to fish. A 2013 report to the Legislature regarding the $10 million appropriation emphasized that the Coastal Villages Region Fund CDQ group spends up to $10 million on vessel maintenance and nearly $20 million on moorage and other costs each year in Seattle. According to the city, the CDQ groups could save up to $75,000 in fuel per trip by harboring in Seward versus Seattle. Once complete, Long said it’s up to the city to be proactive and get firm commitments from the groups interested in using Seward as a base of operations. “People have been listening to Seward say we’re going to build that breakwater for 25 years; they’re not going to put any money down on the table until they actually see something,” he said. That time will likely come in about a year. Long said the city can begin dumping rock in October, as to not disturb returning salmon. He said the interim months would give contractors enough time to stockpile rock for the project from the nearby city quarry. Work will continue through April of next year, and if need be, the finishing touches will be put on the breakwater in the fall of 2015, according to Long. Barring an unforeseen setback, the area behind the breakwater will officially be open for business in the spring of 2016, but access to the shipyard, cargo dock and fuel storage facility will also remain open during construction. “We want to be careful that we keep those users alive and well during the construction period,” Long said. Federal marine habitat impact mitigation plans — which the project’s U.S. Army Corps of Engineers wetlands permit is contingent upon — are currently being worked out, Long said. “Now it’s close enough to fully funded that we’re gong ahead with (requests for proposal) and contracts will be on the street pretty quick,” he said. When designing the breakwater, city officials took advantage of the state-of-the-art vessel bridge simulator at AVTEC, the state’s local vocational and technical training campus. Long said variations of a basic breakwater design and extreme weather conditions were plugged into the simulator while vessels ranging from 400-foot tank barges to large catcher-processors and mega yachts were steered through the entrance. In the end, the city saved the state some money on what was originally a $27.9 million project. “We crashed tens of millions of dollars of vessels up against the virtual breakwater and as a result we changed a couple minor aspects to the breakwater and wound up peeling about $2 million off the cost,” he said. The water that will be behind the breakwater is 24 feet deep now, Long said. He doesn’t foresee the need to have a deeper harbor, as users with larger vessels would likely head to the city’s deepwater railroad dock, but it could be dredged to 31 feet before undercutting the existing dock sheet pile would become an issue, he said. The genesis for the Seward Marine Industrial Center came in 1986 when city voters approved a $30 million general obligation bond to purchase and construct the infrastructure for what shortly after became Seward Ship’s Drydock, Long said. It was then that the first portion of the breakwater was built as well. Seward recently made its final payment on the 25-year obligation, he said. The dry dock and the prospective business center are at the end of Nash Road across Resurrection Bay from the city proper. “A little town of 2,500 people just retired $30 million of debt invested out of their pockets, so there’s a lot of public buy-in wanting to see this area developed,” Long said. As Long explained it, the breakwater is one of three components to the Seward Marine Industrial Center. The second is the shipyard — in the process of being purchased by Vigor Industrial LLC, the Portland, Ore.-based shipbuilder that operates the Ketchikan shipyard as Vigor Alaska. Vigor will act as the “anchor tenant” of the industrial center, Long said. While the shipyard is operated privately, the property is owned by the city. Vigor Industrial announced its preliminary agreement with Jim Pruitt, the owner of Seward Ship’s Drydock in January. In May, the Seward City Council approved operations and maintenance lease transfers from Seward Ship’s Drydock to Vigor. Once the final details of the sale are worked out and it is finalized, Vigor Alaska’s shipyard development coordinator Doug Ward said Vigor plans to invest in the Seward shipyard as it did when it purchased the Ketchikan shipyard in 2012, although perhaps not quite on the same scale. Vigor Industrial currently operates six shipyards in Oregon and Washington in addition to its Alaska facilities. Working with the Alaska Industrial Development and Export Authority, which owns the Ketchikan property, Vigor has overseen more than $130 million of facilities construction and upgrades at its southern Alaska yard. Ward said having two of the state’s largest shipyards under congruent ownership should help draw added marine business to Alaska and Long said the city’s discussions with AIDEA about Vigor as a tenant were nothing but positive. Vigor spent roughly $250,000 on a comprehensive environmental assessment of the Seward shipyard and it came back with a “clean bill of health,” Long said, that was encouraging not only to city officials, but to residents as well. Also reassuring was Vigor’s emphasis to hire locally when expanding its workforce Ketchikan workforce, he said. According to Ward, 97 percent of Vigor Alaska’s 161 employees at the end of 2013 were hired from Ketchikan. “What we expect (Vigor’s) going to do is to keep on doing what they do best,” Long said. “They’ve demonstrated a commitment to the environment; they’ve demonstrated a commitment to their workforce and to doing a good job attracting repeat customers. That’s been their history and their business model and their standard that they’ve used in previous acquisitions. That’s what they’ve said they’re going to do and that’s what we look forward to.” The remaining component to Seward’s Marine Industrial Center is the uplands, of which the city has more than it knows what to do with, according to Long. The uplands are ideal for bulk raw commodity storage, he said, and businesses will likely develop around what support the harbor users and Vigor need. Those “self-sorting” needs could include net mending, propeller repair, welding and fabrication shops, warehouse and refrigeration space or even forklift rental, Long surmised. He said in five years he hopes to be able to see the map of the industrial center’s future — ultimately a “thriving working waterfront” supporting business that “filters out through all facets of the economy that keep a town alive and thriving and a place where people want to be,” Long said. “That’s the kind of thing I’m looking for.” Elwood Brehmer can be reached at [email protected]

Alaska's road construction season is here

Alaska’s second season, that of road construction, is upon us. The Parks Highway will get a major facelift starting this year, with a dozen projects along the entirety of the Anchorage-Fairbanks link. Work already contracted for the northern half of the highway will total about $80 million in 2014 alone, Department of Transportation Northern Region spokeswoman Meadow Bailey said. Not coincidentally, the overall region road construction budget is about $240 million in finalized contracts for 60 projects in 20 communities, or about $80 million more than 2013, according to Bailey. “Almost all of the (Parks Highway) projects are safety improvements or upgrades to capacity — a lot of passing lanes,” she said. Heading south on the Parks, the first large project travelers will encounter is the construction of three passing lanes this year from milepost 272 to milepost 265 between Nenana and Healy. A larger second stage of that work will build seven more passing lanes between miles 296 and 197 and is anticipated to run through September 2015. Both stages of work will include upgrades to grading and embankments along the corridor and the work is expected to total $30 million. Drivers can expect delays of up to 50 minutes and pilot cars in these work zones, according to DOT. Installation of $13 million worth of rumble strips and permanent road striping between milepost 263 and milepost 252 — completion of holdover work from last year — will take up to four weeks and should be done by the end of August. The gamut of resurfacing, bridgework, adding and replacing culverts, and road widening will start as soon as weather permits between mileposts 252 and 239. Delays of up to 20 minutes and weight restrictions during bridgework can be expected in this stretch of work, which will also continue into 2015 and cost $32 million. In all, more than 100 culverts will be replaced, repaired or cleaned in the 13-mile stretch. At mile 194 south of Cantwell, three years of work on a railroad overpass and a new bridge across the Middle Fork of the Chulitna River will commence this spring. Again, traffic delays of 20 minutes can be expected. Bailey said an exact price to the bridgework was unavailable as a contract had not been awarded, but the project was appropriated $20 million in the current state capital budget. Back north in Fairbanks crews will be resurfacing two of the popular routes through the city. About three-quarters of Airport Way will be resurfaced at a cost of $5.4 million, Bailey said, with the remainder of the road being finished in 2015. The 4.5-mile Johansen Expressway will get its first new pavement since it was built 20 years ago. That project will cost DOT $9.2 million. A resurfacing and sidewalk rebuild on of the oldest streets in Fairbanks, South Cushman Street, is out to bid, according to Bailey. “(South Cushman) is a complex street because there’s not a lot of right-of-way to work in,” with businesses near the edge of the narrow corridor, she said. To the north of Fairbanks a $17 million, two-year reconstruction of Goldstream Road will commence this year. Elsewhere in the Northern Region, $7 million will be spent to resurface the first 19 miles of the Edgerton Highway towards Chitina. It is currently chip sealed and will get a layer of asphalt, Bailey said. A continuation of resurfacing and bridgework on the Glenn Highway in Glennallen will continue as well. By the end of the summer, Alaska should have 15 miles of new road. The pioneer-level Tanana Road will extend the end of the Elliott Highway to the south bank of the Yukon River across from Tanana and provide ice road access to the community. “It’s not often we get to build new roads in Alaska,” Bailey said. The Tanana Road is out to bid as well. With $6 million in the proposed fiscal 2015 capital budget, the Roads to Resources project will likely have been appropriated $16 million since fiscal 2013. Central Region Downtown Anchorage’s main corridor should be a lot smoother by the time the cold returns next fall. “The entire Fifth and Sixth avenues from L Street to Ingra (Street) is going to be getting a pavement uplift,” DOT Central Region spokeswoman Jill Reese said. Additionally, the Sixth Avenue and A Street intersection will be closed for a time, Reese said, however it is unclear as to when because contracts for the downtown work have not been finalized. Nighttime paving is set to begin in July and continue into October, with requisite concrete work done during the day, she said. It’s also unclear which end of the Fifth-Sixth corridor will be paved first. West Dowling Road new construction between C Street and Minnesota will resume and continue seasonally into 2016. This summer, the West Dowling-Raspberry Road intersection will be closed for six weeks, Reese said — exactly when is unknown. Long-term work on the Seward Highway in Anchorage is ongoing as DOT is working to secure right-of-ways in the Dowling Road area of South Anchorage, according to Reese. A revamp of the signal lights on the Tudor Road-Seward Highway overpass will impact traffic for a short time, she said. In all, DOT has 51 projects totaling $482 million planned for the region in 2014. Repaving and shoulder widening on Eagle River Road up to mile five will resume soon and go through August. Work on the first five-mile stretch of Eagle River Road will be a 2015 project. “All of these we get started as soon as we can and go as long as we can,” Reese said. A continuation of work from last year, sections of the Seward Highway from Ingram Creek at the base of Turnagain Pass to Canyon Creek — 19.5 miles of highway — will be resurfaced. DOT is also studying options to make the section of the Seward Highway near Indian along Turnagain Arm safer, according to Reese. Resurfacing started last year through Cooper Landing on the Sterling Highway from mile 45 to mile 58 will continue as well, she said. Miles 79 to 82.5 of the Sterling near the Moose River will be getting new pavement, too. At the end of the Sterling, the Homer Spit road will be repaved this summer, Reese said. Back on the Parks, a five-year, three-phase expansion project from Lucas Road in Wasilla to Big Lake Road is getting underway this spring. The 2014 phase of the project will extend the five-lane format one mile from Lucas Road to Church Road at a cost of $17 million, according to DOT. Reese said concerns about extended delays should be answered with travel restrictions being limited to an off-peak 8 p.m. to 5 a.m. timeframe with maximum delays of about 20 minutes. Construction crews and DOT are “doing all they can to make this as easy on people as possible,” she said. Resurfacing is tentatively scheduled for July through September on Parks Highway miles 123-146. Delays of up to an hour when traveling the entire 23-mile stretch should be expected, according to DOT. The work should also reduce future weight restrictions on the section of highway during spring thaw, the department reports. Southeast Region While dominated by water and the Alaska Marine Highway, a few sections of paved road are getting attention in Southeast this summer, but not as many as 2013. “Last year was a much heavier year for construction in Southeast,” region spokesman Jeremy Woodrow said. The biggest project will be wrapping up the $34 million Brotherhood Bridge replacement on Juneau’s Glacier Highway, Woodrow said. Also on the Glacier Highway, a roundabout at the intersection of the highway with Back Loop Road should be completed this year, he said. That work has an $8.1 million price tag. The end of work to light Egan Drive is also in DOT’s sights. “That’s a nice safety improvement,” Woodrow said. On the other side of Gastineau Channel from Juneau, the first six miles of the North Douglas Highway will be resurfaced at a cost of $5.7 million. In Ketchikan, holdover work to rehab and resurface the North Tongass Highway from Ward Cove to Refuge Cove will be ongoing. Gustavus will be the exception to the quiet construction summer in Southeast, according to Woodrow. “We’re repaving almost all of Gustavus,” he said. More than $35 million of work reconstructing Sawmill Creek and Halibut Point roads in Sitka should wrap up this year as well. Woodrow said 20-plus miles of work on the Haines Highway just out of town that DOT had originally hoped to start this season has been delayed because of challenges in environmental permitting.

Lawmakers briefed on Ambler, Juneau road projects

Legislators were brought up to speed on $900 million worth of work on two of the road proposals on the state’s ever-growing list of mega projects at a March 6 committee hearing. The Joint Transportation Committee heard from Alaska Industrial Development and Export Authority leadership on the Ambler Road project in Northwest Alaska and from the Department of Transportation and Public Facilities regarding the Juneau Access road. AIDEA Deputy Director Mark Davis told lawmakers that the authority took over work on the proposed corridor to the Ambler Mining District from DOT last June so the state’s infrastructure financing gurus could investigate options beyond traditional capital appropriation funding for the project. The road would provide access to four copper, zinc, lead and silver deposits that stretch for about 75 miles between the Brooks Range and the upper Kobuk River. Exploration of the deposits has so far been led by NovaCopper Inc., which owns the rights to the largest copper claim known as the Arctic deposit. NovaCopper has also teamed with NANA Regional Corp. on exploring the Bornite deposit, just south of the main Ambler claim belt. A February 2013 report from NovaCopper estimated the Bornite deposit holds roughly 2.4 billion pounds of copper. In July of last year the company issued a preliminary economic assessment of the Arctic deposit that estimated a total resource value of between $619 million and $1.4 billion. The final version of that report, released in September, projected mining and income tax payments to the state of $273.4 million over a 12-year mine life. “Without a road the mines cannot be developed,” Davis said. The Ambler Road would run west for approximately 200 miles from near milepost 135 of the Dalton Highway and give any Ambler-area mines that are developed rail access in Fairbanks.  There, AIDEA would likely partner with the Alaska Railroad to build a small ore terminal, Davis said. DOT took up the project in 2010 when it began reconnaissance studies on the corridor. Since then, the state has put $17.75 million towards the Ambler Road and Gov. Sean Parnell has asked for an additional $8.5 million in his proposed fiscal 2015 budget. Rough cost estimates have put the road in the $400 million range. Davis said AIDEA has value engineered DOT’s two-lane proposal down to a one-lane industrial road that should cost “significantly less,” he said. If AIDEA can secure private funding for the Ambler Road and avoid using public money for construction, its classification as an industrial road could allow restricted use and lower costs. One or more partners would be sought for all construction and maintenance costs, Davis said, similar to what AIDEA has done with the Red Dog mine road north of Kotzebue. “The rationale is to put some of the construction and design on the private sector,” he said. “They tend to be more innovative; they tend to be quicker; they tend to be less expensive than the government.” By starting the National Environmental Policy Act environmental impact statement process this year, environmental permitting could begin in 2016, with construction in 2019, he said. Davis said bonding the state’s portion of work — possibly up to $90 million — could mean no other state contributions would be needed beyond the NEPA process. AIDEA estimates it will need between $15 million and $21 million beyond what Parnell has proposed until permitting is complete. NovaCopper and AIDEA have a memorandum of understanding to keep each other updated on work, given the ties between the road and mine development, according to Davis. This year, AIDEA is continuing discussions about the subsistence, access and economic impacts of the road and mines with area villages, he said. Also, the authority will contract again with DOT and the University of Alaska on geotechnical and environmental impact study work. Years from now, if the road is built and all activity in the Ambler Mining District has wrapped up, Davis said there are multiple options that could provide increased public access on the road. Those decisions will be made during the NEPA process, he said. The first half of the 52-mile Pogo gold mine road near Delta will open to the public once the mine is closed, he said. Lois Epstein, engineer and Arctic program director for The Wilderness Society, testified before the Transportation Committee and raised concerns about how fast the state is moving on the project. “The administration has gotten ahead of itself on Ambler Road,” she said. Before the state puts any more money towards Ambler development, Epstein said there should be clear facts about the viability of the mine prospects and the support garnered from area villages. She questioned whether the state would be able to find private partners to finance enough of the road to justify the estimated $273.4 million return in taxes. NovaCopper’s July 2013 report justifies moving forward with a pre-feasibility study, the company has stated. Epstein said the villages of Bettles, Evansville, Alatna and Allakaket all recently passed resolutions stating positions against the proposed road. One of the biggest concerns area residents have is how the east-west road would impact caribou migration patterns, she said. The Red Dog mine road, which has been promoted as an example of responsible resource development, runs north-south and could affect herds differently, Epstein said. Rep. Craig Johnson, R-Anchorage, said the direct return on investment the project could have is secondary to the benefits of job creation in the very rural region and all but dismissed Epstein’s testimony. “I just hope that at some point we get to see the benefits of development testified to,” Johnson said. “I know we’re looking at specifics, but at some point I think we also need to look at the positive impacts that jobs, and creation of jobs and access to less expensive energy plays in this and we can’t just deal with a piece of dirt turned over and a caribou having a good road to walk on north and south instead of having to cross east and west.” In his testimony, AIDEA’s Davis said the possibility of ice roads used to deliver lower-cost fuel to area villages off of the Ambler Road exists if the road is built. Greta Schuerch, government relations coordinator for NANA, said the state’s partnership with the Native corporation on Red Dog stands as a successful model for Ambler, but that everyone still needs more information on the Ambler project before decisions are made. Juneau access road Extending a road almost, but not quite, to Skagway from Juneau was the second topic for the Transportation Committee. DOT Division of Program Development Director Jeff Ottesen said extending Juneau’s Glacier Highway 48 miles north to the Katzehin River, about three quarters of the way to Skagway, would save the state untold millions in the coming years. The savings would come from retiring one of the state’s mainline ferries without replacing it and the lower maintenance cost of a road versus a 400-foot ferry. “One thing about a road, is that most of that first investment is retained over decades and decades and decades,” Ottesen told the committee. “It doesn’t wear out; it’s not steel that corrodes; it’s not engines that wear down.” Over 50 years, building and maintaining a mainliner ferry costs upwards of $1.4 billion, even after money recovered from fares is factored in. A November cost analysis put the road “right at $500 million,” Ottesen said. The state put $4.6 million towards the project in the current fiscal year and Parnell has $55 million for it in his budget. Currently, DOT is working with federal agencies to complete a supplemental environmental impact statement, or EIS, needed after the 9th Circuit Court of Appeals ruled in 2011 that the state’s original document failed to consider the possibility of improving service with the existing ferries and terminals. The road would end at the Katzehin because the National Park Service deemed the area around White Pass to be a national historic resource and an area that can’t be impacted based Federal Highway Administration regulations. That means the “day boat” ferries on the verge of being built for running Lynn Canal would run up to 10 times per day between a ferry terminal at the end of the road, Haines and Skagway. DOT projects that activity would increase vehicle capacity in the corridor nearly 10-fold by 2020 — anticipated completion of the two-lane road — and demand by more than 18 times from 71 vehicles to more than 1,300 vehicles traveling the route per day. Additionally, travel time between Skagway and Juneau would be cut in half, from an average now of about 7.2 hours with wait-time, to about three hours. Gary Hogins, DOT’s lead on the project, said the traffic added to Juneau’s road system would be “insignificant.” Elwood Brehmer can be reached at [email protected]

Anchorage files suit against MARAD over port management

The Municipality of Anchorage is broadening the reach of litigation to include the federal government among the defendants in the ongoing port expansion drama. During a March 3 press conference, Anchorage Mayor Dan Sullivan discussed his administration’s decision to file a lawsuit Feb. 28 against the U.S. Maritime Administration, or MARAD, in the U.S. Court of Federal Claims. The U.S. Department of Transportation agency was in charge of managing the construction project at the city’s port when cost overruns and questions about construction and design techniques brought the critical infrastructure project started in 2003 to a halt in 2010. No significant work has been done on the port in nearly four years. The latest legal action by the municipality brings the total number of defendants involved in the port work to four in two cases. The municipality sued PND Engineers, CH2M Hill, owner of former port design consultant VECO Corp., and Integrated Concepts and Research Corp. on March 8, 2013, in state Superior Court. That case has since been moved, despite protest by municipal counsel, to federal Alaska District Court in Anchorage. The Court of Federal Claims in Washington, D.C., where the municipality has sued MARAD has jurisdiction over contract disputes with the federal government. The business relationship between the municipality and MARAD ended unceremoniously in 2012 when the agency was “kicked out” of the port project, Sullivan has said. The municipality now has oversight responsibility of the port expansion. “As we all know the management of (MARAD’s contract) was not handled competently and we’re seeking damages as a result of that,” he said. Damages in excess of $10,000, but ultimately to be determined by the court, are being sought on two counts of breach of contract and one count of “breach of the implied covenant of good faith and fair dealing,” according to the municipality complaint. MARAD signed memorandums of agreement with the municipality in 2003 and 2011 detailing its responsibilities at the port. MARAD also signed contracts in 2003 and 2008 with Integrated Concepts and Research Corp., the firm it hired as a management partner under the Small Business Administration’s 8(a) program, which has special provisions for Alaska Native corporations. ICRC was owned by Koniag Inc., the Alaska Native Regional corporation for Kodiak, at the time of the first contract, but was sold to a Virginia company prior to the 2008 contract. Improper application of the preferential 8(a) rule by MARAD in 2008 was one of several issues raised in a scathing Inspector General audit released in August 2013, reviewing the agency’s involvement in port projects in Guam, Hawaii and Anchorage. According to the complaint, MARAD agreed to pay ICRC $11.3 million in September 2012 as part of a negotiated contract adjustment agreement without the municipality’s knowledge. “At the same time MARAD was secretly negotiating a settlement with ICRC, MARAD was pretending to work with (the municipality) to reject the ICRC claim and to prepare a counterclaim with (the municipality’s) assistance,” the complaint alleges. The settlement released MARAD and ICRC from liability and recourse against each other regarding contract work at the Port of Anchorage, the municipality claims. Per the agreements between MARAD and the municipality, the federal agency took 3 percent of the $302 million appropriated for the project as fees for its work, amounting to just more than $9 million since 2003. On Feb. 25, the Anchorage Assembly approved CH2M Hill as a project manager for the port on an initial five-year, $30 million fee-for-service contract. CH2M Hill prepared the 2013 study that deemed PND Engineer’s patented Open Cell Sheet Pile design unsuitable for seismic and design-life criteria at the port. That study was cited extensively in the first lawsuit. PND has claimed from the outset that faulty sheet pile installation was to blame for the project’s challenges. Over the next few weeks, a project management plan will be drafted and Sullivan said he hopes to have a new design approved within a year. First, some of the projects expired permits must be re-acquired. “We’ve got this project back on track, but it’s important that any and all entities that were responsible for previous mismanagement or mishaps in construction are held accountable,” he said. The general statute of limitations on disputes in Federal Claims court is six years; Sullivan said the case falls within that time frame. He said the municipality is standing up for the people of the state that depend on the Port of Anchorage. Outside of Southeast, roughly 90 percent of all the goods that enter the state go through the Anchorage port. So far, the Anchorage Assembly has approved $1.75 million for legal proceedings dealing with the port project, he said. Overall, $439 million in combined funding has been appropriated to the project that started with an estimated cost of less than $300 million in 2003. Of that, $138.6 million was federal money appropriated through various channels over nine years. During his Feb. 18 report to the Legislature, the Anchorage mayor said it would probably need another $250 million to $300 million in addition to the roughly $130 million the municipality has set aside for work now. The money available now will last for some time, Sullivan said, as his plan has scaled back the scope of the project. A brand new $280 million “north berth” dock has been taken off the table and future work will focus on traditional, pile-supported structures to mainly replace what is at the port now, he has said several times. As the 50th anniversary of the 1964 earthquake approaches, port officials have said the aging structure that withstood that disaster likely wouldn’t fare so well if a similar quake were to happen now as corrosion and general age have taken their toll. Sullivan told state lawmakers that he thought that the likelihood of the project receiving federal funding similar to past levels going forward — $138.6 million over nine years — is “very slim,” he said. Because the Defense Department has deemed the Port of Anchorage is a strategic port, $60.4 million of the federal funds the construction project has received to date came from the department, which requires dredging to a mean depth of 45 feet at such ports. The port is currently dredged to about 35 feet at the dock face. That might make the project available for some Defense and federal grant dollars, but he added that he plans to meet with the Gov. Sean Parnell and officials with the Alaska Industrial Development and Export Authority and the Alaska Housing Finance Corp. in the coming months about alternative funding. He said the municipality will prepare its plans for next legislative session and the port would almost certainly be its largest single request to the state in 2015. “We need to really strategize on what are the best sources of money that may again include some additional local debt,” Sullivan said at his press conference. The city has contributed $80.3 million to port construction. Sullivan also may have hinted to the Legislature that action against MARAD was being planned. “We are not going to go quietly into that good night when it comes to legal options with MARAD,” he said at the time. Elwood Brehmer can be reached at [email protected]

Municipality to go after MARAD over port

The Municipality of Anchorage is broadening the reach of litigation to include the federal government among the defendants in the ongoing port expansion drama. An announcement Monday morning from municipal spokeswoman Lindsey Whitt stated Mayor Dan Sullivan would hold a press conference from City Hall at 11:30 a.m., March 3 to discuss his administration’s decision to file a lawsuit against the U.S. Maritime Administration, or MARAD. The U.S. Department of Transportation agency was in charge of managing the construction project at the city’s port when cost overruns and questions about construction and design techniques brought the critical infrastructure project started in 2003 to a halt in 2010. No significant work has been done on the port in nearly four years. In a Feb. 18 presentation to the Alaska Legislature’s Joint Transportation Committee, Sullivan referenced an August 2013 Inspector General’s audit of MARAD’s involvement in port projects in Guam and Hawaii as well as Anchorage. “Essentially, (the IG audit) said MARAD failed in every single aspect of their project management duties,” at Anchorage, he said. The municipality is currently seeking damages from project designer PND Engineers; CH2M Hill, owner of former port design consultant VECO Corp.; and Integrated Concepts and Research Corp., hired by MARAD to oversee the project for the agency. Sullivan told state lawmakers that he thought that the likelihood of the project receiving federal funding similar to past levels going forward — $138.6 million over nine years — is “very slim,” he said. Overall, $439 million in combined funding has been appropriated to the project that started with an estimated cost of less than $300 million in 2003. During his Feb. 18 report to the Legislature, the Anchorage mayor said it would probably need another $250 million to $300 million in addition to the roughly $130 million the municipality has set aside for work now. He also may have hinted that action against MARAD was being planned. “We are not going to go quietly into that good night when it comes to legal options with MARAD,” Sullivan said at the time. On Feb. 25 the Anchorage Assembly approved CH2M Hill as a project manager for the port on an initial five-year, $30 million fee-for-service contract. Elwood Brehmer can be reached at [email protected]

CH2M Hill gives detail to role of VECO in port expansion

A CH2M Hill spokesman issued a statement Feb. 18 in an effort to clarify confusion over the role of VECO Inc. in the Port of Anchorage expansion project. CH2M Hill purchased VECO Inc. in September 2007, and the Colorado-based engineering giant with nearly 3,000 employees in Alaska now has a contract pending with the Municipality of Anchorage to manage future construction at the stalled port project. Approval of the contract has twice been delayed by the Anchorage Assembly as members have expressed concern over a possible conflict of interest regarding the municipality’s ongoing lawsuit against CH2M Hill regarding consulting work VECO Inc. performed on the sheet pile design used at the port. The municipality is also suing PND Engineers and former project manager Integrated Concepts and Research Corp. Assembly members have agreed to take up CH2M Hill’s contract bid Feb. 25. The municipal Bidding Review Board met Jan. 23 and unanimously approved the contract proposal and found no conflict of interest in regards to the pending litigation. In a statement provided to the Journal, CH2M Hill spokesman John Corsi wrote: “VECO was one of several sub-consultants engaged by (Open Cell Sheet Pile designer) PND (Engineers) in 2006 to complement their design team. VECO’s scope of work was to provide technical support to project scheduling and estimating, review of soil test data and properties provided by others and to conduct a single seismic stability analysis of an early OCSP concept design. VECO completed their scope of work in March 2007 and had no other participation in the subsequent design changes and completion of final design by PND, the engineer of record. “VECO also had no role in the oversight of the pile driving and other construction.” As part of its consultant work, a report prepared by VECO dated March 15, 2007, determined that the sheet pile design proposed at the time met seismic stability criteria for the project. The initial construction management contract now pending before the Assembly at the port is for five years and up to $30 million, with extensions that could make it up to a nine-year, $54 million deal for CH2M Hill. If it isn’t approved, municipal officials have said the bidding would have to start over, something that could delay the process up to an additional six months. CH2M Hill was also commissioned by U.S. Army Corps of Engineers for the municipality to evaluate the suitability of the sheet pile design employed at the port after construction challenges halted the project in 2010. That work was completed in February 2013, according to Corsi. Further, the company was tasked in October 2012 to produce conceptual design alternatives for the Corps of Engineers and municipality, which were released in February 2013. Attempts made throughout 2013 to contact CH2M Hill Alaska representatives about the company’s layered involvement in the Port of Anchorage project were unsuccessful. CH2M Hill is coming forward now so its involvement, particularly as it relates to VECO’s work, is fully understood by the Assembly, Corsi said. The February 2013 suitability study prepared by CH2M Hill was cited numerous times in the complaint filed by the municipality March 8, 2013, against PND Engineers, former project manager Integrated Concepts and Research Corp. and CH2M Hill. At a special Feb. 7 Assembly meeting held to discuss the management contract, Mark Lasswell a senior vice president for CH2M Hill said the company planned to move Lon Elledge, the program manager for CH2M Hill’s work on a port reconstruction and expansion project at Gulfport, Miss. Lasswell said Elledge is “one of the select few we have, probably in the world, who is actually managing a project identical to (the Port of Anchorage).” He referred to Elledge as “unique” and “qualified” to lead the Anchorage project. The Port of Gulfport was damaged considerably during Hurricane Katrina in 2005. CH2M Hill’s contract for the Gulfport work, signed in 2008 for $3.03 million, has been amended in scope and schedule to total $35 million by 2015. A copy of Elledge’s resume submitted as part of the contract management bid proposal provided to the Journal by CH2M Hill states that he has overseen environmental permitting, design, construction, budget and scheduling among other tasks since he started on the roughly $570 million Gulfport project in 2009. It states that Elledge has 35 years of experience managing marine and general construction projects. A request to interview Elledge was denied until the Anchorage management contract is resolved. Mississippi state officials have raised concerns over some of CH2M Hill’s expenses claimed at Gulfport. Mississippi State Port Authority Commissioner Bobby Knesal said in an interview with the Journal that CH2M Hill is “doing a good job as far as managing and everything,” but that some of their fees have been “excessive.” An invoice from the company to the Port Authority for the four-week period from June 1, 2013, to June 28, 2013, listed travel, lodging, office and apartment rental, telephone, parking, and equipment charges totaling $14,690. After meeting with CH2M Hill officials, Knesal said they agreed to “cut back” on some of their expenses. “We were paying the lease for an apartment they were renting for people who flew in a couple times a month and I just thought that wasn’t appropriate,” he said. “They’ve been here long enough; they should have established their residency.” The average wage for 18 CH2M Hill managers and engineers listed on the invoice was $150.70 per hour. Knesal said the wages were not in line with local companies, as he said they should be. Elwood Brehmer can be reached at [email protected]

CH2M Hill selected as program manager for Anchorage port reconstruction

CH2M Hill has been selected by the Municipality of Anchorage to manage the design, engineering and reconstruction for the troubled Port of Anchorage expansion project, Anchorage Mayor Dan Sullivan announced Thursday. The company will take over management responsibility from MARAD, a federal agency that previously managed the project, and will help the municipality develop a Request For Proposals for design and engineering services, select a firm to provide the services, and then manage the construction, Sullivan said. “The program manager responsibility is to provide day-to-day oversight of contractors and subcontractors, and does not include development of a design or engineering,” Sullivan said. CH2M Hill will help select a firm for the port construction design, although it could also be a firm to do a design/build project, he said. Because the port is owned by the Municipality of Anchorage, municipal officials will retain overall responsibility for the port project, including legal issues, the mayor said. “The MARAD relationship has not ended, but the agency is not longer the program manager. The federal legislation that allowed MARAD to take on the project remains in effect, however, so any new federal money for the project would come through the agency,” Sullivan said. While MARAD had responsibility, major construction defects occurred on some of the work done through 2010, which will now have to be repaired. Some of the previous construction can be used, however, the mayor said. Sullivan said he hopes to get construction restarted by 2016 and that the rebuilding would likely take three to four years. Environmental permits will have to be acquired once again, he said. The $30 million contract is for five years with options for two extensions of two years, with $12 million for each extension. The contract must still be approved by the municipal assembly, which will take up the matter at its Jan. 14 meeting. Sullivan said the municipality has $130 million on hand for the project in remaining federal, state and port funds. The state has been asked to provide an additional $100 million next year but Sullivan said this was just a “placeholder” to keep the project in the minds of state legislators. The request will likely be modified when engineering and designs are completed, and construction costs estimates can be made. Sullivan said he hopes to keep the over cost of the reconstruction at $500 million or less.

ConocoPhillips building sells for $104 million

A team including Cook Inlet Region Inc. and Anchorage-based JL Properties Inc. has purchased the Downtown Anchorage ConocoPhillips Alaska office tower for $104 million, according to a brokerage firm involved in the deal. Also included in the deal was Washington Capital Management Inc., headquartered in Seattle. JL Properties announced the sale in a Dec. 16 release. “We are pleased to add this prominent property to our portfolio of commercial, retail and residential properties in Alaska. We are excited to partner with astute real estate investors such as Washington Capital and CIRI,” JL Properties Chairman and CEO Jonathan Rubini said in a formal statement. The building complex, at 700 G Street, was constructed in 1983 and is more than 677,000 square feet on 1.7 acres. The 22-story main tower is the tallest office building in the state and ConocoPhillips Alaska is the primary tenant. National brokerage firm Stan Johnson Co. represented the previous building owner in the transaction and reported the $104 million sale price in a Nov. 20 release. JL Properties real estate and investment portfolio is more than $2 billion, according to the company. CIRI is currently working on a new 110,000 square-foot, eight-story office building at the corner of Fireweed Lane and the Seward Highway in Midtown Anchorage. That project is expected to be completed in about a year, CIRI has said.   Elwood Brehmer can be reached at [email protected]

Sealaska land bill awaits congressional votes

The Sealaska land selection legislation was inching towards votes in the House and Senate, but now must wait for congressional action on pressing budget and health care issues. Sens. Lisa Murkowski and Mark Begich introduced the 2013 version of the Sealaska land bill, as it has come to be known, in February. If passed, the bill would transfer about 70,000 acres of federal land to the Southeast Native corporation under provisions of the Alaska Native Claims Settlement Act. Rep. Don Young also introduced mirroring legislation in the House. The land selections made by Sealaska are primarily tracts of timberland intended to support the corporation’s logging industry. When they were introduced, Sealaska Executive Vice President Rick Harris said the company and its subsidiaries spend nearly $60 million per year on timber operations that support up to 400 jobs. The selections include approximately 18,000 acres in the Tongass National Forest’s roadless areas. Murkowski said in an August release that the bill had made significant progress after it passed the Senate Energy and Natural Resources Committee. “It has taken six years, but we have taken the first major step to finally complete the Native land conveyance for Southeast Alaska’s 20,000 Native (Sealaska) shareholders,” Murkowski said. “Some 42 years after the passage of the Alaska Native Claims Settlement Act, there is now a good chance that the federal government will finish paying the debt we owe Natives after they settled their aboriginal land claims.” Murkowski is the ranking Republican on the Energy and Natural Resources Committee. Alaska’s congressional delegation has introduced various forms of the land bill in both houses since 2007. Young’s House version of the bill passed the House Natural Resources Committee in June. The House passed a Sealaska land bill last year that died in the Senate. Republican Energy Committee spokesman Robert Dillon said in May that he was optimistic the bill would make it to the Senate floor — its next step — for the first time this year. In an October email to the Journal, Dillon wrote that moving it forward might be a challenge now considering the issues facing Congress. “I don’t have an estimate on when the Sealaska bill might be brought up, but we continue to look for opportunities,” Dillon wrote. More than 100 changes have been made to the bill from its 2012 version, Harris said, including withdrawing 26,000 acres of selected tracts on Prince of Wales Island noted as areas of concern by fisheries and environmental conservation groups. Additional changes have been made to the bill since its introduction that increase easement rights on proposed Sealaska tracts for hunting and fishing. Elwood Brehmer can be reached at [email protected]  

Tongass access, management on tap at annual convention

Newly proposed timber management strategies should be a conversation driver at the Alaska Forest Association Convention Oct. 23 to 25 in Ketchikan. Forest Association Executive Director Owen Graham said much of what will be proposed will be interim solutions until a long-term combined state and federal forest management plan can be agreed to. That includes a plan put forth by the Southeast Conference community coalition. “The Southeast Conference has been working hard to develop an alternative management strategy that the (U.S.) Forest Service could adopt that would allow them to maintain all their fish and wildlife protections and at the same time increase the timber sale program,” Graham said. A Forest Service silviculture, or forest management, program director is scheduled to present options for how to best regenerate timber growth from harvested areas, Graham said. Managing harvestable areas for future timber production has become a priority for the Southeast timber industry as accessible old growth stands are harvested. Additional Forest Service officials will be at the meetings to give their yearly Alaska timber supply and upcoming federal sale reports if the federal government shutdown has been resolved. In the event that the shutdown is ongoing during the meetings, Graham said he was given the Forest Service’s reports and can provide their updates himself. “We’ve got an excellent relationship with the Forest Service and I know they’ll do everything they can to honor their commitments to us,” he said. Foresters with the state Division of Forestry will also be on hand to give their state land reports. Graham said the Forest Association is continuing to push a proposed land transfer between the state and federal governments of Tongass National Forest land. The state-initiated proposal is to turn up to 2 million acres of federal land into state forest to be managed as available timber land. The federal Roadless Rule, put in place in 2001 under President Bill Clinton, has limited the areas where financially viable logging can occur in Southeast’s 17 million-acre Tongass National Forest. The land transfer was one of the recommendations in the June 2012 report issued to Gov. Sean Parnell by the Alaska Timber Jobs Task Force. Alaska Forest Service officials are supportive of the land transfer as a way to provide the state’s timber industry with a long-term timber supply, Graham said. However, he said its something that may be several years away from getting done. “I just don’t see the land transfer happening with the current (presidential) administration,” Graham said. According to the Task Force report, the Forest Service offered 43 percent of the timber volume for harvest needed to meet its volume under contract sales objectives from 2001 to 2011. Since 2008, the Forest Service has been able to offer only 33 percent of the timber volume necessary to comply with federal management policy because of challenges imparted by the Roadless Rule, the report states. Other annual presentations on University of Alaska and state Mental Health Trust land timber sales will be made as well. The Mental Health Trust manages approximately 130,000 acres of state-owned commercial timber land for the Department of Natural Resources. According to the Trust officials, commercializing Southeast state lands near Petersburg, Ketchikan and Wrangell has been a top priority in recent years. Revenue from timber sale leases can account for up to half of the Trust’s total income in some years, according to the Trust Land Office website. In traditional Forest Association fashion, Graham said the member convention will end with a “red suspender party.” Donated items are auctioned off at the party to raise money for college scholarships offered to Forest Association members’ families. Graham said the auctioned items garner $20,000 to $30,000 for the scholarships most years.   Elwood Brehmer can be reached at [email protected]  

Official: More Fort Greely interceptors possible

FAIRBANKS (AP) — The number of interceptor missiles at Fort Greely could rise beyond the level announced earlier this year, depending on threats from other nations, the director of the Missile Defense Agency said. In March, Defense Secretary Chuck Hagel said the Obama administration had decided to increase the number of missiles at Fort Greely to 44 in response to actions by North Korea. But last week, the director of the Missile Defense Agency, Vice Admiral James Syring, told a U.S. Senate subcommittee that number could go higher as the department evaluates additional threats, the Fairbanks Daily News-Miner reported ( ). Fort Greely is near Delta Junction. "The 44 is important; it addresses what we are seeing from North Korea today," he said in response to a question from Sen. Lisa Murkowski, R-Alaska, who serves on the panel. "What you'll see is the department evaluate the need or the requirement to go beyond the 44 as we evaluate the threat from Iran and other nations like that." Syring also was questioned by Murkowski about progress toward the expansion at Fort Greely, including the restoration of Missile Field 1, which the administration mothballed in 2011, with the additional ground-based interceptor missiles to be installed by 2017. Syring said contracts for work could be released this summer. "The first step is for us to complete on schedule the Field 1 refurbishment and to get those silos ready for the GBIs we're going to buy," he said. "There would be growth possibilities beyond that if we decided to go beyond 44 missiles; 44 gives us a roughly 50 percent increase in terms of the defense of our homeland, against a ballistic missile attack." Murkowski reiterated her criticism of the decision to mothball Missile Field 1, calling it short-sighted. "My concern is that we not leave Greely at less than full capacity and capability," she said. Last week's hearing was related to the Missile Defense Agency's request for about $7.7 billion for the next fiscal year. The budget request includes $51 million to continue radar work at Clear Air Force Station, near Anderson, Syring said. Murkowski also asked Syring about an interceptor missile test failure earlier this month, the third straight such failure. "We understand what the problem is through ground testing," Syring said. "We're confident it's been completed and adequately addressed." Another flight test is planned in March.  

Parnell signs bill for residential housing at ANMC

(AP) — Gov. Sean Parnell on Thursday signed a bill that authorizes $35 million in bonds to build a residential housing unit on the Anchorage campus of the Alaska Native Medical Center. The housing facility will have 170 rooms and will have a pedestrian bridge to the hospital. The medical center currently has a 110-bed capacity. Parnell signed the bill in front of about 200 tribal health leaders at the Alaska Native Tribal Health Consortium office on the same campus. Also attending were two main sponsors of the legislation, state Sens. Pete Kelly, R-Fairbanks, and Kevin Meyer, R-Anchorage. "With 143,000 Alaskans already using this medical center, the great need for health-related housing is well established here," Parnell said. The bill authorizes financing, construction and equipping the residential center. Construction is scheduled to start in March Parnell said the new housing unit will allow families to stay closer together while getting care in Anchorage, and gives Alaska Natives and American Indians greater access to health services. Besides family members of people receiving care at the hospital, patients like a high-risk pregnant woman, an elder recovering from a stroke or an accident victim in long-term recovery were examples given of those who would use the facility. Another important aspect of the building will be a kitchen, where families can prepare traditional foods, which Parnell said would aid in a patient's recovery. "With the new housing facility that SB 88 authorizes, people can support their families in a homelike environment, and this will be a place where cultures and traditions are not only accepted, but they are honored," said Valerie Davidson, a senior director of the Alaska Native Tribal Health Consortium. "They can even cook their own traditional food when they're tired of eating Anchorage food," she said. She noted the importance of housing from her own experience. When she was 4, she was burned over 20 percent of body. While she spent nearly four months at the Alaska Native Medical Center, her mother could only stay for two weeks because other families needed the space.

State awaits key decision from producers on large LNG export project

June 20, 2013 State officials are hoping to hear any day, perhaps as soon as June 20, from companies working on a large natural gas project that they are ready to go to the next stage of preliminary engineering on the project. Earlier this year in his State of the State address, Gov. Sean Parnell laid out a series of milestones for the project including a commitment to undertake a preliminary Front End Engineering and Design, or “pre-FEED” in the first half of 2013. The deadline for that, June 30, is fast approaching. Companies involved are producers BP, ConocoPhillips, ExxonMobil and independent pipeline company TransCanada Corp. So far the companies have met other milestones, such as reaching agreement on a scope of the project, and key design parameters of the gas treatment plant, the pipeline and a large liquefied natural gas plant at an as-yet undesignated Southcentral Alaska port. Moving to “pre-FEED” is significant because it would be the first substantial financial commitment to the latest version of the project, and would require an expenditure of several hundred million dollars. Meanwhile, the project manager for the industry-led group, Steve Butt of ExxonMobil, told a state legislative committee in a briefing on May 30 that part of the gas project is actually under construction. These are the facilities at Point Thomson, a large gas field 60 miles east of Prudhoe Bay, now being built. While this will initially produce a liquid gas condensate with the produced gas injected back underground the long-term plan is for it to be part of the larger gas project. Butt said 1,200 people were working last winter on the Point Thomson project. Work is continuing through this summer, with about 550 people working, be said. ExxonMobil, which is leading that project, achieved a 90 percent Alaska-hire rate through the 35 contractors employed last winter, Butt said. State Sen. Click Bishop, R-Fairbanks, one of the legislators being briefed May 30, said the local-hire rate was impressive. “A 90 percent local hire on the project of that size is almost unbelievable,” Bishop said. Butt said a lot of progress is also being made on planning for the larger gas project. The industry group is now spending about $3 million per month in its work with more than 300 people employed from the companies and contractors. The overall project would involve an investment of between $45 billion and $65 billion, and would ship between 16 million tons and 18 million tons of LNG annually. It would be operating after 2022, if it is built. Expenditures in the last year and a half, since work began on the latest pipeline/LNG version of the project, have totaled about $35 million. This is on top of about $700 million spent by the companies on a previous project to build an all-land pipeline to Alberta so that Alaska gas would be shipped to the Lower 48 states. The fast buildup of shale gas at low costs have taken away the Lower 48 market for now, however, so the companies shifted to an LNG export project partly at the urging of Parnell. Most of the LNG would be shipped to Asia. Project progress In the latest effort the companies have pooled information gathered by the Denali pipeline project, which was pursued by BP and ConocoPhillips but then ended, and the Alaska Pipeline Project, which was being pursued by TransCanada Corp. and then joined by ExxonMobil. Technically, the project that is continuing is still the Alaska Pipeline Project with its new plan for a pipeline to an LNG project, with BP and ConocoPhillips in support of that. Those companies have not yet formally joined the APP. One impediment to that, which will eventually be resolved, is that TransCanada is committed to special terms under the state’s Alaska Gasline Inducement Act, or AGIA, under which the state is also paying up to $500 million to support the companies’ work. AGIA requires that the companies agree to certain terms on tariff structures and financing to which the three producers have objected. ExxonMobil, BP and ConocoPhillips have said they cannot agree to AGIA’s terms and that the agreements will have to change if the project were to eventually move forward. Parnell has said he is open to changes in AGIA once the companies are all in agreement to move forward with the project. Meanwhile, Butt said May 30 that in achievements so far the companies have completed an integrated design for the gas treatment plant, pipeline and LNG plant, have finished needed hydraulic modeling, and have worked out the heat and materials balancing. “This assures us that the project can work, from a technical standpoint,” Butt said. Each of the major components is a mega-project on its own, with the Gas Treatment Plant requiring about 270,000 tons of steel and five sealifts of equipment and materials to the North Slope, he said. Alaskans have seen previous efforts on large pipeline projects, all failing to advance for various reasons, but what is different now is that all parties are working together, including the state. Coordination has also been established with the Prudhoe Bay field operators, which comprise the same three producers but in a different organization. This is important because the gas treatment plant is being integrated with the existing Prudhoe field gas processing facilities, Butt said. There is agreement that 42-inch pipe will be used on the main pipeline. “This is a standard size of carbon steel pipe that can be sourced from a lot of steel mills in different places. It really opens up the market,” in terms of procurement, Butt said. Previous efforts have included plans to use larger pipe sizes including more than 50 inches that would have drawn from a very limited pool of suppliers. The LNG plant in Southcentral Alaska would have three LNG process trains, or production modules, taking an average of 2.5 billion cubic feet a day of gas although the pipeline is being designed to transport up to 3.5 billion cubic feet daily so as to allow for increased seasonal production. Gas plants are more efficient in cold weather, Butt said, so production might be ramped up in winter, which also coincides with periods of peak demand from customers. “Our core challenge is to reduce the uncertainties and risks for the project,” Butt told the legislators May 30. He didn’t mention it, but the uncertainties include the state’s fiscal terms on gas production, on taxes and administration terms of the royalty. Tax terms Now that legislation has passed adjusting the state oil production tax, in Senate Bill 21, state officials have said they are ready to discuss special terms on gas production taxes for the big gas project. Talks on those are believed to be underway now. The oil tax change is important because it will help ensure that oil production will continue and that the infrastructure of the North Slope will be maintained, and paid for by oil production, for the gas project. Meanwhile, there are still other uncertainties for the gas project itself, Butt told legislators. A big one is a stretch of several hundred miles of discontinuous permafrost soils extending through Interior Alaska. Continuous permafrost, or permanently frozen soil, that exists on the North Slope creates a stable soils environment for a buried gas pipeline, which will be cold. However, discontinuous permafrost that freezes and thaws, which exists in the Interior, creates challenges is that it may cause the pipeline to move. The soils south of the Brooks Range, “are a little messy,” Butt said. A buried 42-inch pipeline is heavy, so it is believed that this problem can be handled, but it will still be an area of special focus for state and federal regulators. Last spring, in a previous legislative briefing by the pipeline and LNG group, the possibility that parts of the pipeline might have to be built above ground, similar to the Trans-Alaska Pipeline System, was mentioned. “TransCanada (a member of the industry consortium) has a lot of experience in building Arctic pipelines and has been in discussions for three years with government agencies about this,” Butt said. Permitting itself is a challenge, particularly with a special federal permit now required for Arctic pipelines. “We’re just starting to talk with the regulators about this,” Butt said. Above-ground construction at selected points is also a concern for the state-owned Alaska Gasline Development Corp. in its work on a separate 36-inch pipeline that is a contingency in case the industry-led project fails to advance. Frank Richards, a senior AGDC manager, told the legislators May 30 that seismic hazards from potential earthquakes at the Denali Fault in the Alaska Range and the Castle Mountain fault in Southcentral Alaska, in the Matanuska-Susitna Borough, may require special construction above-ground so as to allow the pipeline to move in the case of an earthquake. The Trans-Alaska Pipeline System survived an earthquake in 2002 on the Denali Fault because of a special design incorporated by engineers when TAPS was built in the mid-1970s, Richards told the committee. The design allowed the oil pipeline to move laterally without breaking in an earthquake. Similar design concepts may have to be built into AGDC’s plan, Richards said. Butt didn’t mention seismic hazards but the large 42-inch pipeline would also cross the Denali Fault and, if it comes to Mat-Su-Anchorage region instead of Valdez, the Castle Mountain fault as well.  

Alaska Housing Finance Corp adds $10K energy rebate

June 20, 2013 On July 1, Alaska Housing Finance Corp., or AHFC, will add a sixth, $10,000 level to its Home Energy Rebate Program for new home construction, the state finance authority announced. Currently, the highest level a new home can achieve for energy efficiency is the 5 Star Plus rating, which awards homeowners up to a $7,500 rebate for investments made to reduce home energy usage. The 5 Star Plus rebate will drop to $7,000 on July 1, as well. “Previously, we had a system that rated homes on a hundred-point scale, zero to 100, and the top 92 to 100 points was our 5 Star Plus,” AHFC energy program spokesman Jimmy Ord said. “So we took the upper echelon of 5 Star Plus homes and went from 95 to 100 points is now 6 Star.” At a June 12 presentation to the public policy forum Commonwealth North, AHFC Executive Director and CEO Dan Fauske said rebates have been awarded for more than 1,900 5 Star-rated homes since the program’s inception in 2008. Ord added that “not many” of the homes enrolled in the Home Energy Rebate would have met the 6 Star requirements. The additional level to the new home rebate was done to further incentivize homebuilders and buyers to invest right away in energy efficiency, according to Ord. It was also done in conjunction with a rebuild of the computer program used to calculate a home’s energy rating, he said. This was done in an effort to incorporate renewable energy generated for home use into a home’s net energy use. Ord explained a scenario in which a home may not meet 6 Star efficiency standards, but solar panels or a small wind turbine offsets the energy loss and qualifies the home for the maximum rebate. “Builders have a product to sell,” Ord said. “It takes an informed consumer to ask for an energy efficient product and a lot of times people buy things on the up front cost as opposed to the operating cost — same thing with homes.” When the $51.5 million appropriated in the recent state capital budget to AHFC’s Home Energy Rebate and Weatherization programs is added to the total, the state has contributed roughly $500 million to AHFC for energy efficiency, Fauske said. Homeowners applying for the existing Home Energy Rebate have received an average rebate of $6,389 Fauske said. They can apply for up to a $10,000 rebate. The final rebate amount is determined by the home’s energy rating after the efficiency improvements are implemented. Fauske said changes made to existing homes have saved homeowners an average of $1,464 per year over the life of the program. He also cited a University of Alaska Institute of Social and Economic Research study that found 12 permanent jobs were generated for every $1 million the Legislature has appropriated to the rebate program. “(The rebate) program, I will defend it whenever someone wants to sit down and have a debate with me. I’ve never seen a better use of public money. Not only are you reducing the use of energy, you’re improving the quality of the home stock,” Fauske said. AHFC’s energy rebate program is unique to Alaska, Fauske said. “We stand alone in the country on this program. We have advised other states; we’ve advised the federal government. We’ve been copied, we’ve been emulated and we share the data,” he said. The change to the new construction rebate coincides with the implementation of an April decision by the AHFC board of directors to increase the Building Energy Efficiency Standards, or BEES, for homes, according to the corporation’s release. BEES sets energy standards for thermal resistance, air leakage, moisture protection and ventilation. Ord said all homes financed by AHFC are audited and must meet BEES. Elwood Brehmer can be reached at [email protected]  


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