Like ND, Alaska struggles with infrastructure decisions, oil prices

Bill_Walker_inauguration_speech

With a new governor, oil prices diving and a $3.5 billion budget deficit, Alaska is struggling with the fate of several public works “mega projects” major contractors have spent years developing. In December, Gov. Bill Walker issued an executive order that ended new work and spending commitments on six of the state’s energy and transportation developments meant to revolutionize Alaska’s economy and generate thousands upon thousands of construction jobs over the next 20 years. 

Because companies like HDR Inc, URS Corp. Dowl HKM and MWH Global have all had roles in projects—going back 20 years in some cases—Associated General Contractors of Alaska met with Walker in early February to “request a seat at the table,” as fiscal decisions on public works projects are made in the capitol, says John MacKinnon, president, AGC Alaska.

“None of these projects have turned dirt, just paper,” MacKinnon says.  “But the feasibility and permitting processes are important and sometimes intense.  The Susitna Dam needs another $500 million to $600 million just to get through the design and permitting stages, and we represent companies that do that work too.”

Walker’s executive order covers the Ambler Industrial Access Road, Juneau Access Road, Susitna-Watana Dam, Kodiak Launch Complex, Knik Arm Crossing and the Alaska Stand-Alone Pipeline Project. Together, this group is meant to provide access to and promote the development of Alaska’s natural resources, especially oil and gas and metals. “They all have further economic benefits than just the construction jobs,” MacKinnon says. “Alaska is a vast state, but the city of Washington, D.C. has more roads than we do.”

Jomo Stewart, project manager, Fairbanks Economic Development Association, said the dam would ensure power hungry interior Alaska “with affordable energy for a century.” The Ambler Mining Road concept provides access to an almost untapped reservoir of zinc, copper and gold, and the Juneau Access road connects the city for the first time with the North American intercontinental highway system. ASAP would help monetize Alaska’s stranded natural gas resources and further alleviate interior Alaska’s heavy dependence on oil for its electricity and heat.

 Stewart, however, said he “understood” the governor’s wish to review spending priorities in the state. “When there’s money being spent on new projects, but our Parks Highway is at half-time maintenance, we think that’s a problem.”

MacKinnon has a different perspective. “They’re not going to take a lot of money out of the bank,” Mackinnon says. “With the Ambler Mining Road were using the same model we used 20 years ago to finance the Red Dog [mine]. It was paid for by the mine. For the dam, we can go to the bond market and that financing will ultimately be covered by the rate payers. We can pay ourselves back.”

Alaska’s contractors have heavily anticipated these “mega projects” and are energized for work to begin, but funds already approved for ongoing projects will provide work while the price of oil freezes the mega projects, says Rodney Hesson, Associated Building Trades Council, Juneau. MacKinnon agrees, saying there is a $2 billion backlog of projects—with funding on the books—but the risk is real. “Sometimes our contractors have spent millions of dollars on these projects…they want to see them get built. They don’t want to see them get held up by politics or some legal technicality.”

Along with MacKinnon who says it would be “foolish” to stop work on these projects, several members of the state legislature have criticized the governor’s actions. Also, outgoing Alaska Department of Transportation commissioner Pat Kemp was asked to vacate his position early when he defended them. “Governor Walker had asked Kemp to stay on until the end of January.

After Kemp sent the memo in defense of continuing some very costly projects–even after Governor Walker had made clear that we need to put the brakes on new spending in light of our dire fiscal situation–Kemp was thanked for his service and asked to leave before the end of the month,” says Grace Jang, spokesperson for Walker.

Because contractors are stakeholders in public works, AGC Alaska says, it ultimately wants a presence in mega project development process. “There’s a lot of talent and expertise in this industry that can provide better guidance than bureaucracy,” MacKinnon says.

Ambler Mining Road—

The 200 mile road would give any Ambler-area mines that are developed rail access in Fairbanks.  

Contractor: Dowl HKM

Developer: Alaska Industrial Development and Export Authority

Cost: $400 million  

Knik Arm Bridge:

Originally conceived in 1923, the Knik Arm Crossing got serious in 2004, when FHWA submitted a Notice of Intent for Environmental Impact Statement (EIS) to the Federal Register. The bridge connects Anchorage to prospective coal and mineral resources in the West Susitna basin

Contractor:  HDR Inc., URS Corp.

Developer: Knik Arm Bridge and Toll Authority

Cost: $782 million.

Juneau Access Road

Juneau, Alaska’s capital city with a population of over 31,000 residents is the largest community on the North American continent not connected to the continental highway system. This project would change that.

Developer: Alaska Department of Transportation

Contractor: HDR Inc.

Cost: $574 million

Alaska Stand Alone Pipeline

 ASAP is a 727-mile long, 36-inch-diameter natural gas pipeline from Prudhoe Bay to a connection with the existing ENSTAR pipeline system in the Matanuska-Susitna Borough.

Contractor: Doyon Associated

Developer: Alaska Gas Development Corp.

Cost: $7.62 billion

Kodiak Launch Complex:

The state-owned spaceport in Kodiak was damaged by a rocket explosion in August. Alaska Aerospace says it plans to rebuild its main launch pad to support larger rockets, at a cost of $6 million to $9 million.

Susitna Watana Hydroelectric Generating Station:

This 735-foot-high dam would cost about $5.2 billion and supply about half of the electrical needs of Fairbanks, Anchorage and Wasilla. If built it would be the second tallest dam in the United States.

Contractor: MWH Global

Developer: Alaska Energy Authority

Cost: $ 5.2 billion

 

 

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