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Inventory of State and Federal Passenger and Freight Rail Programs (2017)

Chapter: Port MacKenzie Rail Extension

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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Suggested Citation:"Port MacKenzie Rail Extension." National Academies of Sciences, Engineering, and Medicine. 2017. Inventory of State and Federal Passenger and Freight Rail Programs. Washington, DC: The National Academies Press. doi: 10.17226/24788.
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Page 42

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PO PO RT MAC RT M KENZIE R ACK AIL EXTE ENZ   NSION IE RAIL EXTENS 40 ION  

  41    The Matanuska‐Susitna Borough (MSB) and the Alaska Railroad Corporation (ARRC), a state  owned railroad, jointly undertook the construction and proposed operation of a new thirty‐ two‐mile rail line to connect the MSB’s Port MacKenzie to ARRC’s rail system. The rail extension  provides a shorter, more efficient rail route to connect Port MacKenzie to Houston, Alaska. This  rail line will support the economic development of fossil fuels and natural resources for export.  New LNG and chemical facilities near the tide flats are envisioned but require rail connection to  Alaska’s interior in order to be viable. The shorter rail route is expected to divert trucks from  the more circuitous highway, and will reduce congestion and highway maintenance associated  with heavy trucks.  The inland area has grown rapidly in recent years due the energy  developments, and needs access to rail to export bulk commodities to new markets.  In  December 2011, after the National Environmental Policy Act review, the Surface Transportation  Board authorized ARRC to begin building the new rail line. Construction was divided into eight  segments which begin in 2012.  The project includes an Environmental Impact Statement (EIS) as required by the National  Environmental Policy Act (NEPA). The EIS and associated studies identified and analyzed  feasible alignment alternatives, preliminary engineering design, and alternatives. Construction  costs were estimated and the project’s economic, financial and engineering feasibility was  confirmed. Right‐of‐way acquisition has been completed for all 32 miles of the project.    Project Budget Project Background Port MacKenzie, located in Upper Cook Inlet, within MSB, has a deep draft dock (60 feet at low  tide) that requires no dredging and can serve the world’s largest ships (Panamax and Cape Class  vessels). The port’s 8,940 upland acres and 1,300 tide‐land acres provide sufficient lay down  area to accommodate bulk storage, supporting transport activities and processing facilities, as  well as rail and terminal facilities for efficient train loading and unloading. Port MacKenzie  specializes in moving heavy industrial and bulk cargo. The rail expansion will complement the  port’s existing capabilities and support economic development at the port and inland. The rail  expansion project also includes a 14 acre rail loading facility near Houston, AK, a fuel tank farm,  and a mile long loop track to provide a safe and efficient rail staging area supporting potential  petrochemical facilities and up to five LNG export operations. The port, America’s  northernmost deep draft dock, is scheduled to be connected to the rail in 2017. The loop track,  when completed, will be the longest industrial loop in the state of Alaska and will support  offloading cargo from railcars directly to ships.  The port also has expansion plans to connect  PROJECT BUDGET State Legislative Appropriation $184,000,000 General Obligation Bonds $30,000,000 Funding Gap $125,000,000 Total Project Cost  $339,000,000 CASE STUDY 4 ‐ Port Mackenzie Alaska Rail Extension  Partners: State of Alaska, Alaska Railroad Corp., STB 

42  the deep draft dock with the existing Bulkhead Barge dock. The deep draft dock will be  accessed by two new trestles and a second conveyor system to allow for efficient loading of  import and export commodities simultaneously. Port MacKenzie specializes in moving heavy  industrial and bulk materials through Alaska and beyond. The connection of new rail  infrastructure to existing port terminal assets will make Port MacKenzie ideal for large industrial  projects and value‐added export processing facilities.  MSB is the lead agency in the project development and construction. Upon completion the rail  line will be turned over to ARRC.  Construction was divided up into six phases which begin in  2012 which includes eight rail segments. The first three segments (1, 3 and 6) were begun in  March 2013 and awarded to three separate contractors. The project requires substantial cross  drainage, 110 culverts will be installed along the entire route.   Segments 2, 4 and 5 were begun  in summer of 2013. Segments 7 and 8 were planned to begin in 2014 and 2015.  The Matanuska‐Susitna Borough was allotted $116 million for funding for the rail extension  project, in the form of state legislative appropriations. Further state appropriations of $126  million was requested in order to complete the project. A $30 million general obligation was  approved for the project in November 2012.  Stages 1, 3, 4 and 6 of the project have been funded. Nearly $60 million is reserved for  segments 2 and 5, while $66.5 million will be kept for segments 7 and 8. The funding was  expected to be approved in the 2013 legislative session but due to the downturn in the energy  market the state has a $3.5 billion deficit and is unable to provide additional funding.  Project Partners  The Matanuska‐Susitna Borough (MSB) – lead agency  Alaska Railroad Corporation (ARRC) – operating entity  Surface Transportation Board (STB) – Manager of environmental review Project Objectives MSB needs a critical rail connection between the port and Alaska’s interior in order to realize  economic development opportunities associated with the deep water port near Point  MacKenzie. This tidewater facility will complement the Port of Anchorage which cannot handle  the projected cargo associated with this project. Planning studies completed over the past  thirty years have resulted in a barge dock in place today with a proposed expansion trestle,  which expand the region’s moorage facilities for deep draft vessels. Interior Alaska produces  wood chips and coal for export and relies on deep draft vessels to move these products to  market.  Petroleum products and an envisioned LNG terminal could also be established at Point  MacKenzie, which would create jobs and boost the local economy. To be viable, a loop rail track  and storage facilities would be required. The objective of this rail extension is to provide  industrial access to increase economic development, regional economic competitiveness, and  job creation. The line would result in mode conversion from truck to rail which would result in  improved air quality and reduced highway maintenance in the state. Today the port is accessed  only by highway and marine vessels. 

  43    Project Achievements A rail track has been two thirds completed but lacks funding to complete the project. State‐of‐ the‐art drainage systems have been designed and installed to preserve the environment and  the asset life of the railroad.  Environmentally sensitive facility design and construction  methods have been used. Separate contractors were hired and assigned to separate  construction segments, to allow maximum progress during the short construction season. Voter  support was secured to pass a ballot initiative for state funding. This project has been identified  and prioritized in the Alaska State Rail Plan.  Project Results When complete, the new rail route connecting Port MacKenzie and Houston will boost mining  operations in the region by cutting the distance between the port and the interior region by  141 miles (227 km), which will reduce transportation costs. Low cost competitive transportation  access is expected to result in a surge in mining activity along the rail line extension, especially  in locations that were underserved by inadequate transportation access.  The port will also be able to increase bulk exports upon completion of the new railway line. The  rail loop of the port will be able to accommodate 110 rail cars upon completion, which will lead  to a significant increase in cargo offloading efficiency.  The port is currently only accessible by a 40‐mile (64.4 km) road that starts from the highway at  Wasilla. After the rail line is built it will have multimodal access to expand the current economic  catchment area. The entire route of the railway extension will include 110 cross drainage  culverts and eight bridges, as well as crossings for trail users and wildlife.  When complete, the project will include the longest rail car loop in Alaska, the extension will  offer highly‐efficient offloading of bulk resources from train to ship. For interior shippers, the  new rail extension shortens the distance to tidewater. Increased rail freight activity, and  development stimulated by the rail extension, will benefit rail belt communities through  increased employment, new rail industries will contribute to the state and community tax base,  and the project will bolster the overall economic health of the region. With room for staging  and assembling, Port MacKenzie can become an ideal site for large construction projects, such  as oilfield modules or pipeline assembly.    Lessons Learned This project was undertaken when the price of oil was high and projected to remain so. Oil related  revenues for mining and drilling activities bolstered the state’s financial position and funded the state’s  appropriations to fund the expansion.  MSB, a regional government authority along with the Alaska  Railroad, a state owned company, undertook the project. At the time, no revenue stream was set up to  monetize a public private partnership funding alternative because it was not anticipated that the price  of oil and the state’s economy would soften.  Upon project completion, the plan was to turn the rail  extension over to ARRC for operation.  When the economic downturn struck, the state ran into a  revenue shortfall and was no longer able to fund the Port MacKenzie rail extension. AARC did not have  financing available to complete the final third of the project. MSB and AARC are now exploring 

44  alternative funding sources to complete the project. Based on the project plan, the rail was the last part  of the project to be completed. Given a revenue shortfall, no rail is in place and no secondary operations  can be undertaken to generate revenue until the track is in place. Every year of funding delay increased  the project cost by approximately 5 percent per year, according to the port director.  Innovative Funding Measures This is an innovative project because MSB has taken the leadership, with a state owned railroad to  develop a 32 mile segment of new railroad. The funding has come exclusively from the state through  appropriations and a general obligation bond.  In response to the economic downturn and the state budget deficit, MSB and the ARRC are looking into  TIFIA loans that the state would execute; however, the state is not in a position to undertake this option.  A second option includes private financing. The possibility of foreign direct investment has been  examined.   What was innovative in the project? MSB’s and ARRC’s partnership was innovative. MSB, a local unit of government, taking the lead in the  project was also unique. A vision to extend a rail corridor, beyond port boundaries, to the Alaska Interior  to boost shipping volumes and economic development was innovative given the economic conditions at  the time.  What measures were used to assess performance? No rail performance measures were identified. The project has not been completed.  How does this case study demonstrate freight funding programs in this state? The state does not have a rail funding program. To date single projects have been addressed via  legislation. The most recent state rail plan recommends a state funding program to address the myriad  of rail projects identified. State rail plan objectives identify future rail extensions/new railroads are  needed to support resource development. The State Rail Plan Vision, “The state of Alaska will use rail to  foster growth and trade, build prosperity, connect and support communities, and provide safe and  efficient freight and passenger services coordinated with other transportation modes, regionally and  internationally,” supports the MSB rail development vision.  The MSB rail project meets each of the  eight state rail plan goals:   Goal 1: Promote Economic Development in Alaska  Goal 2: Enhance Safety  Goal 3: Encourage Partnership and Collaboration  Goal 4: Support Improvements to System Preservation, Efficiency, and Capacity  Goal 5: Improve Connectivity of the Transportation System  Goal 6: Enhance Quality of Life and Environmental Sustainability  Goal 7: Address Community Issues that Arise from Urban Development around Railroads  Goal 8: Establish a Recurring Public Capital Investment Program

  45    Project Status and Timeline  In June 2007, MSB and ARRC signed a Memorandum of Agreement to pursue  environmental work, engineering and alternative analysis in support of the Surface  Transportation Board (STB)‐led environmental document for a Port MacKenzie rail line  extension.    Following an extensive environmental review process, the STB issued a record of  decision in 2011 recommending the Mac East Variant (Mac Central) and Houston South  route.   2011‐2013: Construction bids awarded to Bristol Construction (Segments 1 and 4),  Quality Asphalt Paving (Segment 3), and Granite Construction (Segment 6).   June 4, 2013: Ground‐breaking ceremony.    2014: Segments 1, 3 and 6 substantially complete.   2015: Segments 4 and 5 substantially complete.   Late 2019: Anticipated completion, pending funding.        

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TRB's National Cooperative Rail Research Program (NCRRP) Web Only Document 4: Inventory of State and Federal Passenger and Freight Rail Programs explores rail funding trends and objectives, a program taxonomy, an inventory of federal and state programs, and case studies to highlight rail funding innovation in practice.

The Matrix of Rail Programs includes information about 379 state and federal, passenger and freight rail programs. The matrix allows users to compare programs by state or by defining characteristics, including funding types, project types, applicant eligibility, funding objectives, and primary program elements.

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