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Despite shrinking funds, Alaska legislators make push for investment in Arctic port

Pat Forgey
Rep. Bob Herron and Sen. Lesil McGuire at the Arctic Circle conference in Iceland in 2013. Loren Holmes photo

Arctic development opportunities are opening at a time when Alaska is running out of money, but legislators are trying to find new ways to get investment to fill the gap. 

Sen. Lesil McGuire, R-Anchorage, said it is becoming clear that the state couldn't do it all and that there was a crunch coming.

"I could see the writing on the wall in 2009, there was going to be more money in infrastructure needs than we were going to be able to give out," she said. And despite Alaska making the U.S. an Arctic nation, it's unlikely there will be much help from the federal government. 

Polar-class icebreakers are being built around the Arctic, even by China, but the state's congressional delegation hasn't been able to get a new U.S. icebreaker built. "We have not been able to get the attention of the federal government, they just do not think like an Arctic nation," McGuire said. 

Now McGuire and Rep. Bob Herron, D-Bethel, are trying a new tack with a combination of state funding and private investment. Herron and McGuire also co-chair the Alaska Arctic Policy Commission. On Monday, McGuire introduced Senate legislation to create a state Arctic infrastructure fund, and Herron is planning Arctic port legislation in the House, with both co-sponsoring companion legislation. 

Alaska needs to get involved in the Arctic before others do, Herron said. "The Russians don't actually have much Arctic infrastructure, but they have more than we do," he said. 

Ports aren't the only thing Alaska needs, but a northern deep-water port will be key, he said. At the same time, there also needs to be an enclosed place in the Arctic that can accommodate a C-130 during the winter, he said. "They've got to go inside. They have to be inside a hangar in those conditions," Herron said.

McGuire and Herron say that bringing in private investors can help, even if the state has to play a role. 

"I've met with Guggenheim Partners, Carlyle Group, Citibank Energy," McGuire said. "There's nearly $100 billion in development planned, but it may not come to Alaska."

What McGuire wants to do is create a new Arctic infrastructure fund to be managed by the successful Alaska Industrial Development and Export Authority. It would be modeled after a similar fund that helps provide utility infrastructure. Such a fund would probably need to start with $1-2 billion, she said. 

McGuire said she knows that she'll have some challenges in convincing other legislators in times of tight money in making such a hefty investment.

"Many people go back into history, bringing up grain silos, seafood plants, and other (Alaska megaprojects) -- and rightfully so," McGuire said.  Her proposal is structured so that any investments made by the fund would have to get through vetting, including providing no more than one-third of the total cost of a project. That would mean that other private investors would have to vet projects and invest their own money, which would be at risk as well. 

In the Legislature, that's known as having "skin in the game," and that's how they want to meet real needs while avoiding "hare-brained ideas," she said. 

She said she'd like to see the fund capitalized with $1 billion, which would then use its earnings to provide regular funding. Local banks such as Wells Fargo and Northrim are supportive, because that could amplify their lending ability as well.

The bill defines the Arctic to include not just areas above the Arctic Circle, but includes the Bering Sea and the Aleutian Islands as well. 

"The Bering Sea is the key to the Arctic," Herron said, so it made sense to include the area in the bill. 

Port Clarence is probably the best location for a deep-water port, Herron said, but how it would be built has yet to be determined. That port is about 70 miles northwest of Nome. "Port Clarence is truly our only deep-water refuge, and it makes sense for a lot of reasons," Herron said. 

It's also close to an old radio navigation station with a runway, which would help reduce costs, he said.  "That's probably the most realistic option."

Contact Pat Forgey at pat(at)alaskadispatch.com