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Killing some Alaska megaprojects may prove costly

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published December 21, 2014

Known for big pursuits and outsized dreams, Alaska might have to slash some of its long-pending megaprojects now that crashing oil prices threaten to gut the budget.

But state officials involved in planning two of the state's big transportation initiatives -- nationally scorned as a road to nowhere and a bridge to nowhere -- say savings may not be easy to come by if the projects are cut.

In fact, they say the state might have to repay tens of millions of dollars to the federal government if it wants to kick the Juneau Access Road and the Knik Arm Crossing to the curb.

That possibility is just one reason the state should think carefully before launching megaprojects, said Lois Epstein, an engineer and Arctic program director with The Wilderness Society. The state spends tens of millions pursuing such projects, but struggles to find the hundreds of millions needed to actually build them.

"We need to look at needs first and wants later," said Epstein, author of "Easy to Start, Impossible to Finish," a report on some of the state's megaprojects.

A spokesman for the Federal Highway Administration said if it turned out the state needed to repay the federal funds, it's likely the money could be used for other transportation efforts in Alaska.

But what will actually happen is unknown.

"Until the (Federal Highway Administration) has a chance to know specifically what the Alaska (Department of Transportation) proposes, it is unclear what sort of reimbursement, if any, would be needed," said Doug Hecox, spokesman for the Federal Highway Administration.

So far, no action has been taken to change the course of the projects. But critics of the Knik Arm Crossing recently cheered Gov. Bill Walker's decision to remove funding for the project in his stripped-down capital budget proposal. Money for the proposed Juneau road was also not in his budget.

Walker is reviewing all the state's megaprojects as he seeks to close an estimated $3.5 billion budget hole, said his spokeswoman, Grace Jang. He may choose to go forward with some of them if they provide long-term value for the state, but that decision will be made only after a thorough analysis.

Ambler road moving forward

Another big transportation project Walker has removed from his budget has survived only on state funding. That's the 200-mile Ambler road that would string together mining prospects across the northern Alaska tundra. The road is estimated by the state to cost between $190 million and $300 million.

Walker removed $8 million for that effort set aside in the capital budget proposed by his predecessor, Gov. Sean Parnell.

The state has spent about $22 million on that project, which currently has about $4 million in uncommitted funding, said Karsten Rodvik, spokesman for Alaska Industrial Development and Export Authority.

The initiative -- with costs to be repaid by tolls from users -- is moving ahead with efforts needed to prepare an environmental impact statement, he said. "We have not been told to stop," he said. "We have funding through the end of June this fiscal year."

If that project is killed, it won't face the thorny questions of whether the federal government must be repaid or not.

The road is proposed as a public-private partnership, but opponents say the state will end up bearing all or almost all the costs, with one troubling sign being that the state's potential partner, NovaCopper, has expressed doubts about its survival.

The costs will also surely be higher than expected, in part because more than 150 waterways need to be crossed using either bridges or culverts, said Jill Yordy, clean water and mining program director for the Northern Alaska Environmental Center.

"I think the state will end up being on the hook for a lot more than it's bargaining for," Yordy said.

State to owe for Juneau and Knik projects?

As for the estimated $574 million Juneau Access Road that would link Alaska's capital city to Skagway, it's possible the state might have to repay about $28 million in federal funds that have been spent on the project, said Jeremy Woodrow, a spokesman for the state Department of Transportation and Public Facilities.

"If the state put the brakes on the project right now, the state could owe money to the federal government," Woodrow said.

But he added it's uncertain what would happen, in part because no request has been made to shut down the proposed 50-mile road. "We are dealing in hypotheticals," he said.

The state has spent $8 million of its own money, and another $48 million in state funds has been appropriated to the project by the Legislature.

As for the estimated $900 million Knik Arm Crossing that would connect north Anchorage with the Matanuska-Susitna Borough, shutting down that project might also cost the state.

"There's a reimbursement to the feds if we do that," said Judy Dougherty, director for the crossing. "We've expended $70 million to $75 million in (federal) funds so far, so there's an issue that if you politically decide to shut down the project, you have to pay back the feds."

The state has also spent about $11 million on the project. The effort has about $15 million in state funding currently, as well as some federal money, said state DOT spokeswoman Shannon McCarthy.

Hecox, with the Federal Highway Administration, said it's unlikely any repaid funds would be pulled from Alaska and given to transportation projects in other states, though it's possible.

"We work closely with each state to ensure the federal highway funds they are given can stay in-state," he said.

Epstein, with the Wilderness Society, said Alaska would benefit even if the state had to repay the money, but could use it for other transportation initiatives in Alaska. The state's "sexy" megaprojects have spent money that could have gone to more critical issues, like replacing and upgrading bridges in Alaska, she said.

"At a time of limited federal funding, we need to spend it on our most important needs," she said.