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Alaska Aerospace to return $22 million of unspent state grant

The Alaska Aerospace Corp. agreed to return $22 million of an unspent grant to the state, the Alaska Gasline Development Corp. said it would cut spending by $90 million over the next 16 months, and the state transportation department said canceling two major highway projects in Anchorage and Juneau could mean federal penalties.

Those are among the key issues in status reports released Friday following the Dec. 24 order by Gov. Bill Walker to temporarily halt "discretionary expenditures" on five major projects. A report on the Susitna hydroelectric project is expected next week.

The governor's office said Walker is reviewing the projects to decide what steps to take next in light of the state's multibillion-dollar deficit.

Alaska Aerospace

The Alaska Aerospace Corp. said it will return $22 million of a $25 million grant to the state, but it wants to be able to spend the $2.3 million that remains to continue efforts to attract new business to the Kodiak rocket range.

The state-owned company had announced plans last fall to use $21 million of the grant as an incentive for a private firm that would agree to launch at least three rockets from Kodiak by 2020. In December, the company said it had awarded a letter of intent to Lockheed Martin, but that plan is on hold. Craig Campbell, president of Alaska Aerospace, wrote to budget director Pat Pitney that the company "wants to be part of the solution, not part of the problem."

Campbell asked that $2.3 million of the grant be allowed to be spent to promote expansion efforts. He said the "remaining $22 million is available for the state for whatever purpose the administration may wish to use it."

The 2012 grant had been approved by the Legislature to build a new launchpad in partnership with Lockheed Martin, but that effort faltered.

Alaska Stand-Alone Pipeline

Alaska Gasline Development Corp. president Dan Fauske wrote that his organization has reduced its spending plans by $90 million over the next 15 months to $61 million. It has spent $176 million so far, with $244 million remaining of funds approved by the Legislature.

It also has a secondary role in the proposed Alaska LNG project, the larger pipeline plan in which the state is a partner with the oil companies, but is the chief entity involved in promoting a smaller multibillion-dollar pipeline to Southcentral to provide gas to Alaskans. Under the new plan, the in-state pipeline would be completed in 2024, three years later than previously scheduled.

"The net result of this revised schedule will be an ASAP project that has retained a core team capable of moving the project forward," Fauske wrote of the smaller pipeline.

That would include a complete environmental study, the transfer of 100 miles of federal right of way and field programs that will also be available to the larger pipeline focused on LNG exports. "This will allow ASAP to remain as the state's viable alternative should the Alaska LNG project not proceed" into the engineering and design phase, he said.

Knik Arm Crossing, Juneau road

The Department of Transportation and Public Facilities is telling Walker that the proposed Knik Arm bridge and the Juneau road have "advanced to the point where there is no legal possibility of stopping or even suspending one or both projects without penalty."

Even delaying the projects is likely to trigger federal penalties, Commissioner Pat Kemp wrote, and there's a real risk that that entire amount might have to be repaid if the projects are canceled.

"Both of these projects are long-standing goals of the state, as exemplified by repeated legislative appropriations and the progress accomplished to date under previous administrations," Kemp said.

Kemp argued that each of the projects would pay for itself, something that critics of each projects have strenuously disputed. Each project has been underway for years, with each facing lengthy financial or permitting hurdles.

The Knik Arm Crossing would provide an additional route between the Matanuska-Susitna Borough and Anchorage and open new land close to the state's population center to development.

The Juneau Access Project would extend the Juneau road system 50 miles to a new ferry terminal, shortening ferry trips from the capital to the Southeast communities of Haines and Skagway.

The state has spent $72.9 million of federal money on the Kink Arm Crossing on pre-construction work such design, permitting, right of way acquisition and utility relocation. For the Juneau road, $25.7 million in federal funds have been spent.

Ambler road study

The Alaska Industrial Development and Export Authority said it has $9.7 million left of the $26.26 million appropriated to study the Ambler road project in northern Alaska. NovaCopper, the private company that wants to see the road built, told investors in October "that substantial doubt exists as to our ability to continue as a going concern."

The agency said it would need the $9.7 million and $6.8 million more to complete an environmental impact statement. It could stop the work and allow the Legislature to spend $16.5 million on something else.

"This approach appears the least costly, but risks making all the work done to date a wasted effort," AIDEA said in a document submitted to Walker. If the state doesn't proceed, the it would have a "negative effect" on future partnerships with private industry.

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