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Vol. 13, No. 26 Week of June 29, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Road work needed in advance of gas line

State pegs $2 billion in surface, bridge, facilities needs along pipeline route, routes for pipe, supplies for construction

Kristen Nelson

Petroleum News

Having two competing gas pipeline projects going to the Federal Energy Regulatory Commission isn’t a concern for the Alaska Department of Transportation and Public Facilities.

What concerns the department is potential completion on the ground between gas pipeline construction and work on the state transportation infrastructure — roads, bridges and other facilities — needed to support pipeline construction.

Given proposed pipeline schedules, the department believes it has about six years to complete its own work.

And that work is substantial.

While the price tag for infrastructure work doesn’t compete with the estimated $20-$30 billion gas pipeline, it weighs in at a hefty $2 billion, DOT&PF Deputy Commissioner Frank Richards told legislators June 13 in Fairbanks. His presentation was part of the Legislature’s hearings on the TransCanada Alaska license application under the Alaska Gasline Inducement Act.

Concern over cost

Legislators were more concerned about who was going to pay for this $2 billion in work and how it would affect ongoing statewide infrastructure work than about scheduling it around pipeline construction.

Much of the proposed work would qualify for federal highway funds, Richards said, but federal highway funds are declining and there are competing needs already in the statewide transportation improvement program listings, so the state will have to find alternative funding.

Richards said the state’s existing federal highway program is about $350 million a year, an amount expected to drop off. The identified $2 billion in work to prepare for a gas pipeline, spread out over six years, is about on a par with that existing federal program, he said, so it’s work that the contracting community should be able to handle.

It’s the source of funds that is at issue, he said.

“Should the gas line fund the effort? Under previous FERC rulings, they said that the highway agency could not back charge the gas line for use or deterioration of the highway assets, unless you were able to charge all users,” Richards said, referring to a FERC decision in the 1980s, which found pipeline traffic to be part of highway use and said pipelines cannot be penalized or treated differently.

Rep. Anna Fairclough, R-Eagle River, questioned charging highway use against the gas pipeline, a charge which would appear as part of the tariff. “I believe that that’s counterproductive to the discussions we’ve been having about exploration and opening up the North Slope basin,” she said.

There has been considerable discussion about a low tariff encouraging explorers to look for gas.

More earth moving

This work will be harder on roads than the trans-Alaska oil pipeline, Richards said.

Because the gas pipeline will be buried, there will be more earthmoving. Because the pipe will be thicker, one and a quarter inches thick vs. the one-half-inch pipe used for the oil pipeline, the loads are going to be heavier. There will also be large modules for the compressor stations, he said.

Richards said the department also believes there will be more points of entry and possibly more air traffic.

“And we also know that the condition of our pavements along the existing highway systems are nearing the end of their useful life, so we will likely have deteriorating pavement conditions,” he said.

While the department has detailed information on the condition of Alaska’s roads and bridges, it doesn’t yet have specifics on how the pipeline will be built.

Richards said the department talked to the producers during the Murkowski administration and was told they planned to pre-weld and move 80-foot sections of pipe, reducing the number of field welds. With a single 80-foot segment of pipe per truck and some 750 miles of pipeline in Alaska, “this would equate to almost 50,000 truckloads of pipe being transferred over our roads,” and with the weight of the pipe those trips “... are going to significantly impact the condition of the highway system.”

Avoid construction conflicts

“Why are we talking to you now about infrastructure development?” Richards asked legislators.

Because the department believes it will take six construction seasons, “starting today,” to complete necessary infrastructure work before pipeline construction begins. “That’s a very aggressive timeline,” he said.

The department needs time to develop projects and get them through the design and permitting phases so it can get bids out.

“So in reality we’re behind,” he said.

With escalating prices there will be a cost advantage to doing the work sooner rather than later, he said, and offered one example: Asphalt has gone from $375 a ton at the beginning of the year to an average of $620 a ton in the state in early June.

While there won’t be enough federal funds to do all the work, using state funds shortens the timetable, Richards said, because the federal process required when federal funds are used is lengthy — a sequential process taking some seven years as opposed to the state’s parallel process which can cut two to three years off the time. And federal standards for bridges wouldn’t allow the state to build or improve bridges to handle the heavy loads expected with gas pipeline construction because the extra capacity is above and beyond the federal standard, he said.

Richards also said the infrastructure work will be a great training opportunity for workforce development for the gas pipeline. “It will be similar type work, heavy civil work, with operators, mechanics, surveyors, engineers — all the trades necessary for a successful gas pipeline.”

$1 billion needed on Dalton

Half of the $2 billion in identified projects, $1 billion, is for 36 projects along 415 miles of the Dalton Highway, with work planned to start for approved projects in July. The $1 billion comes out at about $167 million a year for six years, with an initial funding request of $100 million in general funds.

Richards said much of this work was identified in the long-range transportation plan published in the spring, which included $12 billion in projects. “With our heavy reliance on federal highway funds, and declining highway funds now, it just meant that these projects were being pushed farther and farther and farther downstream.”

The Dalton Highway was turned over to the state after construction of the trans-Alaska oil pipeline, and while the state has been spending some federal highway dollars on it, “there’s been significantly little money spent on that road over the last 30 years and it is in need of improvements,” Richards said.

There is also a need for new materials sites along the Dalton, as those used for oil pipeline construction and over the intervening years have been played out, he said.

Other areas needing work include the Elliott Highway (73-mile Fairbanks to Dalton Highway segment), $100 million; the Richardson Highway (95-mile segment from Fairbanks to Delta Junction), $300 million; and the Alaska Highway (200 miles from Delta Junction to the Canadian border), $600 million.

Dalton work first

The Dalton Highway work is first on the department’s list because of big bridge crossings, some $75 million in total, Richards said. “That work can be out this winter, bid and under construction by this time next year and we’ll be able to put folks to work,” he said.

Rep. Mike Doogan, D-Anchorage, questioned why the department would want to work first on the Dalton Highway, rather than on the other highways that “Alaskans are going to be driving on.”

“We don’t know right now whether this work that’s done in aid of the pipeline is actually going to have a pipeline at the end of it, so why is it that we’ve decided to only start work on the road work that we really only need if there’s a pipeline and not on the parts of the highway that Alaskans are going to get some benefit out of, no matter what happens to the pipeline?”

Richards said from his perspective Alaskans benefitted because Alaskans working for the trucking industry “drive the freight and goods north to the North Slope,” so work on that road benefits Alaskans now as well as being needed for pipeline construction.

Lots of handwringing

Rep. John Coghill Jr., R-North Pole, said the Fairbanks community is “intensely interested” in the Dalton Highway, because that industrial corridor “is responsible for north of 80 percent of our income,” but acknowledged that other highways and bridges in the state are also big issues. He said he expects to see “a lot of decisions, a lot of handwringing in front of the finance committees on how to get the best bang to the best place first.”

Rep. Les Gara, D-Anchorage, said he wondered “how much of the tax revenue that we’re taking in, we’re giving back in terms of road construction projects.”

He asked if Dalton Highway funding normally came from the general fund or if industry contributes.

Richards said general fund expenditures for the Dalton Highway “have to date covered mostly maintenance and operations of the highway,” with just some $9 million over the last three years for heavy maintenance. Improvements on the highway over the last eight to 10 years have been with federal highway dollars, which precludes the state “from then putting up a toll specifically on the Dalton.”

Gara asked if the state was expected to pay for “significant road upgrades just to transport the pipe. Are those expected to be at state cost with no reimbursement?”

Richards said it would be up to the Legislature whether to use general funds or other sources.

Sen. Charlie Huggins, R-Wasilla, who was chairing the hearing, said legislators “would prefer not to be surprised by the requirements that go into infrastructure,” and asked Richards to provide information “in as timely a fashion as you can.”

Huggins said that included information on infrastructure needs on the other side of the border. He said he was concerned that without Shakwak funds from Congress going to the Yukon, Alaska might end up investing in infrastructure in Canada, as well as in Alaska, to move a gas pipeline project forward.



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Shakwak: U.S. funding for Yukon roadwork

Alaska Department of Transportation and Public Facilities Deputy Commissioner Frank Richards told legislators June 13 in Fairbanks that Shakwak funds are expected to be cut in the next Congressional highway appropriation.

This affects work on the Yukon portion of the Alaska Highway, because since the late 1970s the U.S. government has provided funding for highway upgrades, with Canada providing right of way and maintenance.

Shakwak funds came up in Richards’ presentation on transportation-related gas pipeline issues, as the Alaska Highway is how gas pipeline materials would get to Alaska overland, including any that might come in at Haines and then go overland for either the Canadian or Alaska sections of a highway gas pipeline.

The Alaska Highway, connecting Alaska with the Lower 48, runs through the Yukon. It is also the road connection, via the Haines Road, between tidewater in Southeast Alaska and the rest of the state. Combined with the state ferry system, it provides the road link between Juneau and the rest of Alaska.

North of Haines Junction, 85 percent of the traffic volume on the Yukon section of the Alaska Highway is of U.S. origin, Yukon Highways and Public Works says on its Web site (www.hpw.gov.yk.ca/trans/engineering/shakwak.html).

WWII military-constructed road

The Alaska Highway was built during World War II for overland military access to Alaska and “has been under reconstruction since the day it was built,” the Yukon department said, with civilian contractors following behind the U.S. military. Responsibility for the road passed to Canada after WWII, but the U.S. was still interested in the Haines Road and the north end of the Alaska Highway.

Canada did considerable work on the Alaska Highway starting in the south, but by the 1970s the Yukon section north of the Haines junction had received little attention. In 1977, following 22 years of discussions, the U.S. and Canada signed the Shakwak Agreement, named for a valley, the Shakwak Trench, which runs through much of the area.

The U.S. provided the money for upgrading the 325 northernmost miles of the Alaska Highway in Canada (50 miles in northwestern British Columbia, the rest in the Yukon) and Canada provided right of way and maintenance. Yukon is responsible for managing the site work.

Work on the portion of the Haines Road that is in Canada and 134 miles of the Alaska Highway between Haines Junction and the Canada-U.S. border north of Beaver Creek has been completed; contracts are under way covering 36 miles.

Yukon funding 60% Shakwak

Alaska DOT&PF officials met with representatives of the Yukon Ministry of Transport in May and Yukon’s ability to improve its highways in advance of pipeline construction was discussed, he said. Richards said the discussions are ongoing, and he will be back in the Yukon later in the summer.

He told legislators some 60 percent of Yukon’s capital program for highway work comes from Shakwak funding. The next reauthorization of the federal highway bill is due out in 2009, he said, and “there is great anticipation that that Shakwak funding will not be there, so that would mean that that will significantly impact the Yukon government and their ability to address the highway needs.”

—Kristen Nelson