Port Mac Rail—Transportation Infrastructure

(This column ran in the Alaska Dispatch on Feb. 24, 2016)

I’m sure columnist Charles Wohlforth felt a genuine lump in his throat as he pedaled for miles on the Port MacKenzie Rail embankment, worried about the sinking Alaska economy and casting blame on an unfinished rail project in his Feb.1 column. On his bike seat, overlooking an arm of Cook Inlet, he retreated to the safety of income taxes as a solution for our fallen oil prices and state deficit, rather than to what needs to be done: diversifying the economy beyond oil. Resource development is going to return hundreds of millions annually to the state of Alaska. The quicker we are to develop the natural resources, the quicker we generate revenue.

We share his earnest concern for our state’s future. But our views diverge there. Where Wohlforth saw a railroad ending in forest, consuming dollars, we see a rail embankment 75 percent complete, awaiting steel wheels on iron rail, the most efficient and affordable transportation for bulk materials since the Industrial Revolution.

We see investment in transportation infrastructure—a fundamental requirement for resource development and economic growth—just as the building of the Parks Highway was an investment in the ‘70s. It connected Southcentral Alaska with Fairbanks and brought economic opportunity to towns and businesses along the corridor. Port MacKenzie Rail will shorten the trip of a 100-rail-car train between tidewater and the mineral wealth of the Interior.

Each Alaska port has its valuable role to play in Alaska’s economy. Port Mackenzie—with rail—will be the least expensive path for exporting natural resources to tidewater. Here’s why:

• When finished, Port Mac Rail is 32 rail miles closer to water from the Interior than the port of Anchorage, and 140.7 rail miles closer than the port of Seward. The dollars saved per ton-mile can be the tipping point to development for projects with narrow profit margins such as mineral development. Saving a million dollars per shipload can determine whether a company exports at all.

• It has 14 square miles of staging grounds. There’re no constraints on space at Port MacKenzie. The laydown area for large projects is massive.

• A 100-rail-car loop will provide the longest industrial loop in the State with efficient handling of bulk materials. Trains will offload materials and circle a mile around for the trip north. Trains do not have to be broken apart.

• It connects to a port with deep waters, 60 feet at low tide, that accommodate the largest ocean-going vessels in the world. Bigger ships mean lower export costs for bulk materials.

• It avoids costly and unsafe congestion of road crossings on the mainline. 

Longtime Alaska prospectors like Ed and Ann Ellis know the importance of cheaper transportation. Their company, Diamond Gold Corporation, just put Port Mac Rail in their operating plan with the Alaska Department of Natural Resources. For 19 years, they’ve been developing a gold-silver-copper deposit and gems in Yenlo Hills, 45 miles northwest of Willow. Ed Ellis plans to export super sacks of sand-like concentrate of precious metals to a smelter in Asia. Port Mac Rail’s role in Ellis’ profit margin is “huge,” he said. Exporting by truck costs three times as much. Will it pan out? We don’t know yet, but we do know that transportation is at the heart of success for this company and for larger ones. 

Columnist Wohlforth ignored how critical rail is to mineral development. In fact he made fun of rail, calling it a “white elephant.” If the builders of the Transcontinental Railroad had shared that opinion, the West would not have been opened up until long after the Civil War. Wohlforth is the author of several books, so it’s strange that he saw no opportunity in transportation infrastructure when he wrote: “In 1915, the Alaska Railroad itself was expected to open vast new mineral and agricultural development, which never happened.”

In his column, Wohlforth forgot about Fairbanks, a town built on mining and the railroad. He forgot about Fort Knox Gold Mine, which could not have happened at low gold prices if it weren’t built close to rail. The Interior has produced more than 18 million ounces of gold. Pogo Mine, alone, has yielded more than three million ounces of gold. Fort Knox has paid some $2 billion to the Fairbanks’ economy over 19 years. In 2014 alone, Kinross Gold, the owner of Fort Knox, paid $17.1 million in state taxes and fees. 

Both those companies—Kinross at Fort Knox and Pogo’s Sumitomo Metal—have written letters of support for Port MacKenzie Rail in previous years. Fort Knox spends some $5 million on transportation costs annually. Reducing the costs of importing materials, they say, will help them be more competitive and give better opportunities for expansion and longevity. 

Right now, there’s exciting news on two large mineral occurrences near Fairbanks, a promising copper, molybdenum, gold accumulation at Shorty Creek, some 70 miles northwest of Fairbanks. Recent drilling results cause UAF Geological Engineering Professor Paul Metz to think that this single mine could yield $385 million per year to the State in taxes, royalties, and fees because it's potentially a high grade, large deposit. There’s also a large gold occurrence near Fort Knox Gold Mine, and a gold deposit, Money Knob, near Fairbanks.

Port MacKenzie Rail would help those projects increase profit margins. The mines would need to haul in by rail hundreds of millions of dollars in freight. The low grade gold needs cheap transportation for operating materials. The copper mine would haul out copper concentrates, first by truck, then by rail to Port MacKenzie, where the sand-like material would be loaded onto large ships for smelting and refining overseas.

Mining does take years to get off the ground, but so does the Alaska LNG Pipeline. Both are worthy investments critically linked to rail.

In addition to mining, Port Mac Rail provides infrastructure for these large projects:

• Moving Cook Inlet gas to Fairbanks via rail. The Alaska Railroad recently became the first railroad in the nation allowed to transport LNG. Salix, Inc. is vying to be AIDEA’s pick for an LNG plant with expansion capability of up to 400,000 gallons of liquefied natural gas per day. If chosen, the company could connect to Port Mac Rail at Ayrshire Road. 

• Providing construction support to the Alaska LNG Project. Port Mac Rail would save the project $100 million over other ports by staging and transporting pipe north by rail through the closer Port MacKenzie. 

• Hauling low-sulfur diesel to Fairbanks by Central Alaska Energy, a company leasing property with completed pad, seeking funding for construction of a tank farm at Port MacKenzie

• Moving supplies to support continued petroleum activity at Prudhoe Bay

• Hauling limestone from Globe Creek’s 1.6 billion ton deposit near Livengood, as agriculture lime and for mines such as Red Dog or the proposed Donlin Creek Mine and ultimately cement exports

• Exporting liquefied natural gas from Port MacKenzie to Japan. The natural resources development company, REI, is doing due diligence on a $1 billion liquefaction facility and power plant at Port MacKenzie. The Japanese company would export Cook Inlet gas to Japan. REI Vice President Mary Ann Pease calls Port MacKenzie “the best port in Upper Cook Inlet for LNG exports to Japan in a timely manner.” REI is still committed to a 2020 timeframe for exports to begin.

The next year or more is going to be challenging. But now is not the time to let our entrepreneurial muscle atrophy as Wohlforth suggests. The returns on resource development and on infrastructure like Port MacKenzie Rail will be far more than the original investment. Let’s get to it.

Vern Halter is Mayor of the Matanuska-Susitna Borough and a dog musher who took first in the 1,000-mile Yukon Quest International Sled Dog Race in 1990 from Fairbanks to Whitehorse, Yukon.

This 2010 video on Port Mac Rail is still pertinent today.

Unless we do something radical to alter our dependence on one pipeline, one oilfield, I think we are looking at some pretty serious difficulties in the future. … Without this, we're toast. —Tim Bradner, natural resources reporter/editor

"The message is this, there are times when it’s very important for the State to invest in infrastructure. I think those times are when the economy is really weak and or when the economy is really uncertain." —Rick Mystrom, former Mayor of Anchorage

His column with same message ran today also.