New Alaska rail line just ends in a forest after consuming $184 million

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An overlook above Port MacKenzie commands a 360 degree view of Point MacKenzie, Cook Inlet and Anchorage a few miles away. Photographed Sunday, Jan. 31, 2016.

POINT MACKENZIE — On Sunday I rode my mountain bike to where Alaska's spending party died. An immense gravel embankment for a future rail line stops here in the woods with no money left to finish it.

Alaskans have spent $184 million on the Point MacKenzie Rail Extension Project but it is $120 million short of completion. To give a sense of scale, the income tax Gov. Bill Walker has proposed to help balance the budget would raise $200 million.

The situation demonstrates what was wrong with not paying taxes all these years. If projects like this had been coming out of Alaskans' paychecks, they wouldn't exist.

The rail spur was supposed to connect the little-used Port MacKenzie -- just across Knik Arm from the Port of Anchorage -- to the main Alaska Railroad line near Houston, a distance of 32 miles.

About five miles of gravel embankment plus an immense train yard area start at the water. On the other end, from the railroad's main line, an embankment runs about 14 miles south around Big Lake. Seven miles of woods and fields separate the two ends.

From a public-access point on Point MacKenzie Road, we rode mountain bikes with studded tires a short distance to where the embankment towers above the swamps and black spruce. A 16-foot diameter tunnel allows a four-wheeler trail to pass through.

The project includes many bridges and tunnels to give mushers access through the barrier, which looks from below like a levee. At one point the gravel prism towers about 70 feet high. The level top is 40 feet across, wide enough for a railroad track with a lane for maintenance vehicles (although there is no track there yet, except at the switching area near Houston). It can't be used as a road, however, because the bridges are narrow rail trestles.

They've done a first-class job. The riding was easy. Snowmachines have been using the line, too, as well as moose. In the sunshine, the views are spectacular. Weirdly so, actually. I've spent lots of time on Point MacKenzie. For the first time, I was high enough to see the landscape, as if following a treeless ridge.

A steel bridge crosses a creek and trail at the north end of the segment. Then the line stops at the trees.

The project began with the dreams of Matanuska-Susitna Borough boosters, along the same lines as their surplus ferry and quiet port, with the idea that the only thing holding back Alaska development is transportation. It's an old idea. In 1915, the Alaska Railroad itself was expected to open vast new mineral and agricultural development, which never happened.

A 2007 study by Paul Metz, a Fairbanks geologist and consultant, justified the project with figures about ore, lime, wood chips and other bulk resources along the Railbelt that could be shipped overseas. The same resources, if economically competitive, could already be shipped through existing ports served by rail at Anchorage, Whittier or Seward. Metz's extraordinary premise was that the shorter train ride alone would make those projects viable, a conclusion for which he provided little support.

Alaska cannot compete internationally on bulky, low-value resources and never has.

Mat-Su officials also hoped the new line would help their port take cargo business away from other ports. Coal from Healy was shipping from Seward and jet fuel from North Pole was going to Anchorage. But fuel shipments stopped when the refinery closed and lower international coal demand and prices have reduced those shipments by more than 80 percent since 2011. No coal trains are running this winter.

If the rail line were open right now, it's likely no trains would be using it. In fact, the railroad didn't ask for the project, and has other higher priorities for capital spending, although it has managed the project with the borough.

It's possible the line could help get Cook Inlet natural gas to Fairbanks or could carry pipe for a North Slope natural gas line or bring in other goods. I doubt those purposes would justify the cost. But that's a moot point now, because the line isn't done. It has just enough money to stay in mothballed status until June, said Executive Project Manager Joe Perkins.

How did this happen? It was all part of Alaska's megaproject process, which is still producing waste (a topic I'll be addressing over my next two columns).

The powerful legislative delegation from Mat-Su wanted the rail line, including Bill Stoltze, a longtime House Finance Committee chairman before he went to the Senate last year. Unable to win the whole $272.5 million to complete the project in 2008, they appropriated $10 million that year, and in 2009, another $17.5 million.

At that point, the project was underway. Killing it would waste the money already spent, right? The Legislature's system of allocating money according to power kept funding dribbling out, with seven appropriations of cash and $30 million in borrowing.

Building the entire Alaska Railroad took eight years. Mat-Su staff has been working on the spur project for nine. Stretching out the construction (and lawsuits) has increased the cost by $31 million. The total price is now estimated at $303.5 million.

Without an enormous additional expenditure, all the money spent so far is wasted.

Alaska's fantasy megaprojects and white elephants are a systemic problem going back to the dawn of the era of Big Oil. They have cost us billions that could have cushioned the transition to the post-oil era and reduced our future taxes.

A generation ago, Alaskan politicians playing with oil money thought they could diversify the economy by building farms to export grain and to produce milk on Point MacKenzie. That project collapsed in the 1980s and early '90s.

Recently, the Point MacKenzie rail project spent millions to buy back farmland from the state's dairy project and, best irony of all, sued the state with its own money to release the agriculture-only covenants, for which it also finally paid $300,000.

We never would have done this with our own money. The solution is to pay taxes again.

Charles Wohlforth's column appears three times weekly. In the 1980s, he reported for the Anchorage Daily News on the Point MacKenzie dairy project.

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