Anchorage port reconstruction at crisis point

The most recent projected cost of the port reconstruction project has increased by several times the original estimate and now stands at $1.9 billion. Every potential funder of the project — federal, state, local and private sources — say this amount is impossible to achieve.

This is bad news for a project that brings in 90% of the consumer goods in Alaska, as well as critical cement and fuel deliveries. Described below is a brief history of how we got to this point and also some options that could bring this project back into a feasible financing plan.

When the project was first envisioned, the port sought to achieve the following objectives: Reduce dredging costs by moving the face of the dock farther out in to the channel. Create new uplands. Maintain existing operations during construction. Provide deeper draft for new classes of vessels. Reduce corrosion problems and reduce sedimentation shoreside of the docks which contributes to seismic instability.

In 2006, based on the criteria developed by the port in consultation with the companies operating there, the PND Open Cell Sheet Pile design was chosen because of its ability to meet the objectives and also based upon the positive experience Sealand had with this type of construction in Dutch Harbor, which was very cost effective and efficient for container operations. This design also created 11 acres of new land at the Anchorage port.

When the municipality went out to bid on the project, the low bidder was a company that had never installed such a dock and also proposed a construction method that was questionable. Another firm that bid on the project filed a formal protest to the bid, showing that the proposed construction method was certain to fail. This protest was rejected by the port engineer who was recently removed. During construction activities, the port was also notified that the installation was failing. This was again ignored by the port engineer.

When the construction of the project completely fell apart, the municipality decided to hire a firm to determine what went wrong and if there were any faults with the PND design. This contract was awarded to CH2M Hill.

Usually a firm conducting an investigation of this sort would be prohibited from performing future work to ensure a truly independent and unbiased report. This was not the case. So along with documenting the construction failures of the project, CH2M Hill found fault with the seismic analysis of the project, using novel analysis methods and standards in opposition to four national and local geotechnical firms that had reviewed the project.

Subsequent to these findings, CH2M Hill was awarded a contract of $52 million to design the new facility. However, inexplicably, the municipality removed the financial analysis and planning module from the scope of the project. So CH2M Hill went on to design facilities without regard to the ability to finance them.

[Anchorage port plan calls for construction, even without full funding]

But they were also now trapped. By finding the north area of the port unusable, they could no longer build container facilities without disrupting existing operations. This required them to propose destruction of the cement and petroleum dock on the south end and to rebuild it farther south at a cost of $290 million, of which currently only $130 million is on hand. It would require a fivefold tariff increase, which the operators there say will have a devastating effect on their customers and the Ted Stevens International Airport operations.

Ch2M Hill (now Jacobs Engineering) also proposes removing all the gravel fill from the north end at a cost of $253 million. I am not aware of any port in the world that is removing port land.

So what are we to do?

Thankfully, the Anchorage Assembly has stepped in to explore development and financing options. This is being led by Assemblyman Christopher Constant, who is co-chair of the Municipal Enterprise and Utility Committee, with oversight responsibility for the port. The port is also located in his district.

This committee has held meetings to hear from companies operating at the port and also invited engineering firms to come forward with any alternative designs that could reduce the cost of the project. During this meeting, one of the invited engineering firms proposed an alternative design for a platform dock in front of the fill at the north end, which would reduce the cost to one-quarter of the estimated cost of the current design. It would also allow construction without interfering with existing operations.

Of course, this alternative and any others that may come forward need to be evaluated. To this end, the Assembly has appropriated $100,000 to hire an independent consultant to evaluate current and alternative designs, to propose a preferred development plan that is solid from an engineering point of view and can be realistically financed. This is similar to the consultant the Assembly hired to provide them independent advice on the troubled SAP computer system.

So at least we now have a process where we can consider and identify a more feasible proposal. We should thank the Assembly for providing leadership on this matter, and I would also note that municipal Manager Bill Falsey has also indicated that the municipality is open to consider alternatives for a lower-cost, financeable project.

Paul Fuhs has a career of more than 30 years in port development and financing in Alaska. He is former Mayor of Unalaska/Dutch Harbor and was Commissioner of Commerce and Economic Development for Gov. Wally Hickel.

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