OPINION: Port of Alaska modernization reaches new milestones

The Port of Alaska Modernization Program reached some major milestones this fall and I wanted to take this opportunity to celebrate and share more about what this will mean for consumers.

The port modernization is a once-in-a-generation project that is critical to Alaska’s economy and our way of life. Without a modernization, we are at risk of losing our port in a natural disaster and the results would be catastrophic for the entire state. The 2018 earthquake did considerable damage to the port and experts found that if the earthquake had lasted just a little longer, major portions of the port docks could have collapsed into the inlet. A May 2024 economic study found that service disruptions at the port would exceed $39 million per week in economic costs.

The good news is that after years of planning, organizing and fundraising, the port modernization is well underway. The new Petroleum Cement Terminal is open, a new administration building has been constructed, stabilization of the north extension is underway, and stakeholders have reached consensus on designs for the two new cargo terminals.

Now that the plans for the cargo terminals are decided, we’re ready to start construction on the first cargo terminal. The municipality will be going out to bid for the construction in the next few weeks, and that means it’s time to put together the funds to pay for construction. The municipality has raised more than $500 million in state and federal grants for the project, including $200 million from the state in 2022 and a $50 million federal grant from the Maritime Administration (MARAD) announced just last week. Additionally, a decision on the MARAD settlement is expected any day now and could lead to up to a $367 million payment for the port.

The cost of all phases for the port modernization is expected to be $1.9 billion, and the port will continue to seek grants and other creative fund sources to minimize the impacts to Alaska’s economy. However, the port modernization must move forward, and if grant funding can’t make up for all of the costs, port user fees like surcharges and tariffs will have to be issued to make up the difference.

As a result, the Anchorage Assembly has approved some recent tariff port modernization surcharge increases. In 2023, the Assembly established a surcharge on carriers for the port modernization, but the amount was so small that most carriers absorbed the cost and did not pass it on to customers. This year, on Nov. 6, the Assembly approved an increase on the port modernization surcharge that will lead most carriers to raise their rates in January, but fortunately, the increases should be fairly modest — an estimated $0.02 increase to the cost of a gallon of milk, for example. The municipality’s team calculated anticipated cost increases to commonly purchased items.

I also want to note that around the same time the Assembly passed the port modernization surcharge this fall, several shipping companies announced that their 2025 rates will be going up by 7.5%. This increase is due to their increasing costs of business, including equipment maintenance, trucking and capital investment in vessels, and is separate from the port modernization surcharge. I understand that the increasing cost of goods in Alaska is a real challenge, so the municipality is doing our best to minimize the cost impacts from the port modernization that come on top of the cost increases imposed by shippers.

I hope that our community will agree that paying a few more dollars on goods is a much cheaper price to pay than having the port fail. If we lose access to the port during a natural disaster, we will have to truck and fly in all of our goods, and that will lead to massive price hikes that are far beyond these modest tariff increases. The small increases we pay on goods today will bring us price stability and predictability for years to come.

I encourage you to visit the port modernization website, which has very good, detailed information on the project.

Meg Zaletel serves as vice chair of the Anchorage Assembly.

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