PART III THE LUTAK DOCK
PUTS BOROUGH TAXPAYERS AT RISK
3. THE BOROUGH'S RAISE GRANT APPLICATION WAS INACCURATE THIS
HOW DO WE KNOW THIS?
A. The borough's grant application and supporting documents described inaccurate 'baseline' and 'most likely outcome' scenarios
B. The borough used 'straw man' arguments to support its claims
C. The granting agency could impose serious penalties for false statements
D. Penalties could include the borough (taxpayers) being required to repay the $20M grant, being barred from receiving future federal grants, and/or additional legal penalties
BASELINE: In June 2021, at the time the Borough submitted its grant application, they basically ignored the fact of the new ro-ro dock, which was already serving our freight needs.
The Lutak dock had been closed by assembly order in 2020 and our local freight has been transported over the new ro-ro ever since.
MOST LIKELY OUTCOME: The borough claimed in the grant application that if they didn't rebuild the dock and it failed, we would 'most likely' be forced to truck our local goods from Seattle, Valdez, Skagway, and Anchorage.
LUTAK DOCK BASELINE
In its RAISE grant application, the borough's “without project” or baseline scenario assumes that "the existing dock will become nonoperational in 1 to 8 years, and that all freight and passenger activities will be diverted to other modes of transportation."
FACTS ON THE GROUND
The baseline, or 'world without the proposed project' included the fully functional ro-ro, and the existing dock had already become nonoperational at the time the borough applied for the grant. Not to mention that passenger activities do not occur over the Lutak dock, but instead utilize the nearby AMHS ferry dock, which is separately owned and operated by the State of Alaska.
QUOTES FROM RAISE GRANT APPLICATION
THE 'MOST LIKELY OUTCOME' IS ALSO MISLEADING
MODAL SHIFT TO TRUCKING
"In the event of dock closure, barged goods would need to be trucked into Haines at a significantly higher financial and environmental cost."
SAFETY
"[T]he increased risk of accidents and injuries associated with a major mode shift to truck traffic that would occur in the event of dock closure."
GREENHOUSE GASES
"If the Lutak Dock closes, the subsequent mode shift to truck transportation for fuel and cargo would result in significantly higher greenhouse gas emissions.."
ECONOMIC HARDSHIP
"Dock closure would create a significant economic barrier for businesses and residents in Haines, with effects extending to the region."
'STRAW MAN' ARGUMENTS
Benefit-Cost Analysis (BCA)
BCA is a systematic process for identifying, quantifying, and comparing expected benefits and costs of a potential infrastructure project.
In support of its grant application to MARAD, the Haines Borough also included a benefit-cost analysis (BCA) that was deeply flawed and misleading.
"Applicants should also be careful to avoid using “straw man” baselines with unrealistic assumptions about how freight and passenger traffic would flow... in the absence of the project, particularly when alternate modes of travel are considered."..."Applicants should assume that users would choose the next best (i.e., least costly) alternative, rather than an overtly suboptimal one."
DIVERTED FREIGHT ROUTES
The BCA outlined the four feasible transportation route alternatives and detailed what percentage of freight would come from each distant city:
"Freight is trucked directly from Seattle to Haines (approximately 1,805 road miles)."
"Freight is shipped from Seattle to Anchorage (weekly service provided by AML) and then trucked from Anchorage to Haines (756 road miles)."
"Freight is shipped from Seattle to Valdez (weekly service provided by AML), and then trucked from Valdez to Haines (691 road miles)."
"Freight is shipped from Seattle to Skagway (weekly service provided by AML), and then trucked from Skagway to Haines (352 road miles)."
1. 2. 3. 4.CONSEQUENCES
When a grant application and supporting materials include false statements of fact, [the agency] is authorized to terminate a RAISE grant agreement, seek reimbursement of grant funds, initiate suspension and debarment proceedings, and pursue other remedies based on the recipient’s failure to comply with federal law or the terms and conditions of the agreement, or MARAD’s determination that termination would be in the public interest.
PROBLEMS FOR BOROUGH TAXPAYERS
The problems in the borough's grant application-- and other problems with this project-- are problems for borough taxpayers. We could end up paying the federal government back, paying for an unfinished or over-budget project, or risking an environment impacted by ore contamination.
Fortunately, the grant agreement has yet to be signed, no money has changed hands, and neither of those will happen until after permitting is complete. Permitting will take until sometime this summer or fall. The grant won't expire until 2029. The next page shows the timeline projected by Turnagain.
4. ADDITIONAL RISKS
HOW DO WE KNOW THIS?
A. Cost overruns are predicted by an Independent Cost Estimate and the borough claims it can recoup cost overruns by issuing bonds (backed by taxpayers)
B. Maintenance costs are projected to outpace revenues
C. Lutak Inlet is a known Geohazard Zone
D. Contamination is an existing and future risk with numerous associated costs to taxpayers, cultural and subsistence users, and ecological and human health
E. Skagway's ore terminal is a case study
COST OVERRUNS
An Independent Cost Estimate (ICE) prepared for R&M Consultants concluded that construction costs alone could reach $29 Million, well above Turnagain's GMP of $25M. The borough in its updated Risk Register named taxpayers as the fallback for cost overruns of all kinds, including contamination and cleanup, which could amount to many millions of dollars.
Maintenance Costs (not including operating costs)
R&M'S 2021 DESIGN
estimated to cost $3.75 Million every 10 years
NEW DESIGN
Low level estimate: High level estimate: $2.12 million every 10 years
The borough has budgeted a mere $5,000 in dock maintenance costs per year for the past 10 years and expects maintenance costs to be less than that in the future, due to new construction.
MAINTENANCE COSTS
Turnagain gave both a low-level and high-level maintenance estimate. Since the low-level estimate didn't include epoxy recoating, which is an extremely important measure to combat corrosion, we're just focusing on the high-level estimate.
The borough has not identified any new customers and therefore has not established that the additional maintenance costs of an expensive new dock would be offset by user fees, meaning that the burden of maintenance costs would fall on residents of the small Haines Borough tax base.
LOCAL TAXPAYERS
DO NOT WANT TO PAY FOR THIS DOCK
Projected maintenance costs (not including operating costs) average $212,000 per year
From 2012-2022, the Lutak Dock has made an average of $135,000 per year from user fees
RISKS AND COST OVERRUNS COVERED BY TAXPAYERS?
Turnagain's cathodic protection system involves a zinc primer and then coating steel pilings with coal tar epoxy.
COAL TAR EPOXY IS NOT BEST PRACTICE, BUT RATHER THE CHEAPEST OPTION
TOXINS HAVE BEEN FOUND TO LEACH INTO MARINE WATERS AND ACCUMULATE IN MARINE LIFE
COAL TAR EPOXY IS BANNED IN SOME PLACES DUE TO ITS TOXICITY AND HEALTH AND ENVIRONMENTAL RISKS
GEOHAZARD ZONE
LUTAK INLET
December 2020 weather
event saw numerous landslides, and widespread slumping.
GEOHAZARD ASSESSMENT
Warned of future landslides, earthquakes, and tsunamis.
GEOHAZARD ZONE
We learned from geohazard surveys following the tragic and destructive 2020 December weather event that the entire Lutak Inlet corridor is at elevated risk for landslides, earthquakes, and localized tsunamis.
Anything stored on the Lutak dock is at risk of being washed into the rich marine waters of Lutak Inlet.
Skagway Ore Terminal Nakhu Ore Facility
Skagway's ore port and Haines' ore dock are interconnected. When Skagway's lease with AIDEA was approaching expiration, AIDEA looked to Haines as a possible place to relocate Skagway's 60-year-old aging and contaminated ore loader.
SKAGWAY ORE TERMINAL
The seabed beneath the Skagway ore terminal is contaminated with tons of heavy metals from decades of ore shipments.
A November 1985 state memo noted that ″the bottom sediments in the Skagway Harbor have been found to be among the most toxic in the world... The air, waters, streets, even kids’ sandboxes are contaminated with hazardous waste." The Skagway Ore Terminal under the name Nahku Ore Facility is listed by EPA as a potential Superfund site. (see link under 'Nakhu Ore Facility' on slide) or here.
The terminal is leased by the White Pass and Yukon Route Railway.
3,000 CUBIC YARDS
of contaminated sediment was dredged and removed by White Pass last spring at an estimated cost of just under $4 million.
200,000 CUBIC YARDS
of sediment may have to be removed before the harbor is considered to be remediated, according to a 2014 report by the Alaska Department of Environmental Conservation.
-Alaska Public Media
APRIL 22, 2022
“Folks, don’t harvest shell food and eat it right now. Don’t go get shrimp or crab. We’re trying to come up with a public service announcement about what’s safe, when, and how far away from the Port of Skagway. But be smart about it. Don’t put your crab pots in the vicinity of the Skagway Port right now. We all know people who have gotten cancer. Just be reasonable … go farther away
.”
Skagway Assemblymember Orion Hanson, The Skagway News
PUBLIC OPINION MATTERS
The borough's misrepresentations in its RAISE grant pose serious risks to borough taxpayers but also provide a potential lever to intervene in the progress of the project.
MARAD abandoned a project in South Dakota after significant public opposition was expressed. A dock project gone wrong in Anchorage disgraced MARAD and forced them to pay hundreds of millions to the municipality.
This project is not a done deal. You can let MARAD know your feelings about the dock project by email at RAISEgrants@dot.gov or by phone at 202-366-0301 (Business Hours: 8:00am-5:00pm ET, M-F).