The bill amends existing law to authorize the railroad to issue bonds to finance the construction and maintenance of a gas line and related facilities for transporting natural gas from Alaska’s North Slope. It also authorizes the railroad to negotiate with producers of natural gas on the bond issue.

“We can use the bonding authority of the Alaska Railroad Corporation to help bring good jobs and needed revenue to the state and to deliver Alaska’s abundant natural gas to a waiting continent,” said Knowles. “We’ve asked the producers to sharpen their pencils and give this a close, hard look. Fully utilizing this unique opportunity would be a significant step forward in Alaska’s effort to finance and construct what would be America’s largest, privately funded construction project.”

Although the railroad would issue the bonds to fund pipeline construction, neither the railroad nor the state would own the gas line nor be liable for the debt, according to Knowles. That responsibility would fall on the privately-owned companies that will build, own, and operate the pipeline. This type of “conduit financing” on a smaller scale has been used in Alaska to help finance the construction of the Valdez pipeline terminal and the purchase of the Snettisham Hydroelectric Project in Juneau.

“Supporters of this concept, including its author Sen. Ted Stevens, saw the value of the railroad as an economic engine for our state, and the need to fuel that engine,” Knowles said. “The bottom line is, tax-exempt financing saves money, and lots of it. Preliminary estimates prepared by the investment firm Goldman Sachs and the [state] Department of Revenue say such a financing plan could save the owners of the gas line more than $1 billion in today’s dollars over the life of the project.”

Knowles’ railroad bonding proposal is a significant state effort to help the project move forward and would complement financing incentives now under consideration by Congress. Federal financing incentives also are being considered by Congress, including accelerated depreciation and measures to reduce commodity risk to help make the gas line project financially viable.

“Support for pursuing this financing option is strong,” Knowles said. “We are moving forward with this legislation because we are confident that it will help Alaska deliver as much as 6 Bcf/d of natural gas to the nation. The long-term economic impact of this project is phenomenal. It will generate revenues for the state, as well as tens of thousands of jobs in Alaska and nationwide.”

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