I am merely trying to figure out what is a salable proposition from both sides. It does seem to me that giving away an asset, and certainly the railroad land itself is an asset, and then ending up having to pay for the claims that might be asserted and satisfied out of that asset is not something the Congress is likely to accept with great enthusiasm.

So I am suggesting that we need to figure out some solution which will satisfy both the State's concerns and the likely concerns of the Congress.

I commend you to consider both those aspects in your further thoughts on this matter.

I have no further questions.

Mr. Udall?

The CHAIRMAN. Where did the impetus come from in this legislation? Were you proposing to transfer the administration in the first instance? Is the State of Alaska pushing this?

Mr. BLANCHETTE. No; it was an administration initiative upon my recommendation. The impetus did not come from the State of Alaska.

Mr. YOUNG. Would the gentleman yield?
The CHAIRMAN. Sure.

Mr. YOUNG. Maybe you missed it. I believe this is the fourth administration that has proposed this. Lyndon B. Johnson proposed it. Then Richard Nixon and I think this is the fourth time it has been proposed.

If the chairman will yield further, you know, this has not been a moneymaker for the Federal Government

The CHAIRMAN. Well, didn't I read in the statement that there was an $8 million profit last year?

Mr. YOUNG. I believe that can be clarified. It was an $8 million profit in certain areas-the sale of some properties-but there was a tremendous ledger sheet of losses, too.

If you look at the amortization of the rolling stock and everything else you are talking about a big obligation the State has taken over. If you just want to run the ship with rust on its hull, very frankly, you can see what would happen.

The CHAIRMAN. I understand this and I think it is a central point here as far as I am concerned.

Mr. YOUNG. The other thing, Mr. Chairman, it was $2.7 million for the sale.

The CHAIRMAN. Is it the administration's position that you will transfer this railroad only if you get 75 percent of the net liquidation value of such properties as the bill provides?

Mr. BLANCHETTE. No, sir; we believe that the railroad will not be transferred if that provision becomes a sine qua non of transfer. We propose to transfer from sovereign to sovereign without the payment of a cash consideration or other consideration back, with the assumption by the State of Alaska of the ongoing liabilities of the Railroad. It is not a gratuitous transfer.

The CHAIRMAN. I was confused. Where did the 75 percent come from? Is that the other committee's?

Mr. BLANCHETTE. It came from the House Energy and Commerce Committee.

The CHAIRMAN. Have they reported the bill?

Mr. BLANCHETTE. They have reported the bill which has the 75 percent of net liquidation value in it and we are opposed to that proviso.

The CHAIRMAN. Mr. Chairman, that is all I have.

Mr. SEIBERLING. Thank you.

Mr. Young, do you have any further questions?

Mr. YOUNG. No further questions.

Mr. SEIBERLING. One other question. In your opinion, would the State acquire a floating easement on all lands other than Native lands in the State if the Railroad is transferred to them?

Mr. BLANCHETTE. The State, no. The State would acquire the right, title, and interest of the United States in those areas where that is represented by fee simple, it would be fee simple.

In those instances where it is subject to a right of reversion or reverter, that would be part and parcel of it.

The bundle of rights to be transferred to the State would be the bundle of rights, no more, no less, that the Federal Government now has.

Mr. SEIBERLING. But the Federal Government has under the 1914 act, theoretically at least, a floating easement on all lands that have been transferred to the State or private lands other than Native lands; and presumably since it is also the owner of all the Federal lands the right to go on all Federal lands.

Now you don't propose the right to go on all Federal lands is being conveyed to this State.

Mr. BLANCHETTE. Whatever rights the Alaska Railroad now has will be transferred.

Mr. SEIBERLING. Yes; but you are ducking the question. The United States has rights which go beyond that of the Alaska Railroad. As the owner of the Alaska Railroad they can give that railroad a right-of-way on any Federal land that the railroad desires to use, assuming the Government decides to give it that right-of-way. Now, that right is not being conveyed, as I understand it. Mr. BLANCHETTE. That is correct, Mr. Chairman.

Mr. SEIBERLING. So if the State owns this railroad and wants to go on other Federal lands, they would then have to go through the transportation provisions of the Federal Land Policy and Management Act with respect to BLM lands and through the transportation title of the Alaska National Interest Lands Conservation Act with respect to parks, national forests, wildlife refuges, and so forth; is that correct?

Mr. BLANCHETTE. You have stated the administration proposal on that issue.

Mr. SEIBERLING. All right. That is the only question I have left. I want to thank you very much, Mr. Blanchette, for your testimony. It has been most helpful.

Mr. BLANCHETTE. Thank you, Mr. Chairman, Mr. Young.

Mr. SEIBERLING. The next witnesses are a panel consisting of Mr. Robert W. Ward, commissioner of the Department of Transportation and Public Facilities of the State of Alaska, and Mr. John W. Katz, commissioner of the Department of Natural Resources, State of Alaska.

[Prepared statement of Robert W. Ward may be found in appendix II, under date of June 8, 1982.]

PANEL FROM THE STATE OF ALASKA CONSISTING OF ROBERT W. WARD, COMMISSIONER OF TRANSPORTATION AND PUBLIC FACILITIES, AND JOHN W. KATZ, COMMISSIONER OF NATURAL RESOURCES

Mr. WARD. Thank you, Mr. Chairman, gentlemen of the committee. My name is Bob Ward, commissioner of Alaska Department of Transportation and with me is John Katz, commissioner of the department of natural resources.

Mr. SEIBERLING. Without objection, we will put your entire statement in the record, if you would care to give us the highlights.

Mr. WARD. Thank you, Mr. Chairman. I would prefer to do that. The statement, I might point out at the outset, has been reviewed and the information is agreed to by legislative leadership so it does carry the support of the executive branch of the State of Alaska as well as the legislative leadership dealing with the issue. The first time this issue was brought to the State was over 11⁄2 years ago. It has already been mentioned here at the initiation of the Federal Government, and Governor Hammond, at that time, asked me as head of the department of transportation to take the leadership position, as far as the lead agency was concerned, in developing a State position.

At the outset, Governor Hammond was of the opinion that it would be much preferred if private enterprise could operate the railroad in a competitive posture with other modes of transportation in the State of Alaska for the movements of goods and services from the South 48 into, out of, and within the State.

He came to the conclusion, as others have, that that was not really a viable possibility and perhaps the only other option was some transfer of the railroad to the State.

Alaskans recognize the importance of the Alaska Railroad and even though it is a Federal operation in Alaska, Alaskans are proud of the service the railroad has performed for the State.

The Governor reached the conclusion that it wasn't possible at this juncture for private enterprise to successfully operate the railroad, and the position was developed for his consideration, that the State was not precluded, inhibited, or constrained from operating the railroad at least as well as the Federal Government has by way of artificial, if you will, barriers in the legislation itself.

He also wanted us to try to maintain as best we could the maximum amount of flexibility for operational institutions so that we would not preclude ultimately and eventually that perhaps private enterprise could still take over the railroad at some time in the future.

As already has been pointed out here in the earlier discussions of the railroad transfer, the proposal that the Federal Railroad Administration put together for consideration which was earlier developed as S. 1500, did not provide for an exchange of cash but it did not provide for a transfer without cost.

Their quid pro quo, if you will, on developing it was the requirement that the State continue to operate the railroad as a railroad, that the Federal employees who have been running the railroad for all these years have their rights protected by the State, that the State would, in assuming the responsibility for operating the rail

road as a railroad, would be faced with a substantial amount of deferred maintenance and we have identified that number somewhere between $120 to $140 million.

The railroad, at times, has identified even a higher number. Also, it seemed that the transfer might not be able to provide a perfect title or some kind of title without cloud.

All these considerations have the potential of great monetary effect on the revenues of the State of Alaska and the costs that the State would ultimately provide.

I think I would summarize issues that are of great concern to this committee from our perspective in the testimony that relate to land issues. Railroad inholdings in Denali National Park, we have always felt and still do that there is very possible accommodation with the Park Service's requirements within the park and that is not an issue of contention with us in terms of easements or at least enjoying the rights under the same agreements that the railroad presently has with the Park Service.

In terms of future rights-of-way and extension, the State, not without some concern on the part of a lot of our citizens, has accepted the fact that the 1914 act would, no doubt, cease to exist with this legislation. The extension provisions thereunder would not prevail but leadership within the State, both on the executive and legislative side seem to be comfortable with the provisions in existing law as have been described by the Secretary of the Interior to accommodate extensions that we would require.

As a matter of fact, the Governor has already started the process as a test, if you will, of those processed.

In terms of potential claims, when we were initially discussing with the railroad constraints against the ability of the State to operate at least as well as the railroad has been able to operate in the past, we question the fact that perhaps land that the railroad had considered, and is considering, might not be able to be guaranteed for continued use of the State for railroad purposes.

They assured us once and again, by a second opinion from the Justice Department, that there were no valid existing claims. against the railroad land and we have accepted that as a State posture.

Also, we do recognize the fact that the Congress might make another finding.

As we point out in the testimony, if that occurs, we would like to be sure that everyone knows that the State would strongly oppose any loss of land that would affect the operating viability of the railroad and we interpret and define that economic viability to include, but not to be limited to, lands needed for both current operations and anticipated development of the railroad.

In cases of specific disputes over specific qualifications under any of the above, a process should be undertaken which involves all affected parties including the State of Alaska.

So if I could just summarize the summary, Mr. Chairman, the State is willing, because we think it is important to accept the railroad and to operate it as a railroad.

We feel that we still must protect the employees. They are Alaskans. They have served the railroad well and they would continue to serve it well.

We feel that we must provide substantial additional capital for the continued operation of the railroad and even though there is a cost, a large cost, the State seems at this juncture to be willing to pay or to accept the risk of that downside cost.

I can see no sentiment, Mr. Chairman, for acceptance of the railroad at any price or acceptance of the railroad accepting this potential liability plus a payment of cash.

And that concludes my statement, Mr. Chairman.

Commissioner Katz would respond to those questions concerning land issues and I to others.

Mr. SEIBERLING. Thank you very much, Commissioner.

Has the State any estimate as to the liabilities it would be assuming if it accepted this railroad under the provisions of S. 1500? For example, let's take the unfunded pension liabilities and related ones. Have you any estimate of those?

Mr. WARD. Mr. Chairman, the retirement programs of the Federal Government are a little different from some. What we do know is that the requirement of an annual contribution that the Federal Government has made available for that contingency is approximately $1.7 million each year.

We felt, based on our best projections, based on the experience and the credited years that employees now have, as we could best anticipate in 1981 dollars what that would extrapolate into the future, we would be required to pay because of service they had built up in the past about $37 million.

Mr. SEIBERLING. That is the aggregate?

Mr. WARD. Yes.

Now, please recognize that it might not necessarily be the same figure someone else would come up with but that is just our best estimate.

Mr. SEIBERLING. What about tort claims?

Mr. WARD. I have no feeling for that at this time, Mr. Chairman, but also, along with employee liabilities we do anticipate again, based on credited time, that we would have an exposure or liability of about $6 million for annual leave and sick leave.

Mr. SEIBERLING. Of course, any arrangement, to be acceptable, has to be a deal that is mutually desirable from the standpoint of both the State and the Federal Government.

I recognize if it isn't desirable the State isn't going to accept it. At the same time, if it doesn't have the appearance, at least, of being desirable from the standpoint of the Federal Government, then it may be difficult to get Congress to approve.

So we need to find some ground where both parties benefit and where benefits are more or less equivalent.

I would hope we could come up with some such solution. I suggested one possibility with respect to Native claims to Mr. Blanchette. I am not sure it is a workable one but I do feel it would be difficult to get the Congress to go along with a proposition whereby we turn over these properties, including 38,000 acres of land to the State, but continue to be liable for claims against those same acres. If the State feels they have got to have all 38,000 acres in order to have something that is acceptable to them, then I think the Federal Government is going to probably end up saying, well, OK, but then you are going to have to accept the liability of the claims