Greg Wolf, Director WTCA

Let me introduce our good friend and colleague Mead Treadwell here to speak to us and give us an update on the A2A Project, the Alberta to Alaska Rail Project. This has been in the news, even just in the last couple of days. You'll hear from Mead that the governor [Mike Dunleavy], at the request of A2A sent to President Trump for a presidential type order. I think the legislature passed a resolution here recently, so there seems to be some activity and we're very interested to hear about this project.

For those of you who don't know Mead, I'll just briefly mention a few things. You'll remember that he was elected as our Lieutenant Governor from 2010 to 2014 working alongside Governor Sean Parnell. During his term he was Chair of the Aerospace States Association, which consists of Governors, Lieutenant Governors from across the United States, and he continues to represent the State of Alaska as chair of an interstate compact advocating for a balanced budget amendment to the United States Constitution.

President George W. Bush appointed him Commissioner of the US Arctic Research Commission. He was in that position from 2001 to 2010, and Chair of it from 2006, and his term continued under President Barack Obama. He had previously served in Alaska as Governor Wally Hickels' cabinet as Deputy Commissioner of Environmental Conservation, and helped implement state and federal oil pollution laws which he helped write as part of the response to the 1989 Exxon Valdez Oil Spill. He also worked on LNG export strategies for a number of governors, including Jay Hammond, Wally Hickel and Governor William A. Egan.

He was a '78 graduate of Yale, and then of Harvard Business School a few years later in 1982. He was a founding officer of the LNG project-promoter Yukon Pacific Corporation. In the private sector he's been involved in a number of successful technology ventures, including global digital watermarking leader Digimarc, a publicly traded company, and chair of Immersive Media Corporation (IMC), another publicly traded company in Canada which pioneered StreetView for Google and is now a subsidiary of Digital Domain.

A number of other public and private positions, but I think most of you know me that I'd rather give him the time to talk about this exciting project. So with no further ado, please welcome our friend, Mead Treadwell.

Well, thank you all for coming out today and I have actually a lot of people to thank. I want to thank Governor Dunleavy and members of his cabinet who've seen the value of the idea we're going to talk about today, and made the request that they did of President Trump, I'd like to thank the Alaska Railroad, Brian [Brian Lindamood is the Vice President and Chief Engineer of Alaska Railroad] is back there. We've been working hard with the Alaska Railroad on how two railroads could work together to complete something we've been trying to do for a long time. I'd certainly like to thank the people who have seen this opportunity and tried to bring it forward. We've got a great engineering group in HDR [Hennigson, Durham and Richardson, Inc.], we've got somebody here from HDR, and all of us as Alaskans. Rita, I'd like to thank you, you're my accountant but to see you be able to go out for lunch so soon after tax day is fun too.

Hey, let's just think about the idea of an Alaska Railroad that connects to the lower 48. It's been around as an idea for some time. When E. W. Herman was told to take a vacation and chartered the Charles W. Elder and came up to Alaska, named the glaciers in Prince William Sound, went over to eastern Russia, people thought, "Well, his secret agenda is to look at the Alaska Railroad," and he did.

There was actually a combine out of England around the turn of the 19th to the 20th century that had raised $100 million to build an Alaska rail link across Canada, and then mining interests in Canada said, "No, we don't want to open up all these mining interests in Alaska," and that project failed. It was looked at again as one way to connect to Alaska to the lower 48 before the United States government went forward with the Alaska Highway. And the Alaska Highway, as you know, was built during the Second World War and perhaps had we had more time, our railroad would have been done then.

In 1968, '67-'68, then Governor Wally Hickel, our second governor, created something called the North Commission, Northern Operation of Rail Transportation in Hawaii and Highways. He had people on that board including Sargent Schriver who had formed the Peace Corps, including Bill Lear. Charles Lindbergh came and addressed the Alaska legislature, and they came back and there was a young guy named Frank Murkowski, who was actually the Commissioner of Economic Development at the time, who staffed that commission and saw that as an opportunity. They looked both at a rail line of the North Slope that Robert O. Anderson, the founder of Arco, discoverer of the North Slope, said to me, "You know, we probably could have thrown away the rail line for the money we would've saved had we gone to the north slope," but the oil industry wasn't really interested in competition for something else to set the tariff on the pipelines at the time.

There was a study commissioned by Senator Rick Urian of Anchorage in 1979 that actually had the state of Alaska set aside the right-of-way to the Alaska-Canada border for a railroad, and that was on DNR's books, as I set aside right away until Tony Knowles was Governor, and he redeposited the land back into DNR's coffers.

And then Frank Murkowski was elected Governor just after he had been Senator. He created a law as Senator that set up a US-Canada commission to pursue this idea. And in fact, if you find the memos of some of his meetings as Governor in Canada on Wikileaks, you know, we're now seeing the effect of Wikileaks, but the Canadians at that time were not really interested. So that commission is on the books but has never been set up. But he did, as Governor, pass a new law that actually facilitated expansion of the Alaska Railroad several different ways. It gave the Alaska Railroad a process that we call the "460 process", that allows the railroad to identify right-of-way to the border and request that of DNR and, essentially, DNR has to accept that request. It's a pretty strong land grant to the Alaska Railroad, conditional land grant to the railroad that would facilitate expansion of the Alaska Railroad.

Another thing that that bill did, which we're not looking to use, but it's interesting that it's in state law, is that the Alaska Railroad itself was actually authorized to invest in Canada in order to make a rail connection happen, and that's part of the law today.

So comes now a study that was done a couple of years ago by the Government of Alberta, because Alberta has what they call pipeline dysfunction or transportation dysfunction. The government and the people of British Columbia said, "We don't want your oil, we don't want your gas to come through to the British Columbia coast," and so there've been huge problems with things like the TransCanada pipeline. They were at one point, I would say, half a dozen or more LNG projects. They're now down to one that may happen. There's actually a law pending in the Canadian parliament that would make it illegal to export oil from the west coast of British Columbia.

And you know that that book called Ecotopia that was published a few years ago, we're seeing that happen in BC. The Government of Alberta has had the challenge of watching the Keystone pipeline, which you know, quite a conversation that I had with Dan Sullivan when we were both serving together in the Bush administration. He had been Assistant Secretary of State for Economics, and there was a presidential permit pending on the Keystone pipeline that would allow that pipeline to go through. Dan gave, I think, a six-week extension as he left office in 2008. Barack Obama's State Department turned that into what is now close to a 12 year adjudication that has yet to be fully resolved.

And so if you go talk to Consul Sato [Mr. Masatoshi Sato is Head of Consular Office of Japan in Anchorage], you and I have to have some conversations, but if you look at our big markets in Asia, there was a very senior Japanese banker who said to me, when I first talked to him about this project a couple of years ago, he said, "We've been burned in Canada. We've been burned because people have not been able to get resources." A Japanese consortium actually wrote off close to a hundred trillion cubic feet of fracking gas in northern British Columbia because of an absence of transportation capability. And his advice was, "Get a presidential permit and then we can talk."

We've heard similar advice out of other Asian nations that are building up their refining capacity and building up their capability to use energy. So with that there was a study done by the Van Horne Institute, paid for by the Government of Alberta, that said, what are our options? And the option that they came up with is build a rail line to Alaska. At that point, the Van Horne study said, "Connect with the Trans-Alaska pipeline either at North Pole or Glen Allen, and ship the bitumen that is essentially landlocked in Alberta out via that direction."

There was a company which was formed called Alberta to Alaska Railway, and I'll tell you about that and give you the brief and then answer questions. So that company's been working several years, has spent tens of millions of dollars, has been working with First Nations in Canada, working with land owners here in the state of Alaska, and now is at the point where they're asking for a presidential permit so they can go to the next round of financing and discussions with Asian buyers, with Alberta shippers, with others who would use this, including people who might ship containers in and out of the Port of Anchorage or the Mat-Su port.

There's been news several ways in the last few months from Alberta to Alaska. The company has made a proposal to complete the rail lane to Port MacKenzie and to operate another port at Port MacKenzie, and that's pending for the Matanuska-Susitna Borough. There's a negotiation going on on the terms of that agreement, but they are very serious about their interest in moving forward and spending the tens, if not over a hundred million dollars to complete that rail line to Port MacKenzie.

We've had discussions with the Port of Alaska because the Port of Alaska brings containers in and out about two days a week, and there's spare capacity at the Port of Alaska. And every time we hear about the challenges of the Port of Alaska, there's no challenge that more revenue can't fix. We've talked to the governor, and the governor made the request on the presidential permit. And what was very interesting is that if you read that letter the governor wrote, he also made the point that we don't have to look at the way this presidential permit process has changed, why don't you bring it back from the State Department to the White House? And that's exactly what the president did last week. And I thank Governor Dunleavy for making that red tape cutting suggestion, presidential permit is actually not required under US law. It's an executive order created by Lyndon Johnson. It's never been an act of Congress and the president does have that flexibility.

So let me take you through the process of what we're talking about, and I just want to start out with one caveat is, you know, I was your lieutenant governor. I was also president of PT Capital. The owners of Alberta and Alaska Railway are investors in PT Capital and employed us to work on strategic issues. When I left PT Capital I brought this client with me. I also have some other clients and Greg, I've appreciated at the podium here, a couple of times in the last a year or so when we've talked about some large transportation projects that may be coming along and I've talked about LNG. I've talked about some other things. Our company works on those issues, but that today I'm going to focus on Alberta to Alaska Railway.

Basically, this is the presentation that we gave the Alaska State Senate. It's an infrastructure development company which wants to build, own, and operate in partnership with the Alaska Railroad, a spur line to Port MacKenzie, a new rail line to the Yukon border, and south to interconnect with their Canadian Pacific and Canadian National railroads. It was co-founded by Sean McCoshen and David Sharpe. It's wholly owned by Sean McCoshen who's a seasoned entrepreneur with experience in infrastructure development, and the project is structured to include as owners Alaska native corporations and the tribes and First Nations upon whose traditional lands this rail line will cross.

It looks to intersect with the North American rail system at Fort Nelson, BC, High Level, Alberta, as well as Fort McMurray, Alberta. It will be able to transport all forms of cargo, both inbound and outbound, it's designed to handle a host of different resources including Alberta's sourced bitumen. It can add passenger service and local freight service to communities along the corridor, and it's following a route that was basically laid out in its last iteration not just by the Van Horne study, but also by a state of Alaska-Yukon Government study that looked at how can we open up some mineralized areas in the Yukon. We believe it has tremendous benefits for people of the North.

A couple of big picture ideas. Here's Fort McMurray in Northern Alberta, it would connect to the CP and the CN lines a little bit further west, but what does this project mean? It means that Alaska ports are two to four days shorter to Asia, that a ship passing by in the North Pacific headed toward ports in British Columbia or in California could actually be unloaded and containers to be on a train, and could be at their destinations, for example, in just in time delivery to support manufacturing in the middle part in North America, possibly before the ships could even dock in other Western North American ports. We believe that this is following a trend that we've seen where you know, the Port of Long Beach has been the biggest port on the west coast. You've seen Seattle, Tacoma grow, you've seen Vancouver grow, you've seen Prince Rupert grow, and for some commodities, not all of them, some of them it's cheaper to leave on a ship, but for some commodities we believe that we are going to be a very good gateway in and out of North America for containerized traffic.

The new rail that's required is a 1,500 miles, 2,400 kilometers and we've joined up about 200 miles of that would be in the state of Alaska. Most of it will be in the Yukon, Northern British Columbia and Alberta. Here is a root of the corridor, and if you happen to have a cabin site or mine claim or something else along that corridor, there will be a process. This line right now, it's been identified that in most cases this line is 10 miles wide. It will be narrowed down through an extensive engineering process to a quarter, or about 500 feet wide. So that's, that's the process today.

We'll go through the traditional lands of all these First Nations where we've been in contact and working with First Nations about ways to be a part of it, and it is being put together by a development team that includes HDR, working on engineering and environmental, Bridging Finance, a billion dollar plus company under management owned by David Sharpe who has been working on financials. Robert Dove, who is also with the Carlyle Group, has just recently joined the company to work on financial issues.

Fogler Rubinoff and some additional members of the team are now soon to be announced an indigenous engagement. Holland and Hart here, Jon Katchen, Colin Parker, Sean Parnell, Tali Kindred, some others who have been working on the project legally here in the state. Jack Ferguson in Washington and I have been strategic advisor. To date the principles up over $35 million. It's wholly owned by Sean McCoshen, but positioned to bring in other strategic owners as they move from the 10s of millions of dollars for the preliminary work, preliminary engineering, preliminary marketing and permitting to the full pre-FID process that you've seen here with lots of big projects.

A little bit about Sean. He is an Executive Officer of McCoshen Group, it's a family office that owns 14 privately held companies including a rail construction company in Texas. His company has assets of about $740 million. That's not enough to build a $17 billion railroad, but it's a significant sponsor and he was in private banking, worked with a number of large private equity firms before that. I would say he's actually a kid from New York, moved to Winnipeg as a teenager and he lives now in Winnipeg, Vancouver, and sometimes I find him in West Hollywood with his seven year old son.

Financially, this project is expected to cost about $17 billion Canadian, about $3 billion or more will be spent on Alaska construction, including some upgrades that we're trying to identify what's needed for the Alaska Railroad. In some cases, the amount of new traffic necessary to make this work is kind of like connecting a firehose to a garden hose and there will be upgrades to the existing Alaska Railroad to make this project work. Right now, the plan is entirely funded by private financing with some support from global sovereign wealth funding institutions.

Canada has an infrastructure bank, and Canada has announced that it's working with it's premiers on some ways to improve rail and pipeline and road infrastructure in the provinces. We have not ruled that out, but it's not an essential part of the plan at present. What's going to make the project happen, just in the same way that those of us who've looked at gas pipelines and other major resource transportation projects in the past, is throughput agreements between commodity buyers and sellers that will help back construction.

Just to reiterate why we believe this is an opportune time. Every single study about connecting the Alaska Railroad is basically dependent on the idea that several large mines would go in at once would need to ship concentrates of ore to smelters either in Canada or someplace else, and that's been behind almost every study to date.

What's different in the study that Frank Murkowski did, first began to look at the strategic position that we could have with Asian trade and cargo and the Van Horne study looked at that and we see increasing demand for resources in Asian markets, and we see ways to counter some of the inefficiencies. Here's something very interesting. A railroad to Alaska can be built straighter, flatter than a railroad through the Rockies to get to a coastal port in British Columbia. The cost of actually shipping a barrel of bitumen as one commodity from Alberta to tidewater, is less to go through Alaska than it is to go be a pipeline with its diluent to the Canadian coast. And that's one of the compelling parts of the economics of this project. It's also been estimated that there's at least $750 billion worth of mineral resources within 100 miles of the rail corridor.

I liked to joke when I was lieutenant governor that you know, we've got 100 million of our 365 million acres. In Canada the provinces, the territories have been given all of their Crown land. A mineral boom in the Yukon is huge in terms of the new mining prospects. There's actually a brand new mining prospect right at the Yukon, Canada border near where this mine could go in, and then there's one on the Tetlin village has been working with on our side. And so there are some potential mineral resources, but we believe this is going to change the economics of many Alaskan enterprises.

We've been working very closely with First Nations and Alaska native corporations for more than three years. That same conversation I had with a financier from Japan who said, "Take a look at your presidential permit," also said, "We really would like to see you have good relationships with First Nations because that has held up a situation." A really interesting Supreme Court case in Canada said this, "That if a premier or a minister gets out in front supporting a project before the appropriate consultation has happened with First Nations, you may have cooked the books. You may have mooted the idea that the consultation is effective." And so while I've certainly met with the premier of the Yukon, I had a conversation with leaders of government in Alberta just this past week, the governments in Canada are not really making very much noise about this kind of project until the First Nation relationships are tied down.

We have achieved exclusivity or business agreements with many of the strategically located business groups in both Alaska and Canada, and we have a business structure that allows for equity participation by First Nations, which is going on. We're working right now on a master agreement with the Alaska Railroad to define cooperation to achieve permitting, including the right-of-way and presidential permit and material lease terms.The specific plan today is this, is that the Alaska Railroad will be applying for this land to DNR and then we'll be leasing it to the HOA Railroad during the life of the railroad, which we expect to be a hundred years lease or more.

The details of that are under negotiation right now, but we're also working to establish key economic principles that will support finance. This railroad from Alberta can't do it anything unless the goods are further shipped on the Alaska Railroad. It's very important that we have a strong partnership with the Alaska Railroad. Frankly, I believe this project will allow the railroad to better serve Alaska's resource industry while maintaining the strong and proper passenger service that they have today.

We also have proposed to fund the unfunded portion of the Matanuska-Susitna Borough rail extension project. If you've been out there, maybe you've been out there on a four wheeler, there is actually a built up right-of-way waiting for rail to be installed. The negotiation is going on with Mat-Su Borough right now on specific terms, but the idea is to go ahead and get that because it's got great land and opportunity for a port for the some of the kinds of cargo that we see shipping out.

I mentioned President Trump's executive order. Last week, April 10th, President Trump went down to Texas and signed two executive orders. The second one was focused on cross border energy projects and will clarify the President is solely responsible for approving or denying pipelines and other infrastructure across international boundaries. I don't think this line and other infrastructure would be here if Mike Dunleavy had not asked for this at the right time. And again, I want to thank the governor.

The Secretary of State previously played that role. All agencies will be discussed but let me just put it this way, if you want to build a project across land in the United States, you have to deal with the Corps of Engineers if you cross wetlands, government land owners when you cross government lands, the EPA, the DEC, and we believe that the environmental conditions that our project would have are significant. There are two very large permits that this project will require.

One will be coordinated by a group called the Surface Transportation Board in Washington, which also permitted the Port MacKenzie rail link, and permitted the bridge for the Alaska Railroad across the town. That group will be in the same way that you've watched some pipeline deal with for the major Washington coordinating agency on this project.

There's a similar agency in Canada called the CTA but, at the same time, you have a sovereign-owned railroad putting rail in the United States on sovereign owned land, and we think the state of Alaska has a whole lot to say about it. So we're also working the process very closely with that. The Secretary of State had been thrust into a role in the last administration to essentially do a second environmental EIS on any international project, whether it was a pipeline or a rail link, or anything else crossing the border. And I believe the reason why President Johnson put that requirement in law to begin with was to see if there's geopolitical concerns, and the geopolitical concerns I think will be addressed under the change that President Trump just did.

The railroad has been designed with an eye toward reducing fuel consumption and approving safety. Our goal is to have it rate as less than 1% curvature that would not exceed 5%, and this is considerably better than existing CP or CN lines crossing the Rockies to the Canadian coast. The project will focus on handling goods that are not hazardous. I will tell you one of the reasons why the project changed from connecting bitumen to the Alaska pipeline, to instead connecting to the Alaska Railroad, is that when you move bitumen in a pipeline you've got to buy almost as many BTUs as a diluent to make it pipeline quality. And at the same time, if you use it in the pipeline, you would either batch it through the pipeline, which has been talked about and it's not easy to do, or you would be dramatically changing the quality of top soil going out of the pipeline through Valdez.

It's an extra couple of million dollars in cost without any commensurate savings. So we think it's much better to connect to the Alaska Railroad and work with Port MacKenzie, and that's why A2A may be offered to buy at Port MacKenzie. But the focus on safety is very strong, and I'll tell you that the bitumen that would be transported on this, the 10 unit trains a day or so that would come through, would be by and large in solid form. And in doing so you've dramatically reduced the fire risk, any fire risk and exposure risk, and any spill risk of this project moving that direction.

So our next steps, we are working with the governor's administration to finalize the master agreement with the Alaska Railroad. We've asked for general support in negotiations with the Mat-Su Borough and Assembly, but I'll just say that things are going well with the borough and assembly and that we continue to them there.

The governor's given us support for the presidential permit, and the State Department expects to revise the questionnaire that there'll be asking for this permit fairly soon, so then our application will go in. There's several things that we have to ask for with our DNR in terms of the right-of-way and establishing the rail corridor. And actually I'll just have to say I've met with the governor's economic development team at the Department of Commerce and there is very strong interest to identify opportunities for all Alaskan appropriations as well A&Cs and village corporations and on the alignment.

So that's the end of my presentation. We can turn up the lights and I'm very happy to answer any questions. I think what I'll do is leave you with a map and thank you very much for your attention.

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What kind of permitting issues do we expect in northeastern British Columbia?

I would say that the connections that we have made with the First Nations' here were very important to the permitting process, and the other point I would make is this is not just a project to ship energy, but a project to ship all commodities, to help the communities along the rail. Occasionally we joke about "well maybe do want to move in this direction," but this is probably the best route for the project, and I think we'll have a different permitting challenge in each of the jurisdictions, but we believe it's possible.

Are there any other conflicting routes going west?

When you're dealing with this part of the Rockies, there are two routes that go through the Rockies now to the coast. There's little social license even for the export for PLNG from communities along that coast. There is some discussion about, or there had been a coal mine that had looked at coming in to Hyder, and Stewart. We wish them well, we have discussions; we don't really see them as a competitor group, but there have been some discussion. There's one other company that's issued a bunch of press releases, but we haven't seen them go through the process that we've brought through that still talks about joining the pipeline, but to my knowledge the haven't had any negotiations for the pipeline or the First Nations.

Consul Masatoshi Sato, Consular Office of Japan

Thank you very much, sir, for your presentation. I have three questions to make, if I may.

First, could you tell me if there is a target date for the completion of this project?

Second, you talk about a Japanese financier who is a little bit reluctant to get on board, until they see, for example; I wonder if there are any other Japanese companies which have shown interest in this project?

Third, could you tell me if there is relations between this project, and the intercontinental railway project, please?

Great, Consul Sato, thank you. I have to thank you and your predecessors for building such a strong relationship between Alaska, and Japan. The first question is on dates.

We would like to be through the pre-feasibility process this year, and I expect we will be. Then it's a two to four year process to get to permitting, and whole financing of the project, which would mean construction would begin sometime in the early 2020s, with the hope that you can get into operation by 2025-2026. I'm very reluctant to put very specific dates on this until we get through the first process, so that's there.

The second thing, I'll just say I had the honour now for several years of serving on a group called the Northeast Asia Economic Forum with Governor Maeda of JBIC [Mr. Tadashi Maeda is governor of the Japan Bank for International Cooperation]. We have not formally approached JBIC on this project yet, but we have talked to companies in China, Korea, Japan, all of whom might be off-takers or suppliers of rail. Frankly, a Japanese steel company is one of the best manufacturers of a steel that we would need for the strength that we are talking about here. There would be a global competition for lots of engines and stock companies, so the formal process in Asia has not begun, there's been a lot of informal discussion.

One of the things to recognise here, is that there has been a huge amount of Asian investment into the oil fields in Alberta. The Premier of China said at one point to the Premier of Canada, "I've bought all of this oil, how are you going to help me get it out? Because you've got this pipeline malfunction here." And I mentioned how, at PT Capital, I was offered the chance to buy a huge amount of fracking resources here, where a consortium including Japanese trading companies had written off $750 million, because of the transportation problems to the coast in British Columbia. Our timing; that's one of the reasons why I'm glad we're willing to have lunch, because we are in the process of narrowing down our target partners on the Asian side.

But think about it this way. The amount of bitumen needed to be the anchor customer for a rail project like this, is about what was done to build two refineries on the west coast when TAPS got started. When TAPS got started, the Cherry Point refinery down in Washington, there were further refineries further south, took the bulk of the output of TAPS. The growth of the Asian energy market is such that there're as many as ten refineries that size being added every year. It's what we heard from the Chinese sources, so we don't think we're going into a conflicted market there, but that's our objective.

The third question that Counsul asked, was how does this relate to the interhemispheric project. My friend Fyodor [Fyodor Soloview is the Founder and President of InterBering, LLC] writes about that quite frequently; there are others. Did you know that the State [of Alaska] has a roads-to-resources process up in the Ambler district? I'll just say that that's not part of our plan, but it's not incompatible with our plan. We're not, at this point, going to the Russians and saying that, and I've met with the Russians over the decades, they did a 12-volume study on a rail link to the Bering Strait. I think it's a great idea, and I told the most current advocates for it, "you really need to come up with a much stronger business model then you've got." And as I've said about this project, it's been studied five or six times in the last century; and this is the first time there's been an anchor customer, and a real need, and I'll just say the election in Alberta was just yesterday, but you had one of the leading candidates for Premier of Alberta pushing this project as one of its last major platform announcements just a week before last.

My question is actually the same. It's about the timeline, but you've also mentioned other commodities that might be viable. What are those, specifically, that you think might have potential on employment as well?

Right now, let's just talk about container shipping. We tried to draw a big circle around container shipping, and our belief is that our edge is going to be in just-in-time shipping. If we can do through traffic, that makes some sense, in one direction, or the other. If, for example, Christmas is coming and there's a late order, and the pet rock of the year is being manufactured in Asia, and they need a lot more of them, this may be a faster way to get them to the stores. And it doesn't compete with air cargo, there's lots of commodities that aren't likely to come by air cargo.

The second thing is that you've got mineralisation here, and you've got the mines up in Northwest Alaska that are looking to, that in some cases develop large concentrates that usually travel in hopper cars, or super sacks, to go to smelters like Trail, BC, and other smelters across Canada. So there's that kind of opportunity, and there's a lot of mineralisation, I think there's about five major mines under some process of financing at this point to move through. There may be some other commodities coming out of North America to Asian markets. About two years ago I was in Dalian, China, which is the largest mineral receiving port in Asia, as I understand it, and you see lots of things travel from North America to that port. There are concentrates of minerals, sulphur, potash, others. All of them are very important to the economics of this project, but at this point we've been focusing on one anchor customer.

I'm from the Canadian side, so I happen to be the director of the pipeline you're talking about, the Trans Mountain, former Kinder-Morgan project, that we are trying to build from Edmonton to Burnaby. That's scheduled to be back on track next week, or next month. We'll see what happens, but one of the things we endure every single day is the protest and civil disobedience that surrounded by anything to do with Alberta oil. One of the concerns is that we would see the same type of disobedience regarding the rail, because it's said that we are going to ship oil, and that's why it's important to be quite prepared for that. Have you put some contingency for the amount of visceral hatred that will come your way, based upon the fact that you want to go through British Columbia?

Thank you very much, and I almost have to say "good luck on your project!" I have been rooting for your project, and frankly I do not think these two projects are incompatible. There's enough production there, and bitumen on a calorific value trades at a discount from regular crude oil, so there's a demand for it, and it didn't happen.

Let me be blunt, and I'm going to take off my A2A hat for a second, and just put on my Alaskan natural resource hat. I believe the climate in changing. I believe that as the climate changes, we need to clean up our energy, there's absolutely no question in my mind about that. I also believe that while we're still using oil and gas the best place to produce it from, is from secure countries like Canada, and the United States, that are not funding terrorism, that are not unstable places in the world, and when I talk to Asian buyers, from Singapore to Seoul, to Tokyo to Osaka, and governments, they all agree. It's very good to get energy from North America, and for us to do that we need to have the infrastructure.

The benefit of a railroad is that it carries more than just petroleum product. You're about to face a brand new law that the lower house has passed, and the Senate is dealing with, it's C-69. I just can't believe that one of the major oil producing nations in the country has said to a company like yours', that has spent hundreds of millions of dollars on permitting, and at the end, if the Prime Minister doesn't like it, here's a hammer and he can shut you down. And that law is pending right now, that's on energy projects that doesn't have to do with railroads.

I'll be honest. Canada is right now, not a whole lot of fun place to do natural resource business. But I believe that one, the pendulum is going to swing. Two, I believe that we are continuing to do things to clean up all forms of energy, including fossil fuels. As an individual investor I have visited a company in Perth, Australia that takes the carbon out of natural gas before it's burned, so the power companies are only burning hydrogen. There's a project in Alberta that is working on de-carbonization of these fuels. I believe that there is an opportunity, and continued need in this area, and that we are not unreasonable in trying to serve this market.

Am I prepared for the hurdles? I guess I'll put it this way. Reasonably, here in the United States so far, Keystone has been a challenge, but reasonably here we deal with this issue, on one particular issue, and you can deal with the carbon tax, and some of the other issues separate. We may be in for a fight, we've worked very hard to develop relations with First Nations, and get this presidential permit through, so that the biggest handles and the last fights aren't as much of it.

How's that for answer?

I'd like to follow-up on Harold's question regarding opposition in Canada. If you reached out in any stakeholder engagement here in Alaska and communities along the railway to get them prepared for this, so it's not as big of a fight?

The answer is yes. In Alaska almost all of the land is in the Doyon region, and there's several specific village corporations. The economic opportunity here is huge! In some cases you have to bring broadband fiber that might not be there in some of the Canadian spots. There's an opportunity to service a rail line considerable. There's an opportunity, as we've said, to be a part-owner of the project, so we've had fairly continuous conversations for the last two years with First Nations in Canada, and the native corporations and tribes here in Alaska.

I'm not going to speak for them. Frankly, what we've said is if you do speak to this project... some of the questions you might have, I mean this is a ten mile wide corridor, "Does it go through my aunt's clothesline?" I don't know. "Does it go through a village site?" I don't want it to.

If you change the route here to go to one side or the other, a corridor, it has impact something up and down the line. And that's the process that HDR is planning to do during the FID process with us. Our promise to all of the communities along the route is transparency and involvement, and understanding on the decision-making here. We've just said we're not going to get to that half-billion dollar threshold until we get some of these key permits out of the way.

Mead, like the whole proposal, assuming the numbers work out, there's more a tendency to be a little optimistic, maybe, about those numbers? At any rate, I was somewhat dismayed when I heard that you persuaded somebody to get the President to issue an order that he's in charge of all projects that go across international lines. That sort of flies right into the current battle going on Congress, and the President over the reach of executive power. If it's crossing that line, get consent of the Senate, and it's constitutional, so I wonder how you see this working out in the Congress.

By the way, my friend John introduced himself as a former many things, but he is a former Attorney-General of Alaska, and knows his subject well in which he just asked.

I'm not a lawyer, so let me try to give you the best layman's answer. The constitution says the President handles foreign policy, though there's also some things that says Congress certainly handles the resources. There has never been an act of Congress requiring a border crossing permit. There has never been any objective criteria established in law on what a border crossing permit should say. There had been a process at the federal power commission under the law, and Lyndon Johnson trying to centralize government, said "I am going to make all border crossings, whether they're wires, sidewalks, bridges, railroads, pipelines, roads, gas lines. I'm going to make all border crossings subject to a presidential permit." George W. Bush moved that process under a couple of executive orders to the State Department.

All is still going well. If we go to the economic desk at the State Department, they would pull other agencies. If this weren't Canada, but North Korea for example, we might say "No, we probably don't want to have too much of the world's energy going through a jurisdiction that might shut us down." Those are the foreign policy questions that were intended by the presidential permit.

President Obama, for whatever reason, and I can guess his reasons had to do with some of the things that we just heard, said "Nope, I want to turn this into an entire referendum on whether or not this project should happen." So if you might not have liked a decision made by the Corps of Engineers on a culvert crossing here, you could go to the State Department and say "Don't do it!" And there have been several of these cases, and the President looked at it and said "This wasn't an act of Congress. This was checking with me, the Chief Executive, to see if building a crossing of a border conflicts with our foreign policy." And that's what he's returned it to, he said "Send the application to the State Department. State Department has 60 days to run an inter-agency process, deliver it to the White House, and we have (I think it was) 30-40 days to render a decision."

So he has taken something that had telescoped into, and you understand in permitting, every single permit that happens in a federal agency, or VIS process, is subject to judicial review. A presidential decision is not subject to that kind of judicial review, and he cut that permit out of judicial review, but everything else, every other issue that were going to have on this, with the surface transportation board, will be subject to judicial review anyway.

Ask the Alaska railroad as they went through a very expensive permitting process to build a bridge across the Tanana river. The STB was not unanimous in giving us the right to put a bridge in and serve our military & training zones today. We don't expect everything to be slam-dunk, we just believe that this one permit, because there is no criteria, you can't go into the court and say "This is how many parts per million was allowed as an effluent, and this is how we're going to get there." There's no objective criteria whatsoever to argue about in a court; does the President want it, or not? So that's what the President did, was brought that process back to the White House.

Mead, how about passenger traffic? From Anchorage through Fort Nelson to Seattle by the existing railroad, is there a plan to have passenger traffic? With new railroad stations?

We will be, right away, a common carrier railroad, like the Alaskan railroad, like others. And the answer is, if it's economic for the railroad to do it, they would certainly look at it. We haven't seen the economics as fundamental to the project, but they are certainly an opportunity. You know as a kid I got interested in railroads, I did my master's project at Harvard on the Alaskan railroad, and tourism passenger traffic is very important. My mother wanted to take the train from Florida to California, and she had to go to Chicago to do that. Regular passenger traffic is not like how I used in Japan very frequently, but tourism passenger traffic is certainly an option for this railroad.

Thank you very, very much, and I just want to say that we're very happy. And again I want to thank our partners. This is a staged project where we are trying to de-risk it, so that we can try it. And Alaskans, we try things! We've got the bones in the desert of some big projects that haven't worked, but we've had some others. This is a vision that Alaskans have had for some time, and I'm very, very glad we've got a sponsor who wants to pursue. Thank you very much!