Alaska ferry system sees $1B worth of opportunity in infrastructure bill

Alaska appears to be in prime position to capture well more than $1 billion in federal funding for ferries that many stakeholders hope is the catalyst for long-sought change in the Alaska Marine Highway System and elsewhere.

The $1 trillion Infrastructure Investment and Jobs Act signed in November by President Joe Biden establishes new national programs and boosts existing funding to collectively offer nearly $1.6 billion in ferry-specific funding, according to information from the office of Alaska Republican Sen. Lisa Murkowski, who was among a group of 10 senators who negotiated the framework of the bill with the White House.

As it turns out, the lion’s share of that $1.6 billion is likely headed to Alaska over the next five years due to the specific language of the provisions. Though it’s not a foregone conclusion all of the money that flows to Alaska will go to the Alaska Marine Highway System, it represents the opportunity for a sharp turnaround from the constant pressures that budget cuts and an aging fleet have put on the state’s ferry system.

Less than two years ago, 10 of the then-12 Alaska Marine Highway ferries were laid up for repairs or lack of funding with little prospect of significant changes.

“There’s basically a billion dollars set aside for the next five years,” said Robert Venables, executive director of Southeast Conference, a community development group. “It’s historic and game-changing if we use it wisely.”

Venables was also the longtime chair of the state’s Marine Transportation Advisory Board, which sunset last year and was replaced by the newly formed Alaska Marine Highway Operations Board.

Most of the overall $1.6 billion will go to a new program aimed at improving rural ferry service nationwide. The program will provide $1 billion spread over five years to eligible rural ferry systems that operated between 2015 and 2020, according to the bill. The catch is that the money is only available for rural ferry routes over 50 miles in length, of which Alaska has many and other states very few, staffers to Alaska’s congressional delegation noted.

A program to fund pilot project electric or low-emitting ferries also provides up to $250 million for those endeavors across the country, but a provision in the bill requires at least one of those pilot tests be conducted in the state with the most qualifying marine highway system miles — Alaska.

The state is also set to receive $73 million from $342 million in grants aimed at ferry vessel and terminal construction through an existing capital program, according to Murkowski’s office.

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For context, the Alaska Marine Highway System has had an annual operating budget of roughly $140 million in recent years.

Alaska Department of Transportation Commissioner Ryan Anderson said the state will be “aggressive” in its pursuit of the available ferry funds but added that DOT officials would also welcome partnering with communities on local ferry projects where appropriate.

“We’re going to really be looking hard at how all this can fit together because we want to make the most of all of those funds,” Anderson said in a December interview.

According to delegation staffers, the new programs should be established by Oct. 1, the end of the federal fiscal year, but the final timelines will depend on agency rule-making procedures. Regardless, the state is starting to use other supplemented capital funds more quickly available from the infrastructure bill to replace the 57-year-old Tustumena ferry that serves Southcentral and Southwest Alaska communities on some of the longest, harshest runs in the system.

The $200 million-$250 million Tustumena replacement vessel has been designed since 2016 but construction of the 330-foot ferry had been on hold as Alaska struggled to deal with ongoing budget deficits.

Anderson said a 30%-40% increase in annual federal highway capital funds to the state — approximately another $1 billion over five years — because of the infrastructure bill made now the time to move on the new ferry.

“People want us to think generational; do those things that are good for the long term of Alaska. This would be one of those things. Replacing a ship is generational,” Anderson said.

The Tustumena replacement is just one instance in which Anderson believes the state will be able to leverage the new federal funds to invest in ferry systems along much of Alaska’s coastline. As for AMHS-specific investments, he said he expects to lean heavily on the new operations board, which is expected to hold its first meeting soon, for strategic direction.

“DOT participates but really this board is going to be integral in the decision-making process,” Anderson said.

Another key provision allows federal highway money formerly restricted to capital projects on roads and ferries to be used for ferry operations, which has been at the center of the debates between Dunleavy and legislators over the AMHS budget.

Venables said he and other coastal community leaders are concerned politics will cause much of the ferry money to be used for short-term budget fixes instead of forward-looking investments.

“There’s an unprecedented amount of funding available to the Marine Highway System, but it needs to go toward the new Marine Highway System, not the old concepts and models of the last 50 years,” Venables said.

[Dunleavy administration unveils 5-year plan to replace aging Tustumena ferry with new vessel]

Dunleavy’s proposed budget relies on ferry revenue and federal funding for all but $5 million of the $141 million AMHS operating budget for next fiscal year.

Cordova Mayor Clay Koplin, an outspoken advocate for changing and investing in the state’s ferries, said he’s skeptical the funding will lead to significant improvements in ferry service and reliability unless bigger, structural changes are made to the system’s governance.

Many AMHS stakeholders have long said the current state agency structure does not work for the ferry system because it injects political uncertainty that prevents the long-term planning needed to improve the operations and economics of the state’s ferries.

“Every time the (state) administration flips you repeat the cycle. I hate to say it but I’m somewhat pessimistic that we’re going to see real change going forward,” Koplin said of the Alaska Marine Highway System.

Anderson emphasized that he wants to do his part to improve Alaska’s ferries given the opportunities about to arrive.

“The Marine Highway System is another unique piece of Alaska that is necessary,” he said. “It’s a part of the highway system that needs to be taken care of.”

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.