ALASKA GOVERNOR MURKOWSKI AND YUKON PREMIER FENTIE

1. (SBU) Alaska State Governor Frank Murkowski and Yukon
Territory Premier Dennis Fentie held two days of meetings in
Ottawa in late February to promote a proposed rail line to
link Alaska and Canada. Murkowski and Fentie jointly tried
to sell the project to Government of Canada (GOC) officials,
including Prime Minister Paul Martin and Minister of
Transport Jean Lapierre. Murkowski and Fentie also explained
the rail proposal, dubbed "Rails to Resources," to Ambassador
Cellucci and visiting Secretary of Transportation Mineta.
They argued that economic benefits would accrue to both
Alaska and the Yukon Territory from expansion of railroad
infrastructure that could further development of natural gas,
mineral, and timber exports to the Lower 48. The GOC appears
willing to participate in a feasibility study of the rail
project but is not inclined to participate in a formal
binational commission. Post will attempt to precisely gauge
GOC interest. End summary.



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RAILS TO RESOURCES:


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2. (U) The proposal for a link between the Alaskan and
Canadian rail systems has been under consideration for
several years. The Rails to Resources Act, enacted by
Congress in December of 2000, was sponsored by then-Senator
Murkowski. It authorized the establishment of a Joint
Binational Commission, staffed equally by Americans and
Canadians, tasked with studying the feasibility of the
proposed rail project that would link the Alaskan rail system
with that of the Yukon and continue on through British
Columbia's railroad and into Washington State. The project
would require construction of some 1,200 miles of railroad
from the end of Alaska's rail terminus near Fairbanks to
Canadian spurs at either Fort Nelson or Fort St. James.



3. (SBU) The Rails to Resources Bill authorized $6 million
to fund U.S. participation in the Commission; it was expected
that Canada would fund an equal amount. (Note:
Subsequently, Congress appropriated only $2 million, not $6
million, for the work of the Commission, but that money has
since been transferred to the University of Alaska for
engineering work on the Alaskan portion of the railroad. End
note.) Over the past five years the GOC has been reluctant
to make a commitment to Rails to Resources. This lack of
enthusiasm appears to stem from concerns that the rail
project would be excessively expensive with doubtful economic
benefits, as well as uncertainties about the eligibility of
this type of binational commission for Canadian federal
funding.



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MAKING THE PITCH IN THE CAPITAL:


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4. (SBU) The Governor and the Premier knocked on many doors
in Ottawa on February 23 and 24. Prime Minister Martin was
positive about the rail project, but did not offer any firm
commitments. Minister of Transport Lapierre indicated that
the GOC might be willing to participate in a joint
feasibility study, but he was not enthusiastic about Canada
joining a binational commission. As a necessary precursor to
a joint study, Lapierre said that Alaska and the Yukon
Territory should develop terms of reference for the study and
convey these to Washington and Ottawa. (Comment: In a later
bilateral meeting with his counterpart Minister of
Transportation Norman Mineta, Minister Lapierre again
indicated a willingness to consider the feasibility study,
but he was not keen on the notion of a binational commission.
End comment.)



5. (SBU) Governor Murkowski and Premier Fentie also had a
separate meeting with Secretary Mineta, who was in Ottawa to
address an aviation conference. The Governor told the
Secretary that Minister Lapierre was agreeable to joining the

SIPDIS
feasibility study for the railroad. He mentioned to the
Secretary the $6 million which Congress had authorized for

SIPDIS
the work of the Joint Binational Commission. Murkowski and
Fentie explained the excellent cooperative relations between
Alaska and the Yukon Territory, and described how the
resource riches of their adjacent economies could be opened
up and exploited by construction of the railroad. The
railroad's proposed new corridor would pass through untapped
mineral reserves (gold, silver, lead, zinc), as well as large
tracts of forest with marketable timber. Murkowski and
Fentie also described, as they had at their other meetings in
Ottawa (reftel), the vast gas resources that the railroad
would help to open up: 35 trillion cubic feet (tcf) in
Alaska and as much as 20 tcf in the Yukon. Murkowski told
Secretary Mineta that he and the Premier are "waiting for the

SIPDIS
Canadians now" for approval of both the railroad and a gas
pipeline.



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COMMENT:


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6. (SBU) The Embassy and the Department have not received
any recent formal communication from the GOC regarding its
wishes or intentions concerning the Rails to Resources
feasibility study. We understand from Minister Lapierre's
staff that the GOC is waiting to receive the terms of
reference for the study from Premier Fentie. Transport
Canada indicated this week that it is also interested in
reviewing cost estimates for the railroad. (During their
Ottawa meetings, the Governor's principal railroad advisor
dropped the figure of $3 million per mile.) At the present
time, there appears to be little interest in staffing or
spending for a Joint Binational Commission. We will follow
up with Transport Canada to determine the current Canadian
position on the feasibility study for the Rails to Resources
project.



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