Flap over US-produced steel casts shadow over Alaska ferry project on Canadian soil

JUNEAU, Alaska — A U.S. requirement that American steel be used to update an Alaska ferry terminal is causing some tension with Canadian officials, potentially threatening the project.

The terminal is on Canadian soil, in British Columbia, but the land is leased to the state of Alaska. Under a 50-year lease signed last year, the state is to rebuild the terminal facilities and docking structure on that land.

The vast majority of funding for the construction work is expected to come from the Federal Highway Administration, which has "Buy America" requirements for steel, iron and manufactured products used in projects it funds. The rest of the funding would come from the state.

The requirement for materials produced in the U.S. can be waived in some circumstances, such as when use of domestic material would raise costs by more than 25 percent, U.S. products are in limited quantity, or their use "would be inconsistent with the public interest."

In a letter to Alaska Gov. Bill Walker this month, Gary Doer, the Canadian ambassador to the U.S., said applying Buy America restrictions to a project on Canadian soil is unacceptable.

"More broadly, Buy America policies run counter to the economic interests of both the U.S. and Canada, as they deny our companies and communities the clear benefits that arise from our integrated supply chains," Doer wrote. "In these tough economic times, Canada and Alaska should be working together to make the best use of taxpayer dollars and allow this project to benefit from unfettered access to the North American procurement market."

One option to resolve the issue would be a public interest waiver, Doer said.

The bid opening for the project has been pushed to Jan. 6 to allow more time to reach a possible resolution.

Reuben Yost, a deputy commissioner with the Alaska Department of Transportation and Public Facilities, said the department doesn't have experience with the kind of waiver Doer suggested. Before the department would make an application, it would want to hear from the U.S. Transportation Department whether such a waiver could be successful, he said.

The Canadian government has threatened to block the project if the state proceeds under the Buy America specifications, Yost said Wednesday. Asked if the state could lose the lease, Yost said the state isn't contemplating that yet.

The state paid about $3.3 million for the lease, department spokesman Jeremy Woodrow said.

The port at Prince Rupert, British Columbia, is part of the Alaska Marine Highway System and serves as a link between Alaska and the Lower 48 that can be more convenient for some travelers to Alaska than the port in Bellingham, Washington.

Teresa Wat, minister of international trade for British Columbia, said provincial officials do not agree with Buy America policies. Excluding British Columbia metal suppliers from work on Canadian soil "is a particularly egregious example of this discriminatory procurement practice," she said in a statement.

Waiving the restriction is important to the province "because we believe in free trade and equal opportunity, and we encourage everyone to adhere to that spirit," she said.

Patricia Eckert, associate director for international trade within the governor's office, said the state wants to explore "every option that's out there," but she did not get into what those might be.

"The postponement is evidence that there is still a good talking relationship between Alaska, the U.S. Department of Transportation and Canadian officials," she said.

The project is estimated at between $10 million and $20 million. While the state could fund the project itself to avoid the federal requirements, Yost said that given Alaska's tight budget situation, that option isn't being seriously considered.