PALMER — The Mat-Su Borough has accepted $17.5 million in state money to work on a portion of a proposed rail extension to Port MacKenzie.

The grant, from the state Department of Commerce, Community and Economic Development, will go toward building a rail embankment traveling in a loop near the Borough’s port facilities, Borough Manager John Duffy said.

The loop will sit on land inside the Borough’s designated port district and is outside the scope of an environmental impact statement required for the rest of the rail line. The project is a joint effort between the Borough and the Alaska Railroad. Overall, the rail line is expected to cost $300 million in federal bonds and will connect the railroad’s main line, running north in roughly the same direction as the Parks Highway. The project includes a number of potential routes, with linkages to the railroad’s main line at different points between Meadow Lakes and a point north of Willow.

In essence, the Borough hopes the extension will allow for freight to move from ships at the port directly onto rail cars, allowing customers to benefit from savings by using trains instead of trucks. In theory, having a port that far up the railroad’s route could shorten overland routes for customers requiring material shipped in by sea to points north of Port MacKenzie.

The rail line could, the Borough believes, put Port MacKenzie in competition with Alaska ports such as Seward and Valdez.

The portion funded through the grant accepted this week will be a 3-mile loop at the end of the line allowing railcars to run up to the dock.

Tuesday, Duffy said the embankment will be built first. Later in the project rails will be installed atop it. In the meantime, the embankment will serve as a road to service port operations.

The money, according to the ordinance passed by the Borough assembly, would go toward finalizing an environmental review, preparation of bid documents, acquiring rights-of-way and design and construction contracts.

But before any loop can be built contractors will have to tame the landscape, Duffy said.

“There’s a huge ridge down there that needs to be dealt with,” he said.

Assembly discussion of accepting the money was, as is the case with most ordinance excepting grants, decidedly brief with a few questions asked about rights-of-way and area roads.

“We’re spending the state’s money on this?” asked Assemblyman Tom Kluberton.

“Yes,” Duffy replied.

“Perfect,” Kluberton said.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.