(a) Subject to (b) of this section, the department may contract in accordance with AS 36.30 for the construction of a secondary highway from the Yukon River to the Arctic Ocean. The provisions of AS 36.10 govern in employment practices on all work authorized by this chapter.

(b) The authority granted under (a) of this section may not be exercised until the state enters into a contract with the participants in the Trans Alaska Pipeline System or other organization formed for the purpose of transporting oil by pipeline from the North Slope (that area of Alaska lying north of 68 degrees latitude). The contract shall provide for reimbursement to the state by the participants, jointly and severally, in the Trans Alaska Pipeline System or other organization formed for the purpose of transporting oil by pipeline, of the full amount of the highway's cost of construction plus interest on the state's expenditures at the rate of seven and one-half percent per year. Complete reimbursement together with interest shall be made within five years from the date of the contract. The state may, with the agreement of the participants, elect to construct an oil pipeline from the North Slope. In that event, the provisions of this subsection requiring reimbursement do not apply.

(c) The contract with the participants must include additional terms and conditions that are in the best interests of the state. Any advance payments made under the contract shall be deposited in a special account which will be used for disbursements to the contractor charged with construction of the highway. Disbursements to the contractor shall be made on order of the commissioner of transportation and public facilities on presentation of a proper voucher or the presentation of a voucher by an employee of the department authorized in writing to certify as to such payment.