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GVEA natural gas trucking plan could start to cut power bills

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Posted: Sunday, April 1, 2012 10:55 pm | Updated: 1:50 pm, Wed Jan 16, 2013.

FAIRBANKS — Our legislators are considering plans to back the GVEA plan to truck natural gas to Fairbanks from the North Slope, which is the best option on the table for reducing electric rates and lowering the cost of heating.

With fuel oil priced at more than $4 per gallon, the need for more affordable energy in Interior Alaska is clear.

At today’s high oil prices, much of the money spent in our part of the state for energy is flowing indirectly into the state treasury, swelling the temporary state surplus by tens of millions of dollars. That is creating a significant economic drain in our region.

So with broad community support, lawmakers are looking at ways to lower our cost of energy, which is vital to the long-term future of Fairbanks.

The pipeline plans that have gained some measure of statewide support have two things in common—long lead times and costs in the billions of dollars.

The key thing is to get infrastructure in place that allows the community to begin to reduce its dependence on oil, the product that is boosting the state bank account and depleting the bank accounts of Alaskans.

The plan that GVEA is working on to truck natural gas to Fairbanks has many advantages and is gaining political and business support in Fairbanks because it is not nearly as expensive and it could be in operation by the end of 2014.

With state assistance on the order of $170 million to reduce construction costs, Fairbanks could get access to natural gas at a price that would be close to what people are paying in Cook Inlet, according to estimates provided to lawmakers by GVEA.

The estimated cost of LNG to GVEA would be in the range of $7.20 to $10 per thousand cubic feet. At present, Fairbanks Natural Gas is selling gas at $23 per thousand cubic feet.

No matter what happens with the various pipeline plans, the trucking plan is an option that carries relatlvely low risk and a quick payback.

It makes sense to do this through GVEA as that is the best way to assure that low-cost fuel would be passed onto consumers and the benefits would be the most widespread. GVEA is a not-for-profit utility and its rates are regulated by the Regulatory Commission of Alaska.

GVEA members alone could save $30 million to $40 million per year on electric rates if the utility is able to switch the North Pole turbine from oil to natural gas, which is substantially cheaper.

In five or six years, therefore, the 45,000 members in the electric cooperative would save what the grant would cost the state up front. But the benefits would go beyond those to GVEA.

Fairbanks Natural Gas, which has about 1,100 customers, would benefit from a much lower cost supply and would have the opportunity, as a customer of GVEA, to pass that savings to customers.

GVEA says it would provide fuel at cost to the gas company, which is the best way to benefit Fairbanks consumers.

The state can make sure the savings go to consumers by regulating FNG rates through the Regulatory Commission of Alaska. That should be a requirement.

The GVEA project would be of sufficient size to begin to create the infrastructure that would be needed for large-scale use of natural gas in the Fairbanks area. A future pipeline or an expanded trucking project are options as the system progresses.

The Flint Hills Refinery would benefit to the extent that it would get lower electric rates from GVEA and have access to lower-cost fuel to operate the refinery. Flint Hills would be financing close to $90 million of the project costs with its own money. In exchange for that commitment, the refinery would get a lower-cost fuel source to operate the refinery instead of high-priced crude oil.

Flint Hills would be an industrial anchor of the project and its participation would lower the cost and is critical to making this arrangement work.

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