The Interior Gas Utility is weeks away from activating its massive natural gas storage tank in South Fairbanks and months away from being able to add hundreds, perhaps thousands, of new customers, according to the utility’s general manager.
In a major milestone for the borough-owned utility, the 5.25-million gallon tank will begin taking gas — trucked in liquid form from Point MacKenzie — in late November, the IGU announced earlier this week.
Filling the $60 million tank will take many months, or about 500 truck loads, IGU General Manager Dan Britton said. That will increase the utility’s capacity by about 50 percent with room for as many as 2,600 new residential customers, he said.
“We kind of call it the heart of the Interior Energy Project,” he said of the tank, which has been under construction since site preparation began in 2017.
“It facilitates the future expansion. It’s our first step to be able to begin adding customers again,” Britton said.
The company is compiling a waiting list over the winter of people interested in tying in to the natural gas network.
The cost to run a line to a home within 100 feet of a gas main is $225.
What about the price comparison and heat output of natural gas versus heating oil? The two are comparable in their price per heating output, measured in British thermal units, at today’s prices of $2.78 for heating oil and $20.81 for natural gas. The utility is hoping to have the price much lower eventually, however, to provide the financial incentive for people to convert to gas.
Britton said there are reasons other than price to change to natural gas.
Natural gas burns cleanly. Prices are more stable over time. Eligible residents of the Fairbanks North Star Borough willing to sign a deed restriction on their home can get up to $14,000 toward converting to natural gas. The fuel can be used on a variety of appliances including stoves and dryers.
“Over time, if oil prices go up, we will be stably priced,” Britton said. “Customers will enjoy those savings.”
Converting a furnace to burn natural gas can cost several thousand dollars. Converting a newer-model System 2000 boiler system from oil to gas, for example, is $3,000 to $5,000, according to an employee at one Fairbanks heating company.
A working group is assembling to develop more incentives for residents to tie in to the natural gas network, according to Britton.
One incentive in place now is through the borough wood stove changeout program. Residents who live in the federally recognized air pollution non-attainment area can apply for money to convert to natural gas so long as they are willing to give up a solid-fuel burning device, such as a wood stove or outdoor hydronic heater, and sign a deed restriction on such devices.
Borough Air Quality Manager Nick Czarnecki said residents can apply even if they used the wood stove changeout program to purchase the appliance they are planning to renounce. Eligible residents can get $10,000 to $14,000 to pay for a new heating system or convert to gas.
People who live in air pollution hot spots have priority for funding under the program, which is paid for with a grant from the U.S. Environmental Protection Agency.
About 50 new customers joined the natural gas network this year, according to Britton, but they won’t receive gas until next year after the new tank is filled.
The utility is able to expand its customer base under its current natural gas supply thanks to the added storage capacity, according to Britton.
Completion of the South Fairbanks storage tank by Jan. 1, 2020, qualifies the IGU to receive a state of Alaska Storage Tax Credit in the amount of $15 million, Britton said.
The utility is also working on getting more gas.
The company recently contracted with oil and gas consultant Mary Ann Pease, of Anchorage, who is being paid $5,000 a month and would receive up to $100,000 more upon securing a contract for natural gas at certain price points.
The IGU board of directors will be briefed about that effort at a board work session on Tuesday at 4 p.m. in the Key Bank building.
Britton said the board will hear about opportunities and challenges with respect to the search for inexpensive natural gas.
Work is underway on a new gas storage facility in North Pole.
The IGU signed a $1 million contract for dirt work at the storage site this week, the utility announced.
“Progress has not always been as smooth or as fast as we would have liked,” IGU Board Chair Steve Haagenson said in a prepared statement. “However, progress has been steady and always targeted to IGU’s stated mission, and the ground improvement for the North Pole LNG Storage Facility is another step along the path forward.”
Two tanks from the Fairbanks natural gas storage site are being recycled and used at the North Pole storage site, Britton said.
A request for proposals for construction at the North Pole site is expected to go out to bid in the next two weeks. The timeline for completing the storage facility is mid-to-late 2020.
“When that is done, then we can begin serving customers in North Pole,” Britton said.
About five years ago, the IGU added more than 100 miles of gas lines in neighborhoods around Fairbanks and North Pole.
The natural gas network in Fairbanks runs west from Hamilton Acres to neighborhoods around the Fairbanks International Airport and from Van Horn Road north to College Road.
In North Pole, the system runs from the Tanana River north, crossing the Richardson Highway to Hurst Road. The western boundary is just beyond Homestead Drive. The eastern boundary is just beyond Gordon Road.
Contact staff writer Amanda Bohman at 459-7545. Follow her on Twitter: @FDNMborough.