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Lawmakers asking for alternative solutions to natural gas trucking plan

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Posted: Friday, April 5, 2013 12:04 am

JUNEAU — With legislation backing the Fairbanks natural gas trucking project near the finish line, some lawmakers are asking about the alternatives.

The question came from Rep. Lindsey Holmes, R-Anchorage, during a Thursday morning House Finance Committee meeting on legislation that would put $355 million of low-interest loans, bonds, grants and tax credits behind a project to bring North Slope liquefied natural gas and propane to Fairbanks starting in 2015.

“Is this going to provide more affordable gas to the Interior than an alternative of importing LNG and either trucking or railing it up to the Interior?” Holmes asked. “If the goal is to get affordable energy to an area that is really distressed, is this a more affordable option than the alternative?”

Her question is similar to one asked by other legislators throughout the session: If Southcentral is going to import liquified natural gas to back up a Cook Inlet shortage, why spend $355 million to bring gas down from the North Slope?

Supporters of North Slope gas say imported gas is expected to be expensive, although the numbers are vague.

The Fairbanks trucking project, conversely, has been explored in detail. The state administration’s numbers put natural gas into Fairbanks homes at anywhere from $13 to $17 per million Btu, equivalent to $2 per gallon oil.

There’s no publicly available dollar figure of what it would cost to import natural gas, truck it to Fairbanks and distribute it. Most importantly to Fairbanks lawmakers, there’s no estimate of what it would cost consumers.

That’s a problem, Alaska Energy Authority Executive Director Sara Fisher-Goad explained. She told Holmes that “we don’t have anything to model” for an alternative.

“I haven’t seen any definition around an LNG import project or if it will ever happen,” said Fairbanks Natural Gas President and CEO Dan Britton, who is one of the key figures pursuing the trucking project.

FNG has been shipping Cook Inlet gas to its customers in Fairbanks for years, with a delivered cost north of $20 per unit. Britton said he has worked to expand that source, but has been met with dead-ends as Southcentral utilities fretted over dwindling Cook Inlet supplies.

Britton said his company has looked at alternatives, and he believes trucking imported gas is something Fairbanks can’t count on to be fast, cheap or dependable.

“There’s been a lot of review on alternatives, but none of them have been sustainable or have a definitive outcome,” he said. “There have been no real definitive numbers of LNG supply. I have heard it will get landed Cook Inlet as low as $12, but how is it stored, how is it processed and how is it transported?”

Gas traditionally costs between $6 to $7 in Anchorage. The $12 figure, he said, could be at the mercy of volatile world markets.

“What happens is it puts Fairbanks in the backseat, too, if a project ever happens,” he said.

John Sims, spokesman for Southcentral gas utility Enstar, said the utility is still deciding whether it will go ahead with plans to import LNG to make up for an expected shortfall. A new gas discovery could shelve an import project indefinitely.

And while Enstar works through that determination, he agreed with Britton that imported gas will be more expensive.

“The actual driver would be the price of the commodity,” he said about bringing gas to Fairbanks. “The big question is the cost of the commodity, and it would more than likely be more than what they’re currently paying.”  In addition to higher costs, Britton said, importing LNG also has other drawbacks. One of the secondary benefits of the trucking plan has been its production of propane, which could serve rural homes that will never be on a natural gas system. That’s not possible with imported gas, Britton said.

“Importing LNG — if that does happen — wouldn’t bring any of those alternative scenarios, and again that could be something that could or couldn’t happen,” he said.

Still, the discussion moving forward will likely hinge on the Legislature’s definition of “affordable.” Will it look for a project that requires the state to write the smallest check? Or will it back a project that delivers consumers the smallest utility bill?

Alaska Energy Authority spokeswoman Emily Ford said the state’s goal has been and will continue to be to lower utility bills.

“We started out with the price point and that was the driving motivator for the project,” she said of a community request for $15 gas. “We started with that price point and built a project around there.”

The $355 million, most of which is loans or bonds, also still requires a sizable private sector investment to complete the North Slope processing facility, buy trucks, build storage facilities and lay pipes.

She said the major advantages of the project have been the private industry buy-in of utilities such as FNG and Golden Valley Electric Association, which bring long-term gas contracts to the table.

When asked if the state has considered alternatives, she said it’s continually working through the review of the project. Even if the legislation passes, she said, the project isn’t guaranteed.

“The project has a foundation,” she said, but added that the state “will be doing extensive due diligence work. The money won’t be spent if the project isn’t viable or if there are more viable alternatives.”

Contact staff writer Matt Buxton at 459-7544 and follow him on Twitter: @FDNMpolitics.

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