Alaska Interior looks to import gas

Wesley Loy

For Petroleum News

Business and political leaders in Fairbanks would love to increase natural gas supplies to their region.

But location is unkind to Fairbanks, which is situated in Alaska’s vast Interior hundreds of miles from both the fabulous gas reserves of the North Slope and the Cook Inlet gas fields to the south.

Fairbanks interests, however, are actively seeking ways to bring in gas and curtail the burning of fuel oil, coal and wood, which is causing a serious local pollution problem attracting the attention of the U.S. Environmental Protection Agency.

These interests soon could have a decent chunk of state money to pursue their goal.

The Alaska Legislature included $500,000 in the state capital budget for the Fairbanks North Star Borough to conduct a “natural gas distribution study.”

The question now is whether the funding stays in the budget, which is now on Gov. Sean Parnell’s desk. The governor has veto power over items in the budget.

According to a legislative summary, the borough grant would pay for two projects.

The first project is “a cost and design study for a natural gas distribution system for the Fairbanks North Star Borough.” This would involve preparing a conceptual system design, rate schedule, construction cost estimates and other work, the summary says.

The second project is “a feasibility and pre-due diligence study of a proposal to bring LNG gas to the Fairbanks region.” A contractor would “examine the business case for bringing LNG gas from the North Slope for distribution to Fairbanks commercial, industrial and residential users and financing that development with a loan of state funds.”

A local company, Fairbanks Natural Gas LLC, already trucks in liquefied natural gas from Cook Inlet to serve customers in the city of Fairbanks, the legislative summary says.

The study area won’t include the city and the Fairbanks Natural Gas service area. Rather, the aim is to determine costs and alternatives for providing gas to unserved parts of the borough, the summary says.

“The portion of the FNSB area to be considered for gas service has a population of about 47,500,” the legislative summary says. “Home heating is provided by a variety of energy sources including electricity, propane, fuel oil, wood, and coal. Consumer costs for these energy sources are comparably high. Local air quality is adversely affected by the usage of low quality fuel oil by the large commercial sites and the military bases, and by the abundant usage of wood and coal for home heating in the area.”

The borough says it wants to begin its study in late 2011 and compete it with a year.

People in Fairbanks long have hoped for construction of a large-diameter pipeline to produce North Slope gas. The pipeline would pass near Fairbanks and provide an opportunity to draw off gas for local use.

But the multibillion-dollar pipeline megaproject, high on the state’s wish list for decades, has yet to materialize.

The idea of trucking LNG down from the North Slope has gained considerable attention and favor in Fairbanks recently.

The Alaska Gasline Port Authority, a state-sanctioned organization teaming the Fairbanks North Star Borough and the city of Valdez, has proposed the trucking idea and a purchase of Fairbanks Natural Gas.

It’s unclear, however, whether any of the legislative grant would go to the port authority.