While a gas pipeline from the North Slope could directly benefit communities along the line such as Fairbanks — or those in Southcentral via a spur line — providing access to natural gas for Alaska rural communities is a challenge.
It’s a challenge the Alaska Natural Gas Pipeline Authority has been looking at addressing with propane.
ANGDA Chief Executive Officer Harold Heinze told the authority’s board Dec. 18 that if you compare piped gas to propane, piped gas is more economic. “But in the case of most of Alaska, we’re not going to have the opportunity for a piped gas supply.”
If you could reach Alaska coastal and river communities with propane — in addition to those you could reach with a pipeline — “you in essence touch 99 percent of the population of Alaska,” he said.
“We’ve now made them part and parcel of the North Slope energy issues.”
A lot is known about the cost of pipeline transportation and the cost of extracting propane from gas.
“What we don’t know about is how, in a rural setting, we’re going to move the propane around,” specifically on the Yukon and Kuskokwim rivers, Heinze said.
He described a demonstration project that would get the authority a piece of information it doesn’t now have — the cost of providing propane to small rural communities on Alaska’s major river systems.
Yukon River propane plant
The long-term goal would be propane extraction from a line moving gas to market from the North Slope.
A mixture of propane and some ethane and butane could be separated as a liquid from a small side stream of the pipeline gas using a small gas plant, Heinze said in a paper describing the project. The cost would be modest, he said, and residue gas would be returned to the line.
The transportation cost for the gas would be low since the Yukon River is close to Prudhoe Bay — and “transportation cost is the dominant part of gas value,” he said, estimating that the Yukon River location would yield a 30 to 50 percent discount. Because rural Alaska now uses diesel, an oil-based and more expensive fuel, gas-based fuel — traditionally lower priced than oil — could provide a “significant opportunity for a new base energy price in rural Interior Alaska.”
What rural Interior Alaska faces now, he said, is a combination of high oil prices, “long tenuous transportation systems — basically you’re hauling it up from the mouth (of the rivers) and then you’re making deliveries to … communities that are not very big.” Add annual storage costs to that and the economics are not good, he said.
The propane would not replace diesel for all purposes: power plants may run on diesel. “On the other hand, why are you using diesel or electricity to heat hot water? That’s a natural task for propane,” Heinze said.
PND Inc. Consulting Engineers completed a feasibility study on propane distribution in coastal Alaska for the authority in August 2005. The report, available on the authority’s Web site (www.angda.state.ak.us/), focused on logistics, required infrastructure and economics of propane distribution in coastal Alaska. The study found that the most efficient method of distributing significant amounts of propane in rural Alaska would be through the expanded use of ISO propane containers.
Heinze said the PND study also found that “in almost every case (the report looked at eight communities around Alaska) … it was a better fuel for cooking and hot water heating, but not necessarily for home heating and certainly not for electricity.”
100 barrels per day for test
Heinze said the demonstration project would truck 100 barrels per day of propane from an existing Prudhoe Bay facility side stream to a wholesale propane facility at the Yukon River highway crossing point, which would also have “a multi-capability loading system at the river level.” There are “tens of thousands” of barrels per day of propane re-injected at Prudhoe Bay, he said, but if 100 bpd of propane could not be obtained from Prudhoe facilities, the North Pole Flint Hills refinery may be an alternate source of propane.
Heinze said when he talked to BP about the idea he wanted to get it on the table. “All I asked them to do was to think about it, in consultation with field operating people” who know the places where propane is fractionated, and “whether there were any side streams we could get to without creating major havoc or expense.”
He said he doesn’t want to have to construct a facility to get at the propane for this test. “Technically what I’m arguing is in the course of working with the gas and making miscible injectant and doing a number of different tasks, you end up with fractionated streams, one of which has got to look like the kind of propane I want. And just find it, drill a hole, put the valve in, and I’ll leave you alone,” he said.
Flint Hills is a fall back. “The front end of a refinery generally pops a little bit of propane out.”
Heinze said he didn’t know the exact situation at the Flint Hills refinery, “but 100 barrels a day out of that refinery might be doable,” although 100 bpd might also be a large part of the propane Flint Hills gets, while on the North Slope 50,000 to 60,000 bpd of propane is re-injected daily, so “asking for 100 barrels, this is not a big deal,” he said.
About 1/20th of what would be required for entire state
The 100 bpd of propane would be about a tenth of what would be required on the Yukon-Kuskokwim river system in the longer term, and maybe one-twentieth of what would be required in the state.
“The stakes we’re playing for are probably in the range of 5,000 to 10,000 barrels a day of propane statewide, so this is in that sense quite a small experiment,” Heinze said.
The experiment is designed “to tell us about the one thing we just don’t know much about: What does it cost to reach the smaller communities with propane?”
We know what it costs to move propane on the highway system and can get a handle on barging to communities, he said.
“The thing we don’t know anything about is how to reach hundreds of small villages up and down the Yukon River. And … what are they going to do with it, how are they going to distribute it in their communities and how much does all that cost?” Heinze said.
A few communities would be selected for the demonstration project and propane would be tested for a range of conversions from fuel oil (water heating and home heating) and reduction in electrical power demand (cooking, water heating and light).
Among the variables tested would be alternative local storage facilities, local distribution systems and appliance design, he said.
ANGDA would look for test sponsor
Heinze told the board that he doesn’t envision ANGDA paying for the project, although it could provide a little seed money “to just advance the definition of the project” and try to get it started. He said it would require $10 million to $15 million over several years to test, analyze and evaluate the feasibility and economic potential of a river-based propane distribution system.
Costs would include: subsidizing propane pricing at the Yukon to make it equivalent to costs when the main gas line feeds a small plant at the river; loans or grants to communities for propane transportation and storage facilities; loans or grants to participating consumers for home storage, piping, appliance conversion and new appliance purchase; and loans, grants or guarantees to participating distribution businesses.
Heinze said Nels Anderson, appointed by Gov. Frank Murkowski as Alaska energy advisor, has reviewed the project and “strongly embraced” it. The Denali Commission was interested in the proposal as part of its ongoing federal investment in rural energy.
He said he presented the proposal to BP — operator of the Prudhoe Bay field — and asked the company about the availability of a facility connection for propane loading to trucks and also presented it to the Association of Alaska Native Corporations Presidents and CEOs.
All interested parties would be involved
Heinze said he wants to meet with all interested parties and also thinks an informational hearing before the Alaska Legislature during this session “is essential if a program is to get under way in the summer of 2007.”
“I have every reason to believe that both rural legislators, the Native corporations and a number of the regional community organizations involved on the Yukon-Kuskokwim will really like this idea. They are caught in a horrible squeeze right now of the high fuel prices, very little relief potentially in sight and difficult logistical issues. … This is at least something that … offers hope,” he said.
Board Vice-Chairman Scott Heyworth said Heinze pitched the idea to Gov. Sarah Palin in early December and Heyworth thought the governor was interested.
Heinze said the idea didn’t get thrown out of the room in the meeting with the governor and he thinks the idea “will receive a very favorable hearing from the Legislature” and that there are “several major grantors of money” who would be interested in the project.
ANGDA wouldn’t run program
He said he does not envision ANGDA running this program, although it would remain involved, and might consider investment in key wholesale and transportation facilities.
Heinze reminded the board that in one of the propane studies ANGDA did, “we hit upon this idea of having transportation and storage vessels that were tanks that were the same size, shape, form basically as ISO containers, the inter-modal type containers that you find all over Alaska, scattered everywhere.”
The idea is that the tanks would go full to the community and be exchanged for the empties that would be taken away and refilled.
And those ISO containers could be made in Alaska, “anyplace that has a fabrication yard, even a small fabrication yard” because “it’s not high-pressure welding, it’s very low-pressure, steel-plate welding,” he said.
With a standardized design and fittings “you could make them all over Alaska” and there could be interest-free loans to start that business in the communities that make them.
Board Chairman Andy Warwick asked what it would take to kick the program off.
Heinze said it would take getting the interested parties together to hammer out the details so you can go after the needed money.
If people are really interested, “I have reason to believe there’s people out there that will take this idea and move it forward. I think we’ve got to go find them,” Heinze said.
