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AGDC gets mixed response in Fairbanks Residents voice support for in-state pipeline but cry foul over rates; Fauske says underlying message at meetings is ‘Get it done’ Stefan Milkowski For Petroleum News
Fairbanks residents turned out by the dozens October 6 for the latest in a series of community meetings hosted by the Alaska Stand Alone Pipeline project, the state-sponsored “bullet line” effort overseen by the Alaska Housing Finance Corp.
While generally supportive of the project, residents complained that aspects of it — mainly the expectation that natural gas would cost more in Fairbanks than in Anchorage — unfairly favored the state’s largest city.
“Anchorage has been getting a sweetheart deal for over 30 years while Fairbanks has been dying,” charged Laurel Sliney after AHFC CEO Dan Fauske offered a brief introduction to the project.
Fairbanks gas prices would drop from $23 per million Btu to $10, and you’re upset? Fauske asked the woman. “This is an incredible savings over what you’ve been paying.”
Fauske explained that Anchorage residents would likely pay less for gas because the capital cost of a straddle plant needed to process gas from the pipeline — estimated at $250 to $300 million — would be spread among many more customers in Anchorage than in Fairbanks. Anchorage residents could expect to pay $9.63 per million Btu delivered, while Fairbanks residents would pay $10.45.
Delivery to Anchorage and Fairbanks Fauske said the state could reduce shipping costs by about 50 cents per thousand cubic feet for each $1 billion it put into the project.
He added that the 2010 legislation driving the project, HB 369, clearly required that gas be delivered to Anchorage and Fairbanks. “This is a time when we as a people need to pull together,” he said.
Over the last six months, officials from the Alaska Gasline Development Corp., the AHFC subsidiary created to pursue the pipeline, have presented the project and heard from residents in more than a dozen communities around the state, from Barrow to Kenai.
About 85 local residents attended the Fairbanks meeting, including several state lawmakers. Project-related maps and posters were spread across the walls, including an artist’s rendering of a suspension bridge over the Yukon River. Attendees were treated to door prizes and a lavish spread of food.
Fauske: Message is ‘get it done’ In an interview after the Fairbanks meeting, Fauske, who is AGDC’s president, said he’s been to a few of the meetings, and that attendance has generally been good. Talkeetna residents were opposed at first, but became more supportive as they learned more about the project, he said.
If there was one underlying message from all the meetings, he said, it was, “Get it done.”
In July, AGDC completed a required project plan covering commercial, financial, engineering and permitting aspects of the project. The plan envisions a 737-mile, 24-inch pipe following the Dalton Highway to near Livengood, passing through Minto Flats, and then following the George Parks Highway south, ending at the Beluga Pipeline near Big Lake. A spur pipeline of about 35 miles would connect Fairbanks to the main line.
The project is expected to cost $7.5 billion, with first gas in 2018. The pipe would initially carry 500 million cubic feet of gas per day, but could be expanded to carry twice that amount.
In-state gas less than LNG Fauske said a large-scale pipeline like the one pursued by TransCanada and Exxon Mobil would be ideal, because it would also provide substantial state revenues. But he said he was aware of the strain caused by high energy prices and the need to get gas to Alaskans as soon as possible.
A smaller, in-state line would charge higher tariffs, but gas would still cost less than liquefied natural gas imported through Cook Inlet, Fauske said. “We do, in my opinion, have a solvable problem,” he said. “It’s just how we’re going to go about it.”
Fauske said initial talks with shippers suggest there will be interest for gas beyond residential and utility demand, something that would reduce per-unit tariffs.
He said it would take about $400 million in state funds to assess whether the project is viable and have enough information to put the project out to bid. AGDC has spent about $22 million so far.
Costs vary with route Questions were wide-ranging.
“What kind of pipe, and where’s it going to be made?” asked Jim Eddy, a retired pipefitter. Fauske replied that it was not his decision to make. The Legislature could stipulate that it be made in a certain place, but that would increase the cost, he said.
Sen. Joe Thomas said he was a “big supporter” of the in-state line, but worried that new drilling in Cook Inlet would satisfy demand there, and Anchorage residents would lose interest in a pipeline. Daryl Kleppin, the project’s commercial manager, replied with skepticism about the prospects of a big find in Cook Inlet. Fauske added later that the pipeline could “absolutely” be built upside down if gas were found in Cook Inlet.
Pamela Miller, who works at the Northern Alaska Environmental Center but spoke for herself, argued the pipeline should go through North Pole, where Golden Valley Electric Association power plants could use it — not bypass Fairbanks altogether.
AGDC Project Manager Dave Haugen said the alternate route will be considered in an environmental impact statement, but he cautioned that it’s considerably longer and therefore more expensive. AGDC officials explained after the hearing that the Parks Highway route would result in cheaper gas in Fairbanks — even with residents paying the cost of the spur line — because of the overall lower cost of the pipeline.
Biggest obstacle? “What is the biggest obstacle?” asked Shawn Lowry, business agent for Operating Engineers Local 302.
“Fairbanks hates Anchorage,” Fauske joked. “It’s the political will to come to an agreement that we’re going to do something,” he said.
Someone argued that distance-sensitive rates should make gas in Fairbanks cheaper. Someone else proposed charging the same price for gas in both cities.
After the hearing, Eddy, the pipefitter, said he could no longer afford to heat his two houses. “It’s our oil, it’s our gas. I think they should just be giving it to us,” he said.
Sliney said she doesn’t want the state to subsidize the project, but she’s okay with state ownership, because the state owns the resource. Regarding the effort to secure a large-scale pipeline through the Alaska Gasline Inducement Act, Sliney said, “I kind of think that was always a pipe dream.”
“The all-Alaska line might be the best,” she added.
Lowry said he’s ready to move forward. “The state needs to develop its resources.”
“I’m 1,000 percent for it,” said Lisa Peger.
Fauske said he would consider the feedback, but that it probably wouldn’t change AGDC’s approach. “That’s not to say we ignore it,” he said. “(But) I got a law I’m abiding by.”
“I’m going to get these two cities hugging before I’m done with this,” he added.
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