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Distributing North Slope gas challenging Enough gas exists to meet Alaska’s needs for decades, but at a cost; and getting gas to rural areas more difficult and costly yet Bill White Researcher/writer for the Office of the Federal Coordinator
Fairbanks: the cost of getting warm
Fairbanks North Star Borough residents currently are out in the cold when it comes to low-cost energy to heat their homes, stores and office buildings.
Mostly they burn fuel oil to generate heat, with the price chained to today’s high oil prices — the highest winter prices ever for Alaska North Slope oil.
Fuel oil cost about $27.67 per million Btu of energy (or $3.84 a gallon) during the just-ended winter, according to a preliminary study for the borough released in February. (The price this spring was over $4 a gallon, but for this article we’ve stuck with the $3.84 used in the new study.)
Fairbanks lies far off the natural gas grid built for Anchorage and other communities near Alaska’s Cook Inlet fields to the south. About 1,100 customers in Fairbanks — mostly commercial accounts — burn natural gas that a distributor purchases from Cook Inlet producers, superchills into liquefied natural gas for ease of transport, then trucks 300 miles to town. Of roughly 25,000 homes in the borough, fewer than 500 burn gas, the preliminary study by Northern Economics found.
All that handling and the small economies of scale make delivered natural gas pricey for Fairbanks consumers — $23.35 per million Btu, compared with about $8.60 in Anchorage and a similar price in the Lower 48. But $23.35 looks attractive compared with heating oil prices — Fairbanks households would save an average of $820 a year if they were burning gas at $23.35 rather than oil at $27.67, the study estimated.
If the delivered cost could be slashed to $14 per million Btu through mass conversions to gas heating, economies of scale and other efficiencies, the average household savings would approach $2,600 a year, the study found.
Fairbanks-wide, the heating-cost savings for all users, not just households, would total $114 million a year at today’s oil and gas prices, or $238 million if the delivered gas price were $14 and today’s high oil prices lingered, the report said.
The North Pole Expansion Plant currently runs on naphtha, but could be converted to natural gas.
The report also noted additional savings in electricity bills if a Golden Valley Electric Association turbine in North Pole that now burns a costly oil-based fuel called naphtha switched to natural gas. But it did not quantify the potential savings to consumers.
A 2009 study for the Alaska Natural Gas Development Authority pegged the potential annual savings to Golden Valley in the low millions of dollars a year if it switched from naphtha to propane extracted from North Slope natural gas. Last year, Golden Valley began investigating how much it might save if it switched to LNG trucked from Prudhoe Bay; its rough estimate is that its fuel savings would reach as much as about $20 million a year at today’s oil price of about $120 a barrel.
A billion-dollar build out? Piping natural gas to Fairbanks homes and businesses would be an expensive undertaking, according to estimates collected from a variety of studies and reports.
Someone would need to snake a network of gas pipelines through town to individual furnaces.
In a sense, the network would resemble a road system. The big North Slope gas line through Alaska would be the freeway. Gas would exit that line into a multimillion-dollar lateral pipe that would channel gas to Fairbanks (think of this pipe as a four-lane highway, as opposed to an interstate freeway). Once in Fairbanks the gas would enter transmission lines that would route gas to different parts of town (like main streets routing traffic), then into feeder pipes (neighborhood feeder streets), then distribution lines (neighborhood streets) and finally service lines to houses and buildings (driveways).
No one has definitively nailed down the cost of such a system. But rough estimates put the total cost at possibly $580 million to $930 million for infrastructure to handle gas after it leaves an Alaska gas pipeline somewhere outside of Fairbanks. That price range is obtained by combining estimates from two studies released in the past 12 months. Consider the cost range to be soft.
Here’s how that cost breaks down:
Delivering gas to Fairbanks From a North Slope methane and gas-liquids pipeline
$210 million • Straddle plant
$60 million • Spur pipeline
$309-$662M • Gas pipelines within town
$25-$200 million? • Conversion of homes to use natural gas
Sources: Northern Economics; Alaska Gasline Development Corp.
$210 million This is an estimated cost of a straddle plant alongside a big gas trunkline.
The plant would solve two problems:
• Gas in the big line would be under high pressure, and that pressure must be reduced.
• Gas in the big line would contain a blend of ethane, propane, butane and other natural gas liquids besides the main component, methane, which is the gas burned in furnaces.
Gas in the big pipeline would be compressed to a potent 2,500 pounds per square inch, or psi, to propel the molecules through the pipe.
But methane when it passes a home’s gas meter is pressurized to as little as a lazy quarter-pound psi, less than the pressure exerted when a child blows bubbles into a glass of milk through a straw.
So a lot of decompressing needs to happen along the way.
Much of the decompression would occur at the straddle plant.
This plant also would extract propane and other liquids so that just methane would flow toward the Fairbanks users. The extracted liquids then would get reinjected into the main pipeline flow, unless an industry sprouted there that could process and sell the liquids.
The Alaska Gasline Development Corp. in July 2011 estimated that a straddle plant would cost about $210 million.
The plant likely would be located well outside of where most Fairbanks residents live. Development is restricted in the Fairbanks core because of poor air quality, especially during winter’s cold-weather inversions as oil, coal and even wood are burned for fuel.
Cleaner air would be a welcome bonus of piping natural gas to Fairbanks. The February 2012 Northern Economics preliminary report says widespread use of natural gas rather than oil or coal would cleanse Fairbanks air now dirtied by particulate matter — soot, smoke and such — as well as carbon monoxide, nitrogen oxide and sulfur dioxide.
$60 million This is a rough cost estimate for a 35-mile pipeline connecting the straddle plant to town.
The estimate also comes from the July 2011 Alaska Gasline Development Corp. report. The report said the gas would be pressurized at 1,400 psi within a 12-inch-diameter pipe.
$309 million to $662 million This is the estimated cost range for a pipeline network within Fairbanks.
The Northern Economics preliminary study figured Fairbanks would need 111 miles of 8- to 10-inch transmission pipe, 118 miles of 6-inch feeder lines, 804 miles of 2-inch distribution lines and 325 miles of 5/8-inch to 1-inch service lines (the smaller diameter for houses, the larger for businesses).
Fairbanks also would need nine pressure-regulating stations – stops along the pipeline network where the gas pressure gets reduced.
Separately, Fairbanks residents would need to convert their homes and businesses to gas systems. This would be expensive, too.
$25 million to $200 million or more?
This is a cost range for converting Fairbanks home water heating and furnace systems to natural gas. To be blunt about it: The wide range reflects imprecise cost estimates.
For hot-water boilers, Fairbanks Natural Gas, the local gas utility that trucks in LNG from the Cook Inlet area, estimates converting an oil-fired gun to a gas-fired gun costs $1,000 to $1,500.
The National Energy Technology Laboratory in 2006 pegged the cost in Fairbanks at $1,400 for replacing the burner to $3,000 for replacing the entire unit.
Changing out furnaces could be more pricey. The 2012 preliminary Northern Economics study estimated the furnace replacement cost at $8,000 to $15,000, depending on the extent of work needed. The authors said they will refine their cost estimates in their final report later this year, and they’re still investigating the cost of commercial-building conversions.
What price for Fairbanks gas? It’s unclear how much delivered gas would cost Fairbanks consumers.
The 2012 Northern Economics preliminary study said, “It is too soon to develop preliminary distribution costs. ... As the project evolves, the number of miles of pipeline and prospective connections per segment will generate preliminary distribution costs.”
Among other variables, the cost would depend on who paid for the infrastructure, how many customers signed up, where they live and how quickly gas became the fuel of choice in Fairbanks.
There’s some sentiment in Fairbanks to ask the state for money to build a local gas pipeline network. Separately, the Alaska Legislature has considered a measure to create a state loan fund to help Fairbanks homeowners convert their heating systems to natural gas.
Please see part 1 of this story in the May 6 issue and part 3 in the May 20 issue.
Editor’s note: This is a reprint from the Office of the Federal Coordinator, Alaska Natural Gas Transportation Projects, online at www.arcticgas.gov/challenges-distributing-north-slope-gas-alaskans.
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