Alaska moves forward with plans for LNG plant to provide power to interior

By Greg Grisolano, Land Line staff writer | 8/1/2013

The state of Alaska is moving forward with a plan to not only build a liquefied natural gas plant in the North Slope, but also truck the fuel overland to communities in the interior.

The plan calls for the 9 billion-cubic-foot plant to be providing power to the community of Fairbanks by late 2015 at a cost of $14.09 to $17.09 per thousand cubic feet to residents and businesses, according to a press release from the Alaska Industrial Development and Export Authority.

The Interior Energy Project was introduced by Gov. Sean Parnell during the 28th legislative session to provide financing for an affordable energy project specific to the Interior of Alaska. The state legislature passed the measure in April. The Interior Energy Project proposes to produce LNG on the North Slope and transport it initially to a natural gas distribution system in the Fairbanks North Star Borough. The project also proposes to use some of the fuel from the plant to serve industrial and transportation customers in interior Alaska.

The plant would ship 300,000 gallons of LNG per day roughly 500 miles by truck to Fairbanks, for use in space heating and power generation. The fuel represents about 50 truckloads per day.

A July 29 report by Platts, an energy and petrochemicals information firm, stated that the borough of Fairbanks has raised concerns because the fuel shipments would increase truck traffic on the Dalton Highway, a gravel industrial road serving the North Slope, by about 50 percent.

Financing for the proposal is expected to come from both public and private sources. The state legislature has approved financing for the plant of $57.5 million in general fund appropriations plus an addition $125 million in low-interest loans through the Sustainable Energy Transmission and Supply development fund. The plan also includes private financing of around $33 million.

The full price tag of the plant could be as much as $207 million, according to the Platts report, which says the state would invest in and own part of the plant, “possibly as much as two-thirds.”

“In addition, the state would also help finance development of LNG storage and a gas distribution system in Fairbanks with $150 million in loans and $30 million in tax credits for a storage facility,” the report stated. “The entire state finance package, including cash investment, low-interest loans and tax credits approved by the Legislature last spring, totals $355 million.”

A spokesman for the Alaska Industrial Development and Export Authority said the agency is currently reviewing four proposals: two from public utilities in the interior, and two more from private utilities firms. The agency also referred questions on highway improvements to the state’s Department of Transportation and Public Facilities.

About a third of the households and buildings in Fairbanks use wood heat as a main or supplemental heat source due to high oil prices, and the particulates in wood smoke combined with those from burning heating oil combine to create dense pockets of polluted air, according to the state Department of Environmental Conservation. The Environmental Protection Agency has classified Fairbanks as a non-attainment area, and penalties including cuts to funds for federal projects will kick in unless the community develops a plan to deal with its air quality problem.

The feasibility report commissioned by the Alaska Industrial Development and Export Authority is available here.

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