The Alaska Legislature voted to spend the funds to bring natural gas to Fairbanks by truck, not the long-awaited, multibillion-dollar pipeline. Still, the plan to convert North Slope natural gas to liquified natural gas for shipment down the Dalton Highway to Fairbanks.
The legislation that passed would enable the state-owned Alaska Industrial Development and Export Authority to issue bonds to finance construction of a plant to convert natural gas on the North Slope to LNG for transport. It would then be trucked down the Haul Road, and then regasified for distribution in Fairbanks. Total costs are estimated to up to $355 million. The project will only be available to those connected to the existing system or big users such as refiners, power plants or big box stores. The expansion of natural gas usage will enable further build-out of the distribution system so that when and if a pipeline arrives the city will be able to make use of it immediately.
The project is estimated to be up and running by mid - to - late 2015 and is expected to reduce the cost of heating in the Fairbanks area by about 40 -percent for those who convert from fuel oil to natural gas. Depending on a number of yet-to-be determined factors, with the largest being future gas and oil prices, legislators said they expected energy cost savings of about 40 percent.
The proposed North Slope LNG plant will also be capable of producing propane as a by-product of the liquefaction process. Early estimates indicate up to 5 percent of the plant output will be propane, totaling 10,000 gallons a day, which could serve up to 1,800 homes in the Interior and Rural Alaska. Two gas utilities are vying to build out the distribution system for Fairbanks. One is now serving a small core area of Fairbanks; the other is a newly-formed public utility that does not yet have pipe in the ground. The project is expected to deliver LNG for a wholesale price of about $10.15 per thousand cubic feet, or mcf, according to AIDEA’s preliminary estimates. That is expected to translate to a delivered retail price of gas in the Fairbanks area for $13.42 to $17 per mcf.
Alaskans have made a bold move to tackle their stranded gas problem for the immense North Slope deposit. The State’s investment is not that great in relation to the economic value of the reserves.
It does not seem likely that a large pipeline option will come to fruition anytime soon. The prices of natural gas in North America are just too low, to attract the tens of billions of dollars such an investment would require.