In terms of energy, the challenges facing Interior Alaska are numerous. Many companies and individuals are working to identify these complex issues and try to determine feasible solutions for Fairbanks and beyond. The solutions to these problems won’t come easy, but they are necessary for Alaska’s 2nd largest city. Fairbanks sees extreme cold during the winter and that cold comes with an extreme price tag for homeowners. Monthly expenses for heating can be upwards of $1200 during the coldest months of the year. Electric bills are also higher in the winter because power generation is mostly oil-fired.
One group that is working to find a solution to the problem is the Alaska Industrial Development and Export Authority (AIDEA). This summer, AIDEA’s board of directors approved $7 million for the purchase of long lead-time equipment for a North Slope natural gas liquefaction plant to serve and LNG trucking operation to Fairbanks. The state legislature approved state financing of $275 million for this project during the 2013 legislative session. Governor Parnell would like to see the “Interior Energy Project” ready by the end of 2015. AIDEA has received proposals from three organizations looking to work on the LNG plan; Golden Valley Electric Association (GVEA) and two private firms, Fairbanks Natural Gas LLC and Spectrum LNG. Each organization could potentially partner with AIDEA to assist in brining affordable heating solutions to interior Alaska.
A plant in full operation would allow about 50 trucks of LNG to be brought to Fairbanks on a daily basis. Some have expressed concern regarding the increased traffic along the Dalton Highway. However, it is estimated that because of the seasonal nature of energy demand, the plant would operate at 60% or less for part of the year. The summer months would have much less traffic than the high demand winter months.
AIDEA states that the assumed 9 billion cubic feet per year of gas converted to LNG will be used for space heating and not for power generation by Golden Valley Electric or by Flint Hills Resources. Given that GVEA has submitted a proposal to work with AIDEA, it is likely that they will also become a customer of the project. The plant at Prudhoe Bay can be expanded to accommodate the additional demand for LNG.
AIDEA conducted a feasibility study of trucking LNG to Fairbanks to help ease the cost of heating. The study shows that the use of LNG could reduce the average homeowner’s heating cost by half of what they are currently paying for heating oil. This would result in an average annual savings of $2,500-$3,000 per household.
Another factor that is driving this project is the need for cleaner fuel in Fairbanks. The use of wood heat is high in Fairbanks due to the high prices of heating oil, but the smoke from wood burning stoves creates a lot of air pollution. The ability to use LNG would help reduce the air pollution in Fairbanks by reducing residents’ dependence on wood heat and burning heating oil.
There is concern about relying on trucking LNG to Fairbanks because the Dalton Highway is often difficult to traverse in the winter months. The Alaska Energy Authority has explored many emergency supply options for this problem. This includes having storage capacity in Fairbanks to hold a 10 to 14 day supply of LNG in case of road closures, as well as making an arrangement with ConocoPhillips to supply LNG from its plant on the Kenai Peninsula.
Many believe that LNG is the way to address the challenges facing the interior, specifically Fairbanks. The state legislature, AIDEA, Fairbanks utilities, and private industry believe that they can help with the cost of energy, provide a cleaner fuel option, and provide a reliable heating source for Fairbanks. The solutions aren’t easy, but groups are willing to work to find a solution that is viable for Interior Alaska to address the issues brought on by the energy crisis that Fairbanks is currently facing.