A looming federal mandate requiring rural Alaska to start using cleaner diesel has some shippers, utilities and consumers worried about the higher costs of supplying and storing the new fuel in cash-strapped communities.

Rural Alaskans must begin transitioning to a blend of ultra-low-sulfur diesel between June and December next year. By the end of 2010, the cleaner fuel must be available for diesel-powered vehicles, marine engines and off-road equipment. Power plants installing new engines to power generators or planning major overhauls will have to switch to the new fuel as well.

The rest of the country has already begun using ultra-low-sulfur diesel fuel, but rural Alaska was granted a series of exemptions, recognizing the unique circumstances in the Bush. Unlike in the Lower 48, Alaska's villages stand isolated, many lacking roads and electric interties, relying instead on small diesel power plants operating within each village. Yet even with the deadline approaching soon, nobody is sure just how much it will cost to potentially convert old diesel storage tanks or retrofit engines in diesel power plants.

"It is going to be an absolute nightmare if we have to tow the line on ultra-low-sulfur diesel," said Meera Kohler, executive director of Alaska Village Electric Cooperative, which supplies power to 53 Interior communities.

The costs of complying with the new regulations could trickle down to rural Alaskans in the form of prices at the pump or higher electric bills. Rural communities are already having a hard time paying for fuel and keeping the lights on. Bulk fuel shipments arrive only a couple of times each year, between breakup in May and freezeup in the fall, and some villages have been struggling to find funds to cover their winter supplies in recent years amid soaring oil and transportation costs.

According to the state, one grade of fuel is distributed for non-aviation uses, and most people use fuel from the same tank to feed power generators, heat homes and fill vehicles. Redundant storage and distribution infrastructure would be required to maintain the 15 parts per million sulfur content that makes the ultra-low-sulfur diesel so clean.

There's a choice to be made about how to comply, but no one seems to have made it yet.

Rural Alaska can switch entirely to the ultra-low-sulfur fuel, which tends to cost more and generates 3 to 4 percent less heat on a British-thermal-unit basis than other diesel. Or, communities and utilities can cover the costs through higher retail prices for distributors and storage units to build redundant systems that prevent any comingling of the two fuel types.

Either way, it's expected to cost more.

Cleaner fuel isn't the problem, Kohler said. Instead, the real trouble might come from using multiple fuels in remote areas, where costs are compounded each time fuel is handled - for example, from a tanker to a barge to a storage tank. And each fuel must have dedicated tanks, containers and hoses.

Concerned about the implications for rural Alaska, AVEC secured about $200,000 for the state's Department of Environmental Conservation to study the costs of converting rural areas to run on ultra-low-sulfur diesel, and to petition the federal government for a lengthier, or even permanent, exemption.

That DEC review, conducted by Northern Economics in 2007 before oil prices spiked, indicates the transition could cost about $209 annually per household, although that amount would fluctuate based on different scenarios, like whether communities added second storage systems, for example. Costs could also increase as distributors upgrade their equipment to transport the fuel.

In some villages, like Tanana, little is happening to prepare for the transition. Tanana city administrator Bear Ketzler said most of his information on the switch is coming from his contacts with the barge lines. Meantime, the village waits to see what happens.

"Rural Alaska is going to be very much unprepared," Ketzler said.