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Natural gas: No silver bullet to Interior Alaska's heating problems

Mike Knoche

The cost of heating Interior Alaska's homes continues to rise while many of our elected officials cheer an energy alternative with questionable viability as a long-term solution.

The Fairbanks North Star Borough would like to expand the use of liquefied natural gas (LNG) beyond the current 1,100 customers, and it reported in June that proposed spur lines would carry gas from Fairbanks to many outlying areas and save residents between $4,500 and $6,300 a year. The same report puts the average cost of retrofitting your home from heating fuel to gas at about $8,000. The study estimates the local pipeline to cost $230 to $600 million, but Borough Mayor Luke Hopkins said the plan considered only local infrastructure, not the LNG source or funding.

Given the current price differential and unpredictable prices in the future, the estimated savings are not realistic. As of today, the cost differential between LNG at $3.08 per gallon (converted equivalents of LNG BTUs) and No. 2 heating oil (diesel) at $3.70 per gallon is 17 percent. On the surface this sounds like a nice break, but what about start-up costs? Besides retrofitting your home and the lack of local infrastructure, the state has proposed a multitude of expensive ideas using public funds. Also, consider that the price of natural gas could increase, and the price of oil could come down. Futures markets may begin to manipulate the price of natural gas as they have with petroleum. These points beg the question: Is there a real long-term advantage to replacing diesel fuel with LNG?

Among the LNG sources proposed by state government:

•  The so-called “bullet line” from the North Slope to Fairbanks at $8 billion, though some state officials say that due to additional infrastructure needs on the North Slope, the price tag could reach $20 billion;

• Liquefying and trucking gas from the North Slope; and

• Another gas line from Anchorage that died with voter redistricting. 
Since 1959, the gas pipeline proposal (aka: the bullet line) has essentially remained unchanged.  It’s expensive and not economically viable.  If it were viable, it would have been built, but instead, it serves as a bully pulpit for many of our elected officials. The proposed liquefaction plant has no interested private investors. Flint Hills and Fairbanks’ Golden Valley Electric Association talked about it but walked away. Big industry does not invest in unprofitable projects. Besides, trucking gas to Fairbanks increases the traffic-and-maintenance requirements for the Dalton Highway, and transportation alone requires copious amounts of diesel fuel, the very fuel the plan aims to replace. These added costs have not been addressed.

Predictions about savings by both the Fairbanks North Star Borough and Governor Parnell are shots in the dark when you look how they arrived at their estimates.  Parnell’s assessment that this local source will bring down the cost of LNG is more so because we are not isolated from world markets. The Fairbanks North Star Borough plan does not consider an LNG source, so the cost of tying the proposed local lines to whatever LNG source surfaces is unknown.

Add it up. Getting gas to Fairbanks from the North Slope requires pipelines or a bullet line and a liquefaction plant. That’s big money, and trucking it to Fairbanks requires diesel fuel. If gas makes it to Fairbanks and the infrastructure arrives at your door, do you spend $8,000 hard-earned dollars retrofitting your home to use a fuel source whose price is just as unpredictable as the current source (oil)? Or do you come up with another plan?

I overheard someone say “this town (Fairbanks) is gonna die if we don’t get gas.” No it’s not, it has been here for more than 100 years. In that hundred years, humans have gone from harnessing energy by burning coal and lumber to learning to refine fuels, then looking towards the sun, wind, and tides. Industry has told us the status quo is good enough. Politicians followed suit. Progressive thinkers looked the other way and worked to develop technologies that just a few years ago seemed out of reach. There are people in Fairbanks now heating their homes with solar energy and geothermal technology. True, alternative energy is often expensive, but the long-term net benefit leaves this gas business out in the cold. It isn’t likely that alternative energy is going be available to everyone right away, but a gas project is no silver bullet. It’s not a long-term solution. Interior Alaskans need advocates of long-term community planning.

Mike Knoche owns and operates Straight Ahead Construction, LLC. He has a Master’s degree from the University of Alaska, Fairbanks and is a guide and naturalist for ExploreDreamDiscover Tours. Mike became interested in energy issues as he saw the Interior community struggling to pay for basic needs like home heating.

The views expressed above are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.