Utility, refiner form pact to truck North Slope gas

FAIRBANKS: Effort will supply generation, later may go to homes.

August 7, 2011 

FAIRBANKS -- Two companies have formed a partnership to truck liquefied natural gas from the North Slope to the Interior in a move expected to lower high energy costs and keep an important business operating.

The Fairbanks Daily News-Miner reported Friday that Golden Valley Electric Association and Flint Hills Resources are partners in the $180 million project. The companies say a steady supply of natural gas will help wean their operations away from expensive diesel fuel.

The electric utility figures that replacing diesel with gas in its generators will cut about 10 percent off electric bills to nearly 100,000 Interior customers. Flint Hills spokesman Jeff Cook also said the gas will keep the North Pole refinery in business.

The plan is to have natural gas in place by 2014.

Fairbanks North Star Borough Mayor Luke Hopkins hailed the partnership. He said it could help solve two nagging borough problems -- high energy costs and chronic winter air pollution. "This is incredibly important for our community," he said Thursday.

Projects have been discussed for years to deliver gas to the Interior, including state efforts to promote a gas pipeline and efforts by the Fairbanks North Star Borough and Alaska Gasline Port Authority to explore a separate trucking plan. Those plans languished, and the electricity utility and Flint Hills decided it was time to move forward on their own project, GVEA President Brian Newton said.

"We'd both tell you we can't afford to wait," Newton said. "We've got to do something to lower costs."

The project will require construction of a plant to liquefy natural gas on the North Slope, along with a storage facility that will return it to gaseous form in North Pole. A fleet of about 40 trucks will be needed to transport gas between those two points along the Dalton Highway each day.

The costs of the project will be split evenly between GVEA and Flint Hills, Newton said, with the utility's portion funded through federal loans.

Newton said a contract has been signed with a supplier on the North Slope, but he declined to say who will be providing the gas. He said the price of natural gas in the contract is linked to the price of oil, so it will always remain competitive as the cost of diesel rises and falls.

GVEA and Flint Hills plan to share about 7 billion cubic feet of gas a year from the trucking project. An undetermined amount of additional gas could be available to be sold in the Fairbanks market.

Newton said that additional gas supply will help spur more infrastructure in Fairbanks to allow businesses and homeowners to use the fuel. That will ultimately improve the chances that a much-discussed natural gas pipeline will someday transport fuel to the Interior, he said.

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