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Cost of heating fuel has Fairbanks, Bush hurting

Most people in Anchorage have little feel for the utter pain and financial hardship being caused by high fuel oil prices in Fairbanks and rural Alaska. We're comforted here by quite reasonable natural gas prices, though we may yet get our comeuppance -- we may run of natural gas. More about that later.

But in Fairbanks, the news is not good. The Interior community depends mainly on fuel oil for space heating and also power generation, although inexpensive coal softens the bite on the electricity side.

But how would you like to devote an amount equal to your home mortgage to paying your winter fuel bill? That's what is happening in Fairbanks.

There are disturbing signs of the strain this is causing. Ralph Seekins, a Fairbanks businessman, told me he had to do a lot of payroll advances last winter so his employees could pay fuel bills.

Lorna Shaw, external affairs manager for the Pogo gold mine east of Fairbanks, said her company was surprised and dismayed when five local hires, all Fairbanks residents, went to work at the mine and then, because they work multi-day shifts at a remote site, moved their families to more affordable locations in Idaho and Montana. We're losing our Alaska work force because of high energy prices and Shaw is rightly worried.

Things are even worse in small villages, where fuel is moved by small barges and sometimes by air. Low-income rural families spent about half of their disposable income on energy, university studies have found.

All of this in a rich state with $41 billion in our Permanent Fund and another $15 billion in other savings accounts. If we're not taking action to help our citizens, we should be ashamed.

Does anyone care about this? Yes, but the solutions seem piecemeal. For starters, we have one of the most ambitious state-funded renewable energy programs in the nation, with $200 million spent so far on small projects in rural villages and a $67 million down payment on a multibillion-dollar hydro project at Susitna.

Those will help but they only address electricity. The real problem is space heating. Can we find a way of getting rid of the dependence on fuel oil for heating?

Maybe. Fairbanks is hoping for natural gas, which won't be cheap but it will solve air pollution problems created by oil and older wood stoves.

The state's Alaska Gasline Development Corp. is working hard on a small-diameter gas pipeline from the Slope that could get gas to Fairbanks but the Legislature has been slow in giving AGDC the money it needs to advance the project quickly. Too many legislators want to wait for the big gas pipeline in the sky, I guess.

Private firms are bolder. Flint Hills Resources, which operates a refinery near Fairbanks, and Golden Valley Electric Cooperative, the regional utility, are working on a plan to truck liquefied natural gas, or LNG, from the North Slope. Nothing radical about this. LNG is now trucked on a smaller scale from Southcentral Alaska to Fairbanks.

Meanwhile, Alaska Village Electric Cooperative, which operates small utilities in 53 small villages, has advanced an even bolder plan to generate electricity with gas on the North Slope and distribute it around the state with long-distance transmission lines. Nothing radical about this, either. Electricity is shipped long distances all over the world. If this is affordable, homes could convert to electric heat, AVEC says.

There are lots of questions about this but people are actually doing this in Southeast Alaska where there is cheap hydro power. Many owners of homes and businesses there have kicked the oil habit and gone electric.

In the Interior, people are working on new-technology wood burning systems and wood pellet fuels. Wood is something we have a lot of and it has long been used in Alaska.

The energy crisis seems regional, focused in Interior and rural Alaska, but our day is coming here in Anchorage because our gas fields are being depleted.

Experts hired by our regional utilities point out that gas needs will exceed production by 2015 and we'll need to bring in gas from somewhere else. Imported liquefied natural gas is realistically the only solution and it won't be cheap.

It's a head-scratcher that we're still exporting gas as LNG from Kenai, meanwhile.

There have been some recent gas discoveries but we don't yet know how big these are. Filling the supply gap identified by the utilities' gas supply study will take some big discoveries.

I'm not comforted by vague assurances that there's a lot of gas out there in the Inlet. 2015 is right around the corner. If there really are new discoveries, we need to see some numbers. If there really are contingency plans to import LNG, we need to know about them. We could quite easily be in the same boat as Fairbanks and rural Alaska.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every month in the Daily News.



By TIM BRADNER
Economy