The board of the Alaska Industrial Development and Export Authority, the state's development corporation, is now approaching its go/no-go decision on the idea of a state-subsidized liquefied natural gas plant on the North Slope. The plant would support an LNG-trucking operation to Fairbanks.
Fairbanks desperately needs help with sky-high energy costs (the community is largely oil-dependent) and Gov. Sean Parnell and the Legislature have stepped in with a plan to get gas to Fairbanks. It is a stop-gap until a gas pipeline can be built from the Slope. That isn't certain, of course.
Trucking LNG is a creative and innovative idea but a lot of people are beginning to have misgivings -- not about the goal (getting gas to Fairbanks), but how it would be delivered.
The notion of adding a third or more to the truck traffic now on the Dalton Highway cannot be taken lightly. Navigating Atigun Pass with a tankload of LNG in a whiteout, and several times a day, can't be taken lightly either.
Before it pushes the button on several hundred million dollars of state funding, the authority's board will step back and take a cold look at this, as they should. This is more urgent with our state now facing some huge budget deficits -- $1.8 billion this year.
Are there alternative ways of getting gas to Fairbanks?
When the LNG trucking idea was first conceived a few years ago, it looked as if Southcentral Alaska had no gas to spare and trucking it from the Slope seemed like the only alternative.
That's changed, however. Hilcorp Energy, Buccaneer Energy, Furie Operating Alaska and Cook Inlet Energy have all made new gas discoveries in the Inlet or are developing new gas from older fields. These companies have gas to sell, and they'd love to sell it to Fairbanks. Buccaneer, for one, has written to AIDEA's board expressing that interest.
We have yet to get confirmation of the discovered volumes of gas but Furie is confident enough in what it has found that it plans to install a new gas production platform and a supporting pipeline in Cook Inlet next summer.
Also, Conoco Phillips has just applied for new federal permits to export LNG. That would restart the company's mothballed Kenai LNG plant, for two years at least.
We now have more gas, but how do we get it to Fairbanks? A pipeline is the most efficient method, but that could take years.
The quickest alternative to meet the governor's goal -- gas to Fairbanks by 2015 -- is to expand the LNG trucking operation that now operates from the Mat-Su Borough to Fairbanks. For years, Fairbanks Natural Gas, which operates the small gas utility in the Interior city, has operated a small LNG plant in Mat-Su from which it trucks LNG up the Parks Highway to Fairbanks.
Why not ask Fairbanks Natural Gas to expand this plant? The pipe connections to get more gas to the plant are already in place.
With Conoco Phillips reopening its Kenai LNG plant, why not send some of that LNG to Fairbanks rather than exporting all of it?
We could load large bulk tanks of LNG at Conoco Phillips' plant, barge them to Anchorage and ship them to Fairbanks on the Alaska Railroad. Bulk LNG tanks on barges could also supply LNG to western Alaska communities.
Most of the fuel oil used in western Alaska is now shipped by barge from the Tesoro refinery at Nikiski, so we know this fuel-delivery system works.
Either of those alternatives would seem to be less expensive, and less risky, than building a new plant on the Slope, where costs are very high, and sending 25 or more tank trucks a day south through Atigun Pass.
I have a lot of faith in AIDEA and its board. A recent law change has given the independent directors a majority on the board, rather than appointed state officials. The authority has a good track record with projects, too.
AIDEA has had its lemons, though. The lessons from those should be remembered.
One is that politically driven projects must be examined very carefully by independent sources. This one is political, but in a good way: the governor's (and Legislature's) desire to help people get more affordable energy.
There are other examples that offer cautionary lessons, however. An AIDEA project that really went south was a big fish plant in South Anchorage, which is now a church. That was pushed on AIDEA by influential legislators, and there was a gloomy outcome. Well-intentioned people tried hard to make it work but the fundamental concept was flawed, and that should have been foreseen.
A second important lesson from failed projects is that group-think can set in, where people working hard on a project really want to see it happen and can blind themselves to contrary information.
I know this happens because it happened to me, to the point where I became a booster in my reporting on some of these projects and was chided by friends who knew better. I learned a lesson.
That's why independent reviews are needed. This is the job of AIDEA's directors. Hilcorp, Buccaneer Energy and other companies with newly found Cook Inlet gas should be invited to come visit.
Our governor has made a commitment to Fairbanks and the community needs help. It shouldn't matter where the gas comes from, as long as it comes.
We can't let this project turn into lemons. The governor has enough on his hands wrestling with multi-billion-dollar state budget deficits.
Tim Bradner is an Alaska business writer who lives in Anchorage. His column appears once a month in the Daily News.
Tim Bradner
Economy