I've never understood why North Slope oil producers have to truck the diesel they use up the Dalton Highway from Fairbanks. The oil comes from the Slope. Why can't they just make it there?
This is a real head-scratcher. The oil comes out of the well on the North Slope and is shipped to Valdez by pipeline. It's either made into diesel at PetroStar's refinery in Valdez and then trucked back to the Slope, or it's transshipped by tanker to Tesoro's refinery near Kenai, made into diesel and then shipped by rail and truck back to the Slope. Think of the energy use, and the carbon footprint, of all that.
The explanation for this bizarre set of circumstances is a U.S. Environmental Protection Agency rule that requires trucks and many other kinds of equipment to use ultra-low sulfur diesel, a special type of fuel in which the sulfur has been mostly removed for the sake of human health (the pollution resulting from high-sulfur fuel contributes to cancer).
This rule makes sense in high-population areas of the country, and while it costs refiners a bit more to make the ultra-low sulfur diesel (which consumers pay for) the human health benefits are worth it.
However, the EPA has also applied the rule to rural Alaska and places like the North Slope, where the wind blows a lot, diluting the effect of the pollution. Those are certainly some things we can quibble with EPA about, but the agency has stood firm.
Meanwhile, it's quite practical to make conventional high-sulfur diesel in small refining units in the oil fields. Those exist, but the special equipment needed to extract sulfur and make ultra-low sulfur diesel hasn't been economical to install on the Slope.
Thus, the diesel is made in Valdez or near Kenai, where the refineries are larger and have the equipment. Then it is trucked back to the Slope.
My concern is less that than what we're doing on the Dalton Highway, a 414-mile gravel road from Interior Alaska to the North Slope. This is a rough road -- not the Parks Highway.
There's no public data on how many diesel tankers drive north every day but there are a lot. It seems like every week or so I read of a truck rollover and a spill along the side the road, and the potential for driver injuries seems obvious.
Now we're about to add a lot more truck traffic to the Dalton. The state's Alaska Industrial Development and Export Authority is leading a project to build a small liquefied natural gas plant on the North Slope and to truck liquefied natural gas, or LNG, south to Fairbanks for power generation and space heating.
Fairbanks is desperate for relief from sky-high fuel oil prices for heat and power, and this seems like a workable interim solution until a gas pipeline can be built. But it will add another 25 to 30 tankers a day on the Dalton headed south with LNG and back north empty. These, in addition to all those diesel tankers, is asking for trouble.
The obvious way to reduce this traffic, and these hazards, is to take a new look at making the fuel on the Slope, cutting down on the truck traffic. This wasn't possible a few years ago, but it might be now.
There are new technologies, for example, for making liquid fuels from natural gas, and there is a lot of gas at Prudhoe Bay. Diesel made from natural gas is ultra-clean and will meet and exceed the EPA's specifications on sulfur and other pollutants.
The basic technology used isn't new. Gas-to-liquids and its cousin coal-to-liquids has been around for decades and is widely used in some places, like South Africa. The problem has been that these plants had to be huge to produce enough volumes of the fuel to overcome high capital costs in building the plants.
In recent years, however, small technology companies have been doing a lot of work on developing smaller plants that are now believed to be cost-effective. The U.S. Department of Defense, interested in having these small plants available to make fuel for tanks near battlefields, sponsored a lot of this work. The commercial motivation now is to tap and use gas now being flared from shale oil and shale gas fields.
The major oil operators should be aware of this work. BP, for example, has experimented with small gas-to-liquid plants for offshore platforms and even built a small plant near Kenai to test its technology. The plant is still there, although it is no longer operating. BP's interest is focused on the large gas pipeline and LNG export project these days.
Meanwhile, the work on small-scale gas-to-liquids continues to progress and there are several of these units designed and ready to be built, awaiting regulatory approvals in the Lower 48.
I would think the North Slope operators would be quite keen on anything that could cut costs, but I believe there is also a public interest at stake. That is in increasing safety on the Dalton Highway. If we can reduce the traffic we reduce accidents, fuel spills and the occasional injuries that result from heavy truck traffic.
Now think of being behind the wheel of a heavy diesel tanker headed north through Atigun Pass in a whiteout, encountering a string on LNG tankers headed south
There will also be less wear and tear on the highway. Dalton Highway maintenance is already a major item in the state's transportation budget. All of the problems will be compounded when the LNG trucks start rolling.
I'd love to drive the Dalton Highway with my family some day (I did it years ago), because it is a wonderful experience. But it can be hazardous now because of the industrial traffic, which is a shame.
If we can reduce the traffic, save costs and carbon emissions and enhance safety on a scenic highway, why not?
Tim Bradner is an Alaska business writer who lives in Anchorage.
EconomyBy Tim Bradner