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BP agrees to truck natural gas to energy-starved Fairbanks

Mike Campbell

Anxious to avert a burgeoning energy crisis in Alaska's heartland, Golden Valley Electric Association reached an agreement with BP on Tuesday to truck huge quantities of liquefied natural gas from the Arctic oil fields to Fairbanks by 2015. “The high cost of space heating is crushing Interior Alaska,” Golden Valley noted in a news release announcing the deal.

Over the next 20 years as much as 23 billion cubic feet of natural gas could move annually to Fairbanks, the state's second-largest city, according to the Fairbanks Daily News-Miner. That amount “is sufficient to meet both the immediate and long-term needs of Interior Alaska residents and businesses,” according to Golden Valley.

It would be one of the largest uses to date of the vast reserves of natural gas across Alaska’s North Slope -- the largest conventional natural gas reserves in the nation. The Slope's reserves have been largely trapped by the lack of a pipeline or other means of moving the fuel to markets.

“We recognized an opportunity to address the energy crisis facing Interior Alaska residents and businesses -- in particular, the high cost of space heating,” Cory Borgeson, Golden Valley’s interim president and CEO, said in the press release. “BP’s willingness to work with our cooperative to address Interior Alaska’s energy crisis is appreciated and is crucial to the long-term success of our communities.”

Golden Valley officials say the gas could provide heat and electricity for 100,000 Interior Alaska residents. In 2010, the population of the Fairbanks North Star Borough was 97,581.

According to the News-Miner, the contract is the key component of a plan to truck liquefied natural gas from the North Slope to Fairbanks. Thirteen months ago, Golden Valley and Flint Hill Resources, which owns a refinery in North Pole, announced they had formed a partnership to hammer out a trucking plan.

Back in 2010, then-state Rep. Jay Ramras, R-Fairbanks and a proponent of an in-state gas pipeline, told the News-Miner trucked gas could help Interior Alaska prepare for larger supplies. Ramras wondered, however, whether long-term financial commitments for trucked natural gas could place a drag on eventual prices -- which could be far cheaper -- for piped gas. “If it’s a good deal for Fairbanks,” he said, “I’m all for it.”

The agreement announced Tuesday puts Golden Valley in position as an Interior Alaska gas aggregator, something of a wholesaler. Gas purchases will flow through the company.

What the deal will mean to Interior Alaskans’ hefty heating and electric bills is unclear, although Golden Valley allowed that it “provides an opportunity for decreased fuel costs.” 

The company added, “It is difficult to determine the precise impact this natural gas contract will have on the average Interior resident’s electric bill. Savings are contingent on the price of other fuel sources, including oil.”