SOUTHCENTRAL: Plans for coal-fueled facility might kill pipeline spur, he says.
PALMER -- Matanuska Electric Association cites the unpredictable future of natural gas prices in the Cook Inlet as one reason coal is an attractive fuel for a 100-megawatt power plant it plans to bring online in 2015.
Utility and pipeline consultant Mark Foster, at a recent public meeting about the cost of coal, warned attendees that by choosing coal, MEA could kill a project to ship North Slope gas through a pipeline spur to Southcentral Alaska.
"The economics of that spur line will be materially undermined if you switch from natural gas to coal," Foster said recently by phone.
It's an issue of economies of scale, Foster said. More demand for North Slope natural gas in Southcentral Alaska drives down prices. Less demand means less gas moving through the pipe and higher prices per cubic foot.
If MEA generated 100 megawatts of electricity with coal instead of natural gas, that's 21 fewer cubic feet per day moving in the pipeline, according to Foster.
He said that could push prices up from $4 to $5.10 per thousand cubic feet, or mcf.
"For a typical household in Southcentral using 182 mcf/year of natural gas, the difference in the spur line tariff due to a 100-megawatt, coal-fired power plant amounts to an increase of $200 per year," Foster wrote in a chart outlining the potential effect on the spur line.
MEA spokesman Tuckerman Babcock said he doesn't buy Foster's stance.
"Our 100 megawatts of coal is not going to make or break a gas line," Babcock said. "It's such a small amount, compared to all the other needs down here."
Commercial customers Agrium, which runs a fertilizer plant in Nikiski, and Conoco Phillips, which operates a liquefied natural gas plant there, use 60 percent of the natural gas produced in Cook Inlet.
Utilities and residential customers split the remaining 40 percent, according to information from the Alaska Natural Gas Development Authority.
But currently, neither Agrium nor Conoco Phillips is part of the spur-line project.
Agrium is making alternative plans to build a coal gasification plant. Conoco has applied to extend for two years its contract to export liquefied gas from Kenai, hoping to spur more gas exploration and development there.
Foster's numbers don't include Agrium or Conoco as customers on the gas spur line.
Babcock said there's no guarantee that North Slope gas will be more economical than coal or even gas available today.
"It's going to cost more (than Cook Inlet gas)," said Andy Warwick, chairman of the Alaska Natural Gas Development Authority on Thursday.
It's also years away from production, he said. Warwick said plans by MEA to generate power with coal would probably not put the spur-line project in jeopardy.
But the utility's plans could adversely affect the economics of the line.
"If I was on the MEA board, I wouldn't be counting on North Slope gas," Warwick said.
The price will depend more on how many commercial users tap into the line, he said. The pipeline gas will cost more than what Agrium now pays for stranded gas in Cook Inlet, Warwick said.
North Slope gas may not be priced low enough to compete with Agrium's plans to build a coal gasification plant, he said. The line needs large users like Conoco, he said.
"If we could supply that, it would help the viability of the spur line immensely," Warwick said.
Find Daily News reporter Rindi White online at www.adn.com/contacts/rwhite or call 352-6709.
