Bringing LNG to the Bush: projects must show profit to be funded.

• Author: White, Rindi
• Position: OIL & GAS SPECIAL SECTION - Liquefied natural gas

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High energy prices are a harsh reality for residents of rural Alaska. Despite State programs aimed at subsidizing the high cost of energy, some residents spend more than 30 percent of their income on electricity and home heating.

"A $200- to $300-a-month electrical bill is not uncommon," said Bethel Mayor Eric Middlebrook. That doesn't include other fuel expenses, such as the $100 or more residents spend to fill their vehicle fuel tanks or what they spend on fuel for snowmachines or four-wheelers.

PDC Harris Group LLC, a joint venture involving PDC Inc. Engineers, hopes to change that. Mike Moora, an engineer with PDC Harris, is working with the City of Bethel on a pilot project to bring a combination of liquefied natural gas and compressed natural gas, or LCNG, to the community as a cost-saving option to liquid fuels. Moora said if the project works in Bethel, it could serve as a model for other communities.

"They're in the boat that most of the remote Alaska villages are in," Moora said of Bethel.

PDC Harris Group has prepared a plan that would focus on space heating and power generation. To demonstrate whether the change is feasible, several furnaces or boilers in Bethel community buildings will be converted from fuel oil to natural gas. The city also hopes to demonstrate a project that would replace up to 90 percent of the fuel in the community's diesel engine electric generators with LCNG. If those projects prove viable, a distribution system could be set up to carry natural gas to homes throughout Bethel.

If the project works in Bethel, the community could serve as a hub and distribute natural gas in its liquefied and compressed form to surrounding villages.

But first they have to show the project makes fiscal sense. The city of Bethel has applied for grant funding from the Alaska Energy Authority, through its Emerging Energy Technology Fund grant program, to clearly define the project, examine supply chain economics and flesh out the project costs and potential returns.

"Does it generate a return for a business and is it saving a rural community's energy costs? It's got to do both," Moora said.

It's too early to know the costs of changing fuel sources; that's something the study will determine. But if the numbers prove out, Moora estimated Bethel could be ready to receive LNG and use it to heat community-owned buildings in three to four years.

PRICE, AVAILABILITY, PROFIT

The profit picture is where rural Alaska...