Natural gas system grows in Fairbanks: new customer on the North Slope?

• Author: Liles, Patricia
• Position: BUILDING ALASKA

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For years, many Alaskans have hoped for a North Slope gas pipeline project, longing for the related economic boom and for the cheap fuel that could be available to the rest of the state.

While North Slope producers and Alaska government leaders focus on the long-discussed, large-scale gas pipeline project that many desire, a Fairbanks-based, privately owned gas distributor is seeking to jump-start the process of commercializing North Slope gas.

Fairbanks Natural Gas has been negotiating with North Slope producers to purchase up to 1 billion cubic feet of natural gas a year, as a new feedstock for the company's growing gas distribution system in Fairbanks.

As envisioned, the company would build small liquefaction facilities on property it has acquired in Deadhorse, trucking LNG the 400-plus miles south to Fairbanks. Anticipating purchasing about 1 billion cubic feet of gas annually, Fairbanks Natural Gas expects to invest between $20 million and $50 million on the project, according to company president Dan Britton.

"One of our primary drivers in our North Slope project is to get into a stable-priced market," he said. "It's a huge investment for a company of our size, but it will provide some stability and security."

Already, the company has spent about $250,000 on the project, including land acquisition and permitting work. Fairbanks Natural Gas received its development permit from the North Slope Borough in November 2006, a lease from the state for land at Deadhorse, an exemption from the Environmental Protection Agency for completing a storm water pollution prevention plan and a determination from the Federal Aviation Administration that the project will not constitute a hazard to air navigation.

As soon as negotiations with the producers are complete and taxation issues are resolved, Fairbanks Natural Gas will order equipment and begin the construction project, anticipated to be a 16-month process.

Trucking liquefied natural gas down the Dalton Highway--a mostly gravel, industrial route with significant driving and road hazards--will be more expensive and add to maintenance costs for the company's existing fleet of 16 tanker trailers, Britton said. But those increased transportation costs will likely be offset by savings in North Slope gas prices, compared to the ever-increasing Cook Inlet gas costs, he said.

ESCALATING PRICE FOR EXISTING COOK INLET FEEDSTOCK

Currently, Fairbanks Natural Gas buys its feedstock from the Beluga River gas field in the Cook Inlet region. The gas is liquefied at the company's Point MacKenzie facilities, trucked to Fairbanks using special tractor-trailers, re-gasified at one of two storage centers and sent to the company's 1,100 customers in Fairbanks via the ever-growing pipeline network the company is building.

Fairbanks Natural Gas has grown substantially each year since...