Update on the Interior energy project.

• Author: Bradner, Mike
• Position: ENERGY

Home and business owners in Interior Alaska have gotten at least a temporary respite from the sky-high energy prices that have threatened the regional economy, thanks to the plunge in crude oil prices. The unexpected drop in oil prices, from $110 per barrel in mid-2014 to the mid-$40 per barrel in early 2015, has devastated the state budget, but it has been a boon for Interior residents' checkbooks.

The respite has also allowed the state and Interior community leaders to take a fresh look at an innovative plan to reduce energy costs by trucking liquefied natural gas, or LNG, from a new LNG plant that would be built on the North Slope. When the Interior Energy Project was launched two years ago by the Alaska Industrial Development and Export Authority (AIDEA), the state development corporation, the goal was to have natural gas delivered to Fairbanks area consumers by late 2015 at a price of $15 per million British Thermal Units, or mmbtus.

As that plan was developed the cost has come in higher than expected and with the first LNG deliveries delayed to 2017 or later. The relief in energy prices has allowed AIDEA to take a fresh look at the project, at the possibility of delivering LNG from Southcentral Alaska and at a possible investment by the state authority in owning, at least temporarily, part of an expanded Fairbanks gas distribution system. The North Slope LNG trucking plan is still on the table, but other options are now being considered.

High Energy Costs

Until recently high energy costs have been a real drag on the Interior economy. Crude oil prices over $100 per barrel, which has been the norm in recent years, translated to heating oil costs of $4 a gallon or more, causing a real hardship since most homes and buildings in the region heat with oil. Anecdotes of monthly heating bills being more than a home mortgage were common, and there were stories--never verified--of people packing up and leaving Fairbanks.

The economic problem was severe and was similar to hardships felt in rural villages, including the Yukon River valley of the Interior, where home energy costs soaked up much of a family's disposable income. Relief from high oil prices will be delayed in rural Alaska, however, because fuel there is mostly delivered by barge in summer. Rural communities are still using fuel oil and gasoline delivered last year when prices were high. Price relief will come eventually when the 2015 barge deliveries are made.

The Interior does have one source of low-cost energy. That is coal, and the coal reserves are considerable. Usibelli Coal Mine, Inc. has been operating its coal...