Alaska governor announces plan to finance small LNG project on North Slope
Anchorage (Platts)--10Dec2012/301 pm EST/2001 GMT
Alaska will finance $355 million of a liquefied natural gas project on
the North Slope to support an LNG trucking operation as well as LNG
regasification facilities near Fairbanks, in Interior Alaska, as well as an
expanded gas distribution system in the city, Governor Sean Parnell said late
The proposal needs approval by the state Legislature in its 2013 session.
An Interior Alaska electric cooperative, Golden Valley Electric Association,
has been working on a plan for an LNG plant that would convert 9 Bcf/year to
LNG, which would replace oil that Golden Valley now uses to generate
electricity at generation plant near North Pole, east of Fairbanks.
Golden Valley would also make gas available to Flint Hills Resources for
its refinery, also at North Pole and which also uses oil for refinery
operations, and for space heating in the Interior city.
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BP has signed a contract to supply Golden Valley with up to 23 Bcf of
gas over several years for a North Slope LNG plant. The LNG would have to be
trucked from the Slope about 400 miles to Fairbanks on the Dalton Highway.
Fairbanks residents and businesses are hard hit by energy costs. Fuel
oil is running at about $4/gal this winter and temperatures have been 30
degrees to 40 degrees below zero Fahrenheit.
POWER GENERATOR SOUGHT MORE GENEROUS PLAN
However, the plan falls short of what Golden Valley had pushed for,
which was a $200 million grant to build the plant itself, according to the
utility's CEO, Cory Borgeson. An outright grant would have resulted in lower
costs to consumers, he said.
What Parnell has offered is a $50 million state grant, $275 million in a
low-interest loan through the Alaska Industrial Development Corp., and $30
million in gas storage tax credits through an existing program to help
finance LNG storage tanks.
Fairbanks Natural Gas, a small natural gas utility, serves about 1,100
residential and commercial customers in the core Fairbanks area with LNG
trucked from south-central Alaska. FNG was working on a plan to truck North
Slope LNG before Golden Valley started work on its plan.
Flint Hills Resources was previously a partner in Golden Valley's
initiative but recently withdrew from the project, citing an unwillingness to
proceed with a project that requires a government subsidy, its spokesman,
Jeff Cook, has said.
Parnell also sees the Slope LNG plant as a possible temporary solution
for natural gas needs in south-central Alaska, where existing gas fields are
being depleted and utilities are planning to import LNG or compressed natural
gas from outside Alaska.
--Tim Bradner, firstname.lastname@example.org
--Edited by Robert DiNardo, email@example.com