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AIDEA on fast track for Slope LNG plant, tanker trucks

Posted: October 9, 2013 - 11:53am

The Alaska Industrial Development and Export Authority is pushing ahead with its fast-track plan to develop a small liquefied natural gas plant on the North Slope and to truck the LNG 500 miles to Fairbanks on the Dalton Highway.

Jim Hemsath, AIDEA’s deputy director for project development, said his agency plans to have Request for Proposals out for construction of a gravel pad for the plant by mid-October.

The gravel pad for the LNG plant would be constructed next spring and allowed to sit through the summer for the gravel to settle, he said. 

The foundation for the plant will be built in the fall, and equipment for the plant will start arriving late that year.

It’s a fast schedule, Hemsath said.

“We’re trying to stay in front of a fast schedule,” Hemsath said Sept. 16 to the World Oil and Gas Congress conference in Anchorage.

Gov. Sean Parnell says he wants the plant operating and LNG trucks delivering LNG to Fairbanks by late 2015. AIDEA estimates that natural gas delivered as LNG from the slope and regasified in Fairbanks will reduce an average homeowner’s heating bill by $2,500 to $3,000 per year.

Meanwhile, negotiations are proceeding at a fast pace in forming a public-private partnership to own and operate the plant, Hemsath said. AIDEA will make an equity investment and will own part of the plant with private partners.

Last spring the Legislature appropriated $330 million for the project, including a $57.5 million general fund appropriation, authorization for $125 million in low-interest AIDEA loans for the plant construction, and $150 million for low-cost financing for a new gas distribution system in Fairbanks.

The plant is estimated to cost $205 million, with an expectation that AIDEA will make a $40 million equity investment and that private partners would invest $30 million to $40 million. Remaining funds needed would be financed with low-interest state loans, Hemsath said.

The fleet of 60 to 70 specialized LNG trucks and trailers will be financed separately, he said.

Negotiations are underway with three potential partners including Fairbanks Natural Gas, which now owns a small gas utility in Fairbanks, Golden Valley Electric Association, the regional electric co-op for Interior Alaska, and Spectrum LNG, which operates a small LNG and truck fueling operation in Arizona along with a small gas distribution system at Deadhorse, a contractor service center near Prudhoe Bay.

“We’ll make a decision on which companies to go with, and it will take another month to work out the contract details,” Hemsath said.

AIDEA spokesman Karsten Rodvik said negotiations on forming the consortium are expected to be completed in October.

There are still uncertainties facing the project, particularly with air permits, Hemsath said. There is a significant amount of carbon dioxide in Prudhoe Bay gas that will have to be dealt with.

AIDEA’s fast-paced approach has been questioned by some who believe the cost of the plant, particularly the plant units treating the raw gas, may be underestimated.

Prudhoe Bay gas contains about 12 percent carbon dioxide as well as natural gas liquids like propane and butane that must be removed before LNG can be made.

Hemsath said the design includes a pre-treatment unit. Propane pulled out of the natural gas will be sold separately as a fuel product, and heavier gas liquids will be used to provide fuel for power generation at the plant, he said. Some liquids can remain in the LNG, which will have the effect of enriching it.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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