The following editorial first appeared in the Fairbanks Daily News-Miner:
It’s not an easy time for the Interior Energy Project, the state-backed community effort to secure a clean-burning, low-cost home heating solution to the greater Fairbanks and North Pole area. Upward creep in cost estimates from former liquefaction plant partner MWH Global caused a split and delay when it was determined the project could not achieve the price target of $15 per thousand cubic feet of gas, the energy equivalent of roughly $2 per gallon heating fuel. Now, as oil and gas prices continue to slump and local officials express concern that the project may once again be bogging down, it’s a tough picture for the project. But the goal of long-term, low-cost energy supply for the Interior is one that residents should continue to support.
When project partner MWH Global parted ways with the Alaska Industrial Development and Export Authority, which oversees the state’s interest in the project, the culprit was escalating cost estimates for the North Slope liquefaction plant where gas was supposed to be processed and put into liquid form for truck transport down the Dalton and Elliott highways to Fairbanks. The price of the plant rose high enough that the project’s other components — transport, storage and local distribution — couldn’t be funded with available state money while keeping the overall cost to consumers at or below $15 per mcf, the rate at which state economists say local residents are likely to quickly convert from existing heating sources such as heating fuel or wood. After a refocusing to include Cook Inlet as a potential supply source, the state held a new bidding process that saw strong participation from the energy sector, eventually selecting Salix Inc.
But little progress has been relayed on negotiations with Salix for the liquefaction plant or on a source of gas supply for the project. The lack of public information has local leaders frustrated, coupled with the fact that the first phase of distribution piping for the project being completed last year and this year saw little further development. Although AIDEA and Alaska Energy Authority officials tried to explain the paucity of information at a recent borough briefing, there’s only so much community members and their elected representatives can take on faith.
That said, the community would be wrong to give up on the project, even though the gas it would bring if it met its price goal would currently be roughly on par with current heating fuel prices.
Only five years ago, heating fuel prices were double their current level, with some residents leaving the community or curtailing business plans because of the outrageous cost. The Interior still needs a long-term supply of clean, affordable energy, because it would be just as easy for prices to shoot back up to their former levels.
Giving up on the project because of negotiating difficulty and current low heating fuel prices would be an extremely short-sighted move, akin to not dealing with Alaska’s revenue issues if oil prices rebound. The structural issues that contribute to Alaska’s boom-and-bust cycle, on local and statewide scales, won’t be defeated until dependence on a commodity prone to massive price swings is reduced.
