AIDEA board delves into cost of trucking LNG to Fairbanks


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The Alaska Industrial Development and Export Authority discussed the cost of “using the haul road as a pipeline substitute,” as Deputy Director Mark Davis described it, at the agency’s Dec. 5 board meeting.

The two biggest variables to that cost are the fuel the haul-trucks use and the amount of LNG per trip they carry, AIDEA Energy Development Finance Coordinator Nick Szymoniak told the board. If trucks that run on LNG are used, the transport cost is estimated at $4.53 per mcf; if diesel trucks are used that cost grows to $5.03 per mcf.

Transporting LNG nearly 500 miles from the North Slope “is up to 40 percent of the cost of bringing energy to Fairbanks,” AIDEA Executive Director Tim Leonard said.

It has been projected by plan participants that if the first gas in late 2015 can be delivered for about $15 per mcf, the final cost after distribution build-out in the Fairbanks area would drop to $13 per mcf by 2021.

The transport costs were calculated in a study done by logistics consulting firm PROLOG Canada Inc. for AIDEA.

The challenge with using LNG-powered trucks, Szymoniak said, is that Dalton Highway-ready LNG trucks are not available. Fairbanks Natural Gas LLC currently uses LNG-fueled trucks to transport LNG from its Southcentral liquefaction plant to Fairbanks, but those trucks to not have the power to get over 4,800-foot Atigun Pass on the Dalton.

Szymoniak said AIDEA’s team was told by truck manufactures that more powerful LNG engines would be on the market sometime in 2015 — roughly the same time first gas is expected to move down the highway.

Diesel was calculated at a pump price of $4.65 per gallon with trucks getting five miles per gallon.

If LNG trucks were to be used at some point in the operation, a fueling station would need to be built near the mid-point of the highway at a cost of about $2 million.

Peak winter gas demand in 2020 is expected to require approximately 300,000 gallons of LNG — roughly equivalent to 24.6 million cubic feet of gas — delivered to Interior per day, or more than 25 deliveries daily, AIDEA projects.

Handling peak demand would mean having upwards of 60 truck and LNG trailer rigs available, the team said. For the first gas — with a late 2015 target — between 20 and 30 rigs will likely be needed.

According to the U.S. Department of Energy, one gallon of LNG equates to 82 cubic feet of natural gas.

Szymoniak said LNG trailers are about $300,000 each.

“The LNG trailers themselves only cost up to 10 percent of the actual (transport) price,” he said.

Who would own the trailers is up to whatever agreement is reached between the gas utility and the one or more trucking companies contracted to haul the LNG, AIDEA’s Davis said. How many new trucks that would need to be purchased to support the operation is another variable dependant up what company or group does the work.

AIDEA held a “trucking roundtable” in November with industry members and Alaska Trucking Association participants, to get feedback about the plan.

“There’s definitely interest from the (trucking) industry for the work,” ATA Executive Director Aves Thompson said in an interview.

The annual cost of each rig is projected to be $900,500 when capital and operating costs are modeled over four years, according to the study.

At that price, a full 60-rig fleet would cost more than $54 million per year. Szymoniak said a four-year operating period was calculated with no infrastructure residual value to keep the model conservative and assure a viable project.

Davis said the state’s work towards building a gas pipeline from the North Slope to Southcentral affects the AIDEA team’s forecasting.

“This is, as (Gov. Sean Parnell) says, an interim approach. We are not trying to model a long-term solution, although we have to plan for this being a long-term solution,” he said.

The Fairbanks North Star Borough-owned Interior Gas Utility, one of the service area distribution applicants, has said its plan could have as many as 12,000 customers by 2021. Fairbanks Natural Gas currently serves about 1,100 residential and commercial customers in the city’s core.

Breaking the yearly rig cost down further, the PROLOG study determined each diesel truck could run 182 trips per year at a cost of $4,660 per trip. That cost is figured using a four-axle trailer filled with 11,500 gallons of LNG.

The AIDEA team said they are continuing discussions with the state Department of Transportation and Public Facilities about whether or not heavier tanker trailers could be used on the Dalton, which could drive down the final gas price if more LNG is hauled each trip.

“We have to figure out what can we do practically, day after day, after day, and still maintain the highway,” Thompson said.

According to DOT officials, the Dalton Highway could handle about 20 additional trucks per day as it is currently maintained.

Driver salary would count for about $185,000 of the annual trucking cost, the study found. Szymoniak said that driver and fuel expenses would combine to account for about 40 percent of the yearly cost to move gas.

Davis added that AIDEA and industry will have to work the Department of Labor and Workforce Development to assure the operation has enough drivers qualified to work on North America’s northernmost highway.

Szymoniak said truck downtime could add up to 3 percent to the modeled transport cost, possibly increasing it to $5.18 per mcf. Depending on how large the truck and trailer fleet is, he said 25 percent to 33 percent it can expect to be stored in summer, when gas demand drops. That projection is still less than the summer demand decrease of 80 percent to about 60,000 gallons per day. Deliveries will be made to fill LNG storage units in the Fairbanks area when user demand slows, he said.

In the dialogue with DOT, Davis said AIDEA was told the Dalton Highway has never been closed for longer than three days, and the overall gas project plan includes a minimum of five days of gas storage on the North Slope and in Fairbanks.

Fairbanks Natural Gas is in the process of building a $35 million, 5.25 million-gallon storage facility in Fairbanks partially with tax credits available through the legislation that approved funding for the North Slope and Interior construction portions of the project, Senate Bill 23.

FNG has also said it will keep its 1.8 bcf capacity Southcentral liquefaction plant open while gas is trucked from the North Slope.

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