Flint Hills files application, then backs off LNG trucking plan


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Flint Hills Resources has filed plans to build a $184 million natural gas liquefaction plant at Prudhoe Bay with Alaska agencies, but has put the project on hold until sufficient customer demand is firmed up, a company spokesman said Nov. 19.

“We’re backing off until we see what others come up with,” Flint Hills spokesman Jeff Cook said.

Mike Brose, a company vice president, said in a press release that Flint Hills will await proposals from others before proceeding. The company is a subsidiary of Koch Industries,

If the plant is built, LNG would be trucked from the North Slope about 400 miles to Fairbanks, in Alaska’s Interior, to provide fuel for industrial customers, including itself, and other potential buyers.

Flint Hills operates a refinery at North Pole, east of Fairbanks, and now uses crude oil to provide power and to heat crude oil taken from the Trans-Alaska Pipeline System for refining.

Golden Valley Electric Association, the Interior Alaska electric cooperative, had been working with Flint Hills on the plan to truck LNG, but Brose said Nov. 19 that a joint-venture approach will not proceed, although Golden Valley could be a customer for the plant.

Golden Valley is hoping to use natural gas from LNG to generate power, replacing fuel oil that is now used in generation plants.

In its application to the state, Flint Hills said it would build its plant on a gravel pad ranging from 9 acres to 12 acres. A 1 million-gallon LNG storage tank would also be located at the site.

Meanwhile, there is another company interested in a North Slope LNG trucking operation. Spectrum LNG LLC, owner and operator of Desert Gas LP, in Arizona, has also filed applications with the state to build a Prudhoe Bay LNG plant, according to Ray Latchem, Spectrum’s president.

Spectrum’s plant in Arizona now supplies 50,000 gallons of LNG daily for vehicle fleet use in the Los Angeles and Phoenix markets.

The company also led development of a small LNG plant near Anchorage that now supplies LNG for shipment by truck to Fairbanks Natural Gas, a small gas utility operating in Fairbanks.

Ironically, Flint Hills and Spectrum have both filed for surface leases at the same locations near the Prudhoe Bay field.

“We filed our applications first and they came along and top-filed on us within 30 days, which means the state will have to decide which one of us gets the lease,” for the plant, Latchem said.

Elizabeth Bluemink, spokesman for the state Department of Natural Resources, confirmed that Commissioner of Natural Resources Dan Sullivan will decide which company will get the lease.

Flint Hills spokesman Cook said the company is in discussions with a North Slope producer to supply gas to the plant.

Golden Valley had separately negotiated a contract with BP to supply gas for its needs, but that assumed it would be part of the Flint Hills project, but Cook would not confirm that Flint Hills is part of the BP contact with Golden Valley.

Latchem said that if Spectrum’s plan goes forward it would make LNG for local use on the North Slope, for vehicles or heavy equipment, but would also truck LNG to Fairbanks.

Latchem previously helped develop Fairbanks Natural Gas, a small private utility that now serves 1,100 commercial and residential customers in a core downtown area of the city with gas shipped as LNG from Anchorage by truck.

In its Nov. 19 press release, Flint Hills said, “With the completion of phase 2 engineering, the next step that must be taken is to determine whether there is sufficient interest in LNG, outside of the industrial demand that FHR (Flint Hills Resources) is targeting, to build a plant.

Flint Hills believes that the Alaska Industrial Development and Export Authority, or AIDEA, and the Alaska Energy Authority are the right entities to explore that question, and has invited those entities to provide the company with a proposal. 

Mike Brose said, “we don’t think that we would build the plant for our needs and the needs of other industrial users alone, so we will wait for AIDEA or AEA to do further investigation and present a proposal if they think that is appropriate. Flint Hills is willing to provide AIDEA and AEA our completed phase 2 engineering studies if that would be helpful in their analysis.”

Brose said that Flint Hills anticipates that Golden Valley’s needs for power generation will be considered in the analysis by AIDEA and AEA.  

If the project were to proceed, Flint Hills said it could have its plant operating in the second quarter of 2016, assuming that it can begin construction in 2014.

About 500 construction workers would be needed to build the facility. Operations would require about 10 permanent staff, according to the application.

 

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.

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