Plan for Southeast alternative fuel revived with propane

  • An aggressive proposal to ship low-cost propane to rural Alaska communities will start in Cordova, where the town’s fish processing facilities are natural anchor tenants to make the project economic. Alaska Intrastate Gas Co. plans to eventually supply nearly 20 communities from Prince William Sound to Kodiak and Southeast with propane for space heating. Photo/File/AP

Alaska has a love affair with natural gas, but Frank Avezac says rural areas of the state should at least consider a date with its little sister, propane.

Avezac is CEO of Alaska Intrastate Gas Co., a startup utility that March 4 announced plans to provide 17 coastal communities — from Kodiak to Metlakatla — with propane as an alternative to fuel oil with construction starting as soon as this year.

The aggressive proposal by Alaska Intrastate Gas Co. would start in Cordova with infrastructure buildout in 2016 and then move to Juneau, Valdez and Ketchikan.

Residents of the communities planned for gas development could see fuel cost savings of up to 30 percent from a switch from fuel oil to propane for space heat, according to Alaska Intrastate Gas Co.

The full list of communities Alaska Intrastate Gas hopes to serve includes Kodiak, Valdez, Cordova, Yakutat, Klukwan, Haines, Skagway, Juneau, Angoon, Sitka, Kake, Petersburg, Wrangell, Klawock, Craig, Ketchikan and Metlakatla.

Larry Head, vice president of power and energy for Alaska Intrastate Gas’ global engineering partner AECOM, said both the physical and market characteristics of propane make it a better option for remote Alaska communities.

“The capital cost for producing, shipping and storing LNG is many times higher than that of propane,” Head said.

Propane is a byproduct of sorts in natural gas reserves. It is typically separated from the methane that is pure natural gas. Cook Inlet’s natural gas is “clean” or “dry” gas, meaning it is almost pure methane, while North Slope natural gas is “dirty,” with a host of vapor fuels and carbon dioxide that must be pulled off before the gas can be shipped and sold.

The project would buy Canadian propane and barge it from Prince Rupert to the coastal towns at a delivered price of about $1.10 per gallon to $1.30 per gallon, up to 50 percent cheaper than delivered LNG, according to Head. At that point, the vaporized propane would be mixed with air to produce a blended gas known as syngas, which has virtually the same burn characteristics as natural gas, he said, meaning the two can be used interchangeably in distribution pipes and appliances.

The advantages of propane over LNG for small-scale use “go on and on,” Head said.

Natural gas has to be chilled below minus-260 degrees Fahrenheit to make it LNG for ease of transport. When done on a small scale, the liquefaction process can add $2-$3 per gallon to the cost of LNG.

Propane, on the other hand, liquefies at minus-44 degrees and can be kept liquid at warmer ambient temperatures for transport with relatively little compression. It has also historically been cheaper than diesel, or fuel oil, on an energy equivalent basis, Head said, and likely always will be because there just aren’t enough backyard grills to use it all.

Delivered fuel oil is selling in small quantities for about $2.60 per gallon in Cordova, according to vendors.

“Right now there’s a major glut of propane and there’s going to be a major glut for many years ahead because there’s not outlets for its use,” he said.

Cordova was chosen as the starting point for the project because its fish processing facilities can act as market anchor tenants to supply the base demand needed to make the development of propane and propane accessories economically viable from the get-go, according to Head.

“Our analysis shows we don’t need heavy adoption, we simply need the anchor clients to sign up and then residential clients will be provided, based on their interest in having a change-over (from fuel oil),” he said.

Commitments to convert from a majority of residents and small businesses will likely be needed in the smallest communities without large anchor market tenants, Head added.

Changing home heating systems from fuel oil to propane or natural gas can cost as little as $1,000 to $1,500 for newer boilers, in which just the burner must be replaced, or up to nearly $10,000 for a complete replacement boiler.

The project has tentative agreements with fish processors in Cordova to buy gas that should be finalized soon, Head said.

The first step is getting the infrastructure in place.

“Right now, all we want to do is get pipe in the ground, because without pipe getting in the ground you’re never going to bring any type of gas to anybody,” Avezac said in an interview.

Outgoing Cordova Mayor Jim Kasch said Alaska Intrastate Gas first came to Cordova with a plan to supply LNG nearly 10 years ago when energy prices in Alaska were at record highs. At that time, the claim was natural gas for half the cost of fuel oil, he said.

The Cordova City Council approved a land sale to the utility for a landing facility, but the deal was rejected in a public vote.

Kasch was on the city council when the people of Cordova rejected the deal.

This time, Kasch said he was first made aware of the revived plan March 7 and sees it as a “cart before the horse scenario,” because Alaska Intrastate Gas and AECOM have yet to apply for permits to build the necessary storage, vaporization and distribution infrastructure while wanting to start building this year.

“If they can do something to mitigate (high energy costs) and reduce the cost of daily life here in rural Alaska, boy, I’m all for it but they need to sell themselves to the communities where they plan on doing this and I’ve yet to see that,” Kasch said.

Avezac said the holdup on the land sale years ago was opposition to filling in tidelands, which Alaska Intrastate Gas doesn’t intend to do this time around, not an opposition to the overall plan.

“We’ve never met anybody that doesn’t want gas, ever,” he said.

As for working with the city, Head said, Alaska Intrastate Gas has certificates of public necessity and convenience that give the utility access to right-of-ways for piping, and while permit applications have not been filed, discussions have been had and he sees no issues in getting the paperwork squared away.

He said further information about project financing and detailed construction timelines would be made public soon.

Elwood Brehmer can be reached at [email protected].

03/09/2016 - 2:39pm