Opinion | Fairbanks Daily News-Miner
It’s heartening to see natural gas distribution lines being placed in Fairbanks neighborhoods this summer. While it’s one thing to be told that natural gas delivery is closer for Interior residents than it’s ever been, and another to believe in an abstract way that such a statement is true, there’s something about seeing the pipe actually going into place that drives the point home for many of us. That said, there are still several crucial hurdles to clear before gas arrives in Fairbanks and North Pole. The communities and the utilities that serve them would do well to maintain focus and do everything possible to make sure the Interior Energy Project stays on track.
The first big decision point and potential stumbling block will come this summer and fall, as the Alaska Industrial Development and Export Authority looks to firm up cost estimates and capacity for the North Slope gas liquefaction plant that will process the natural gas and place it on trucks for transport to the Interior. The plan is to have enough variables addressed to have a solid estimate for the final delivered cost of gas by Oct. 3. But a key part of that price will be the amount of gas that local utilities like Fairbanks Natural Gas, the Interior Gas Utility, and GVEA sign on to purchase, as there are economies of scale that benefit the project if greater purchase commitments are made. But utilities are understandably skittish about locking into purchase agreements for gas that may not be economic, or at least not enough so that residents will switch over en masse from other options like heating oil. It’s a classic chicken-and-egg problem, with the potential for great economic hardship if agreements aren’t reached for gas supply — without purchase agreements in place, the project can’t succeed, as there’s no point in bringing gas all the way to Fairbanks if no one is signed up to buy it once it arrives.
To further complicate matters, the delivered cost of gas isn’t the only major factor utilities are weighing in looking at what kind of a commitment to make to the project. The utilities must base their purchase on the number of their customers they believe will be willing to convert to gas, and a significant factor in that decision for local families will be the up-front cost to change over from their current source of heat. The estimated cost of conversion for homeowners ranges from a few thousand dollars to more than $10,000, a sum that few have readily on hand. Fortunately, utilities have the ability to pro-rate that cost, spreading it out over multiple years to reduce the impact on residents’ bottom lines.
But that requires either private or state funding to cover the conversion costs in the interim, and so far the utilities and state entities aren’t in agreement as to who should foot the bill. The utilities are looking to the state to help cover those costs, but state officials say that a public loan should be the last resort if private entities don’t agree to take part. We’re inclined to agree with the state, in that private backing should be applied wherever possible. That said, the overall objective should be to keep the cost of gas at a level that residents can afford it, so utilities have a responsibility to obtain competitive financing rates that don’t drive up costs for end users. They should maintain open and frank discussions amongst themselves and state entities, to ensure that all parties are well informed about potential breakdowns in this key aspect of the plan.
Finally, some responsibility does land on us, the consumers. If the state and utilities continue to make progress with the plan and this fall’s cost estimates would bring meaningful savings for local energy customers, it is in the community’s best interest for as many people to make the switch as possible, as early as possible. More demand means more gas. More gas means greater capacity. Greater capacity means costs are spread out over as large a base as possible, bringing the end price for gas down.
And in the end, that’s what we all want — residents, utilities and the state alike. What we have to do to get there is maintain focus and do everything we can to keep the ball rolling forward.