By Matt Buxton

JUNEAU — The Alaska Railroad is applying to become the nation’s first railroad system to ship natural gas by rail, a move that comes as the state looks for cheap ways to deliver the product to Fairbanks.

Alaska Railroad Corp. CEO Bill O’Leary told the Senate Finance Committee on Monday that the public corporation will apply this week with the Federal Railroad Administration to carry liquefied natural gas containers.

The attention comes a week after the state announced plans to buy Fairbanks Natural Gas and parent company Pentex in a bid to bring an increased supply of gas from Cook Inlet to Fairbanks. Gov. Bill Walker said he’s targeting a low price for gas and will be looking to use the underutilized Alaska Railroad to achieve that goal.

“With these announcements, we are certainly ready, willing and able to help with the movement of LNG,” O’Leary told the committee.

O’Leary said the application with the federal agency would allow the state railroad to begin shipping liquefied natural gas containers, known as ISO containers. He said the practice is common in Japan but has never been done in the United States. He said he expects the approval process to take about six months.

The ISO containers would take a bit longer to purchase and put into action, about 12 to 18 months, O’Leary said. When asked just how much it would cost the railroad to ship gas, he declined to give an exact number.

“Ours is just one portion in the larger supply chain on this,” he said. “ We have been working with a number of different possible shippers and have quoted differently on different logistical solutions.”

O’Leary said a couple of companies have approached the railroad in the last year to explore shipping gas to Fairbanks.

The ISO containers have a capacity of about 11,000 gallons of LNG, meaning each container can carry about 908,000 cubic feet of natural gas. If the rail supply were to match the 6 billion cubic feet per year projected output of the now-scrapped North Slope processing plant, it would take a little more than 18 ISO containers per day to supply the Interior. Two ISO containers can fit on one rail car, O’Leary said.

Alaska Railroad Corp. spokesman Tim Sullivan, in an email after the meeting, gave additional insight into how the railroad would handle shipping gas.

“The operating model that we’ve been looking at has the shippers owning or leasing the ISO containers, not the Alaska Railroad,” he said. “Our belief is that they would be ordered as soon as there is a decision made on shipping the gas by rail.”

Still, many lawmakers continued to air skepticism about the state’s plan to buy Fairbanks Natural Gas. In a news conference Monday morning, Soldotna Republican Sen. Peter Micciche said he thought it wasn’t a good move because the purchase doesn’t guarantee additional gas supplies to Fairbanks. Micciche is the manager of the ConocoPhillips gas export plant in Kenai.

“I would hope that they reconsider,” he said. “I think there are other options that should be evaluated, and it’s clear that this deal really provides nothing in additional supplies to the Interior.”

Micciche floated the idea of using a cheap and readily accessible plastic pipeline to provide a direct route of additional gas to Fairbanks. He was critical of any plan, including providing it by rail, that adds more handling steps to the gas.

After the meeting, he showed off a piece of 4-inch FlexSteel pipe, a plastic pipe reinforced with sheets of steel. He said an 8-inch line could supply Fairbanks and could be put into the ground quickly, cutting out the need for costly liquefaction and re-gasification plants.

Micciche said he plans to hold a review of the Alaska Industrial Development and Export Authority’s plans to purchase Pentex in the Senate Special Committee on Energy, which he co-chairs with Fairbanks Sen. Click Bishop, at 1:30 p.m. Thursday.

When asked about the possibility of a pipeline, AIDEA spokesman Karsten Rodvik said it would be considered.

“We will evaluate this option for its potential in getting natural gas to Interior Alaska,” he said. “We will be looking at all options.”

AIDEA is pursuing a sale agreement with Pentex with a deadline of Feb. 28.

O’Leary said he was confident that rail can serve as a lower-cost alternative to trucking gas north and said the railroad has been in talks with the Walker administration about the potential.

“We’re much more efficient for moving bulk quantities than by moving by truck,” he said. “And we’re looking for business.”

Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.