by Margaret Kriz Hobson, E&E reporter

EnergyWire: Friday, March 13, 2015

At a time when Alaska state officials are eager to provide low-cost fuel to the energy-hungry Fairbanks region, the Alaska Railroad Corp. is seeking to become the first U.S. company to ship liquefied natural gas by rail.

The Alaska railroad and three other companies — Union Pacific, BNSF Railway and Florida East Coast Railway Co. — have applied for Federal Railroad Administration permits to ship LNG on their rail lines.

Currently, no liquefied gas is transported by rail in the United States.

The Alaska railroad is proposing to transport LNG from the Cook Inlet’s offshore natural gas fields to the Fairbanks region.

To carry the fuel by train, the company would liquefy the gas in southern Alaska and transfer it into 11,000-gallon intermodal tanks known as ISOs.

Those containers would be transferred onto flatbed trucks and driven to the railroad staging area. There, railroad workers would load two ISOs onto each 89-foot flat rail car. The company anticipates running a 30-car train to central Alaska every four days.

“We have the existing infrastructure already, and we have the capacity on the railroad,” noted Dale Wade, vice president for marketing and customer service at the railroad.

“We have extensive experience in moving bulk chemicals, many of which are flammables, as well. So that doesn’t scare us at all.”

At an Alaska Resource Development Council meeting last month, Wade said that FRA officials have been encouraging about the company’s proposal to haul LNG.

“Their point to us was, ‘We are not here to stand against you,'” he said.

“At this time, we believe we will be the first railroad in the United States to carry LNG. … We’re optimistic about that,” Wade asserted. “We’ve submitted the

[application], and we don’t see any reason why it won’t go through without delay.”

The Alaska Railroad Corp., an independent corporation owned by the state, is looking to enter the LNG hauling business at a time when the company’s shipments of other commodities, specifically bulk petroleum and coal, are declining.

The company operates 45 passenger cars and 1,381 freight cars on 656 miles of track that connects ports in southern Alaska with Anchorage, Fairbanks and North Pole.

Ramping up gas, lowering pollution
State officials have long struggled to provide lower-cost energy to interior Alaska, where heating fuel and electricity prices are among the highest in the nation.

Rather than pay for expensive petroleum-based fuels, many local residents turn to wood-burning stoves for heat, worsening the region’s severe winter air pollution problems.

Only about 1,000 Fairbanks residents and businesses currently use natural gas, which is trucked to the region by Fairbanks Natural Gas, a local gas utility owned by Pentex Alaska Natural Gas Co.

FNG buys the gas from producers in the Cook Inlet and converts it to LNG at the company’s Point McKenzie liquefaction plan, which is now at its maximum capacity.

To expand Fairbanks’ supply of natural gas, AIDEA had been focused on tapping the abundant gas reserves on Alaska’s North Slope. An estimated 34 trillion cubic feet of gas is stranded at those oil fields (EnergyWire, Sept. 23, 2014).

In September, AIDEA signed a preliminary agreement to hire an outside company for the project. But the agreement fell apart in January when the project proved to be too expensive.

Shortly afterward, Alaska Gov. Bill Walker (I) issued an edict directing state agencies to find new solutions for getting cheaper fuel to interior Alaska.

This time, Alaska is eying Cook Inlet’s reserves, which the state estimates at 1.54 trillion cubic feet of recoverable gas.

In February, AIDEA signed a letter of intent to buy Fairbanks Natural Gas parent company Pentex, a move that Walker said would promote his goal of “bringing energy relief to Interior Alaska.” The AIDEA board also asserted that the acquisition would promote expansion of the local gas distribution network in central Alaska.

That transaction drew immediate criticism from Republican state legislators, who protested that the state is interfering with local business markets.

The state corporation is currently drafting a financial analysis of the proposed Pentex purchase, which will go to the board in late April.

Pipelines in the pipeline
Meanwhile, AIDEA’s Interior Energy Project is also casting a wider net in hopes of attracting proposals for other projects that could provide cheaper heating and electricity to central Alaska.

The state corporation plans to launch a formal request for information, with the top project contenders due to be considered by the AIDEA board “in an expedited manner,” according to a corporation spokesman.

In the long term, Fairbanks businesses and residents could get access to cheaper fuel by hooking into a large-scale natural gas pipeline that would carry fuel from the North Slope to an export terminal in southern Alaska.

Currently, Alaska has two pipeline projects on the drawing board. Last year, the state agreed to partner with three major oil companies and TransCanada to study the possibility of constructing a multibillion-dollar pipeline and export project.

More recently, the governor called for the state to consider building its own large-volume natural gas export project (EnergyWire, Feb. 20).

However, neither project is likely to begin carrying gas to Fairbanks for at least another 10 years.

The Alaska Railroad’s Wade acknowledged that a gas pipeline could provide fuel at a lower cost than moving LNG containers by rail. But he predicted that the railroad could be ready to ship fuel to Fairbanks within the next two years.

“This project isn’t being offered as a replacement for a pipeline,” he said.

“But we believe that the pipeline project will take longer than the patience of people in Fairbanks who are waiting for that solution. So this would be a wonderful interim solution.”