Fairbanks Daily News-Miner editorial

The estimate of a $19.50 per thousand cubic feet price point for gas delivered by the Interior Energy Project, as declared Wednesday by representatives for the Alaska Industrial Development and Export Authority, is a tough pill to swallow. The goal of the project when it was embraced by Gov. Sean Parnell and the Legislature in 2013 was to have gas to consumers at a cost of $15 per mcf, an estimate that later expanded to a range between $14 and $17, then between $15 and $18, and now an approximation of $19.50, with cautious optimism that the number might improve slightly depending on the way financing for project components lines up. A $19.50 price point for gas might not put the project’s viability in the danger zone — but it’s a lot closer to it than we’d like.

Make no mistake, gas at $19.50 per mcf would still be a meaningful savings over current heating fuel prices, which are about 30 to 35 percent more expensive for an equivalent amount. But the project was designed for savings closer to 50 percent, and the estimates of how many homeowners would convert were modeled at that price point. The upward-creeping cost estimate may erode the willingness of residents to switch to natural gas, which in turn would mean costs would be spread out between fewer customers, exacerbating the rising price issue.

We can’t afford to have that happen.

Another potential impact to the willingness of customers to sign up is the cost of conversion to homeowners, which no partner in the project has yet definitively addressed. Estimates for converting residential boilers to natural gas range from $2,500 to $10,000 depending on the model and how much work needs to be done — a significant expense, especially for those residents already struggling to make ends meet because of their current heating costs. Some have called on the state to provide financing — whether in the form of a loan program or grant funds to help partially cover conversion costs. AIDEA representatives have said they would prefer that utilities take care of the financing of conversions, letting residents gradually pay back the conversion cost as part of their utility bill, but as yet there hasn’t been clarity on whether the Interior Gas Utility and Fairbanks Natural Gas have sufficient funds and mechanisms to cover the up-front cost of widespread conversions, or whether those costs would drive the natural gas price point up further. For residents contemplating conversion, this is a vital issue, and one AIDEA and the utilities must sort out if they hope to have customers willing to buy gas once it’s trucked to the city gate.

What Wednesday’s AIDEA presentation made more clear is that despite price creep, trucking remains the Interior’s best hope for cheaper natural gas. The option of bringing Cook Inlet gas north via the Alaska Railroad was estimated by plan proponents as costing $14.50 per mcf for delivery to the “city gates,” before approximately $6.50 per mcf in estimated utility costs were added, for a final consumer cost of about $21 per mcf.

The importance of this project to the economic fortune of Interior residents is high and demands the full attention of all parties involved, whether they be consumers, utilities, legislators or even the governor. If Bill Walker’s election lead should hold, we call on him to make good on his campaign pledge to declare an energy disaster in the Interior and do all he can to make sure gas cost estimates to consumers do not rise further — and even drive those prices down if possible. And if Gov. Sean Parnell should be re-elected, he and the Legislature already have much invested in this project — they should maintain focus to ensure their previous efforts were not done in vain.