JUNEAU — There are several options before the Interior Energy Project, but moving slowly is not one of them.

Project lead Bob Shefchik said at the Feb. 25 Alaska Industrial Development Authority board meeting that within the next month his team would look to draft a short-list of two or three ways to get natural gas to the Interior. Since AIDEA killed the original North Slope liquefied natural gas trucking plan around the New Year, Shefchik said new project proponents have “come out of the woodwork” with ideas on how to lower energy costs in the Fairbanks area.

Shefchik is the former board chair of the Fairbanks North Star Borough-controlled Interior Gas Utility.

He said that while the primary investigation will be on LNG feeding the region either from the Slope or Cook Inlet, the Interior Energy Project team will keep an open mind.

“If gas comes in a Zeppelin we will look at gas in a Zeppelin, but we will focus on the entire supply chain and the community cost of gas,” a view of the project that was missing before, Shefchik said.

AIDEA’s new project team has the resources of the governor’s office, Revenue, Natural Resources, and Commerce departments committed to getting a cleaner, lower-cost energy option to the Interior.

Gov. Bill Walker introduced parallel bills to the House and Senate that would expand AIDEA’s ability to use Interior Energy Project financing, now dedicated to a North Slope source, on another plan.

“It’s our job now to bring you guys forward a project and our sole focus is to do that,” Shefchik told the AIDEA board.

If gas, once liquid or otherwise, can be delivered to Interior residents at about $15 per thousand cubic feet, or mcf, it could save area households thousands on their home heating expense each year and be cost about half the energy equivalent of $4 per gallon fuel oil.

The challenges to getting Cook Inlet gas north at a reasonable price are contrary to a North Slope source. The Slope has a stable, inexpensive gas supply and high capital and transportation costs, the opposite of Southcentral.

Fuel oil prices have fallen significantly with the price of oil over the last five months, which has strained the immediate viability of the project. However, oil prices are expected to rebound and the economic feasibility of gas to Fairbanks could easily improve as the project moves along. Lower oil prices are seen only as a respite while the Interior Energy Project unfolds.

The goal is still to get first gas to the Interior by the fall of 2016.

Expanding the LNG trucking operation currently owned by Pentex Alaska Natural Gas Co. would be the most straightforward approach to adding to Interior’s gas supply.

Pentex subsidiaries Titan Alaska LNG and Fairbanks Natural Gas handle the midstream and downstream portions of the gas supply chain, respectively.

Fairbanks Natural Gas President Dan Britton said in an interview that Titan’s Point MacKenzie LNG plant already runs virtually at its capacity of about 1 billion cubic feet, or bcf, of gas per year, so growing the gas supply would mean expanding the plant.

LNG from the Titan plant serves about 1,100 Fairbanks Natural Gas customers in the heart of the city.

Adding capacity to the plant would mean adding a new LNG train — what amounts to a completely new liquefaction facility.

Britton said lower capital costs at the Southcentral plant mean it could likely be expanded incrementally with a couple 3-bcf trains as Interior gas demand ramps up to 6 bcf over several years.

He estimated each new LNG train could be bought, shipped from the Lower 48 and installed for about $30 million apiece.

With support infrastructure, such as a maintenance shop and control room already in place, integrating a new train or two is not an exhaustive proposition.

“It’s those types of things that don’t seem like a lot, but cost-wise add up very quickly,” Britton said. “(Having a system in place) really simplifies the installation and the costs associated with installation.”

Simply being in Southcentral helps a great deal, too. AIDEA’s North Slope project partner MWH Global Inc. originally pitched a 9-bcf North Slope plant for about $200 million. As the engineering process moved along the plan shrunk to a 6-bcf plant with a bare-bones construction cost of nearly $230 million.

Britton said the site at Point MacKenzie is 17 acres, ample space for two larger LNG trains. AIDEA’s North Slope gravel pad is about 10 acres.

Adding plant capacity would mean adding another transmission pipeline, he said, but with an existing right-of-way to Enstar Natural Gas Co.’s nearby off-take point, that shouldn’t be an issue.

Another small bonus of the Point MacKenzie plant is its position on Enstar’s system before the gas is odorized, meaning it doesn’t need to be cleaned.

The biggest challenge could be getting the expansion done in time.

Lead-time on a 3-bcf train is usually about 14 months, according to Britton. He said a downturn in the market has opened some production slots previously occupied by other projects, but it would still likely take a year to get a train to Alaska.

Most of the process engineering could be leveraged from other projects, meaning pre-purchase work would probably take several weeks at most, Britton said. From there, the detailed engineering would be done while the train is being built.

When the order for a train would be placed depends on when, or if, the sale of the Titan plant to Hilcorp subsidiary Harvest Alaska is approved.

Attorney General Craig Richards has said he wants to investigate the pending sale agreed to last November for anti-trust concerns. The Regulatory Commission of Alaska typically handles such matters on its own.

A Department of Law spokeswoman said she could not comment on a pending investigation, but Britton said a final close date between Pentex and Harvest Alaska has been pushed back from July 15 to Sept. 30 at Richards’ request. The RCA’s decision is expected before Sept. 12.

If it takes to the end, time will be squeezed to get first gas to the Interior in late 2016 from the Titan — or Harvest — plant.

Harvest Alaska has said the company is “actively pursuing” expansion within 18 months if it acquires the LNG plant and Britton said they have told him the same thing.

The agreement between Pentex and Harvest includes a 10-year supply contract for LNG delivered to Fairbanks for $15 per mcf equivalent. That does not include regasification and distribution costs to customers.

Amassing an LNG trailer fleet would be done while waiting for the LNG train. The trailers — about $240,000 each — usually require about a six-month lead-time for delivery.

Titan Alaska LNG runs two truck-trailer rigs to supply Fairbanks’ current gas demand.

The possibility of sending LNG north via the Alaska Railroad has received greater attention since the focus of the Interior Energy Project shifted to the south.

Britton said he believes rail transport will likely play a role in future LNG transport, but what exactly the transportation system will look like remains unclear.

A little pipeline

Sen. Peter Micciche, R-Soldotna, believes a small pipeline from Southcentral to Fairbanks is the way to go.

An eight-inch, flexible steel pipeline could be laid for between $297 million and $405 million, he said in an interview March 2.

AIDEA has roughly $280 million available from the $332.5 million Interior Energy Project financing package in Senate Bill 23.

Micciche said he has not seen an “all-in” cost that brings gas to residents at lower than $18 per mcf.

“What you keep hearing is little pieces of the project that sound reasonable. You put them all on a ledger sheet and add them up and you’re at the cost of an eight-inch, flex-steel pipeline from Big Lake to Fairbanks,” he said. “Now do you want to fiddle around with all those handling costs for years or do you want to deliver gas the way everyone else does to a market the size of Fairbanks.”

Micciche knows LNG; he is the superintendent of ConocoPhillips’ LNG export facility in Nikiski.

A pipeline could be done as quickly as expanding LNG shipments, Micciche said, as soon as a right-of-way is secured. He suggested sharing the Alaska Railroad’s right-of-way or the Department of Transportation’s Parks Highway route.

He proposed a pipeline to the north shortly after AIDEA announced its intent to purchase Pentex.

“This makes (the Flint Hills oil refinery) viable again; LNG doesn’t,” Micciche said. “So the railroad can fiddle around with a few cars of LNG or it can go back to the thousands that it moves when Flint Hills is back in production — its single largest customer (before the refinery closed).”

Shefchik said during the AIDEA meeting that his team had meetings scheduled with Enstar and would fully vet Micciche’s proposal independent of other ideas.

Alliance says ‘no’

Alaska Support Industry Alliance President Kevin Durling sent a letter to AIDEA Executive Director Ted Leonard Feb. 23 asking the state financing organization to reconsider its plan announced in late January to buy Pentex.

Durling wrote that private companies are investing in projects to meet Fairbanks’ energy needs and that AIDEA’s entrance to the market sets a “dangerous precedent” of government competing with private enterprise.

“AIDEA has already shown in their previously selected (North Slope) LNG project that they are not able to choose ‘economically viable winners.’ Their initial involvement and subsequent pivot to (Cook Inlet) LNG and the purchase of Pentex will likely delay solving the Fairbanks energy issue,” he wrote.

AIDEA has said it would act as a majority shareholder in Pentex and current business operations and management would remain in place. Negotiations of a definitive agreement between Pentex and the authority are ongoing, Shefchik said March 3.

AIDEA board member and former state senator from Fairbanks Gary Wilken said the letter distressed him because the Alliance has shown little interest in the project to this point.

“I don’t remember the Alliance being at any of our meetings,” Wilken said.

Durling was traveling and could not be reached for further comment in time for this story.

Wilken encouraged the business organization to learn about how much work has gone into the Interior Energy Project and offered to help anyone interested in the work gather more information.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.