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By Yereth Rosen
ANCHORAGE, Alaska, July 25 (Reuters) - A proposal to truckliquefied natural gas from Alaska's North Slope 400 miles south(640 km) to Fairbanks is economically and technically feasibleand an improvement for the environment, according to a reportissued on Thursday by a state agency.
The proposal, already embraced by Governor Sean Parnell andendorsed by the state legislature, is to build a $207.5 millionliquefaction plant at Prudhoe Bay and truck the LNG to Alaska'ssecond-largest community.
Prudhoe Bay and other North Slope fields hold vast amountsof gas, with 35 trillion cubic feet already proven and much morebelieved to be above the oil layers. But the gas is stranded forlack of an export market that would justify a costly pipeline.
A report from the Alaska Industrial Development and ExportAuthority (AIDEA) found the project made sense, as long as thestate makes good on intentions to subsidize it and privateinvestors chip in at least $37.5 million for the plant andprovide the trucks.
The plan envisions LNG deliveries to Fairbanks by late 2015.Lawmakers this spring approved measures that would provide $57.5million in direct grants and $125 million in low-interest loans.
Volumes are predicted to be relatively small, at just 9billion cubic feet a year. Still, it would be the first evercommercial delivery of natural gas from the North Slope oilfields to any area outside that oil-producing region.
While the Fairbanks North Star Borough, with about 99,000residents, is much smaller than most markets considered in thepast for North Slope gas, the area's customers would bewell-served by the trucking project, the AIDEA report said.
Residents now depend on costly fuel oil or wood-fired stovesto provide heat over the bitterly cold winters. Apart from thecost - fuel oil is about $4 per gallon, equivalent to $30 perthousand cubic feet of natural gas - those energy sources causeair pollution, the report noted. Wood-smoke pollution hasprompted alerts about unhealthy air in and around Fairbanks.
Trucked LNG would likely cost Fairbanks consumers $14.09 to$17.09 per thousand cubic feet, the report said.
Plans to develop much-larger North Slope natural gasprojects have languished. Since the 1970s, Alaska officials havesought to entice industry to build an overland pipeline to bringNorth Slope gas to other parts of the United States.
State officials are now eyeing the alternative of an800-mile pipeline from Prudhoe Bay to a new liquefaction plantat a southern Alaska port, from where tankers could ship 2billion cubic feet a day of LNG to Asian markets. That idea alsodates back to the 70s, but has gained support from Parnell andothers who note the United States is now saturated with shalegas.
But oil companies have estimated the cost of building theoverland pipeline to be as much as $41 billion, and the LNGproject plus the pipeline to be as much as $65 billion.
