Port Mackenzie

Construction of a $50 million expansion at the small Titan natural gas liquefaction plant near Port MacKenzie could be underway next year.

Air Liquide, a major gas technology company, has been selected for the construction, according to Dan Britton, general manager of the Fairbanks-based Interior Gas Utility, which owns and operates the Titan plant.

The expansion would allow more liquefied gas to be made at the Mat-Su plant for shipment by truck to IGU’s customers in Fairbanks, he said.

Britton spoke in a presentation Friday to an energy task force of Commonwealth North, an Anchorage public policy group.

The utility is also close to completing a new 5.25 million-gallon LNG storage tank in Fairbanks that would support IGU’s expanded gas distribution system in the Interior city, Britton said.

IGU also has construction underway of a smaller LNG storage plant at North Pole, east of Fairbanks, to serve new customers there, he said. North Pole is hit hard by winter air pollution and switching from heating oil and wood-heat to clean-burning natural gas would ease that problem.

Britton said construction of the larger Titan plant will take about two years once the go-ahead has been given. That will depend on the closing of a funding package for the plant, he said.

IGU will finance the plant with proceeds from a tax-exempt “conduit” revenue bond to be sold by the Alaska Industrial Development and Export Authority, the state’s development finance corporation.

The state authority will issue the bond but IGU will be responsible for paying for it over time. AIDEA commonly use conduit bonds to finance public facilities, in this case a utility.

IGU now ships LNG to Fairbanks from the existing small plant by tank truck, typically sending five trucks a day north on the Parks Highway. When the new plant expansion is complete shipments will expand to about eight trucks daily, Britton said.

A critical advantage of having more storage in Fairbanks is that it will create more flexibility for the utility and allow the shipments to be evened out on a year-around basis. Because storage capacity has been short in Fairbanks IGU has had to operate more trucks on a daily basis in the winter months than in summer.

When the new tanks are operational more LNG can be stored in the summer, allowing the winter and summer trucking schedules to be evened out, he said.

IGU now has about 1,100 residential and commercial customers for natural gas in the core Fairbanks area. Additional distribution lines have been installed in Fairbanks and at North Pole, and customers in those areas will be served as additional LNG deliveries are made and gas is available.

If natural gas prices remain stable in Cook Inlet, where IGU now buys its gas, studies by the Fairbanks utility indicate that about 35 percent of residents and 70 percent of commercial businesses and institutions within the utility’s service areas will switch to gas from oil and wood.

If Cook Inlet gas prices were lower the numbers may increase, to an estimated 50 percent of residents and 100 percent of commercial customers, Britton said.

“One of the key issues we face is the cost of converting a heating system. It can range from $2,000 to over $10,000 if the conversion requires a boiler replacement,” he said.

Getting the delivered price of the gas low enough to make an investment to convert attractive is important, Britton said. IGU now prices its gas at $20.81 per thousand cubic feet but that could be lowered to about $18 per thousand cubic feet once there are more Fairbanks customers for IGU, he said.

Additional customers, which will come with more gas supply, will allow IGU to spread its fixed costs over a larger customer base.

The delivered price of gas in Southcentral Alaska by Enstar Natural Gas Co., the regional gas utility, ranges from $10 per thousand cubic feet to $15 per thousand cubic feet, Enstar has said.

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