Tim Bradner

Tim Bradner is co-publisher of the Alaska Legislative Digest.

Siemens and a joint-venture of two Mat-Su Alaska Native organizations are teaming up to propose a modular “micro” liquefied natural gas plant at Houston, on the Parks Highway, to supply gas to the Interior Gas Utility in Fairbanks.

The IGU is building out a natural gas distribution system.

The Siemens and the Knik partners have have made an offer to supply liquefied gas to the Interior utility at a price of $12.60 per thousand cubic feet, or mcf, which would be about $15.50/mcf once gas is delivered through IGU’s distribution system to customers.

If the IGU makes the decision to proceed, the plant could be built and operating by December, 2019.

Details were made available Monday from a presentation made by Siemens and its Knik partners to IGU’s board in Fairbanks on May 15.  The IGU was not available Monday to comment on the proposal.

The $15.50/mcf cost to consumers compares favorably to a $22.91/mcf price now charged to customers by Fairbanks Natural Gas, the small utility now serving the community, according to the Siemens/Knik presentation.

Fairbanks Natural Gas is now trucking LNG to the Interior from a small LNG plant near Point MacKenzie, in the Mat-Su Borough. The plan is for FNG, which serves a core downtown Fairbanks market, to be merged with the newer Interior Gas Utility, which is building a distribution system near North Pole, east of the city.

Under the proposal, Knik’s Alaska Native village corporation, Knikatnu Inc. and its tribal partner, Knik Tribe, would own the project, according to Tom Harris, Knikatnu’s CEO.

Siemens, an international energy company, would provide its proprietary modular micro-LNG technology to manage construction and operation and help with financing and training for tribal members and Knikatnu shareholders who would work at the plant, according to Tom Greer, a Siemens spokesman.

This is similar to the structure of business Siemens has developed with other tribal entities in the U.S., Harris said.

A key part of the plan is that Knikatnu and Knik Tribe will have access to low-cost financing for tribal energy projects available through the U.S. Department of Agriculture, he said. Knikatnu owns a 40-acre parcel at Houston that would be available for the project.

The initial capital cost was not available in details released Monday, but the total build-out of the project is estimated at $100 million, including facilities to connect to an Enstar Natural Gas Co. pipeline and Alaska Railroad tracks, both which are nearby the Houston plant site, as well as facilities to unload LNG shipped by rail to Fairbanks.

The Siemens/Knik proposal is to start with two of Siemens’ LNG production modules to produce 60,000 gallons of LNG per day and to eventually expand to four modular units to produce 120,000 gallons per day.

The IGU has an alternative to the Siemens/Knik proposal in that it can build a new, larger LNG plant at the site of its existing small plant near Port MacKenzie. The existing plant is not large enough to supply the growing gas demand in Fairbanks as the IGU builds its distribution system, so a larger new plant is needed in any event.

Harris said a unique aspect of the Siemens/Knik plan is that the Siemens technology would allow a plant to be sized to meet existing demand and then expanded to meet growth through the installation of additional modules.

A challenge in building a new plant near Port MacKenzie is that it wouldn’t have the advantage of Siemens’ modular technology, Harris said, and would likely have to be built oversized for the present market to allow for growth. That would result in a lack of efficiency and higher costs.

An advantage of building the project at Houston is that the trucking or rail-shipping distance to Fairbanks is shorter. It would also eliminate the problems created by a major increase in LNG trucks using the Knik-Goose Bay Road.

Harris said the IGU should retain ownership of the small plant in any event so as to provide a backup supply of LNG.

Siemens has, meanwhile, demonstrated its ability to build the modular plant in a northern climate with a new two-module plant now operating at Dawson Creek., B.C., with LNG shipped by truck up the Alaska Highway to Whitehorse, in Yukon Territory.

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