IGU sees opportunity in Alaska LNG pipeline | Local News

Glenfarne Group, the new majority owner of the Alaska LNG project, is expected to issue a final investment decision on the project by December.

“It might happen this time,” Sudduth said, referencing past false starts or withdrawn investments to kick-start the megaproject. “If they do reach a final investment decision, they will have buyers who are under binding agreements and people who will finance the line.”

At the same time, the state-owned Alaska Gasline Development Corporation noted that it has an agreement with an unnamed company in the Fairbanks area to construct a 12-inch lateral line to Golden Heart City.

However, building the Fairbanks lateral requires an increase in demand from both customers and utilities.

“You have to continue building gas mainlines and convert major users,” Sudduth said. “We have to ensure any new generation that gets built between now and then can accept natural gas, even if it doesn’t accept it from the beginning for cost reasons.”

Golden Valley Electric Association currently lacks any power generation assets that utilize natural gas due to the enormous cost. The University of Alaska Fairbanks coal-fired plant can also operate on natural gas, but the cost has prevented it from doing so.

Both Fort Wainwright and Eielson Air Force Base have been referenced as potential beneficiaries of piped natural gas. Fort Wainwright is currently exploring options to replace its aging coal-fired power and heat plant, while Eielson is set to host an advanced nuclear microreactor pilot project within four years.

Sudduth added that for IGU and the Fairbanks North Star Borough to benefit from the pipeline, the gas utility needs to connect its Fairbanks and North Pole distribution systems.

“They have to be connected through a high-pressure transmission line along the Richardson Highway,” Sudduth said. Another design would travel partially on the Richardson Highway and then through the Badger Road area.

Doing so will cost about $18 million. Sudduth said IGU applied for a federal grant but was denied. A smaller grant paid for design, engineering, site survey, and permit preparation for the 14-mile connector. IGU will now look at phasing the project.

“Even aside from preparing for Alaska LNG, redundancy and system reliability will make a large improvement,” Sudduth said.

Sudduth added that the state will need to ensure in-state cost parity for both the main Alaska LNG line and the Fairbanks lateral. While the Alaska LNG project is being touted as a potential economic boon by Gov. Mike Dunleavy and by the Trump administration, the in-state gasline will likely operate at less than 10% of its capacity due to the lower number of customers and utilities.

A 2023 report issued by energy consultant Wood Mackenzie notes that the Alaska LNG project will require at least one major industrial customer to provide affordable natural gas to in-state users.

In addition to customers in Fairbanks and North Pole, IGU provides natural gas to Matanuska Electric Association in Southcentral Alaska.

In 2023, IGU signed agreements with Harvest Midstream and Hilcorp, LLC to source natural gas from Prudhoe Bay, in part to secure a permanent supply to meet projected growth and to avoid a crunch as accessible resources in Cook Inlet become uncertain. Once the trucks start rolling, it will be the first time a Railbelt utility uses North Slope gas.

“There will be a party and you will be invited,” Sudduth told the Assembly.

As part of the agreement, Harvest built a liquefaction plant to process natural gas supplied for Hilcorp. The plant can produce up to 150,000 gallons a day—three times the capacity of IGU’s Titan II facility in Point MacKenzie.

Sudduth said a typical delivery is about 75,000 gallons, or five trailers’ worth. In the first year, that’s about 250 days of pickups from the North Slope. When not in use, she said the goal is to place the plant in warm status and work on trailer maintenance.

That strategy would change if IGU secures major customers, which would require an increase in production and delivery of LNG. She emphasized the need for more maintenance and improvements to the Dalton Highway, as access to the North Slope becomes increasingly essential.

“Aside from commissioning activities, we will avoid in September and May altogether because of washouts and all of the potholes that happen,” Sudduth said.

Sudduth noted that if the Alaska LNG and lateral lines are constructed, IGU’s contract with Hilcorp includes a severability provision.

However, she added that from IGU’s perspective, there are still opportunities to utilize the Harvest plant’s infrastructure — especially if it were relocated to Fairbanks, though she stressed it might not be a prospect Harvest supports at present.

“There are still ways to fulfill a contract in case where we might be unsuccessful in getting out of it,” Sudduth said.

IGU has a 5-million-gallon storage system in Fairbanks, compared to the 150,000-gallon capacity on the North Slope.

“If that plant is moved to Fairbanks, it can start producing into large storage and then we can start serving communities that otherwise would not be able to benefit from the spur line,” Sudduth said.

That would include Delta Junction, Tok, mines, and “projects that are otherwise uneconomical due to the high cost of energy.”