A decades-old project to deliver piped gas to communities from Kodiak to Juneau — so homes and buildings can be heated with propane instead of dirtier stove oil — is close to breaking ground with the support of a Fortune 500 company, officials said.
But residents in Cordova, the first town targeted for improvements, said this week they are skeptical of the Alaska Intrastate Gas Co.'s plans, following years of false starts and limited information about the firm's finances and other details.
"It looks a lot like a shell game," said Clay Koplin, chief executive of the Cordova Electric Cooperative and the town's incoming mayor.
AIGC majority owner Frank Avezac, an accountant, said there is no scam and that people he's talked to in Cordova and elsewhere support the idea.
"I would say nothing gets built in this state unless all the stars align and the timing is correct," said Avezac, explaining why the company hasn't succeeded in past attempts to deliver gas to rural communities.
Now is the optimal time to create a system that delivers propane to furnaces and boilers because of low interest rates that can reduce the costs of borrowing for the $20 million to $25 million effort in Cordova, he said.
There also are clear environmental benefits.
"I'm not an earth muffin here, so I don't want that distorting anything I'm telling you here, but diesel fuel is dirty, it's toxic, it's a carcinogen when spilled or burned, and it's too valuable to incinerate when gas is so cheap," he said.
The company and its new Fortune 500 partner, international engineering firm AECOM in Los Angeles, announced Friday that a groundbreaking in Cordova was happening in "early 2016."
Avezac later clarified that construction is more likely to begin in the middle of this year.
AIGC first plans to build a propane landing facility and piping infrastructure in Cordova, the press announcement said.
"Based on the current pricing, we project that customers could realize immediate savings of up to 30 percent, without any out of pocket costs," Juline Magden, AIGC's chief financial officer, said in the statement.
After Cordova, the companies plan to bring piped propane to Juneau, Valdez and Ketchikan.
AIGC, incorporated in 1986, said it holds Certificates of Public Convenience and Necessity from the Regulatory Commission of Alaska for its plan, which includes providing gas to Sitka, Kodiak, Angoon, Craig, Haines, Kake, Klawock, Klukwan, Metlakatla, Petersburg, Skagway, Wrangell and Yakutat.
Those certificates amount to approval by the state's utility regulator and allow the company to lay pipes in utility corridors, without right-of-way permits from the city of Cordova, said Avezac and Larry Head, an AECOM vice president.
"You need no permits to access their utility corridor because it's already granted" through the RCA's certificates, Head said.
But that may not be correct.
"Just like any other utility, they have to follow the federal, state and local permitting process when they're doing any type of work," said Rodney Crum, the state regulatory commission's chief of consumer protection and information.
Such right-of-way approval is a must before the company can put pipes in the ground, said Jim Kasch, former mayor of Cordova.
Kasch said he believes Avezac has rural Alaska's best intentions at heart when he says he wants to get cheaper, cleaner fuel to communities. Kasch said he's not opposed to the company's plans, but he said AIGC isn't ready to begin building in Cordova.
"If there are 20 steps, I don't think they are at step 1 yet," Kasch said.
He said the company will also need a U.S. Army Corps of Engineers permit before the landing facility can be built, a process that would involve the city and public hearings.
"You're bringing a fuel barge scenario to sensitive fishing grounds and our livelihood in Cordova is commercial fishing," Kasch said. "A lot of things have to happen before they break ground."
Head said a Corps permit is not needed based on the location chosen by AIGC to build the landing facility. He said the plan would not go forward without the city's support. "We're not going to show up and start digging in the street," he said.
Avezac said AIGC is working with Eyak Corp., the local Native village corporation, to build the landing facility on land leased by that corporation.
"In general we really want to help Cordova with reduced energy costs," said Brennan Cain, the Anchorage-based vice president and general counsel for Eyak Corp. "A lot of our shareholders and descendants are there, so we try to be supportive of projects we think will reduce energy costs."
Avezac said the company is working with the Alaska Industrial Development and Export Authority. The state corporation could provide financial support in a loan that AIGC would pay back, Avezac said.
"We are not looking for grants or subsidies," he said.
Karsten Rodvik, AIDEA's external affairs officer, said he is not aware of any recent discussions between the state corporation and AIGC.
Rodvik said there were discussions in the past, but no formal agreement was reached.
"We did indicate our interest by letter, but that was some years ago," Rodvik said. "We'd be happy to talk with them again."
Head said the companies have been talking to seafood processors and other industrial users in Cordova to line up large, anchor customers to support the project.
He said the project needs building permits from the city of Cordova to construct propane storage tanks, and that liquid propane would be converted to gas in vaporization units before it's piped to customers.
Head said propane can be delivered to Cordova for roughly half the cost of diesel fuel and reach customer's appliances for even less. It would also be much cheaper than the cost of delivering liquefied natural gas. He said the cost of converting appliances to handle propane from stove oil would be borne by ratepayers over 20 years.
"The viability of propane makes this a no-brainer," he said, adding that the propane would be shipped in from Canada, where there is large glut of the fuel.
Some Cordova residents said they'd love to burn propane instead of stove oil for heat, but they have concerns about AIGC.
In 2012, voters in Cordova rejected AIGC's plan to acquire city tidelands for the project after opponents raised questions about AIGC's finances and its ability to complete a project once started.
"I'm skeptical," said Mary Anne Bishop, an outspoken critic of AIGC's plans in 2012. She called the latest announcement "bizarre" because AIGC, just out of the blue, is claiming construction will soon begin.
"It's always on the verge of happening with them," she said.
Koplin, the incoming mayor and with the Cordova electric utility, said AIGC has approached the utility about being a partner in the project. The cooperative is receptive, but cautious.
It seems like AIGC wants to pass all the project's risk onto other companies, Koplin said. He believes the project won't deliver savings to customers at today's low diesel fuel prices, which could last for several years.
Koplin added that despite his requests, AIGC has not shared the cost of delivering propane to homes and offices.
"In the absence of a business plan, in the absence of some hard numbers, my eyebrows are perched," Koplin said.