JUNEAU -- Natural gas is being looked at as the solution to high energy costs in Southeast Alaska, but it is Canadian gas, not Alaska gas, that's likely to be shipped to Juneau and other Panhandle communities.
Juneau's electric utility, Alaska Electric Light and Power, has provided the city with power since before it was the capital, but it was recently purchased by Spokane-based Avista Corp., which not only provides electricity to its hundreds of thousands of Pacific Northwest customers but natural gas as well.
Now Avista wants to use what it's calling a "virtual pipeline" to ship liquefied natural gas to Juneau, where it would be restored to a gas and piped to homes and businesses through a new distribution system.
In a city where almost everyone uses heating oil, Avista's ability to bring the same heating options enjoyed by the rest of the nation is intriguing, said Mayor Greg Fisk.
"If their price figures work out, the difference between heating oil and natural gas means it's a potential major saver for households," he said.
What Avista is proposing, said spokesperson Jessie Wuerst, is buying natural gas in Canada, having it converted to LNG, then trucking it to Puget Sound in large, trailer-size vacuum flasks. There it would be barged to Juneau, where it would be regasified, which is done by simply allowing it to warm, then piped to Juneau neighborhoods.
Avista told the Juneau Assembly that the entire project was expected to cost $130 million over 10 years but could provide significant savings to customers.
"There's a savings over home heating oil of about 35 percent, and over propane of 42 percent," Wuerst said.
Savings like that have the city intrigued, but it's also important that a company such as Avista is proposing it, Fisk said.
"It's a complex project with a lot of moving parts but they're a well-seasoned company and I'm certainly taking their ideas seriously," he said.
So far, Avista has made informational presentations to the Juneau Assembly but hasn't asked for any financial or other commitments, Fisk said.
The utility representatives also met with Gov. Bill Walker about their plans to bring LNG to Juneau, said Katie Marquette, Walker's press secretary. They didn't request anything from the state but Walker appreciated hearing about their intentions for Juneau, she said.
State government offices are among the major Juneau users of heating oil.
The most recent community in Alaska to get natural gas is Homer, which, despite its proximity to the source of much of the state's natural gas in Cook Inlet, wasn't connected to the Enstar distribution system in Southcentral Alaska until recently.
It took an $8 million state capital appropriation from the Alaska Legislature to bring a gas line to Homer but it also took something else from the city. Homer created a local improvement district that required every property in town to pay a share of the cost of the distribution network whether or not they intended to convert to natural gas.
The cost of conversion in Juneau, which Avista estimates at $2,000 to $15,000 a home, would remain the responsibility of homeowners. Wuerst said Avista is exploring options for low-cost financing of those conversions, possibly through existing Alaska Housing Finance Corp. programs.
"We're working very hard to find a means through which the total cost of conversion doesn't fall on the customer, because we know that conversion is very expensive," she said.
Avista told the city that 78 percent of eligible homes would have to convert to make the project economically viable.
But it would be the customer's choice, she said.
"It's a choice, it isn't any mandate," Wuerst said. "People can keep their heat pump, or go to a heat pump, or whatever," she said.
In Homer, it wasn't optional, said City Manager Katie Koester. The city created a special improvement district, charging every property $3,263, regardless of size or value. The city's assessment database shows $1.6 million properties being charged the same as homes worth $28,000.
"The council really struggled with how to do that, but it decides all for one and one for all and to do it evenly per lot," she said.
An alternative that was considered was to add the cost to the city's property tax, but that had the problem of not charging many of the big beneficiaries of natural gas exempt from tax, such as government and nonprofit buildings.
And Koester questioned whether Homer would ever have gotten access to natural gas without the state picking up 75 percent of the cost of a trunk line from Anchor Point to Homer.
"If it has been economically feasible to do it, it probably would have already been done," she said.
Juneau Mayor Fisk said Avista hasn't requested public assistance, but he doubted Juneau would support mandatory assessments.
"I don't even know how it would be possible to require people to do that but that certainly hasn't been broached here," he said.
Wuerst said that's why Avista was exploring ways for people to finance conversions.
Surrounding villages that use diesel generators to produce electricity have been closely watching Juneau's response to the gas proposal.
Inside Passage Electric Cooperative General Manager Jodi Mitchell said they're considering what Avista is proposing for their villages.
"They're the ones promoting it and we were just listening to what they have to say but it sounds encouraging," Mitchell said.
This isn't the first time IPEC has considered switching to natural gas, she said. But the last time it did, officials had concerns about logistics and whether shipping systems were reliable enough to keep the fuel liquid at minus 260 degrees.
Now, Mitchell said, with Avista behind the proposal and Juneau possibly needing a steady supply of LNG, IPEC can have more confidence in its supply chain and is willing to take a new look at natural gas as a power supply.
Hoonah, Kake and Angoon all get state subsidies from the Power Cost Equalization program because of their reliance on costly diesel fuel. While natural gas could lower costs, IPEC might need state help with the costs of conversion, Mitchell said.
Elsewhere in the state, officials expressed doubt that LNG would work.
"If we were able to get a fuel supply and we were able to get cheaper power we'd definitely do it, but it would be an infrastructure hurdle," said Mark Bryan, operations manager at Alaska Village Electric Cooperative.
Few of AVEC's 51 communities in Western Alaska have the kind of dependable year-round shipping needed to use LNG, he said.
"Our only community that gets barge service all year is Old Harbor, off Kodiak Island," he said.