Economic Feasibility of North Slope Propane Production and Distribution to Select Alaska Communities

Tobias Schworer and Ginny Fay of UAA's Institute of Social and Economic Research (ISER) recently prepared and submitted a final technical summary for the Alaska Natural Gas Development Authority. The report is titled, "Economic Feasibility of North Slope Propane Production and Distribution to Select Alaska Communities." The question they asked is, "Could propane from Alaska's North Slope reduce energy costs for electric utilities and residential space heating, water heating and cooking demands?"

They explored the hypothesis that propane is a viable alternative for 14 selected communities along the Yukon and Kuskokwim Rivers, coastal Alaska and Fairbanks. Their analysis forecasts propane and fuel prices at the wholesale and retail levels by incorporating current transportation margins with recent analysis on Alaska fuel price projections. Annual savings to households associated with converting to propane from fuel oil can be up to $1,700 at $60 per barrel (bbl) of crude oil, and amount to $5,300 at $140 per barrel. Fairbanks residents would benefit from switching to propane for all applications at crude oil prices of $60/bbl. Interesting to note is that switching to propane for domestic water heating makes more sense at lower oil prices than conversions for home space heating. Three of the 14 communities are projected to benefit from switching to propane for home heating at crude oil prices greater than $80 per barrel, and four communities at crude oil prices of more than $110/bbl. On the other hand, nine communities would benefit from conversion to propane for water heating as crude oil prices reach $50 and above. The realized household savings are also sensitive to assumptions surrounding the operating cost of the production facility and barge transportation delivery costs.

They concluded that there may be savings associated with switching to propane for utilities and for residential space and water heating and cooking needs.

Download a PDF of the full report.