The Alaskan Bush Considers Propane, and first a Propane Plant

The sun sets behind an oil rig in Prudhoe Bay, Alaska. (image: Reuters)

To some ambitious entrepreneur, the icy wilds of Alaska would surely look like a promising market for propane, which travels well and often powers homes off the grid. Montana, Wyoming, and North Dakota — large and sparsely populated places — are all serious propane states, burning more of the gas per capita than Michigan, the country’s largest customer. But Alaska, the largest and most sparsely populated state of them all, has a notably small appetite for propane.

That may change, according to the local Arctic Sounder newspaper. A proposal from the far north of Alaska hopes to entice an oil company to build or renovate a propane processing plant in Prudhoe Bay — a dot in the Arctic Circle with exactly one permanent household, according to the 2000 census. The facility would pull an estimated 20,000 barrels of propane a day from North Slope oil, offering new jobs, new revenue, and a low-cost heat source for state residents.

As it stands, diesel fuel powers generators and heats homes in the Alaskan Bush. It’s an increasingly pricey choice, with gallon prices hovering above $8 in remote areas, and monthly heating bills in the hundreds. “There’s a need for alternative energy,” a supply coordinator with the Alaska Natural Gas Development Authority (ANGDA) said at a recent propane summit.

Enter propane. The gas is being pitched as a way to cut power bills, if propane-powered stoves and driers replaced electric models. In turn, more propane use would help the state save on its rural power subsidy, which offsets steep prices paid in remote parts of the state. (Left unclear is the potential role in home heating.) Under the ANGDA plan, an oil company would operate the proposed processing plant at Prudhoe Bay, ginning up an estimated $383 million a year. The authority would then buy back propane, and distribute it to the Alaskan market at cost. It would be a far cheaper option than propane from Outside (read: outside Alaska), the Sounder explains.

The plan faces a few challenges. The price tag on building the refinery and the logistics of moving it around the state would be in the tens of millions of dollars. A previous plan to goose the Alaskan propane market failed to catch the industry’s interest. ANGDA recently sent letters to three major oil companies, hoping to court them with the deal.

Meantime, Alaska appears ready to burn some propane. One oil and propane distributer said he’s been peddling more LPG recently to families and fish plants. “The demand’s there,” he says.