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Alaska Senate hearing looks at rising fuel costs

Posted: September 12, 2012 - 12:02am
Bill Carron, director of the Division of Oil and Gas in the Alaska Department of Natural Resources, testifies before the Senate Energy Working Group on Monday, Sept. 10, 2012, at the Noel Wien Library in Fairbanks, Alaska. The purpose of the hearing is to explore how fuel prices are set in Alaska. (AP Photo/Fairbanks Daily News-Miner, Sam Harrel)  Sam Harrel
Sam Harrel
Bill Carron, director of the Division of Oil and Gas in the Alaska Department of Natural Resources, testifies before the Senate Energy Working Group on Monday, Sept. 10, 2012, at the Noel Wien Library in Fairbanks, Alaska. The purpose of the hearing is to explore how fuel prices are set in Alaska. (AP Photo/Fairbanks Daily News-Miner, Sam Harrel)

FAIRBANKS — With winter on its way in Alaska’s Interior, members of the Senate Energy Working Group met in Fairbanks to discuss the issue of rising heating costs.

The group heard Monday from experts and the public on reasons for Alaska’s energy climbing rates and ways to bring the costs down.

The panel found that lowering prices in a large state with a small market, high costs and little infrastructure is no simple task, even in an energy-producing state such as Alaska, the Fairbanks Daily News-Miner reported Tuesday.

“It’s going to be worse this year,” said Polar Fuel owner Mervin Gilbertson.

His words, as well as personal stories of thousand dollar energy bills, underscored the urgency and frustration surrounding the Interior’s high energy prices and the need for something to be done as they continue to rise.

The group, which met at the Noel Wien Library in Fairbanks, is chaired by Democratic Senators Joe Thomas and Lyman Hoffman.

One route that has been explored is selling the state’s royalty oil at a discount rate for in-state use. About 12 percent of all oil produced in state goes to the state either as value or in-kind. The Flint Hills Refinery is the only buyer of royalty oil, which comes in slightly more expensive than regular crude oil.

The argument is that lower cost crude could result in savings for the consumer.

But Bill Barron, the director of the state’s Division of Oil and Gas, said selling royalty oil at a cut rate just for in-state use raises constitutional and legal issues. Statutes require the state to get at least as much or more value out of the crude than fair-market value, he said.

He also said selling crude at a discount rate to a specific buyer creates a number of issues because it would give an unfair advantage even if it were solely for in-state use.

“If you don’t give it to all buyers, then it produces a significant issue about unfair business practices,” he said.

Even if the state found a way to reduce the price of crude for in-state refining doesn’t mean the relief will be seen at the pump or at the next heating fuel fill up, said Ed Sniffen, a senior assistant to the Alaska Attorney General.

When asked about what the state could do to lower the cost of energy, Sniffen suggested the state look at ways to increase competition with the few remaining oil refiners in the state. One way would be to establish large oil storage facilities to create an Alaska market for gas and heating fuel that’s processed in the Lower 48, where the infrastructure is bigger.

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