Alaska Diesel Strategy

Rural Alaska Economic Analysis

Diesel Cost Assessment

With the federal fuel rules, cost is uncertain and there is little consensus on the extent of an increase in diesel costs for rural areas. Without knowing the cost increase, it is hard for individuals, and local and regional organizations, to plan budgets for fuel, heat, and power costs.

The daily wellbeing of rural Alaska residents and communities depends on the ability to generate electricity and heat from hundreds of continuously operating diesel engines and burners. The fuel distribution system that services these engines will be impacted by the federal fuel rules. A cost analysis for Alaska is consistent with Section 111(a) of the Clean Air Act whereby the Administrator is obligated to determine the best demonstrated technology “taking into account the cost of achieving such [emission] reduction and any non-air quality health and environmental impact and energy requirements.”

The Department of Environmental Conservation (DEC) contracted with NorthernEconomics Inc. to perform a cost assessment of transitioning rural Alaska to ultra-low sulfur diesel (ULSD). The assessment looked at how impacts to household costs associated with delivering ULSD to rural communities would vary depending on how the transition occurred and in what part of rural Alaska the transition occurred. Researchers took into account community size, infrastructure considerations, fuel distribution methods, available fuel types, refinery costs, regulatory requirements, and demand.

NorthernEconomics Inc. has completed the cost assessment. The link below is to the full text of the report.

The analysis suggests the household costs of transitioning to ULSD fuel are highest for the regions of the state with lowest income. This disproportionate impact is due to the greater reliance of project area communities on diesel for heating and power generation in comparison to the rest of Alaska. The analysis further indicates several characteristics of project area communities would exacerbate this disproportionate adverse economic effect.

By starting to burn ULSD in 2008, villages could benefit from a process called “blend-down,” where average sulfur concentrations decline, over three years, to less than the mandated level of 15 parts per million. These factors are addressed in the report and suggest the blend-down approach is a low-cost alternative to new tanks, cleaning and waste disposal, or temporary drum use.