Draft study backs regional co-ops for rural Alaska tank farms, comments due Friday

The Denali Commission is taking public comments through Friday, Oct. 16, on a draft study that recommends regional cooperatives as the preferred way for rural Alaska communities to share bulk fuel purchasing, maintenance and training while keeping ownership of their own tank farms.

The draft study, dated Sept. 9 and prepared for the commission and the Alaska Energy Authority, asked whether pooling the work of rural Alaska's bulk fuel facilities could cut costs, extend their life and reduce spill risk. Its answer: "Yes. Working together can save money."

Its starting point is that the tank farms it examined aren't charging enough to replace themselves. Tank farms in the study's data charged an average of $7.68 a gallon. Its figures for independent operators come from nine publicly owned tank farms, including Allakaket, Ambler and Golovin. Without financing, a small facility operating on its own would need to charge $11.51 a gallon to cover routine upkeep and save enough to replace the facility when it wears out. In a regional cooperative, the study estimates, that figure would be $9.71.

Two things drive the difference. Cooperatives in the same regions buy fuel for about $4.84 a gallon, 13% less than the $5.58 individual operators pay, the study estimates. And the model assumes cooperative tank farms last 35 years, compared with 25 for facilities on their own or in looser partnerships. That longer life "has not been verified using observed facility-life data from cooperative communities," the study says. If cooperative facilities lasted 25 years too, a large cooperative facility would cost about 27 cents a gallon more than one in a looser partnership, according to the study's sensitivity analysis, though still less than the study's estimate for a large facility on its own.

The tank farm financial data, from 2020 to 2025, also predate the 2026 war with Iran, the study notes. For comparison, the state's summer survey found heating fuel in surveyed Alaska communities averaged $7.97 a gallon, up nearly 23% since winter, Alaska News reported Oct. 2.

Roughly 400 bulk fuel tank farms operate across rural Alaska. They average 40 years old, past an expected life of 20 to 30 years, and about half are at risk of flooding, erosion or permafrost-related failure, according to the study. It puts the cost of fixing critical deficiencies at about $1 billion, against about $500 million state and federal funders have invested over the past 30 years. The Denali Commission alone provided more than $275 million for bulk-fuel storage projects from 1998 through July 2023, the Government Accountability Office reported.

In a Wednesday post, the commission asked "the people who know these systems best" what the study got right, what it missed and what questions remain. It plans to present the findings at the Alaska Rural Energy Conference in Fairbanks on Oct. 28.

"Our power and bulk fuel program is 1/3 to 1/2 of our annual appropriations that we receive," Jocelyn Fenton, the commission's director of programs, said at an energy conference in May.