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INUVIK
Residents of Inuvik can expect to see their heating bills more than double by the end of August at the earliest – the estimated time when the entire town will be running on synthetic natural gas.

Mayor Denny Rodgers, right, explains the town's short-term and long-term plans concerning its natural gas supply issue on Tuesday to a crowd of more than 150 people, while senior administrative officer Grant Hood looks on. - Katherine Hudson/NNSL photo

Frustration permeated the community hall of the Midnight Sun Recreation Complex Tuesday night as between 150 and 200 residents and business owners grilled the panel, composed of town and GNWT employees as well as members of Ikhil Joint Venture, Inuvik Gas and ATCO Midstream Ltd.

It may take two to three years to access a new supply of natural gas, so Inuvik Gas is preparing to supply the town with synthetic natural gas – a mixture of propane and air that would be delivered through the existing natural gas distribution system and burns just like natural gas – for a short-term solution. Ikhil's reserve has about one year of natural gas left after water entered one of its wells in 2010.

The synthetic natural gas has been tested since October in cold temperatures and at different loads – mimicking summer and winter demands.

Inuvik Gas must negotiate the price of the synthetic natural gas with the town and make an application to the Public Utilities Board (PUB). Following that is a 60-day notice period during which the PUB can hear any complaints about the proposal.

To help conserve the remaining natural gas available at the Ikhil well, the hospital, high school and Midnight Sun Recreation Complex are now using diesel for heating but will switch to synthetic natural gas when it is available. The rest of the town would follow by as early as late August.

Previously, Inuvik Gas worked with Ikhil as the primary source of energy and the backup was the synthetic natural gas. The company is working in reverse now, where the synthetic natural gas will be the primary system and during times when the Dempster Highway is out, it will be able to draw on Ikhil to keep the energy flowing in town.

Although the heating value is the same between natural gas and its synthetic counterpart, the cost of synthetic natural gas is double. The cost of natural gas today is $19.30 per gigajoule, while the cost of synthetic natural gas is estimated at $40/gigajoule.

The cost of the gas would fluctuate based on the price of propane: 75 per cent being driven by its price and 25 per cent based on the cost of delivery from Inuvik Gas as well as ensuring Ikhil is kept in standby mode.

Mike Dever, senior vice-president and general manager of ATCO, said he thinks natural gas is the best option for the town and that the company can deliver a natural gas solution with some government support that will continue to provide users with a discount compared to other fuel options.

"The $40 price that we talked about is the price to bridge ourselves from where we are today to what we think is a more affordable long-term solution," he said. "We recognize it's a significant burden to bear as natural gas consumers but it's a necessary cost to allow us the time to develop what we think is a more affordable natural gas solution."

The clock is ticking. Two options for viable natural gas resources are on the table: South Parsons Lake, owned by ConocoPhillips with a projected cost of between $60 and $70 million, and MGM Corp.'s Umiak well.

Colin Nikiforuk, general manager of Ikhil Joint Venture, said the proposal for South Parsons Lake's 3,000-metre-deep well could have natural gas on-stream by May 2013 if drilling started in January. But if its itinerary was pushed back, it would be set up for May 2014.

Mayor Denny Rodgers said a new development is the potential for investment by MGM if Umiak was used as the natural gas source.

If South Parsons Lake was a successful source for natural gas, the panel estimated the cost of natural gas for residents would sit between $27 and $34/gigajoule: still a jump from current rates. The cost of natural gas from the well would be driven largely by the level of government support to get the well drilled.

"I know the news we're giving here tonight is not good news. I know nobody wants to see their heating bill double," said Rodgers.

He said the additional cost to the town for converting the Midnight Sun Recreation Complex to diesel and putting it on synthetic natural gas when it's available will cost the town an additional $400,000 to $450,000, and that residents would not see a "huge increase in taxes" this year as a result.

"We're trying to find a way to cushion that, perhaps run a small deficit. Certainly it's not our intention to add any more burden on to the taxpayers that are already going to be added on," he said.

Residents brought up alternative options, such as wind and solar power, as well as a micro nuclear reactor, which can power a small remote community.

An alternative to a long-term natural gas solution of one to two years would be moving back to heating oil, according to Nikiforuk.

One landlord said it's not fair what he must now do to his tenants.

"What do I do to them – I raise their rent for one year? I'm not sure. It's not clear for me and how you pass the buck to me and I need to pass the buck to my tenants, too. It's not fair," he said.

Resident Mary Ann Ross said she has been a homeowner since 2004.

"We were all encouraged to build and buy into the natural gas," she said. "I don't want you guys to get off easy tonight. I think there's real issues here ... We have five months to prepare as homeowners. I'm living in a one-income home and you're asking us to pay for all of this, which is insane."

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