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Yukon Energy to replace diesel with natural gas

Yukon Energy plans to have natural gas generators up and running by 2015. Two new gas engines will replace diesel engines that are past the end of their life, said Yukon Energy president David Morrison.

Yukon Energy plans to have natural gas generators up and running by 2015.

Two new gas engines will replace diesel engines that are past the end of their life, said Yukon Energy president David Morrison.

Natural gas will save Yukoners $2.7 million a year beginning in 2015, with that figure going up to $4.2 million by 2017, according to the corporation’s estimates.

“The economics are significant, when you look at the cost savings for rate payers of using gas versus using diesel,” said Morrison.

Critics have voiced concerns that bringing natural gas power to the Yukon will pave the way for oil and gas development locally.

Specifically, many are concerned about hydraulic fracturing, or fracking, a controversial method for extracting natural gas widely used in B.C. and other jurisdictions.

But Yukon Energy has a contract to buy its natural gas from a Shell Canada Ltd. plant in Calgary, and none of it is fracked gas, said Morrison.

“It is conventional gas. It is Shell’s own gas from Shell’s own wells.”

Yukon Energy has contracted two studies on the environmental impacts of diesel versus conventional and unconventional gas, and gas wins in all scenarios, said Morrison.

The Pembina Institute compared lifecycle costs of diesel versus Shell gas from Calgary specifically. And IFC Marbeck compared diesel with conventional and unconventional gas.

In all cases, diesel was found to be the least environmentally friendly option, said Morrison.

In fact, fracked gas from B.C. may have a lower impact than conventional gas from Alberta, since Alberta gas is produced using coal power, he said.

Yukon Energy would like to see the gas come from Fort Nelson eventually, but right now there are no plans to build a liquefied natural gas plant there, said Morrison.

Because the Yukon is not connected to the Outside by natural gas pipelines, the gas must be cooled to minus 162 degrees Celsius and trucked in.

Yukon Energy is mandated by the Yukon Utilities Board to have a backup system.

Currently, a diesel plant supplies power when there is a problem somewhere else on the system, or in winter months when demand for electricity exceeds what the hydro plants can supply.

Diesel is much more expensive than hydro power.

Last year Yukon Energy spent less than a million dollars on diesel power. But that was an anomaly, said Morrison, resulting from a particularly warm winter.

Natural gas costs half as much as diesel, including delivery to Whitehorse, he said.

With the two new gas generators, natural gas will replace an estimated 95 per cent of diesel usage.

Originally the two new generators were expected to be housed in the existing diesel plant at Yukon Energy’s site near the Whitehorse dam.

But the costs to retrofit the plant for the new equipment were too high, said Morrison.

Instead, the corporation has decided to purchase self-contained modular units. They will sit on a pocket of land between the train tracks and Robert Service Way adjacent to Yukon Energy’s existing facilities.

The new space will be, in part, purchased from the Crown and in part leased from White Pass & Yukon Route Railroad.

The total cost of the capital project is $34.5 million, said Morrison. That includes the cost of the generators themselves, about $10.5 million, and delivery to Whitehorse.

The cost of replacing the old diesel engines with natural gas engines is about 10 per cent more expensive than simply replacing them with new diesel engines, he said.

The Yukon government has approved in principle up to $39.2 million in debt financing for this project and other investments.

That has interim Liberal Leader Sandy Silver concerned.

“The Yukon Party is ultimately in charge of these major capital investment decisions, and they seem incapable of providing Yukoners with a fiscally viable plan, so we borrow.”

The Yukon Party’s recent decision to give the Yukon Hospital Corporation $27 million towards its debt will not inspire good financial planning in the other corporations, he said.

“What message does this send to Yukoners? Rack up your credit card and then tell your parents that they should pay off your debt so that you can save the interest? This is your fiscally responsible plan?”

He wants to see how and why the decision was made to finance the project with debt, he said.

Yukon Energy is required under regulations to pay for capital spending with 60 per cent debt finance and 40 per cent equity finance, said Morrison.

Unless they are granted the money from some other source, this is the only choice they have, he said.

Yukon Energy still has to get the project approved by the Yukon Environmental and Socio-economic Assessment Board and the Yukon Utilities Board.

The corporation will host a public meeting about the project on July 8 at the Mount McIntyre Recreation Centre from 4:30 to 8:30 p.m.

Contact Jacqueline Ronson at