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St. George Skirts Fuel Crisis

By | September 27, 2012

With fuel stores dwindling and temperatures already dropping below freezing, St. George spent last week anxiously awaiting a resolution to a potential energy crisis. The city’s supplier, Delta Western, had reached the end of a 20-year agreement with village Native corporation Tanaq to deliver fuel to the remote island, and it was unclear how residents were going to heat and power their homes.

“It would have been disastrous,” says Mayor Pat Pletnikoff. “It would have just meant the shutdown of our community, period.”

Delta Western no longer found it cost effective to serve the community. And as Alaska Dispatch reported earlier this week, Tanaq didn’t have any interest in taking over the operation. While Tanaq didn’t return a request for comment, they’ve previously stated that it would be hard for them to handle the logistics, and they didn’t see the business being very profitable. Their mission involves producing large dividends for shareholders, not supplying St. George residents with fuel — even if those people are, in many cases, one and the same.

With St. George set to run out of fuel in October, that put the community in crisis mode. Representatives from the city, Tanaq, and Delta Western met in Anchorage last week to find a way to get fuel to the 100-person village. APICDA — a regional corporation that gets Bering Sea fish quota in exchange for putting revenue back into the communities it represents — also had a seat at the table.

By the end of the negotiations, Tanaq and Delta Western committed to getting a fuel barge out to St. George this fall. Larry Cotter, APICDA’s CEO, says his organization has agreed to pay for the fuel up front and then recover the costs as sales are made.

“To the extent a crisis may have existed, it no longer exists,” says Cotter.

Still, St. George isn’t totally out of the woods. This shipment should get them through May, but after that, it’s unclear how fuel operations will be managed. The delivery out to the faraway island has to be a moneymaker if another private company is going to pick it up. Demand there is low. St. George hasn’t had a real economy since the fur seal industry was dismantled in the 1980s. And fuel already costs more than $6 a gallon. So, rates can’t be boosted too much without gouging residents.

A city takeover is another possibility. The municipality would run the tanks, use some of the fuel for power generation, and then sell the rest to residents. But again, the obstacle here is money. St. George already owes more than half a million dollars in fuel loans, and its annual city budget is tiny. Cotter says that APICDA could step in once again to make this solution work.

“I don’t think the city is capable of getting finance on its own, so this would be another instance where APICDA would maybe step forward and assist the city in coming up with the money to acquire the business,” says Cotter.

Still, he and Pletnikoff are optimistic that come May, they’ll have a permanent fix to this problem. And, they both emphasize, St. George is working on projects that would bring down the island’s fuel consumption. The State of Alaska is scheduled to upgrade the city’s power system next summer by putting in a more efficient generator and installing at least one wind turbine.

Perhaps even more importantly, the legislature has also committed a couple million dollars toward improving St. George’s harbor. The hope is that would support a local fishing fleet, maybe attract a seafood processor, and even bring in other businesses down the road.

And wherever business is, there’s usually a fuel supplier handy.

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