North Slope Borough backs state agency’s financing of first methanol plant in U.S. Arctic

The North Slope Borough expressed support this month for a state agency’s financing of a new methanol plant that, according to its founder, could advance economic development and decrease emissions in the region.

Alyeschem, planned to be built in Prudhoe Bay in the next few years, would use existing natural gas to create two chemicals — methanol and ultra-low-sulfur diesel — that are currently imported into the oilfield area in great volumes, said the founder and CEO of the project, JR Wilcox. The first petrochemical facility in the U.S. Arctic, it would support producers in the North Slope and other places across Alaska, he said.

“The whole idea behind this project is, let’s stop importing so much and do things for ourselves,” Wilcox said. “It’s great to be able to use these abundant resources to actually make the things that we need. Hopefully, this is just one more step down the road to being increasingly self-sufficient.”

Methanol has a low freezing point, and on North Slope oilfields, it’s mainly used for freeze protection in wells and pipelines. The chemical also helps prevent pipeline corrosion and preserve the functionality of gas compression equipment.

Ultra-low-sulfur diesel is a fuel used for almost all diesel engines in such machinery as trucks and construction equipment. Compared to diesel high in sulfur, it produces lower emissions and adheres to Environmental Protection Agency standards.

Alaska has been importing methanol and ultra-low-sulfur diesel by barging and trucking the materials from thousands of miles away, Wilcox said.

Alyeschem would locally produce up to 32,500 gallons of methanol per day, meeting 100% of the North Slope oilfield demand for the chemical, Wilcox said. It would also meet 20% of the demand for ultra-low-sulfur diesel, he said.

Economically, the facility would allow companies to save on transportation costs and generate tax revenues, according to a statement from the Alaska Industrial Development and Export Authority, which in May announced its commitment of up to $70 million in loan financing for the construction and long-term operation of the Alyeschem plant.

“AIDEA is committed to supporting projects that strengthen Alaska’s economy and enhance our energy independence,” executive director Randy Ruaro said in the statement.

The North Slope Borough Assembly adopted a resolution in June supporting AIDEA assistance in the financing and development of Alyeschem, saying that the agency’s involvement is “in the best interests of the borough.” Borough officials emphasized the importance of the project’s compliance with permitting requirements and communication with local leaders.

Gov. Mike Dunleavy supports the project, saying in a statement from AIDEA that the plant “is not just an investment in Alaska’s economy but a strategic asset for security and the ability of our producers to continue working in case of supply disruptions thousands of miles away.”

Alyeschem is expected to bring 150 in-state construction jobs, AIDEA has said. Wilcox said that about 10 people would operate the plant after construction.

The facility would use natural gas, water and carbon dioxide to create methanol and lower sulfur content in diesel.

“On the North Slope, we have billions of cubic feet of ... what’s called stranded natural gas because we have no pipeline to ship it anywhere, so that makes it economical to build a treatment plant on the North Slope,” said James Plosay, Air Permit Program manager with the Alaska Department of Environmental Conservation, one of the agencies that reviewed the project.

Since the plant would burn natural gas, it won’t have zero carbon emissions. However, on a larger scale, by using carbon dioxide as a building block, it can help reduce greenhouse gas emissions in the region, Wilcox said.

“Carbon utilization is one of the things that’s kind of neat about this,” Wilcox said. “A lot of times, people are worried about greenhouse gases coming out of something, and we’re ... taking them and making them not be greenhouse gases anymore.”

AIDEA estimated that the plant’s operations would “reduce CO2 emissions by 93%, or 45,000 tons annually, compared with current supply chains.”

With materials produced locally, trucking emissions on the Dalton Highway could drop by over 4,000 trucks annually, according to AIDEA.

“There’s reduced emissions, reduced spill risk, reduced risk of injury, you know, more space on the Dalton Highway to go bring up things that really matter,” Wilcox said.

If the facility sells methanol to producers outside of Prudhoe Bay, the same barges or trucks that bring gasoline in one direction could take methanol back — whether it’s Utqiaġvik via a snow road or Nome or Bethel by water, Wilcox said.

“The ideal shipping arrangements would be to stop making trips with empty tanks,” Wilcox said. He added that “most of the methanol used in the state is used in the North Slope oilfields, so the number of miles of trucking will be radically reduced” for overall methanol transportation.

Graham Smith, petroleum land manager at the state Division of Oil and Gas, said that “there’s definitely a need for methanol, and how they’re getting it now is a lot more challenging, a lot more potentially environmentally harmful, just because of the logistical issues of transporting it all the way up from all over the place.”

While methanol is a relatively simple chemical to produce, none of the companies operating on the North Slope have attempted to do so before.

Tim Bradner, publisher of the Alaska Economic Report, said that the methanol plant production and cost savings would not be significant enough for big companies to divert their time and attention to it.

“It just wasn’t a big enough business deal for them,” he said. “Whereas for a small developer like JR, developing his own project, it’s worth it.”

Bradner noted that there might be challenges navigating the new experience of building a petrochemical plant in a remote place in a cold environment.

“It’s the first time a product (would be) made from North Slope natural gas at the site and for local use,” Bradner said. “It has not been done on the Slope before.”

Wilcox, a former BP employee and a Cook Inlet Energy co-founder, said he has been working to develop the methanol plant for about 10 years.

[From 2018: Anchorage startup’s deal with BP sets stage for unusual North Slope plant]

To protect the plant from harsh Arctic temperatures, its operational parts will be indoors, Wilcox said. The biggest challenge is the isolated nature of the Prudhoe Bay location, which makes development more expensive and complicated, he said.

“You don’t have the big utility grid to plug into,” he said. “You have to truck in all your water and you have to truck out your wastewater. ... It really forces you to think through, where is each truck going? And how are we using our power? And how can we best integrate everything in order to really make it efficient?”

While methanol production is relatively common in other parts of the country, such as the Gulf Coast, new methanol projects have been met with resistance in some places. For example, in 2021, a $2 billion project to build a Kalama methanol plant in southwest Washington was canceled over concerns about greenhouse gas emissions from natural gas the plant would run on. The large-scale plant was primarily intended for export to the Chinese market, The Seattle Times reported.

“Three contrasts are that Alyeschem’s plant is dramatically smaller, uses the existing Prudhoe Bay natural gas supply, and is focused on local markets,” Wilcox said.

The project has acquired the plant location with a gravel pad and a pipeline corridor. The plant will take up about 0.4 acres, and the full site, with the tank farm, the coolers and the truck loading area, will cover about 5 acres, Wilcox said.

About 30% of the Alyeschem facility design is completed, major permits acquired and several investments secured, Wilcox said. The final investment decision is expected this summer, and once that happens, the development is estimated to take two years.