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A few days ago, I questioned whether Fairbanks would ever see “cheap gas.” Here’s an update.

First, to recap: Assuming the state doesn’t (or can’t) subsidize the actual fuel, the question is really about pipeline transportation costs, the price of natural gas, and the relative price of gas versus oil.

In terms of transportation costs, Gov. Palin and her gas team argue TransCanada is the best in the long run -- the economy of scale, coupled with a host of rate-setting requirements, will result in the lowest shipping costs possible. But representatives from ENSTAR, which is planning a small, in-state pipeline, said their tariffs would likely be within reason, too, at about $2 to $2.50 per thousand cubic feet. (Gas is selling for about $12 per mcf in the Lower 48.)

“I don’t think the size of the pipe is going to have an impact on the price of the gas,” said one ENSTAR rep.

Most of the price of the gas will likely come from the gas itself rather than the shipping cost. With either pipeline, the gas would be priced in relation to market prices in other parts of the country or world. (If the state could make $12 off its royalty gas in Chicago, it can’t sell it in Alaska for $5 -- the Alaska Constitution probably wouldn’t allow it.)

Oil products like gasoline and heating oil are also priced in relation to market prices elsewhere, roughly speaking, so the question becomes whether natural gas is relatively cheaper per unit of energy. That is, how many units of gas does it take to heat a home versus units of oil?

Harold Heinze of the Alaskan Natural Gas Development Authority offered one answer yesterday. Talking about natural gas and the potential for gas liquids like propane, he said some places could see “maybe like a 50 percent discount” in energy costs, as long as the gas was transported efficiently.

“The opportunity is there for a significant reduction in total energy cost,” he said.

ENSTAR estimated that Fairbanks could cut its energy costs in third by completely switching from fuel oil to natural gas (assuming its current gas price, which is below national prices).

There is the caveat that oil prices are much higher now in relation to natural gas prices than they have been, but analysts expect that to continue for a while.

Then there’s the question of state subsidy.

Sometimes this comes up in a different context, such as, State government doesn’t need any more money -- let’s do something that helps Alaskans with fuel costs. But artificially lowering the price of gas, investing in a small pipeline for in-state use, or supporting a pipeline that could be completed sooner but not bring the state as much money, can all be considered subsidies. Whatever money the state gives up by not pursuing the most profitable project is, in effect, a subsidy to its residents.

And that subsidy could be huge. If the state somehow were to promise $5 natural gas for Alaskans and the price went to $20, the state would essentially be paying $15 to lower the cost of each mcf to $5. The question then becomes, What else could the state do with those $15? Would it make more sense to sell the gas for $20 in Chicago, and then help residents insulate their homes and buy more efficient heaters so they don’t need as much gas? Or build the Susitna Dam and help people convert to electric heat? Or, for that matter, write everyone a check for $15 times whatever?

That’s the administration’s argument anyway -- that it makes sense to pursue the most profitable gas line project out there, and then figure out how to help Alaskans with all that extra money. That said, they have promised to consider subsidizing a small, in-state line to reduce transportation costs. And there’s the governor’s short-term energy plan, which lawmakers have yet to take up.