Yukon Energy's $38-million proposal for a new backup generating plant using liquefied natural gas to power the motors has been recommended for approval by YESAB.

The Yukon Environmental and Socio-economic Assessment Board issued its 115- page draft recommendation Thursday.

The affected parties and the public have 33 days to provide the assessment board with comments on the draft report, with the possibility the board could extend the comment period to 60 days.

The decision will ultimately be up to the Yukon government once the assessment board issues its final recommendation.

In its recommendation, the assessment board's executive committee indicates its draft report does not include an exhaustive list of recommendations because Yukon Energy's proposal has done a thorough job of addressing issues.

The Yukon Utilities Board has also began a formal review of the project proposal, and will be holding a public hearing March 31 to April 3.

Justice Minister Mike Nixon has instructed the utilities board to report back to him with recommendations on the project proposal no later than April 15.

Yukon Energy wants to have the new plant operational by the end of this year.

Backup diesel generation is generally used in the cold winter months when hydro capacity is unable to meet peak demand.

The publicly owned utility insists the switch to natural gas would save millions upon millions of dollars in fuel costs, and is much better for air quality than burning diesel fuel.

The proposal, however, had a rough ride at the public meeting hosted by the assessment board in mid-December.

There is growing evidence natural gas – methane – is harder on the atmosphere than diesel because the process of producing natural gas inevitably involves some escape of methane, the board's three executive members were told.

It was said methane is substantially more toxic for the environment than CO2 released from burning diesel.

Embracing natural gas, many argued, means embracing the controversial practice of hydraulic fracturing.

It was said at the meeting and in the written comments to YESAB that while the hydraulic fracturing may not be occurring in the Yukon, it's poisoning somebody's backyard somewhere.

The Ta'an Kwach'an Council of Lake Laberge announced a week after the meeting it was terminating discussions with Yukon Energy regarding a business partnership in the new generating plant because of its objection to fracking.

Yukon Energy, however, is continuing to negotiate a partnership arrangement with the Kwanlin Dun First Nation.

The assessment board's executive committee members heard at the meeting and in submissions that while natural gas may be cheaper than diesel right now, it won't remain so, despite what Yukon Energy says.

North America, the committee heard, is currently isolated from the world market for LNG. But as it begins exporting LNG, North America and the Yukon will begin paying what everybody else in the world is paying, the committee heard.

Natural gas was selling for $4.47 per unit in North America today.

The same unit was selling for $15.50 in Japan, and about $11.50 in Europe, according to global market quotes.

Yukon Energy is proposing to build the plant next to Robert Service Way, across from the old go-cart and motocross track.

The facility will include two 4.4-megawatt generators with room for a third a few years down the road. There will be an LNG storage facility on site and the required equipment to convert it back to natural gas.

Yukon Energy says it needs to replace two 45-year-old generators one way or the other.

Replacing the diesels with new diesels and providing the required upgrades in technology to modernize the existing plant to run the two new diesels would cost $33.5 million, according to figures provided to the assessment board by Yukon Energy.

The utility says while going with natural gas is a little more expensive initially, the savings in fuel costs for ratepayers would more than make up the difference in a few short years.

In figures provided to YESAB regarding costs and anticipated growth in demand, Yukon Energy indicates savings of $1.3 million in 2015, the first full year of operation, $2.2 million in 2016, $2.6 million in 2017 and $3.1 million in 2018.

Others, however, have suggested Yukon Energy has inflated the savings.

If Yukon Energy is not even spending $1 million annually now on backup diesel generation, some have asked, how can it anticipate savings of more than $1 million next year, and several more millions in the years to come?

The utility has also put forward submissions on air quality that show burning natural gas is much cleaner than burning diesel.

Yukon Energy president David Morrison has explained in the past the utility has entered into a five-year supply contract with Shell Canada's LNG facility outside Calgary.

The facility is supplied by conventional wells, not hydraulic fracturing, he has pointed out.

Meanwhile, Yukon Electrical Co. Ltd. is proceeding with plans to convert its six diesel generators in Watson Lake to hybrid engines capable of burning both diesel and natural gas.

Its proposal, which received the green light from the assessment board and the Yukon government subsequently, includes the addition of a new LNG facility at the existing generating plant.

The project calls for the conversion of the first diesel this summer, with the remaining five to be converted next year.