The Alaska Industrial Development and Export Authority will keep Fairbanks Natural Gas management in place as it works toward expanding natural gas service in the Fairbanks-North Pole area.
In a July 10 submission of supplemental information regarding its application to acquire a controlling interest in Fairbanks Natural Gas, AIDEA told the Regulatory Commission of Alaska that it will keep Dan Britton and other FNG existing management in place after its acquisition of Pentex Alaska Natural Gas Co. However, the authority said it will eliminate a vacant regulatory affairs position, since FNG will be unregulated after the acquisition.
AIDEA said it intends to incorporate its Project Development and Asset Management Program group into the management of Pentex to take advantage of that group's experience managing other projects, which it routinely manages for AIDEA, including the Delong Mountain Transportation System at Red Dog and the Skagway Ore Terminal. The authority said the group does not provide day-to-day management, "but rather a form of asset supervision in which AIDEA keeps track of its investments and works on any issues that may arise."
Contact with board
AIDEA said its executive director, John Springsteen, will continue to be the lead interface between FNG's Britton and the AIDEA board, and said it would also have the support of Alaska Energy Authority engineers, including Kirk Warren, who have extensive liquefied natural gas experience.
"Since AIDEA intends to work toward consolidating the Fairbanks gas utilities into a Local Control Entity, its management role will be transitional, likely lasting only for the next two years," the authority said.
Bill signed
House Bill 105, signed by Gov. Bill Walker on June 30, allows AIDEA to pursue options other than trucking LNG from the North Slope to provide low-cost energy to Interior residents.
HB 105 removed the North Slope restriction on the source of natural gas for the Interior Energy Project, although legislative intent language at the beginning of the bill notes that the removal of the North Slope restriction allows for geographic flexibility and is not meant to allow expansion of the project beyond the scope of the Interior Energy Project. The intent language also requires that AIDEA use "an open and competitive process" to develop LNG production capacity and affiliated infrastructure.
The bill amends AIDEA's funding authority for the project, up to $275 million in financing for an LNG plant and natural gas distribution system to serve Interior Alaska, by removing the requirement that the LNG facility be on the North Slope, requiring only that the LNG plant be "in the state."
Pentex purchase
AIDEA applied to RCA in June to acquire 100 percent interest in FNG, which holds a certificate of public convenience and necessity and is authorized to provide natural gas distribution service in portions of Fairbanks.
RCA said that after the acquisition, AIDEA intends to accelerate the build-out of natural gas distribution lines to new customers, increase operating efficiencies and coordination, and reduce rates. RCA said AIDEA also has plans to work with the Fairbanks North Star Borough, the City of Fairbanks and the City of North Pole to transfer FNG to a coordinated Local Control Entity.
While FNG is subject to economic regulation by RCA, the commission said that because AIDEA is a political subdivision of the state, it is exempt from economic regulation.
RCA received letters of support for the acquisition from the Matanuska-Susitna Borough, the City of Fairbanks and the Fairbanks North Star Borough.
Matanuska-Susitna Borough Mayor John Moosey said AIDEA's efforts tie directly to the work the borough is doing at Port MacKenzie with the goal of stimulating the economy, reducing energy costs and providing infrastructure to enable resource development, and said approval of HB 105 is compatible with the borough's efforts "to assist in getting low cost Cook Inlet LNG to the market." Moosey said the borough is working with both WesPac Midstream and REI on plans to develop LNG plants at Port MacKenzie, and said HB 105's provision to allow for lost-cost energy from any area of Alaska "opens up competition that will more likely result in a successful outcome."
Moosey also said that the borough was pleased that, as part of AIDEA's purchase of Pentex, "there will be strong consideration" for returning the LNG plant just north of Port MacKenzie back to the private sector.
"With that action, our two LNG projects can compete on an equal playing field," he said.
Mayor John Eberhart of the City of Fairbanks and Mayor Luke Hopkins of the Fairbanks North Star Borough both supported AIDEA's purchase of Pentex. They cited the high costs of energy and the benefits of large-scale natural gas to the Interior. Eberhart said that since the 1950s, private industry has failed to bring large-scale natural gas to Fairbanks, and Hopkins cited a recent study by the Council for Community and Economic Research that showed borough residents paid nearly 250 percent of national average utility costs, while Southcentral residents paid 5 percent below the national average.
This story originally appeared in Petroleum News. It has been republished with permission.