Interior Gas Utility Approves Pentex Purchase

Interior Gas Utility Approves Pentex Purchase

Robin Woods

Fairbanks Daily News Miner

FAIRBANKS — The Interior Gas Utility voted 5-2 on Tuesday night to proceed with the purchase of Pentex Natural Gas Company for about $60 million, a critical step in a long — and at times contentious — battle to bring natural gas to Interior Alaska.

Tuesday’s vote authorizes IGU General Manager Jomo Stewart to execute a purchase and sales agreement and a finance agreement with the seller, Alaska Industrial Development and Export Authority.

On Thursday, AIDEA will hold its own vote to approve or deny the sale.

Stewart said the sale would put IGU “within striking distance of our goal” of $15 per thousand cubic feet of gas (MCF). He said a three-year contract to purchase gas occasionally suffers from bad optics, but makes finding cheaper gas easier than a long-term contract would.

“Working hard to find a succession contract with lower prices will be critical,” Stewart said.

Two IGU board members, Frank Abegg and Pamela Throop, said they firmly believe the deal is not good for Fairbanks and voted no on the acquisition. Both were skeptical of projected conversions to natural gas and sales.

Because Fairbanks Memorial Hospital and Golden Valley Electric Association withdrew previous consumption figures and conversions, gas will be too expensive, Abegg said.

“I can’t figure out with this package how we get to $15 (MCF), which would beat $2 (per gallon) heating oil,” he said.

He also said that Fairbanks Natural Gas “is just barely a business” after earning $50,000 in net income from $15 million in sales.

Throop said she was torn about the vote, but ultimately her concerns outweighed the benefits “primarily because we didn’t get to design the project ourselves. This project has been designed by AIDEA and others outside our board,” she said.

Throop wasn’t convinced by the numbers, either, referencing immediate risk mitigation required of Pentex’s assets — costing as much as $10 million — and conversion projections.

Comments from Abegg and Throop were insufficient to sway other board members, many of whom spoke strongly in favor of the acquisition, even if it weren’t the perfect deal.

Steve Haagenson said if you stopped at every pothole in the road you’d never reach the destination. “The question is, are you gonna grab the steering wheel and hit the gas? Then you can steer around the obstacles.”

Jack Wilbur repeatedly said the Pentex acquisition would be a good deal. “It’s time to take action on this project. I believe we have a project that will work for us.”

Bob Shefchik, a self-proclaimed “numbers guy” who recently was appointed to fill a vacancy on the board, despite significant public outcry in the process, said the community will acquire a $44 million utility for $33 million.”

“The end of the day, when the deal closes, there will be a combined utility with a value of assets that exceed the value of debts. A little high on debt, but not out of the range of reasonable,” he said.

Board Chairman Mike Meeks echoed Shefchik.

“Yes, there are risks with this project. But that’s our job, to manage risk using data and facts,” Meeks said.

Public comment lasted more than an hour, and much like the previous meeting, no strong consensus emerged. Although the number of people advocating the plan — particularly from the business community, and former and current politicians — outnumbered those opposed, many supporters were still critical of the deal.

Jim Whitaker said the deal is not perfect, “but it’s a darn good start.”

Doug Isaacson acknowledged the quandary.

“Today, it may not be the most economic decision. But tomorrow, it will. Tomorrow, we’re going to need this project.”

Nicholas Ferree said it’s the best chance for his generation to get cheap, clean energy, “and probably the last chance of my business career.”

Opposing comments returned to bad economic projections and poor planning. Carl Huff worried about passing the bill on to later generations.

“I still don’t see the light at the end of the tunnel,” he said.

Contact staff writer Robin Wood at 459-7510. Follow him on Twitter:@FDNMcity.

By |2018-02-20T11:42:54+00:00December 8th, 2017|Interior Gas News|