Matt Buxton

FAIRBANKS — The Alaska Industrial Development and Export Authority board on Thursday signed off on the purchase of Fairbanks Natural Gas and its parent company, Pentex.

The board’s approval, made through a resolution approved at a meeting in Anchorage, allows the state to spend up to $54 million to purchase Pentex Alaska Natural Gas Co., which owns Fairbanks Natural Gas and a natural gas liquefaction plant in Point MacKenzie, as part of a larger plan to lower energy costs in the Interior.

“It’s a great day for the families of Fairbanks and North Pole,” said Gary Wilken, a board member from Fairbanks. “I feel really good that this is the first step of bringing low-cost energy to our cities. It’s tangible; by winter at least 1,100 meters will have lower cost gas.”
According to a news release announcing the decision, the public ownership of the company will reduce the cost of service to existing customers in the Fairbanks area by about 13.3 percent this winter.

“I think that it’s a good example of government doing what private industry hasn’t been able to do,” Wilken said.

Gov. Bill Walker announced the plan to purchase Pentex and Fairbanks Natural Gas earlier this year as part of a refocusing of the Interior Energy Project. Initial attempts by AIDEA to get natural gas off the North Slope ended up coming in more expensive than expected.

The refocus was helped by the passage of House Bill 105, which has yet to be sent to the governor to be signed. The bill allows AIDEA to consider sources of natural gas outside the North Slope, a restriction placed on the project when it was first approved in 2013.

The long-term goal of the purchase will be for the state to transfer ownership of Fairbanks Natural Gas, which holds the service area for the city of Fairbanks, to the municipal Interior Gas Utility, which holds the service area for North Pole and much of the rest of the medium- and low-density areas of the Fairbanks North Star Borough.

“We expect the Pentex acquisition to be a short-term strategic investment that can play a significant role in helping achieve long-term success for the Interior Energy Project,” said AIDEA Executive Director John Springsteen in the news release.

Wilken said the money approved for the Interior Energy Project will not be used to purchase Pentex. The purchase will be done with the state agency’s loaning ability and will be recuperated when it’s transferred to the Interior Gas Utility, accomplishing the state goal of unifying distribution.

The purchase includes a natural gas liquefaction plant in Point MacKenzie, which Pentex had agreed to sell to Hilcorp, a Cook Inlet natural gas producer, for about $15.5 million.

That sale agreement is still set to move ahead under the purchase, but it’s still being reviewed by the Regulatory Commission of Alaska to ensure customers are treated fairly.

While the purchase of Fairbanks Natural Gas doesn’t solve the problem of finding a gas supply to meet the needs of Interior residents not presently served by gas, it has been pitched as a way to bring down the cost of distribution. The Interior Gas Utility held its official groundbreaking for the first phase of its distribution system in North Pole last week.

At an update to local officials in mid-May, Interior Energy Project leaders said the combination of the two utilities would save about $2 million a year in operations and $5 million to $11 million in construction of the expanded distribution system.

An increased source of natural gas has yet to be determined. Last week the state began taking bids from companies interested in supplying natural gas. Different modes of transportation have been explored, including by truck, which is how gas is currently delivered, and by rail and small-diameter pipeline.

The results of the bids are expected later this summer.

The close of the Pentex purchase is expected to be occur by the end of October.

Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.