By Matt Buxton

FAIRBANKS — The meeting may have been filled with a mind-boggling array of numbers, complex financial modeling and technical jargon, but the message was that progress is being made on the renewed effort to bring natural gas to Fairbanks.

State officials shepherding the Interior Energy Project’s new attempt to source gas from Cook Inlet instead of the North Slope told local officials and the public at the Pioneer Park Civic Center on Tuesday night that things are moving ahead on multiple fronts.

Much of the presentation focused on the state Alaska Industrial Development and Export Authority’s plan to purchase Pentex, which owns Fairbanks Natural Gas and a Port MacKenzie natural gas liquefaction plant, in a bid to consolidate distribution in the Interior.

Bob Shefchik, the former head of the Interior Gas Utility who joined AIDEA earlier this year to helm the Interior Energy Project, explained that bringing distribution under public ownership will have numerous benefits, both in the short and long term.

“It’s a strategic acquisition and the idea is to promote the advancement of the distribution,” he said. “The return on equity expectations are lower, the tax burden is lower.”

He said public ownership of Fairbanks Natural Gas will result in about a 14 percent reduction for the system’s roughly 1,000 customers soon after the pending sale closes.

In the long term, combining Fairbanks Natural Gas and the Interior Gas Utility will pencil out to save about $1.5 million to $2 million in operations annually. The buildout costs, he said, of a combined system would save between $5 million and $11 million.

Due diligence on the purchase is moving toward a signed purchase agreement by the end of the month. The sale would close by the end of July, according to the presentation.

Shefchik said the state is also preparing to begin soliciting a new source of more natural gas in the coming months.

The state will issue an open solicitation to private businesses to deliver natural gas to Fairbanks in the coming days. The delivery method has largely focused on trucking, but there has been discussion of delivery by rail or by small-diameter pipeline.

Others asked about the pending sale of the Port MacKenzie to Harvest Alaska, a pre-existing  agreement Fairbanks Natural Gas made last year. The sale already has been challenged before the Regulatory Commission of Alaska and by the office of the Attorney General.

That deal would require that Fairbanks Natural Gas purchase gas at $15 per thousand cubic feet delivered to Fairbanks, not including the cost to store and distribute gas.

Shefchik said the state intends to attempt to renegotiate the cost. The target price for Interior Energy Project customers is $15.
“Whether or not we’re successful, I can’t predict,” he said. “That first B (billion cubic feet of natural gas) at $15 while not a bar to success, is a challenge.”

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