The Interior Gas Utility and Alaska Industrial Development and Export Authority have approved a memorandum of understanding to forward the Interior Energy Project. The state funded IEP is aimed at increasing the availability of gas in the city, as a less expensive and cleaner burning alternative to other fossil fuels and wood. The project has a lot of moving parts and is behind schedule, but the MOU is a key step.

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The memorandum of understanding was approved in separate meetings this week by the Interior Gas Utility and Alaska Industrial Development and Export boards. The MOU lines out terms for the North Star Borough-created IGU’s purchase of Fairbanks Natural Gas from AIDEA. AIDEA bought the formerly private utility as part of the state funded IEP to increase availability of gas in Fairbanks. IGU general manager Jomo Stewart said the $58 million purchase, will be financed over 50 years.

”The interest rate on the loan itself will be .25 percent,” Stewart said. “There will be a deferral built into this loan of 15 years where no interest will accrue, and there will be no principal or interest payments.”

Stewart said the 15 year deferment will allow time for the IGU to build a customer base beyond the one established by Fairbanks Natural Gas in the city’s downtown area. The MOU also paves the way for access to state financing for gas processing, transportation, storage and distribution infrastructure. Stewart said the next step involves specifically lining out how that development will happen.

“Really nail down the process, get the dollars flowing and get the things constructed that eventually bring these benefits of all this work to the front walls of the homes and businesses in Fairbanks.”

The Interior Energy Project has long targeted delivering gas to Fairbanks customers at a price equivalent to $2 a gallon heating oil. Stewart said the latest price estimate slightly exceeds that target due to added costs.

”There’s a little bit built on for customer charges and probably a little bit for operations,” Stewart said.

According to AIDEA, finalization of the MOU documents is due by March 3st, but contingent on securing a gas supply to feed increased demand in Fairbanks. AIDEA is negotiating a supply contract with a Cook Inlet producer for the gas, which would be moved by truck or rail to Fairbanks.

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