Two versions: House passes gas project, AIDEA bonding; Senate Resources just gas
By Kristen Nelson, Petroleum News
Two versions of a bill to promote natural gas for the Fairbanks area moved in the Alaska Legislature April 15.
As introduced, the administration bill removed the restriction that a liquefied natural gas project for the Interior must be based on the North Slope.
House Bill 105 passed that body by a 37-2 margin April 15 and includes the major elements of the bill as proposed – the elimination of the requirement that the Interior gas project use North Slope natural gas; an adjustment of Alaska Industrial Development and Export Authority bond authority amounts to reflect inflation; and termination of old bond authorizations AIDEA has not used.
Among other changes, House Finance also added to what AIDEA could bond – a hydroelectric project and the rebuilding of Southcentral electric transmission lines.
Meanwhile, Senate Resources, also acting April 15, stripped the companion bill, Senate Bill 50, of all of the AIDEA bonding changes, leaving just an amended version of the bill removing the requirement that North Slope natural gas be used for the Interior energy project.
Just four words
As Rep. Steve Thompson, R-Fairbanks, co-chair of House Finances, said in carrying the bill on the House floor, it all started with the goal of removing four words, “from the North Slope,” from the Interior gas project authorized in SB 23 in 2013.That project, which AIDEA dropped at the end of 2014 when it didn’t pencil out, called for building a liquefaction plant on the North Slope and trucking LNG to Fairbanks. The bill also provided for distribution line construction in the Fairbanks area. It is viewed as providing a short-term source of natural gas for Interior consumers in advance of a major North Slope gas pipeline.
AIDEA is now looking at sourcing natural gas in Cook Inlet, which is the source of existing LNG provided to some 1,000 customers in the Fairbanks area by truck from a small LNG plant near Point MacKenzie.
HB 105 underwent a considerable metamorphosis in House Resources, which moved a version April 8 with a number of amendments to which administration officials objected. Some items, such as a requirement that the project be regulated by the Regulatory Commission of Alaska, were removed from the House Finance version.
Both House versions included a requirement that AIDEA submit quarterly reports on the Interior energy project to the Legislature, including a description of progress on all project components; an update on local distribution infrastructure build out; to-date and anticipated conversions to natural gas; and an accounting of funds used and expected to be used, including loans, grants and bonds.
Another element retained in the Finance version reflects concern that AIDEA could compete with private entities in obtaining natural gas. It prohibits AIDEA from entering into gas supply contracts without obtaining legislative approval – unless for the benefit of an LNG facility or distribution utility owned by AIDEA or a subsidiary, and is to provide the utility with a natural gas supply to serve customers in Interior Alaska.
The Senate version
SB 50 as passed out of Senate Resources includes the same quarterly report requirement.It also defines the project as providing “natural gas to Interior Alaska as a primary market” and adds intent language specifying that the increased geographic flexibility provided in the act is solely to “advance the Interior energy project” authorized in 2013. “This Act does not expand the scope of the project nor authorize any other activity beyond accomplishing those stated goals”; the intent language also specifies that AIDEA will “use an open and competitive solicitation process to select private entities to participate in developing the liquefied natural gas production plant capacity and affiliated infrastructure described in this Act.”
Senate Resources Chair Cathy Giessel, R-Anchorage, said in the April 15 meeting that due diligence requires putting the AIDEA bonding adjustments in another bill, and said SB 50 had been scaled to focus on Interior energy.
Sen. John Coghill, R-North Pole, said the intent language was to ensure that the focus remains solely on advancing an Interior gas project. Coghill also said he is concerned with Cook Inlet as a source of natural gas for the Interior because he believes while Interior would have had the first offtake contract on the North Slope and would be the last to lose that contract, in Cook Inlet it would likely be the last to get a contract and the first to lose it.