By Matt Buxton, email@example.com
JUNEAU — Before going back to the Legislature to ask for more money to make the Interior Energy Project work, state officials say they’re going to work through every alternative to bring gas to Fairbanks.
That includes the potential $52.5 million purchase of Fairbanks Natural Gas — which has caused many lawmakers heartburn since it was announced two weeks ago — as a bid to unify and drive down the cost of gas distribution in the Interior.
But one of the most outspokenly skeptical lawmakers of the purchase told state officials in a hearing on Thursday that there could be the case for putting more money toward the energy project, even with the gloomy state of the budget.
Legislative Budget and Audit Committee chair Rep. Mike Hawker, R-Anchorage, told Alaska Industrial Development and Export Authority head Ted Leonard and Interior Energy Project team leader Bob Shefchik to consider asking for more than just permission to pursue alternatives to North Slope gas.
“Don’t cut yourself short. If you need more than that, you need to put it on our tables and talk to policymakers, so we can make that decision and provide the additional support to move the project forward,” he said. “I would very much entertain that. It’s an ask and we have to judge that. … We as legislators need to seriously consider the need to up our ante in this even in this time of tight budgeting.”
The legislature authorized about $330 million in grants, low-interest loans and bonds for a project to truck gas from the North Slope to the Fairbanks area in 2013. When that effort came up short, the state set its sights on Cook Inlet as an alternative.
That would require the Legislature lifting limitations that required the project focus on the North Slope. That proposal, which was introduced in a bill by Gov. Bill Walker on Wednesday, was slapped with four committee assignments, making it a tough uphill battle to get the bill passed.
That move, as explained by House Speaker Mike Chenault on Wednesday, was an effort to hold the administration’s feet to the fire to get more information on just what the state plans to do with the project.
That was largely the purpose of Thursday’s Legislative Budget and Audit Committee meeting, which Chenault attended even though he’s not a member of the body. Hawker stated the intent of the meeting was to review the status of the Interior Energy Project, including the failure of a public-private partnership to build a North Slope gas plant, the recent announcement to buy Pentex — which owns Fairbanks Natural Gas and a gas liquefaction plant in Point MacKenzie — and where the state plans to take the project next.
Leonard said the state has shelved the private-public partnership for the North Slope plant as its costs rose well past initial estimates, driving up the cost of delivered gas and sucking up low-cost state money.
“We saw that we needed to take a pause and reevaluate the whole supply chain,” he said.
To that end, the state will consider purchasing Fairbanks Natural Gas to merge it with the Interior Gas Utility, allowing the two previously adversarial utilities to share storage, distribution and administration.
Leonard clarified that the state also intends to allow the pre-existing contract that Fairbanks Natural Gas owner Pentex had to sell its Point MacKenzie liquefaction facilities to gas producer Hilcorp to play out.
He added that it’s not the intent of AIDEA to get into the business of owning and running Fairbanks Natural Gas for the long-term.
“Our goal is to hold the asset for a short transition period and work with the community to create an integrated system,” he said. “Then we would spin it off. … That could either be to the borough (and the Interior Gas Utility) or another private operator. It is not the goal of AIDEA to own this project for the long term.”
But as Hawker pointed out, the existing supply stream of Fairbanks Natural Gas is maxed out at a paltry 1,000 customers. Not much in the purchase of the used facilities will expand the gas supply, he said, asking just what the plan to increase supply was.
Shefchik, who had served as the volunteer head of the Interior Gas Utility up until joining AIDEA this week, said that he will be spearheading an exhaustive effort to look at any and all options to bring more gas to the Interior.
He said the governor already has directed the Department of Natural Resources and the Department of Revenue to assist in the search, and there already are several private companies looking at bringing gas to Fairbanks.
“In liquefaction there are opportunities, like the REIs, the WesPacs, the Cook Inlet Energys and the Hilcorps that would like to provide liquefied gas to the Interior,” he said. “We are going to go through due diligence with anyone who says they can solve the energy costs of the Interior. I can assure you we will look at rolled steel pipe.”
Shefchik and Leonard said the efforts will allow the state to refocus money along the supply stream. WesPac, for example, in its proposals has said it can get gas to Fairbanks without the need for any state subsidy, allowing more money to be focused on driving down the cost of distribution.
Even with the seemingly encouraging message from Hawker that more money could be in the mix, the state was adamant about exhausting the alternatives.
“At the end of the day I have a singular goal and a singular focus,” Shefchik said, “and if the tools are not sufficient, then we will come and talk to you.”
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.