By Matt Buxton, email@example.com
FAIRBANKS—The field of 16 companies interested in getting natural gas to Fairbanks has been whittled to five.
The Alaska Industrial Development and Export Authority on Wednesday announced the five companies it’s selected as potential sources of natural gas for the state’s Interior Energy Project.
The companies, listed in alphabetical order, are Hilcorp Alaska subsidiary Harvest Alaska, Phoenix Clean Fuels, Washington-based Avista Corp. subsidiary Salix, Spectrum LNG and WesPac Midstream.
They represent a wide variety of proposals, from complete plans to purchase, process and ship gas to Fairbanks to just the offer to build a liquefaction facility. Many companies also offered alternatives that covered more of the process.
The one offer to build a pipeline from the Cook Inlet area to Interior, oft cited by some legislators as the cheapest long-term solution to the Interior’s energy woes, did not make the final cut.
AIDEA spokesman Karsten Rodvik said the plans were each reviewed on a wide range of criteria, including meeting the goals of the Interior Energy Project, which are to deliver gas to the Interior at the lowest price, at the shortest time frame and to the most customers possible.
“Everything that came in was subject to a fair and thorough and rigorous evaluation,” he said, noting that the pillars of the Interior Energy Project weren’t the only criteria for evaluation.
The companies were also judged on their background and expertise in the natural gas industry, he said.
The target price, as has been discussed by many local leaders, is $15 per MMBtu of natural gas. That is about equal to a $2 gallon of heating oil.
None of the plans include the cost of local storage or distribution to customers, which has been quoted around $4 to $5 per MMBtu.
The least-expensive all-inclusive proposal came from Phoenix Clean Fuels.
The company is made of up many of the subcontractors that worked with project management firm MWH Global on a North Slope source of gas before it proved uneconomic around the start of this year.
Their proposal, which appears to be a refined version of what MWH had offered, would deliver gas to the Interior by the end of 2017 at about $10 per MMBtu. The final price customers would pay would add in processing, local storage and distribution costs.
The group’s proposal also asks for the largest input of cash from the state at about $166 million in a combination of grants, loans and bonds.
The company that didn’t ask for any state money is Harvest Alaska, a subsidiary of Hilcorp Alaska, a natural gas production company that has recently purchased interests in fields throughout the state.
Without any assistance, the company’s proposal to build a merchant liquefaction facility that could be used by any owners of Cook Inlet gas comes in at $4.95 to liquefy an MMBtu of natural gas.
By comparison, the Phoenix subsidized liquefaction done on the North Slope is cited around $3.99 per MMBtu. Both North Slope-focused plans put forward by Phoenix and Spectrum LNG cite the lower cost of North Slope gas as a benefit over Cook Inlet plans.
Rep. Jim Colver, a Palmer Republican who represents part of the Interior and co-chairs the House Energy Committee, is optimistic.
“Man, there’s some good bids,” he said in a phone interview after reading through the proposals.
Colver acknowledged the raw price of each bid doesn’t tell the whole picture of which plan is better than another. A plan that uses fewer state dollars means more money would be available locally for distribution, he said.
“You’ll have to pencil out how much state subsidies are needed,” he said.
Rodvik said reviewing the impact of subsidies is just one of the many things that will be reviewed moving forward. He said in the next few weeks AIDEA, the local Fairbanks utilities and the five companies will continue more in-depth discussions.
“These are the issues now that will be taken up in very thorough discussions including AIDEA and the Interior utilities and these five finalists,” he said.
The companies will be asked in mid-October to make their “best and final offer,” Rodvik said. Those offers will be reviewed and one will be put forward to the AIDEA board for selection by the end of the year.
Five-page summaries of each company’s proposal can be found online athttp://www.interiorenergyproject.com/.
Here are the lead options proposed by finalists. None of the plans include the cost of local storage or distribution to customers, which has been quoted around $4 to $5 per MMBtu.
Harvest: Proposes a processing facility in Cook Inlet area that would liquefy natural gas at about $4.95 per MMBtu. Gas and delivery to Fairbanks utilities would be extra. Unlike all other proposals, Harvest’s plan includes no state investment.
Phoenix: Proposes a full package, including purchasing, processing and delivering gas at $10 per MMBtu. It also requires the largest state investment of any project with $45 million of grants, $72 million of low-interest state loans and $49 million of state bonds. Price would increase 2 percent per year until it reaches $11 per MMBtu and would lock in at that price until 2036. Delivery in late 2017.
Salix: Proposes a processing facility in Cook Inlet that would liquefy natural gas at $2.87 per MMBtu. Gas and delivery to Fairbanks utilities would be extra. Requires $45 million state grant and $50 million in state low-interest loans. Delivery planned for late 2018.
Spectrum LNG: Proposes a processing facility on the North Slope but doesn’t specify a price for LNG processing. Instead, it cites a $10 per MMBtu delivered to Fairbanks as achievable. Requires $45 million state grant and $35 million in low-interest state loans. Delivery planned for early 2017.
WesPac Midstream: Proposes a processing facility in Port MacKenzie that would liquefy natural gas at $3.46 per MMBtu. Gas and delivery to Fairbanks utilities would be extra. Requires $45 million of state grants, $72 million of low-interest state loans. Delivery planned for early 2017.
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.