By Matt Buxton email@example.com
FAIRBANKS — Even though the state has approved millions in funding, selected a global infrastructure development company and approved millions more for infrastructure in Fairbanks, it’s clear that getting natural gas off the North Slope is still a “massive undertaking.”
The Alaska Industrial Development and Energy Authority’s Board of Directors met in Anchorage on Wednesday to hear an update on the Interior Energy Project, with the most critical part being the progress on a natural gas processing facility on the North Slope.
AIDEA selected global infrastructure development company MWH earlier this year as the lead project manager to develop, construct and operate the facility.
MWH is in the design phase of the project with the tricky problem of figuring out just how big of a plant to build.
The size of the plant, as board member Gary Wilken pointed out, will depend on the amount of gas there is to sell, and just how much gas the plant will sell will depends on the price and, coming back to the start, the price will depend on the size of the plant.
MWH representatives explained they plan to have a number by sometime in October. But to get there they want to sign agreements with the companies to buy gas in a range of prices in July.
“My discomfort is we don’t know that until we have a price that they can sign up for,” Wilken said. “You can give them a range, but you won’t get a commitment. Without that commitment, how do you size the plant, 3, 6 or 9 (billion cubic feet)? This gets in a cycle. I don’t understand what you’ll say to them in July that gets a commitment that gets them to move forward.”
Chris Brown, the regional manager for MWH in Alaska, said that the July price range should be enough for a company to seriously consider an agreement. And if they don’t, he said, then the plant will likely move forward without them.
“If they’re not willing to be locked in, then they don’t count,” he said. “There’s no way you can do business otherwise.”
The prospective buyers are Golden Valley Electric Association, the fledgling municipal Interior Gas Utility, and Fairbanks Natural Gas, which currently gets some of its gas from supply-troubled Cook Inlet.
GVEA CEO Cory Borgeson also added that the North Slope plant offers the benefit of long-term gas contracts, something companies won’t find elsewhere.
Still, Mike Pawlowski, a deputy commissioner of the state Department of Revenue, said simply hammering out the legal documents in the three-month time frame is ambitious.
“Price aside, just coming to agreement on those precedent agreements, the terms of conditions of each of those commercial agreements, I think three months is incredibly aggressive on that, much less than the price setting,” he said. “All of those commercial terms are going to be incredibly detailed and doing that with three months, price aside is a massive undertaking.”
The board will meet next in late June for approval of agreements to continue moving forward. MWH plans to sign flexible contracts with buyers in late July and lock into price in October. Construction is set to begin on the plant after that, with first gas delivered to Fairbanks in late 2015 or early to mid-2016.
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.