Matt Buxton, email@example.com
FAIRBANKS — The plan to unify and expand the Interior’s natural gas distribution network is coming together, but a contract to put gas in the expanded system has yet to be signed.
The state is “zeroing in” on a source of additional natural gas for the Interior Energy Project, project team leader Gene Therriault said at an Interior Gas Utility board meeting last week.
The gas contract is an important part of the way forward for the Interior Energy Project, not only as a source of gas but also because it is one of the three things needed to unlock state financing for the project.
After an attempt to build a North Slope project fell apart and the state announced it would be buying Fairbanks Natural Gas, the Legislature in 2015 approved additional legislation for greater oversight of the project. In addition to requiring quarterly reports, House Bill 105 required the state identify a source of gas as well as project buildout plan and a utility rate before the additional project funds approved in 2013 could be spent.
The pending agreement contains both a proposed buildout plan and estimated rate customers will pay, about $15.50 per thousand cubic feet of natural gas.
“The third major component is the price of gas itself, and we continue to work on that gas supply contract,” Therriault said at the Interior Gas Utility meeting. “Of course we need specific things from our Cook Inlet producer, we need flexibility on our take-or-pay obligations and we need a very competitive price, and we think we’re zeroing in on that.”
Therriault said he couldn’t talk specifics of the negotiations in an email exchange Thursday.
In an interview late last year, Therriault said negotiating a gas contract out of Cook Inlet has been challenging because the needs of the Interior Energy Project are different than the typical Cook Inlet gas contract. He explained that the Interior Energy Project needs to be for longer than the usual couple-years contract and some flexibility in the early years when the project is growing demand as people convert to natural gas.
Interior Gas Utility General Manager Jomo Stewart said once a gas contract is signed, the Interior Energy Project will be able to move quickly to produce the numbers needed to satisfy the legislation and unlock the funds. He said the legislation itself is helpful because it helps vet the viability of the project.
“We have an agreed-upon financial model that allows you to have the mechanism to fill in the blanks once you have the last set of data points,” he said. “Once you have more clarity on that, you have the thing to build the estimate to satisfy not only HB 105 compliance but the project in general and show it’s a worthy investment.”
The Interior Gas Utility’s board of directors is expected to meet next Tuesday at its downtown offices to act on a pending agreement that would allow it to take ownership of the once-private Fairbanks Natural Gas and commit the state to support some $330 million of investments in the project.
The Alaska Industrial Development and Export Authority is expected to meet the following day to approve the agreement.
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.