The Interior Gas Utility’s general manager and board chairman held the first of two sessions Tuesday intended to help the public understand the IGU’s $59.5 million proposal to buy Pentex Alaska LNG Co., the parent company of Fairbanks Natural Gas and its LNG-processing and storage facilities in Southcentral. The IGU board is scheduled to vote on the deal on Dec. 5.
IGU General Manager Jomo Stewart reminded the 20 or so people who showed up for Tuesday night’s meeting in Fairbanks City Hall how the effort to bring natural gas to the Interior began about 10 years ago. That’s when local residents began looking for alternatives to heating oil after its price began rising toward a peak of 4-dollars-a-gallon.
“It was sucking $300 million to $600 million a year out of our economy, when that price of oil reached its peak of four-dollars-plus,” he said.
Before long the task force formed in response to the price hikes settled on liquefied natural gas. Not only because LNG was cheaper, but also because it would burn more cleanly that other heating fuels.
“By giving people another fuel option, at a reasonable price, that was cleaner certainly than oil, but way cleaner than wood,” LNG could help relieve the Fairbanks area’s growing air-pollution problem, Stewart said.
To get the LNG to Fairbanks and then distribute it locally, the Interior Gas Utility or IGU, settled on a deal proposed in late 2012 by former Gov. Sean Parnell that he called the Interior Energy Project. Parnell offered a package of grants, low-interest loans and bonding authority worth a total of $332 million, which the Legislature approved in 2013.
“And that’s where we are today,” he said.
The deal the IGU board will consider on Dec 5 would use about $59.5 million of that funding package to buy Pentex and its assets from the Alaska Industrial Development and Export Authority, or AIDEA. The assets include the Titan LNG plant at Point MacKenzie and tanker trucks to bring the gas to Fairbanks. The IGU would use the distribution system of another Pentex asset, Fairbanks Natural Gas, along with infrastructure IGU has been building, to pipe LNG to the Fairbanks and North Pole areas beginning, tentatively, in 2020.
“We’re trying to rapidly transition an energy economy,” Stewart said.
It’s a complex deal with many moving parts that include building more infrastructure using a $331 million funding package financed through AIDEA. The IGU will use some of that to upgrade the facilities and build news ones and clean up contamination at some of the Pentex sites. Perhaps most importantly, he said, the IGU will have to persuade local residents to convert to LNG to heat their homes and businesses.
“Conversions are what’s going to drive this,” he said. “Usage is what drives the system.”
That might be a challenge, because the IGU concedes it won’t be able to provide LNG as cheaply as it originally had hoped. That’s a key consideration for property owners who will have to pay for converting to an LNG-fueled heating system – the cost of which, Stewart conceded, will vary widely.
“It’s hard to say, at a forum like this, what your conversion costs are going to be,” he said in a response to a question submitted by a member of the audience.
Firm answers to many questions raised at Tuesday’s forum were hard to come by. But the conversational back-and-forth format used by Stewart and IGU board chairman Mike Meeks helped make some of the complexities more comprehensible, says Alison Carter, who sat in on the session.
“It was a lot of information,” Carter said afterward. “I certainly didn’t absorb it all. But I do feel I have a much better idea of what’s going on.”
Stewart says that’s what he and the board had hoped the meeting would accomplish.
“I do hope the folks that did come feel that they got the answers – not necessarily the answers they wanted,” he said. “But, that they felt they got the information they were looking for. To at least know what’s going on.”
Stewart will get one more chance to let folks know what’s going on – in next Tuesday’s forum at North Pole City Hall. He says the public will get a chance to comment on the Pentex purchase during a Nov. 30 IGU board work session in the borough Assembly meeting room. Board members are scheduled to vote on the purchase on Dec. 5. If they approve the deal, the AIDEA board will vote on Dec. 7.