IGU Board Member’s Resignation Letter Sparks Debate Over Pentex Deal, Gas Price/Supply

Aug 8, 2018

The Interior Gas Utility's board of directors reluctantly accepted the resignation of Frank Abegg Tuesday. But several people who turned out for the board meeting told members they’re concerned about the fiscal issues Abegg raised in his four-page resignation letter. And an official with the Alaska Industrial Development and Export Authority denied his accusations that the agency put the IGU in a financially precarious situation.


Fairbanks attorney Mike Walleri told the IGU board that he’s troubled by the concerns Abegg raised in his resignation letter. Especially his concerns over the utility’s well-being.

Ex-IGU General Manager Jomo Stewart, at right, talks with members of the Interior Gas Utility's board of directors and staff in Tuesday's meeting.
Credit Tim Ellis/KUAC

“This kind of stuff that came out – I was shocked to see this,” he said.

Walleri says he realizes the IGU, like startup companies, must incur debt to gain assets to operate. But he says the debt the utility racked-up in buying Pentex Alaska Natural Gas Company from the Alaska Industrial Development and Export Authority, or AIDEA, is excessive. Abegg wrote the state agency effectively charged the IGU $75 million for the company, which AIDEA bought in 2015 for $56 million.

“It bothers me,” Walleri said. “It bothers me a lot.”

Gene Therriault heads up AIDEA’s Interior Energy Project, which facilitated formation of the IGU. Therriault denied Abegg’s allegations. He said after the meeting that officials with the Fairbanks North Star Borough and its two incorporated cities approved AIDEA’s plans to buy Pentex, then sell it to the IGU.

“AIDEA would not have purchased Pentex if it did not have the support which we received in three resolutions that were debated by the local government,” he said after the meeting.

Therriault says the cost of the purchase shouldn’t have been a surprise to the IGU board, because AIDEA outlined its plan for the local officials before it bought Pentex. And he says AIDEA charged the IGU a fair price for the company, based on its analyses and consultants’ reviews.

Outgoing IGU board member Frank Abegg, left, and Gene Therriault, AIDEA's Interior Energy Project coordinator.
Credit IGU, UAF

“Certainly it’s anybody’s right to continue to question that,” he said. “Many people have an opinion. We had an expert opinion.”

Other concerns Abegg listed in his letter include the cost of upgrading the aging Pentex plant, IGU's lack of a natural-gas backup source, and challenges to bringing in gas at a competitive price.

Another member of the public, Carl Hough, told board members they should consider a proposal by Siemens to develop another source of natural gas as proposed instead of relying solely on Pentex’s Titan LNG plant near Point MacKenzie. Siemens has offered to finance and build a LNG plant near Wasilla in exchange for long-term gas-sales contracts.

“The Siemens proposal was just a lot easier to grasp,” Hough said. “Maybe they’re better at it, maybe they’re more polished.”

But former IGU General Manager Jomo Stewart, speaking as a member of the public, told board members that although Siemens staged a slick presentation to the board on May 15, it didn’t provide detailed information on how the company’s proposal compares with the Pentex plan.

“Really,” Stewart said, “all it was was a big ol’ PR opportunity for a proposer – an unsolicited proposer – to make a direct pitch to the board. And, a direct pitch to the public, in the absence of actually giving substantive information from which this board could actually make a determination.”

Board members Jack Wilbur and Steve Haagenson both agreed the presentations lacked substance, and said that’s why they canceled a second presentation by Siemens. Haagenson says he wants details that’ll enable IGU officials to make an apples-to-apples comparison. Therriault says that’s why AIDEA also has concerns about Siemens’ proposal.

“I think you heard tonight at the IGU table that there’s a high level of frustration that Siemens has produced PowerPoints, but not actually produced a proposal,” he said.

Board Chairwoman Pam Throop said after the meeting that she shares Abegg’s concerns about the purchase price of Pentex and other issues. She says she intended to vote against it the deal when it came before the board in December. But she says an expert convinced her that local control over the facility outweighed concerns over AIDEA’s high selling price.

“I do believe,” she said, “that we as a community are better off by owning IGU than having it owned and run by people who don’t live in this community. Like AIDEA.”

Throop says Siemens representatives have committed to giving a thorough, substantive presentation on the proposal on Aug. 21.