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IGU to buy first commercial North Slope LNG to support growth in Interior

Former IGU Board member Patrice Lee comments at the special meeting of the Interior Gas Utility Board. Tuesday, January 17, 2023.
Former IGU Board member Patrice Lee comments at the special meeting of the Interior Gas Utility Board. Tuesday, January 17, 2023.

The utility that feeds natural gas to 2,000 customers in the Interior has decided to change sellers in a move to stabilize the supply. At a meeting Tuesday afternoon, the board of the Interior Gas Utility voted to buy natural gas from Hilcorp North Slope, LLC and have it trucked down from the North Slope. It would be the first commercialization of North Slope gas.

Currently, the Interior Gas Utility (IGU) serves 2,232 customers in Fairbanks and North Pole with liquified natural gas (LNG) purchased from Hilcorp, and trucked up from Cook Inlet on the Parks Highway. The current contract is to supply gas through 2032.

IGU General Manager Dan Britton said Hilcorp told its customers last spring it might not be able to renew contracts for drilling in Cook Inlet as they expire, and they said there aren’t enough reserves.

“And they indicated that they did not have line of sight beyond their current contractual commitments that they have to us, Enstar, Chugach Electric, Matanuska Electric and others, how they would meet the total demands that they are today, in the future,” Britton said.

IGU currently operates a Liquefaction facility, named Titan, located in Cook Inlet that has the capacity to produce 50,000 gallons of LNG per day. That’s where the LNG is loaded onto truck headed to Fairbanks and North Pole. But Britton says at the rate IGU is adding customers, more liquefaction capacity is needed.

Britton gave the board a lengthy presentation of the different options available, including expanding Titan, adding a modular, temporary liquefaction plant at nearby Point McKenzie, importing liquified natural gas from Canada, or trucking it down from the North Slope.

Each option had its plusses and minuses. Expanding Titan was first considered in 2019, but that option was less likely after Hilcorp’s announcement that their support is unreliable. Building another small facility at Point MacKenzie, that would be called Titan II, would cost $60 million, and would not solve the Cook Inlet gas slowdown. Britton said bringing in Canadian gas has been examined for several years, as the utility expanded.

“And so we've evaluated barging out of the Vancouver area into a port in Alaska, and then either trucking or railing the LNG from there, trucking L N G from areas like Fort Nelson and Northern Alberta. And at each time the rates resulted in cost increases to our customers above our other options,” Britton said.

Britton said any potential solution out of Canada or the Lower 48 would be riskier pricing than Alaska LNG.

He pulled the board toward the North Slope for the fourth option, a two-part contract for supply with Hilcorp North Slope, LLC, and liquefaction with a company called Harvest Midstream.

“They're ready to build and operate 150,000 gallon a day L N G plant in the north slope with the targeted commencement date of October, 2024,” Britton said.

The contract would begin when the new liquefaction plant is ready in October 2024, and run until June 2045. Hilcorp and IGU would coordinate gas supply between IGU's current

Cook Inlet contract and the new, North Slope contract.

Before the presentation the board heard public comment. Former IGU board member, Patrice Lee worried the proposal had not been vetted enough.

“You have a momentous decision ahead of you. It may very well be the right decision, but do you have to make it tonight? Can you slow down and make sure that you've turned over every stone?” Lee said.

Former Borough Assemblymember Hank Bartos said IGU is pivotal in reducing the Interior’s wintertime air pollution.

“I guarantee you the EPA is gonna demand in order to meet their air quality standards. We're not gonna meet it unless we have an adequate supply,” Bartos said.

Board member Steve Haagenson encouraged others to vote on the fourth option because the deal would be consistent.

“You know it's gonna be this price. It's nice to know that predictability of it. Also, the addition of capacity, and I think we need to continue to grow and for the benefit of this whole interior of Alaska,” Haagenson said.

Haagenson said this would be the first commercialization of North Slope Gas, and it would be effectively a 30-year contract for IGU because after 20 years there are two five-year extensions available. The board passed the resolution unanimously.

Robyne began her career in public media news at KUAC, coiling cables in the TV studio and loading reel-to-reel tape machines for the radio station.