The Interior Gas Utility’s board of directors approved a nearly $60 million deal Tuesday to buy Pentex Alaska and its natural gas processing, storage and transportation assets. The board’s vote is the first step toward the IGU’s $346 million plan to buy and build a gas utility for the Fairbanks area. The deal now awaits final approval by the Alaska Industrial Development and Export Authority’s board of directors.
None of the IGU board’s seven directors liked everything about the complex deal worked out over the past few years to buy Pentex and its assets. But, says board vice chair Jack Wilbur, it’s good enough to get the IGU into the business of distributing natural gas on a scale necessary to accomplish the goals of holding down energy costs and improving the area’s air quality.
“It’s a good deal for our community,” he said. “It’s not the deal that we were hoping for five or six years ago. But it is a good deal.”
Board member Pam Throop disagreed, for several reasons, including the Pentex sticker price and terms of purchase.
“I want us to have this project,” she said. “I don’t like the terms of the project at all.”
Frank Abegg joined Throop in opposing the deal. Among the reasons he cited was his suspicion the purchase worked out by the Alaska Industrial Development and Export Authority benefits it much more than the IGU. AIDEA owns Pentex and its assets, including Fairbanks Natural Gas, both of which would be sold to the IGU as part of a $331.2 million financing plan to enable IGU to buy and build a gas utility for the Fairbanks North Star Borough.
– Frank Abegg
“I personally am disappointed in the current position of AIDEA, for lots of reasons,” Abegg said.
Both Abegg and Throop voted in the minority against the purchase, which the board approved 5-to-2. Before the vote, board members heard from 22 people, most of whom spoke in favor of the deal. Though they expressed reservations – as did Tim Cerny, president and owner of Fountainhead Development.
“Is this deal perfect? No. But it has been my experience that no business deal is perfect,” he said.
Cold Climate Housing Research Center CEO Jack Hebert said he’d prefer Fairbanks-area residents solve the problems of high heating costs and poor air quality through efficient building designs that would maximize energy efficiency. But in lieu of that, and given the need to find solutions quickly, Hebert gave qualified support to the Pentex purchase.
– Jack Hebert
“We’re at a point where we’ve got to make a decision,” he said. “And rather than show the rest of the state we can’t come together and we’re always going to be bickering over one thing or another and talking about it, we’re going to have to come together and stand in support of this, in my mind.”
And Chena Hot Springs Resort developer Bernie Karl offered his grudging support for the deal – in his own inimitable way.
“I have to speak in favor of the resolution,” he said. “We need to do this. I think it’s insane the amount of money we’re paying for Pentex. And I think it’s insane the price we’re paying for gas. But I still have to support it.”
Perhaps the strongest arguments against the purchase were made by Merrick Peirce, a former board member and chief financial officer for the Alaska Gasline Port Authority. He says the deal shows the IGU will fail to lower heating costs and improve air quality – and other objectives.
“None of the project’s original 12 goals are being met,” Peirce said. “Not one – not one.”
After the meeting, Patrice Lee, the newly elected IGU board member who’ll begin her term in January, says she would’ve voted with the minority in opposing the Pentex purchase. But she says her first priority when she’s seated will be to learn more about the IGU and its players.
“Listening, learning and being a team player,” Lee said. “But, also bringing forward my concerns, which I’ve outlined here.”
AIDEA issued a statement this morning praising the IGU board’s decision. The Pentex purchase won’t be made official until it’s approved by the AIDEA board of directors, which is scheduled to vote on the issue Thursday.