Slow gas deal causing problems for Interior Energy Project

IEP logo (Credit Alaska Industrial Development and Export Authority)

Slow progress securing a sufficient natural gas supply is causing problems for the Interior Energy Project. A gas contract is key to the Alaska Industrial Development and Export Authority lead project to provide a lower cost, cleaner burning fuel to the Fairbanks-North Pole area. IEP team leader Gene Theriualt said a gas deal with Cook Inlet producers is expected this summer.

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”We may have a contract in hand by the time of the next AIDEA board meeting which is on the 10th of August,” Theriualt said.

The gas deal is being put together by Fairbanks Natural Gas, a local utility purchased by AIDEA in 2015 to advance the Interior Energy Project. FNG is currently operating on a limited contract to supply its existing 1,500 customers. FNG President and CEO Dan Britton said the deal which expires next spring, is not sufficient for the larger needs of the Interior Energy Project.

”We’re looking to create options in the new contract which would allow us to expand a gas service to more customers,” Britton said.

Another aspect of the Interior Energy project is merging FNG into the Fairbanks North Star Borough’s Interior Gas Utility, to form a single non-profit entity to distribute gas. The merger has been slowed by a funding issue. Theriault described a temporary restriction included in project funding legislation.

”It said that we were not able to expand the scope of work under the existing loan until we identified the source of gas,” Theriault said.

The expandable gas supply would enable extension of service to more customers over new distribution lines installed in the North Pole area. That promises economies of scale, expected to lower the cost of gas, but in the meantime, Britton said rising operational costs of serving FNG’s current small customer base, are driving a rate hike.

”There’s been pricing pressure and, as a result, we’re looking to increase rates by 3 percent,” Britton said.

Britton said that will boost the average residential gas customer’s bill by over a hundred dollars a year. He expects the increase to be temporary, and said the Interior Energy Project continues to target a long term gas price equivalent of $2 per gallon heating oil.