Long awaited Interior natural gas contract expected

The fate of the long pursued Interior Energy Project will soon come into better focus. The state funded effort hinges on a natural gas supply from Cook Inlet, and that’s expected next month.

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The North Star Borough voter formed Interior Gas Utility, is a utility without any gas to sell, but IGU general manager Jomo Stewart said a forthcoming contract with a Cook Inlet producer could change that. Stewart said he can’t yet share details, but the contract is central to presentations planned for a September 5th IGU board meeting.

“We already have scheduled, at our next board meeting, to get the first run of financial modeling of this project as it will stand having secured a gas supply,” Stewart said.

The over $300 million state financed Interior Energy Project calls for the IGU to purchase and merge with local gas utility Fairbanks Natural Gas. FNG currently trucks in Cook Inlet gas for over a thousand local customers, but is poised to grow if more gas can be secured, and the merger goes through. The Alaska Industrial Development and Export Authority purchased FNG’s parent company Pentex in anticipation of financing it’s re-sale to the IGU. Stewart said that’s still the plan, as long as the gas contract comes in at a good price.

“You wouldn’t want to move forward on the purchase of this kind of major investment, and accepting that kind of debt load, in the absence of definition on things like what’s the gas supply cost,” Stewart said.

Stewart notes numerous other moving parts that need to be nailed down, including the cost of expanding Cook Inlet LNG processing, transport to, and storage in, the Fairbanks area, as well as local demand projections.

“Getting that definition is what’s in the offer now,” Stewart said. “So in the course of say the next month, month and a half, that information that has been generated is gonna start to become public.”

The Interior Energy Project is aimed at increasing local availability of gas as a cleaner, potentially cheaper alternative to oil, coal and wood. Stewart cautions that it has to pencil out.

“We’re not gonna wanna move forward on a knife edge,” Stewart said.

Borough assembly member John Davies is optimistic that the interior energy project can succeed and reminds the public that a lot has gone into getting to this point, and it’s important to see the project through.

“In this case, I think the glass is more half full,” Davies said. “The problem I see is that the history of Fairbanks has been that we pick a direction and then we stop and go some other direction, and that’s a guarantee to get nowhere.”

Davies suspects the challenge will be in sorting out the details.

“I think it’s very likely we’ll get a project that works,” Davies said. “The question is how well will it work and how fast will we be able to build out and those kinds of questions. Those are really the operational questions.”

Davies also points to distribution lines already in the ground in North Pole that if supplied with gas could provide area residents an alternative to wood heating, and reduce wintertime fine particulate pollution.

“That pipe was put there, that priority was put there, because of the air quality issues that are our there,” Davies said.

Fairbanks Economic development Corporation CEO Jim Dodson said addressing air quality and the cost of energy through the Interior Energy Project is Fairbanks best path forward.

“We can make this our project, and that $325 million that Fairbanks got to do this, even though it wasn’t enough money, it is a darn good start,” Dodson said. “And by the way, it’s the only start we’ve ever had.”

Dodson said the project is the first time the state has invested in energy for Fairbanks.