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Vol. 18, No. 18 Week of May 05, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Munis challenge FNG to service lower-density areas of borough

The game is on to expand natural gas supplies in the Interior.

The Interior Alaska Natural Gas Utility is asking state regulators for a service area covering sections of the Fairbanks North Star Borough not currently served by the local distribution company Fairbanks Natural Gas LLC. The request comes shortly after Fairbanks Natural Gas applied to expand its service area to include those same sections.

Additionally, state regulators have given Spectrum Alaska LLC the go-ahead to build a small pipeline to support a North Slope liquefaction system the company is proposing.

Although a publicly owned utility is exempt from certain state utility regulations, the IANGU is electing to go through the regulatory process. The IANGU came into being last year after the cities of Fairbanks and North Pole transferred their utility-making authority to the Fairbanks North Star Borough to create an area-wide gas utility.

In their respective applications, the IANGU and Fairbanks Natural Gas both cited the economic and environmental benefits of making gas available to as many consumers as possible in the Interior, where fuel oil dominates the space heating market, but the IANGU also claims to have “several significant advantages” as a municipal entity.

In an abstract sense, the IANGU claims to have “the political support of the community” because of its municipal constituents. Concretely, the IANGU believes it would have an easier time getting state grants and lower cost financing than a private utility would because it “is driven to provide and expand service to residents rather than to optimize profit.” It also believes it would end up with a lower tax burden than a private utility.

The IANGU envisions a nearly $500 million infrastructure build-out across the Fairbanks North Star Borough between 2014 and 2019 funded entirely by state loans and grants.

Limited expansion to date

Some 15 years after receiving its initial certificate from the Regulatory Commission of Alaska, Fairbanks Natural Gas still serves an area limited to the high-density core of Fairbanks, less than 1 percent of the total borough population, the IANGU charged in its application. It wrote, “(Fairbanks Natural Gas) has been unwilling or unable to develop the political consensus necessary to address and resolve the issues associated with providing service even in its limited service area within the Borough. (Fairbanks Natural Gas) has been unwilling or unable to get the job done and has only been willing and able to provide service to a fraction of the potential customers within its service area.”

Fairbanks Natural Gas blames logistical issues for its slow expansion. First, the utility was stymied by flagging gas supplies from Cook Inlet. Since securing a North Slope supply contract in 2008, it has been working to build a North Slope liquefaction plant.

The Alaska Legislature recently gave the Alaska Industrial Development and Export Authority the ability to finance such a plant. Both Fairbanks Natural Gas and the Interior Alaska Natural Gas Utility have expressed an interest in participating in the project.

In its application, the IANGU said it would contract for supplies with a North Slope producer once the plans for a North Slope liquefaction plant “become more defined.”

The seven-member IANGU board of directors includes Bob Shefchik, Frank Abegg, Bill Butler, Steve Haagenson, Michael Meeks, Oran Paul and Jim Laiti. Currently, the members are all appointees, but in future terms four members will be publically elected.

Spectrum on the move

The Regulatory Commission of Alaska has given Spectrum Alaska LLC a certificate to construct a small pipeline to support a North Slope liquefied natural gas operation.

The eight-inch pipeline would run some 1,100 feet to connect a proposed LNG plant to be built to the existing natural gas facilities at the Prudhoe Bay unit. The system would primarily serve North Slope industry transportation customers to start, but the company has said it would also be open to exploring other markets accessible by tanker truck.

The RCA granted the certificate based on the previous work of Spectrum Alaska and its managers, led by President Ray Latchem. The company and its affiliates are responsible for the Fairbanks Natural Gas LLC liquefaction plant in Southcentral, the North Slope distribution utility Norgasco Inc in Alaska, as well as an LNG facility in Arizona.

—Eric Lidji

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