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Parnell: $355 million for Fairbanks gas Major financial package would finance North Slope liquefaction plant and fund storage and distribution infrastructure across Interior Eric Lidji For Petroleum News
In advance of the upcoming legislative session, Alaska Gov. Sean Parnell is proposing a $355 million financial package designed to bring natural gas to Fairbanks by late 2015.
The bulk of the package, to be introduced through legislation, would be $275 million in Alaska Industrial Development and Export Authority loans and bonding authorizations to spur private construction of a North Slope liquefaction plant. The package also includes $50 million from the general fund and $30 million in existing gas storage tax credits, which could go toward the plant, or toward local distribution lines or other infrastructure.
The primary goal of the project is to bring liquefied natural gas and propane to Fairbanks and to rural Interior communities along the road and river system, but it could also serve Southcentral markets, Parnell said. “The state has stepped up with a financial package that will lead to lower heating and electric costs,” Parnell said in a statement on Dec. 7. “And, it can be a springboard for cheaper energy for Alaskans in other communities.
The project would deliver gas at $12 to $15 per 1,000 cubic feet to homeowners, Parnell told the Fairbanks Daily News-Miner, cutting heating bills in half compared to oil. The goal is to bring the project online by 2015, with expansions continuing for years to come.
The effort is meant to alleviate high fuel costs while the state and industry continues to pursue a natural gas pipeline that would eventually supply local markets directly.
Eying all major users Alongside the announcement, AIDEA put of the call for “a single full-service entity, or an organized team of entities, that can participate in financing, planning, design, construction, commissioning, and operating the North Slope LNG Plant program.”
The letter imagines a modular facility capable of producing between 7 billion and 9 billion cubic feet of LNG per year, but able to expand to 20 bcf per year, if needed.
Among the potential customers, AIDEA listed the local distribution company Fairbanks Natural Gas LLC, the local electric cooperative Golden Valley Electric Association, the oil refiner Flint Hill Resources, the new municipal entity Interior Alaska Natural Gas Utility and “other customers within Alaska that would benefit from LNG availability.”
For weeks, Fairbanks Natural Gas has claimed to be ready to begin construction on a North Slope liquefaction facility, while GVEA is currently permitting a similar operation at a different location. Flint Hills was originally partnering with GVEA, but backed out because of its improved energy economics and because it hesitated to take the lead on a project increasing designed to address numerous energy issues for the entire region.
AIDEA is accepting responses through Jan. 8.
While Fairbanks Natural Gas President Dan Britton praised the proposal to the News-Miner as potentially lowering the risk of the project, Fairbanks North Star Borough Mayor Luke Hopkins, a force behind IANGU, questioned the amount of grant funding. “$50 million? I was hoping to see a lot more,” he said. “I ask, is this the plan that gets us the lowest cost energy? We have to see how all this breaks out. When you have bonds that have to get paid back, that gets all put on the back of the ratepayers.”
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