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RCA OKs LNG storage service for Fairbanks utilities FNG, IGU
Kristen Nelson Petroleum News
The Regulatory Commission of Alaska has approved liquefied natural gas storage service for Fairbanks Natural Gas and Interior Alaska Natural Gas Utility. FNG is a subsidiary of IANGU. Both are owned by the Fairbanks North Star Borough and operate as IGU, the Interior Gas Utility. The utilities have RCA certificates of public convenience and necessity for natural gas service and had applied to amend their certificates to include natural gas storage service. The Alaska Legislature “has separately defined LNG storage public utility service and natural gas public utility service, and we consider these to be different types of utility service,” RCA said, so it treated the applications to amend as applications for new certificates authorizing LNG storage public utility service and approved them on that basis.
History IGU reviewed the utility’s history in a March presentation to the House Energy Committee.
FNG began operating in Fairbanks in 1998 and currently has more than 1,100 residential and commercial customers.
In late 2012, the Fairbanks North Star Borough acquired natural gas utility power by transfer from the City of Fairbanks and the City of North Pole and established the Interior Alaska Natural Gas Utility, IGU, which consolidated with FNG in June 2018 and operates as an integrated not-for-profit public facility.
FNG provides natural gas transmission service within select areas of Fairbanks; IGU is authorized to provide natural gas distribution service within portions of the borough not served by FNG.
Because the utilities are owned by the FNSB they are exempt from economic regulation by RCA, but the commission said the Alaska Department of Revenue determined that to qualify for tax credits, which the utilities want for their new storage facilities, they must comply with RCA certification requirements.
New storage facility FNG is constructing a new 5.25 million-gallon LNG storage tank in Fairbanks, and IGU will be assembling LNG storage in North Pole, RCA said, both with financing from a $125 million loan from the Alaska Industrial Development and Export Authority. The loan carries no interest for the first 15 years and then has a 0.25% interest rate. RCA said the utilities also have access to additional bonding authority through AIDEA and to tax credits through the state.
FNG has been required to maintain a minimum five-day LNG storage reserve in Fairbanks based on projected daily demand for noninterruptible customers, FNG told RCA in its application. FNG has two storage facilities currently with a total capacity of 340,000 gallons.
The utility’s Fairbanks assets include two LNG storage facilities, one with a capacity of 90,000 gallons and the other with a capacity of 250,000 gallons.
A smaller LNG storage facility for North Pole is estimated at $12.1 million. Two 75,000-gallon storage tanks and a multipurpose building are planned for North Pole. Seventy-three miles of pipe infrastructure are in place in North Pole.
Interior Energy Project A 2015 bill passed by the Alaska Legislature renewed the Interior Energy Project, designed to bring low-cost energy to the Interior. Initial legislation passed in 2013 created the Interior Energy Project to truck North Slope natural gas to Interior Alaska and gave AIDEA financial tools and a deposit of $125 million into SETS, the Sustainable Energy Transmission and Supply Development Fund. The legislation limited interest charged for project financing and the financing language was retained in the 2015 legislation which broadened the source of natural gas for Interior to include Cook Inlet.
In 2017 the AIDEA board approved a development plan as required in the 2015 legislation. AIDEA had acquired Pentex Alaska Natural Gas Co., which owned FNG, in 2015; IGU was certified by RCA in 2013. The two utilities were consolidated in 2018.
Titan Alaska LNG, a Pentex subsidiary, has a natural gas supply contract with Hilcorp Alaska through March 31, 2021, with enough capacity, 5 million cubic feet per day, for existing FNG customers, with expansion up to 15 million cubic feet per day allowed with 18 months advance notice to Hilcorp.
IGU told legislators in a February quarterly report that it has initiated discussions with potential suppliers for long-term supply beginning in the spring of 2021.
Expansions The Titan plant at Point Mackenzie has a capacity of 50,000 gallons of LNG per day, 1.5 billion cubic feet per year, and is to be expanded to increase LNG production.
Construction is underway on the 5.25 million-gallon LNG storage tank. Work began on the storage tank foundation in January 2018, with the outer tank substantially complete by Jan. 1, 2019, and work proceeding on the inner tank. The project has a target completion date of fall 2019.
Design and engineering have been completed for the initial LNG receipt, storage and regas facility in North Pole, where distribution lines have been pre-installed. The utility has been working to install distribution lines in conjunction with road work.
IGU told the FNSB assembly in June that bids had been received for LNG storage and vaporization at North Pole but had been rejected due to price and inability to meet schedule; the work was to be re-bid. The utility said it is evaluating the potential for a temporary installation to accelerate availability of natural gas in North Pole. Initial capacity of the North Slope facility will be 150,000 gallons, with future expansions possibly including additional bullet tanks and a possible future large tank to serve the adjacent utility, Golden Valley Electric Association, should it desire LNG.
Front-end engineering and design, FEED, is underway for the expansion of the Titan facility with the study to be completed in the fall.
Tax credit There is a tax credit for liquefied natural gas storage facilities that begin commercial operation before Jan. 1, 2020. House Bill 87, introduced in 2019, would extend the credit to a facility that begins commercial operation before June 30, 2021.
The original bill provided for up to $15 million or 50% of costs for an LNG storage facility that goes into operation before Jan. 1, 2020. The bill passed by the House this year extends the credit to a facility that begins commercial operation before Jan. 1, 2021, but reduces the maximum amount to $5 million if the facility begins commercial operation on or after Jan. 1, 2020, and before Jan. 1, 2021.
IGU told the FNSB assembly in June that extension of the storage tax credits was in House Finance for 51 days before a committee substitute was introduced; while the bill passed the House unanimously, the Senate did not take it up. The bill will remain in the Senate Finance Committee until January 2020 when it could come back for consideration with a retroactive effective date.
Financing Money from tax credits for tanked storage will be under the oversight of RCA, the IGU board and the FNSB assembly to ensure the savings are passed to ratepayers, IGU told the FNSB assembly in March.
IGU said the $125 million in SETS funds was expected to be fully drawn by October. IGU requires some $15 million in short-term bridge financing prior to issuance of bonds to complete construction of the North Pole storage facility, advance FEED work for Titan expansion and install service lines to customers in Fairbanks and North Pole, and has requested access to a $7.5 million line of credit with the FNSB which would be repaid with bond proceeds. IGU said it has an additional commitment for financing from a local bank for remaining required short-term funds.
- KRISTEN NELSON
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