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AIDEA: North Slope pad, BlueCrest loan
Kristen Nelson Petroleum News
The Alaska Industrial Development and Export Authority board of directors had two items of oil and gas interest on its June 26 agenda: the North Slope Pad and an amendment to the loan agreement with BlueCrest Alaska. The board passed both resolutions.
North Slope Pad The North Slope Pad, a 22,991-acre parcel on the north side of Spine Road on the North Slope, was originally leased by the Alaska Department of Natural Resources to Spectrum Alaska LLC, AIDEA CEO/Executive Director Tom Boutin said in a June 26 memo to the board. When AIDEA purchased Spectrum in 2014 as part of the Interior Energy Project it took control of the property, and DNR issued a replacement lease to AIDEA.
AIDEA constructed a pad on the site in 2014 for some $6 million, intended as the site for a liquefied natural gas plant to supply LNG to Fairbanks and the Fairbanks North Star Borough. That plan was abandoned due to cost.
The 2018 sale and purchase agreement between AIDEA and the Interior Gas Utility for Pentex was conditioned on DNR transferring the lease for the North Slope Pad to IGU, but DNR required AIDEA to apply for a new lease.
IGU agreed to waive the pad transfer, and in early 2019 the IGU board voted against taking the North Slope Pad.
Since early 2018, AIDEA has been in negotiation with Prudhoe Bay Chemical Co. for the use of the pad in the development of a small-scale methanol plant. In April 2018 the AIDEA board voted to approve a long-term sublease of a portion of the North Slope Pad to PBC.
The memo says, “PBC is now in advanced discussions with a third party for potential investment and construction of the proposed methanol facility. PBC and this third party have expressed a strong interest to take control of the entirety of the NSP site and sub-lease, or through assignment, lease directly with DNR. Provided a final investment decision is taken within the next three months, active on-site development of the methanol facility could take place as early as 2019.”
AIDEA staff recommends approval of NSP as a development project financing, with any final terms with a third party for sub-lease or assignment subject to board approval.
BlueCrest AIDEA loaned BlueCrest $30 million for an onshore drill rig, rig camp, their transportation to the project site and associated tools, equipment and fixtures.
For additional collateral security, BlueCrest was required to fund a $6.06 million reserve count to be used in the event of loan default if a foreclosure sale did not provide sufficient funds to provide the outstanding loan balance.
“BlueCrest has been diligently paying down AIDEA’s term loan on a timely basis,” Boutin said in a June 20 memo to the board. “Debt service (principal and interest) is $705,242.88 per month with monthly principal payment not in excess of $500,000 per month.”
Boutin said the current loan documentation on release conditions for the reserve account is complex, and BlueCrest and AIDEA staff have agreed to a proposal for release of the $6.06 million reserve and use of the funds to pay down the loan.
The AIDEA term loan matures July 1, 2022. With use of the reserve account to pay down the principal the loan balance would drop from the current $22.9 million to $16.3 million in July.
Boutin said AIDEA staff is recommending approval of the resolution proposing the release of the reserve account and use of the funds to pre-pay outstanding principal balance.
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