Providing coverage of Alaska and northern Canada's oil and gas industry
March 2019

Vol. 24, No.13 Week of March 31, 2019

Storage credit extension is considered

House and Senate bills would delay the deadline for having new LNG storage facilities in operation to qualify for tax credits

Alan Bailey

Petroleum News

Parallel bills that would extend the deadline for state tax credits for the construction of new liquefied natural gas storage facilities are moving through the state House and Senate. House Bill 87 has passed House Energy and been referred to House Finance, while Senate Bill 77 has been referred to Senate Finance. The bills, designed to ensure the availability of credits for storage facilities being built in Fairbanks, would make the credits available for any new storage facility that is in commercial operation by June 30, 2021. The current deadline is Jan. 1, 2020.

The credit amounts to the lessor of half the construction cost or $15 million for each new facility.

IGU testimony

During public testimony on March 21 Dan Britton, general manager of Interior Gas Utility, told House Energy that IGU is building a large LNG storage facility in Fairbanks and a smaller facility in North Pole. The projects come as part of the Interior Energy Project, a project to bring increased supplies of natural gas to Fairbanks and its surrounds, to reduce the cost of energy in the region and to address major air quality issues resulting from the widespread use of wood burning stoves for heating buildings. While the expanded LNG storage capabilities are critical to the success of the IEP, the project economics assume the availability of the tax credits, Britton told the committee.

Tight timing

Although both tanks are planned to be in operation by the Jan. 1, 2020, deadline, the timing is very tight, Britton said. Any overrun in the project schedules would put the credits at risk, thus increasing the cost of the IEP and pushing up the eventual cost of the resulting gas supplies. The lower the cost of gas delivered to customers in Fairbanks, the more people will convert to the use of gas and the greater will be the impact on air quality, Britton explained.

Construction of the large tank in Fairbanks is currently scheduled for completion in the fall of this year, while the North Pole facility should be completed in mid-November, Britton said. The facilities will include LNG storage, vaporization and unloading structures he said.

The LNG destined for Fairbanks is manufactured in a plant near Point Mackenzie on Cook Inlet: The LNG is shipped to Fairbanks by road. While the new tanks will increase the security of gas supplies for Fairbanks consumers, the greatly expanded storage capacity will enable the Point Mackenzie plant to operate year-round, thus making gas available for potential customers who, currently, have access to gas distribution pipelines but no gas supply, Britton commented.

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