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16 companies express interest in North Slope natural gas project, including GVEA, Fairbanks Natural Gas and new borough gas utility

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Posted: Friday, January 11, 2013 11:01 am | Updated: 5:37 pm, Fri Jan 11, 2013.

As part of Gov. Sean Parnell's plan to help get a North Slope gas plant built, the state asked for letters of interest a month ago.

Sixteen entities responded with a mixture of general statements and detailed plans.

The Golden Valley Electric Association, Fairbanks Natural Gas and a company headed by Ray Latchem, who built Fairbanks Natural Gas, are among the companies that submitted plans.

The new Fairbanks municipal gas utility said it does not plan to compete to build the plant, but it could be a partner or become involved in some way.

The state asked for letters of interest from companies that wanted to finance, develop and/or operate a North Slope plant that would extract natural gas at Prudhoe Bay, turn it into a liquid by cooling it, and haul it in trucks to Fairbanks, where it would be turned back into a gas.

GVEA and the municipal gas utility have made their proposals public, while FNG declined to do so, but issued a press release. FNG President Dan Britton said the proposal contains confidential information.

The Alaska Industrial Development and Export Authority published the request for letters of interest Dec. 7.

Jim Strandberg of AIDEA said a staff report with a preliminary analysis on the 16 proposals should be ready by the end of the month.

In its press release, Fairbanks Natural Gas said natural gas could be delivered to homes in Fairbanks at a cost that would be substantially lower than what the company now charges.

The company said natural gas could be delivered for $15.98 per thousand cubic feet, which is more than $7 less than the current rate.

What's not clear yet is how FNG would get to those numbers and how much its system would be expanded and when.

At present, FNG has about 1,100 customers. Its press release does not say how many customers it plans to add, but it says the cost to consumers would decline to $13 "as the natural gas distribution system expands."

We'll need to see all the details and a justification for all the internal assumptions before making conclusions about this proposal or the others.

GVEA is likely to be a major customer of any natural gas plant, perhaps the most important customer, and the economics of any plan will depend upon whatever contract is reached.

In its proposal, GVEA said the cost of the North Slope plant to handle 9 billion cubic feet a year is expected to be about $200 million. The utility said a state grant for that amount is preferable.

The governor has proposed a $50 million grant and about $275 million in loans, but the size of a grant and the terms of loans will be subject to change after the Legislature gets into the process.

Part of the discussion will include the analysis from GVEA, which says the governor's plan would mean higher costs for natural gas to the consumer than from a plan with a larger grant.

For its part, the Interior Alaska Natural Gas Utility included a three-page letter outlining its major goal-getting natural gas to as many homes and businesses as possible as quickly as possible for $15 per thousand cubic feet.

That would be about half the cost of fuel oil and close to the cost of delivered firewood, which is likely to be attractive enough to cause people to want to switch to gas. Conversion of home furnaces could cost several thousand dollars for many homes and the state may end up proposing  a low-interest or no-interest financing program.

The gas utility said while it does not plan to "respond as a primary provider on the North Slope" it could be  partner with some other entity. Its ability to accept state grants without tax liability and its ability to be exempt from most taxes could be beneficial elements, the utility said.

 

 

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