JUNEAU — It’s been a busy year since the Legislature signed off on a multimillion-dollar project to truck liquefied North Slope natural gas to Fairbanks. Complicated deals have been inked, million-dollar loans have been written and heated legal battles have been waged.
Yet, when delivering a project update to the Legislature on Wednesday, lawmakers asked for assurances that the project will be able to deliver affordable natural gas on the timeline promised.
The Legislature approved more than $300 million in financing, loans and bonds to help get a North Slope processing facility, trucking and distribution off the ground. The hopeful delivery date of gas being in the end of 2015.
Mark Davis, project manager with the Alaska Industrial Development and Export Authority, told the House Energy Committee that the project is on track to meet the gas delivered deadline and is set to have gas distribution utilities Fairbanks Natural Gas and Interior Gas Utility start adding pipe to their systems as early as this year.
Rep. Pete Higgins, R-Fairbanks, asked what guarantees there are that the utilities work to serve as many customers as possible, especially with FNG’s history of its slow buildout in mind.
“FNG in Fairbanks, one of the things that got me is that they sat on their laurels without doing their buildout,” he said. “My question, though, is with IGU, what do we have so they don’t sit on their laurels with their own buildout?”
Davis said there are things that AIDEA can do through its financing tools, such as reserving portions of money until certain benchmarks are reached, that can make sure the utilities are acting. One of the biggest drivers of a rapid buildout, he said, will be the need to generate revenue to pay off loans.
“AIDEA is engaged with both utilities and is willing to lend to them and will lend to them but wants them to follow a scheduled built out,” he said. “We will be asking for pro-formas from each about how much they would borrow, where would put in the pipe and how much pipe they’ll be putting in the ground. We need to have the pipe cash flowing to pay back the loans.”
Davis also said the state learned its lesson from working with the Healy Clean Coal Project. The state helped finance the plant but failed to ensure it had any control over the plant and that left the state without access. AIDEA won’t make the same mistake when it comes to make sure the North Slope processing facility will prioritize gas for home heating, he said.
“AIDEA wants to have some control and therefore has taken the lease of the pad in its own name,” he said. “We will have control over the project by owning the pad and we will have control with the loan conveyance so we will be able to specify the priorities for the gas.”
As far as how the project fits in with talk of a state partnership on a large diameter natural gas pipeline, Davis said the trucking project can serve as back up if the pipeline falls through. The trucking project would be expanded to begin to meet needs of other areas. If the pipeline does come through, then parts of the project can be relocated to Fairbanks, with a goal of beginning to serve areas that aren’t close to the pipeline.
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.