FAIRBANKS — A decision before the Golden Valley Electric Association’s policy-making board today could make or break a plan to truck natural gas to Fairbanks.
The electric utility’s board of directors is deciding whether to enter into a multimillion-dollar contract with the Alaska Gasline Port Authority to buy natural gas.
If the contract is approved, rate-payers stand to save about 6 percent on their electric bills starting in two years and more if oil prices rise, according to the deal makers.
But the contract hinges on a new business enterprise for the port authority, a small non-profit partnership of local governments formed 11 years ago to advance a gasline project from the North Slope to Valdez.
The partners are the Fairbanks North Star Borough and the city of Valdez. A third member, the North Slope Borough, announced last week it is withdrawing from the alliance and gave no reason.
According to the port authority’s business plan, the agency is taking out hundreds of millions of dollars worth of loans; buying Fairbanks Natural Gas LLC for an estimated $64 million; building processing plants on the North Slope and in North Pole; and trucking natural gas down the haul road.
A contract with Golden Valley is crucial for the port authority to secure financing — an estimated $250 million.
“Golden Valley is the anchor tenant. This contract is needed,” said Luke Hopkins, the Fairbanks North Star Borough Mayor and secretary of the port authority’s board of directors.
Trucking gas down the haul road is being touted as a stop-gap measure until a natural gas pipeline is built.
Golden Valley officials say natural gas is a better value for rate-payers. The price of natural gas rises more slowly than the price of oil, according to Brian Newton, Golden Valley’s chief executive officer.
“That is the beauty of this deal,” Newton said.
Dan Osborne, vice chairman of the utility’s board of directors, said he’s unsure if he’ll support the contract although he offered no specific criticism.
Is there a downside?
“There may not be one,” Osborne said. “Our goal is to get the best deal for Golden Valley’s members. They are being hammered right now by high oil prices.”
The contract is expected to span about 15 years, and the price for natural gas will vary. Other details of the contract are being kept secret, which is commonplace for fuel contracts, officials with the electric utility said.
“This is how you get the best deal,” Osborne said. “It’s fair for the vendor and it gives us a fair price.”
Newton said the contract involves risk, but so do all of the utility’s fuel contracts.
One risk is that a natural gas pipeline is built, and the gas piped to Fairbanks is cheaper than the gas that comes by truck.
“That’s a good problem to have,” Newton said. “I hope it’s going to be less.”
Gas pipeline projects have been in the works for years. Last week, the Alaska House of Representatives passed a bill to expedite a pipeline. Previous attempts to legislate construction of a gas pipeline failed or remain unproven.
“You tell me how many times there’s talk about a gas pipeline,” said Hopkins, the Fairbanks borough mayor and port authority official. “This is a known contract for a known price right now.”
Contact staff writer Amanda Bohman at 459-7544.