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North Slope natural gas plant delayed

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Posted: Wednesday, December 18, 2013 6:29 am | Updated: 6:57 pm, Fri Dec 20, 2013.

FAIRBANKS - Interior Alaska will have to wait a few more weeks to find out who will build and operate the North Slope natural gas plant that will fill tankers with gas bound for Fairbanks and North Pole.

The Alaska Industrial Development and Export Authority was expected to pick one of three proposals for the North Slope plant at today’s board meeting, but that choice was partly delayed to find just how much gas the Interior’s largest buyer will want.

“We had initially anticipated a decision at this upcoming Wednesday board meeting,” AIDEA spokesman Karsten Rodvik said. “However, the board decided to postpone its decision until January in order to receive additional information on the project in accordance to a request from GVEA.”

Golden Valley Electric Association is eyeing natural gas as a replacement for costlier fuels used in its power plants and likely will be the largest gas buyer during the project’s early years.

However, exactly how much gas GVEA will buy wasn’t a question asked until recently.

AIDEA sent a letter Nov. 13 asking GVEA, among other things, how much gas it could commit to buying.

“Depending upon an agreed-upon fixed price that is commercially reasonable, GVEA envisions being able to commit to purchasing between 1.5 and 2.5 (billion cubic feet) of gas annually,” GVEA CEO Cory Borgeson wrote in a letter the next day.

In an interview with the News-Miner, Borgeson went on to explain that the figure was produced in a day and said a more accurate figure will take more time.

That figure, which will heavily impact early demand for LNG in Fairbanks, could play a critical role in the which proposal the AIDEA board decides to go with.

Those proposals include bids from Spectrum LNG, MWH Global and Fairbanks Natural Gas’ parent company. The Legislature, backed by Gov. Sean Parnell, approved of millions of dollars for the state to kickstart delivery of natural gas by truck to Fairbanks.

GVEA had initially explored partnering with the state on the North Slope plant, but dropped out when the state’s terms changed.

Borgeson said the electric co-op has provided some discussions with MWH about the project.

“AIDEA recognizes the need for negotiated contracts for the plant capacity and they have asked Golden Valley to look at the three proposals to determine if Golden Valley can become a purchaser of LNG,” Borgeson said. “In order to do additional due diligence it would require additional time.”

Under the revised deadline, the next time the board could pick a plan will be Jan. 14.

Many people familiar with the project said they weren’t concerned about the delay because long-lead-time items for the plant can be ordered as late as January. That group includes Bob Shefchik, who is the chairman of the Interior Gas Utility’s board, a utility that could also be a big buyer of gas.

“The delay to make sure all the term sheets are complete and fully understood is well worth the time,” he said. “I think it was good judgment. The next decision point for the trucking isn’t until January and doesn’t cost them anything in their timeline.”

The delay also has been an opportunity for the board to look at other possibilities for natural gas, Rodvik said. Today’s agenda includes updates from the Alaska Department of Natural Resources, the Alaska Railroad Corp. and the Alaska Gasline Development Corp.

“The board wanted to hear from DNR on Cook Inlet, from the railroad on the possibility of moving LNG by rail and the status of the Point MacKenzie rail extension, and to hear from AGDC on the status of its project,” Rodvik said in an email.

It’s a move that Gov. Sean Parnell strongly warned against during his visit to Fairbanks last week, saying that he’ll be holding the board responsible if the delivery of natural gas slips past a late 2015 or 2016 deadline.

“The governor’s priority is to get gas to the Interior as soon as possible,” said Sharon Leighow, the governor’s spokeswoman. “In terms of decision making — AIDEA needs to stay the course and make a timely decision from the three proposals they have received.”

Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.

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