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Parnell seeks meetings to settle differences on natural gas plans

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Posted: Sunday, September 23, 2012 12:17 am | Updated: 11:30 am, Mon Jan 21, 2013.

FAIRBANKS — Gov. Sean Parnell says that since “no path forward has been agreed to among the various stakeholders” in Fairbanks about natural gas, he wants to meet individually or collectively with executives from the Golden Valley Electric Association, Fairbanks Natural Gas, Flint Hills and the Fairbanks Economic Development Corp.

“I am inviting you to participate in meetings, individually or together, to identify and resolve outstanding issues,” Parnell said in a letter to the four companies Monday.

The governor said that with no agreement among the four, “I would like to facilitate efforts to find a unified front to resolve Fairbanks and Interior energy needs.”

Parnell proposed a first set of meetings in Anchorage or Juneau in mid-October.

“I encourage you to contact each other to determine if a single meeting or series of meetings would be the most helpful. Please come prepared with your proposal to move a natural gas solution forward for Fairbanks and the Interior.”

One of the key roadblocks is that the parties have different and sometimes conflicting interests. That is expected as they are responsible to different groups of owners.

In rough terms, here is how it looks to me:

Fairbanks Natural Gas and Flint Hills want a solution that works best for them. Fairbanks Natural Gas wants to improve, not decrease, the value of its company, which may be for sale, and to make more money. 

Fairbanks Natural Gas, which is controlled by a Minnesota investment firm, has been limited by its gas supply from Cook Inlet and its decision to put off the plans announced in 2008 to build its own facilities on the North Slope, buy gas from Exxon and truck it to Fairbanks.

When an FNG plan for a state-backed financing was derailed, one of the reasons given by state officials was that without contracts from GVEA and Flint Hills as major buyers of the gas, the North Slope project didn’t pencil out.

Flint Hills, which is owned by the billionaire Koch Brothers, has not wanted any part of a government-owned project, such as that promoted by some people in Fairbanks to get natural gas trucked to Fairbanks. Flint Hills would have to be an anchor customer of any project to improve the economics.

GVEA has sought the gas option because it wants a cheaper fuel to use at its North Pole generators, which are now using high-priced oil.

The lack of agreement with these three entities, with each one wanting something different, is one reason for delay.

The Fairbanks Economic Development Corp. has been an advocate for state assistance to Fairbanks to expand the infrastructure and the number of people using natural gas for energy. It has focused on changing the energy supply for he space-heating market in Fairbanks.

There are also private firms that will oppose any change to the current energy market in Fairbanks because it would harm the economics of their operations.

These meetings with the governor are a good idea, but since the public won’t be part of the discussion, we will continue to get only a partial picture of what’s really going on.

The main complaints I’ve heard about the proposal from Mayor Luke Hopkins and others for a local natural gas utility is that it would create a new layer of bureaucracy, it would take too long to get in operation and it would be cumbersome.

I appreciate the governor’s decision to get directly involved in the process. He can’t back any plan before the situation is clarified.

I think that he has had to take that step because the divergent interests of the local companies have prevented a unified approach or the development of a clear plan to lower prices for consumers.

In addition to the governor’s help, we also need a  local government initiative of some kind, such as the utility proposed by Hopkins, to create order out of disorder.

Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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