Pipeline installation

Matt Buxton/News-Miner

Crews install a section of 8-inch pipeline as part of the backbone of the Interior Gas Utility on Wednesday, July 29, 2015. The crew was one of a dozen working around the North Pole area during summer 2015.

The Fairbanks North Star Borough, the Matanuska-Susitna Borough, the Alaska Railroad Corp. and the Interior Gas Utility are joining forces to apply for up to $75 million in federal grant money via President Joe Biden’s Build Back Better program.

If approved, the money would finance expansion of the IGU’s Titan II liquefaction plant, located in the Mat-Su borough, doubling capacity, and would pay for about 18 miles of rail to be built, which would allow for gas to be shipped to Fairbanks by rail instead of by truck.

The federal government would require the two boroughs, the utility and the railroad to sign a joint agreement creating a “regional growth cluster” and to pay for 20% of the project costs. The Borough Assembly is voting on whether to support the grant application at its next regular meeting on Thursday.

The end result would be cheaper natural gas in Fairbanks because the IGU would have a lower debt burden and the cost to ship gas to Fairbanks would go down, according to Elena Sudduth, IGU customer service and marketing manager.

The IGU carries debt totaling over $151 million with most owed to the Alaska Industrial Development and Export Authority, owned by the state. Those payments start in 2033 at the earliest.

The benefit of the project for Southcentral Alaska is that the railroad would be 18 miles closer to a major developing port, Port MacKenzie, owned by the Mat-Su borough, whose leaders have been working on getting a 32-mile rail link from the Parks Highway to Port MacKenzie.

“While this project proposal will not bring the PMRE (Port Mackenzie Rail Extension) fully to Port MacKenzie, it will make significant progress towards that end,” reads a resolution by Borough Mayor Bryce Ward going before the Borough Assembly. “The full completion of the PMRE will offer highly efficient offloading of bulk resources from train to ship; for Interior shippers, the new rail link shortens the distance to tidewater; and increased rail freight activity, and development stimulated by the rail link, will benefit railbelt communities through increased employment, contributions to the state and community tax base, and overall economic health.”

The Fairbanks Economic Development Corp., the Alaska Congressional delegation, Gov. Mike Dunleavy and various chambers of commerce are being asked to write letters of support of the project, Sudduth said.

The application process is two-phased and final approval — assuming the project makes it through the first phase — won’t be known for about a year, Sudduth said.

The project involves constructing two railroad spurs connecting the Alaska Railroad to the IGU’s two natural gas storage sites in Fairbanks and North Pole. Both sites are already near the rail line and the spurs would be several hundred feet.

Expansion of the Titan II plant has long been part of the IGU’s plan. The utility was poised to sell bonds to finance the estimated $50 million expansion in early 2020 but paused the bond sale due to a drop in oil prices caused by the Covid-19 pandemic.

After the Build Back Better program was created, the IGU saw an opportunity in what is known as the Build Back Better Regional Challenge, Sudduth said.

The challenge is “designed to assist communities nationwide in their efforts to build back better by accelerating the economic recovery from the coronavirus pandemic and building local economies that will be resilient to future economic shocks,” reads a federal website describing the program.

“The $1 billion Build Back Better Regional Challenge will provide a transformational investment to 20-30 regions across the country that want to revitalize their economies. These regions will have the opportunity to grow new regional industry clusters or scale existing ones through planning, infrastructure, innovation and entrepreneurship, workforce development, access to capital, and more,” the U.S. Economic Development Administration website reads.

Applicants that make it through phase one of the application process will receive $500,000 “in technical assistance funds to develop and support three to eight projects to grow a regional growth cluster.”

The FNSB, Mat-Su borough, IGU and Alaska Railroad project has three parts, the liquefaction plant expansion, the railroad expansion and the railroad spurs. The majority of the money would pay for the Titan II plant expansion, Sudduth said.

New efficiencies involved with the plant expansion are anticipated to save the IGU almost $1 million annually in production costs, according to the resolution going before the assembly.

The Build Back Better Regional Challenge grant application deadline is Oct. 19, Sudduth said.

Contact staff writer Amanda Bohman at 907-459-7545, at abohman@newsminer.com or follow her at twitter.com/FDNMborough.

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