FAIRBANKS — Unlike Anchorage with its nearby source of natural gas, and Juneau with hydroelectric power, Fairbanks residents rely on heating oil and wood for most of their energy needs. Not only has this meant higher energy costs for the Interior, but also contributed to air quality issues that have brought burdensome outside regulations to home owners and wood sellers.
In 2013, we sought to take Fairbanks’ energy needs into our own hands with Senate Bill 23, creating the Interior Energy Project. We had the vision of expanding the availability of affordable natural gas to the Interior at the lowest-cost possible, to as many residents and businesses in the Interior as possible, and as quickly as possible. Even with the fall in oil prices in the past few years, the need for a long-term, clean, and affordable energy alternative for the Interior remains.
There have been several bumps in the road — expected with any project of this scale—but over the past few years our community has successfully crossed many of the hurdles necessary to bring that original vision to reality. Among them: the 2014 and 2015 build-out of a natural gas distribution system covering nearly all of Fairbanks and core-North Pole; the 2015 purchase of the Pentex assets including the Liquefied Natural Gas (LNG) production facilities at Point MacKenzie, LNG trailers, and local distribution infrastructure; the passage last spring of Property Assessed Clean Energy legislation to assist in commercial conversions; and, in September 2017, securing a gas supply agreement with Hilcorp and adoption of a qualified plan of development.
These actions allowed agreements signed in December to consolidate the Fairbanks Natural Gas and the Interior Gas Utility systems into a single gas utility through the sale of the Pentex assets to IGU. With those actions, and final approval of a land use permit modification in hand, construction is now underway on a large-scale LNG storage facility in south Fairbanks that will support future customer growth of the combined utility system.
The Alaska Industrial Development and Export Authority team overseeing the Interior Energy Project has been diligently deploying the original financing package — no small feat in the state’s current fiscal environment — to advance development of an investment-grade local natural gas utility in anticipation of this moment. This includes not only tens of millions of dollars in grant and SETS loan funds, but also up to $150 million in project financing which will help finance increased LNG production and careful distribution expansion. Unfortunately, the authorization for this critical bond component is set to expire this year before it can be used. As a result, we have introduced legislation — Senate Bill 125 and House Bill 261 — to extend the authorization to 2023 and ensure the Interior Energy Project team continues to have access to all the financing mechanisms originally approved, and still needed to develop the project.
Initial reporting on SB 125 and HB 261 mistakenly linked the legislation to financing of an Alaska natural gas pipeline. Let us set the record straight: the bonds referenced in SB 125 and HB 261 are strictly for the development of the Interior Energy Project. In fact, the section of law we propose to extend already contains language ensuring the bond funds can only be used for the IEP. This language was crafted to protect against diversion of funds to purposes beyond what it was intended for.
From previous experience, we, and other members of the Interior delegation anticipate facing renewed questioning on the merits of our Interior Energy Project by skeptical, though well-intentioned, colleagues. The accomplishments of the past year help demonstrate that the long-awaited dream of expanded access to affordable natural gas in the Interior is going to be a reality. This community’s support and resolve in seeing this project through has been outstanding, and we will be calling upon that support once again to ensure either SB 125 or HB 261 passes.
Sen. Pete Kelly, R-Fairbanks, is the Alaska Senate President.