The Alaska Gasline Port Authority announced Tuesday plans to purchase Fairbanks Natural Gas, including a 10-year gas supply contract the distributor holds with ExxonMobil Corp. on the North Slope.

Authority officials say the project would "substantially" lower energy costs in Fairbanks, acknowledging there is the potential for liquefied natural gas (LNG) sales to Southcentral Alaska to help meet shortages during times of peak demand in winter.

A separate agreement between the port authority and Golden Valley Electric Association, a Fairbanks utility, is in the works to find an anchor customer for high volumes of gas to power a North Pole electric plant.
FNG President Dan Britton shopped the plan among lawmakers during the last legislative session, seeking state funding for a $250 million LNG plant on the North Slope. FNG had the gas but not the financing, and many lawmakers were dismissive of his proposal.

Under the deal announced Tuesday, the port authority would gain FNG's assets, including the gas supply contract for up to 17 billion cubic feet a year, and a gas liquefaction plant at Point MacKenzie.

Currently, FNG liquefies Cook Inlet gas, then trucks the LNG to Fairbanks to supply about 1,100 homes and businesses.

But if the proposal -- and the revenue bonds -- go through, the Southcentral liquefaction plant could be retrofitted as a regasification plant. LNG could be trucked from the North Slope, hauled hundreds of miles south and stored at Point MacKenzie, where it then would be turned back into a gas and fed into the distribution system to meet peak demand on the coldest winter days, Britton said.

The port authority and FNG figure the North Slope liquefaction plant could be started within two years. The authority would sell gas to customers on a cost-of-service basis, not as a for-profit, Britton said.

And if a large-diameter natural gas pipeline is ever built, either to Valdez or Canada?

"We see those projects as at least a minimum of 10 years out," Britton said. "This project could be a bridge to that bigger opportunity. Or, in the event those other projects don't come to fruition, it's a huge insurance policy for the Interior and other areas. We've protected ourselves."

At this point, the port authority has signed a letter of "intent to purchase" with FNG, and Golden Valley's board approved a memorandum of understanding to buy the LNG at a meeting Monday night.

Bill Walker, the port authority's general counsel and project manager, announced Monday he's running for governor in 2010. Walker said his campaign will center on an "all-Alaska" natural gas pipeline from the North Slope to Valdez.

Contact Rena Delbridge at rena@alaskadispatch.com