Legislature 2001: Local gas plan gets a boost

Bill would offer cash to launch natural gas service in Southeast

Posted: Thursday, April 26, 2001

The Alaska Industrial Development and Export Authority could sell $76 million in bonds to finance a natural gas project for Southeast under a bill passed by the House on Wednesday.

Alaska Intrastate Gas Co. got state regulatory approval in 1998 to bring liquefied natural gas from Canada to 17 communities from Ketchikan to Yakutat, plus Valdez, Cordova and Kodiak.

Juneau, Sitka and Ketchikan are tentatively scheduled to go on line in 2002 or 2003. A final engineering plan for Juneau could be ready by the end of the year, with the potential for breaking ground next spring, said Paul Rusanowski, a Juneau-based vice president of Alaska Intrastate.

Gas from Alberta and British Columbia would come by rail or pipeline to Prince Rupert, then be shipped to Southeast. Gas would be stored in holding tanks and distributed through pipeline networks. If North Slope natural gas is commercialized, Intrastate would turn to that source as it becomes available, Rusanowski said.

The company wants AIDEA to sell bonds to pay for the first phase of the project providing gas to Juneau, Sitka and Ketchikan. Rusanowski said the bond debt would be repaid by ratepayers. Other financing would probably be used to extend the network to the remaining communities, he said. The

project cost for the 17 Southeast communities will be more than $100 million, he said.

The bill was sponsored by the House Finance Committee. Co-chairman Bill Williams, a Saxman Republican, said it is a preliminary step toward what he hopes will be a relatively cheap and environmentally friendly fuel source for Southeast.

If the project succeeds, Rusanowski projects savings on heat and hot water of 15 to 40 percent over fuel oil, 60 percent over propane and 69 percent over electricity. For Juneau, the company calculates an annual natural gas bill for a residence would be $1,001, compared to $1,346 for fuel oil, $2,638 for propane and $3,642 for electricity.

One propane dealer is not sure natural gas in Southeast will be as cheap as advertised, however.

Dave Standerwick, vice president of Arrowhead LP Gas, which does business in Juneau and several other Southeast communities, said natural gas is usually offered in places with larger populations. The storage containers necessary to keep the gas cool and pressurized are "very, very expensive," and there doesn't seem to be enough of a base in Southeast to keep the rates low, he said.

"We're certainly concerned with the potential impact it could have on the propane business and every other energy business in Southeast Alaska," Standerwick said from Sitka.

There still would be the need for propane in locations off the pipeline systems, he said. But if the natural gas project gets under way and then fails, it might have devastated other businesses in the meantime, he said. "I guess if they can do it and do it in an effective and efficient manner, I think it would be a great thing for Southeast Alaska."

Passage of House Bill 236 does not mean the project will definitely be built. AIDEA must determine whether the project is financially feasible and has community support before backing it. AIDEA Executive Director Bob Poe said that process will take several months.

"I don't know right now whether this will be financially feasible or not," Poe said.

But Rusanowski said the project will go forward with or without AIDEA financing. AIDEA is "the best source of long-term financing available right now," offering a break of 1 to 2 points of interest compared to conventional financing, but the bonds aren't critical, he said. The result of not getting them would be a year's delay in the project start-up, although all of Southeast would be on-line as scheduled by 2009, he said.

Some House members expressed concerned that they were approving the project before AIDEA's review.

"We have other AIDEA monuments in this state and I would hate for this to become a third monument," said Rep. Joe Green, a Republican from Anchorage.

Alaska law requires the Legislature to approve AIDEA projects of more than $10 million.

The bill passed 38-0 and now goes to the Senate.

Empire reporter Bill McAllister contributed to this article.

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