Here we go, again

Pat Reilly (Contributed photo)

Here we go again: Alaska is about to embark on another financial boondoggle.

 

On Dec. 5, Fairbanks’ Interior Gas Utility is set to commit $60 million to purchase Pentex Alaska Natural Gas, including its Southcentral Alaska facilities from the Alaska Industrial Development and Export Authority (AIDEA).

The money for the deal and expansion would come from a $330 million package of grants, bonds and loans approved by the Alaska Legislature in 2013. The project would liquefy natural gas at Point McKenzie, truck it to Fairbanks and distribute it to households throughout the city. This project is not economically viable and could raise the cost of energy in Fairbanks by $1,000 per household or more.

The Alaska Legislature funded this project with good intentions in 2013 when energy prices were high. At that time the cost estimate of the project was expected to be less than $15 per MCF. The current estimate is $22 and has high potential to climb higher.

There are some other considerations today that did not exist when the funding was legislated.

The large gas line project now has a high level of interest from China and could become an economic reality soon. Furthermore, Doyon is continuing its efforts to find a local source of gas by drilling in the Nenana Basin this winter. If either of the projects is successful, there would be no need for building a large LNG system and trucking gas from Cook Inlet.

Why not postpone this decision long enough to see what happens with these projects? Why proceed with a project with negative economic impacts on Fairbanks, at this time, when Alaska is in desperate need of operating capital?

Why put good money after bad now, when Alaska, specifically AIDEA, has a history of supporting uneconomic projects?

The legislature could extend the time for availability of funding until we have answers to these two gas projects and the economic benefits of the project can be assured. Throwing money away in the hopes that Fairbanks consumers will convert to gas when it clearly isn’t economic is the ultimate waste of state money.


• Pat Reilly of Anchorage is CEO of Rain Proof Roofing, a family-owned business founded in 1962, and past-president of Associated General Contractors. He stays actively involved in securing a successful economic future for Alaska. My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire.


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