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Republican majority leaders question AIDEA deal

By Rhonda McBride Photojournalist: Brian Hild, Rik Pruitt - 11:31 AM February 1, 2015

Republican majority leaders say Gov. Bill Walker took them by surprise this week when he announced the Alaska Industrial Development and Export Authority was taking steps to buy the Pentex Natural Gas Company for more than $52 million. AIDEA announced on Wednesday that, in conjunction with Walker, the corporation signed a letter to purchase Pentex and its assets.

The plan is to turn Cook Inlet gas into liquefied natural gas, truck it to Fairbanks and, ultimately, lower energy costs. According to a survey of more than 300 urban communities, Fairbanks is paying the highest amount for heating fuel and electricity in the nation.

AIDEA is a state-owned corporation, which provides business loans or other support to the private sector to spur economic development. Sometimes the agency steps in to give industry a boost, such as it did when it bought a $23.6-million interest in a Cook Inlet drilling rig and later sold it for a $5-million profit. AIDEA says the rig helped to spawn a renaissance in Cook Inlet exploration.

But Rep. Mike Hawker, an Anchorage Republican who has pushed legislation to revitalize Cook Inlet drilling, said AIDEA is overstepping its bounds in the Pentex deal. He also questioned the governor’s role in it.

“In addition to federal overreach in this state, we also have to be cautious about state overreach,” said Hawker. “The Alaska landscape is littered with the failed dreams of Alaska’s politicians funded by AIDEA.”

Hawker also said the governor should not only have kept legislative leaders informed about this deal but questioned whether there’s been an adequate public oversight.

“Part of the concern I have about this is there has been no public record of any conversation held at AIDEA on that issue,” Hawker said. “AIDEA is an entity that’s supposed to be responsible to the public of Alaska.”

An AIDEA spokesman says, at this point, the deal is just a proposal and will eventually get plenty of public scrutiny. It needs additional legislation to tap into funds held by the Interior Energy Project, which was created by the Legislature in 2013.

Although Alaska faces a $3.5-billion budget gap for the current fiscal year, there’s enough money in the fund to pay for most of the costs of buying Pentex. There are also low-cost loans available.

Pentex is an umbrella corporation for:

  • Fairbanks Natural Gas, a gas company serving Fairbanks
  • Arctic Energy Transportation, which provides the transportation industry with LNG and CNG (Compressed Natural Gas) to fuel trucks and other operations
  • Polar LNG, a company developing an LNG plant on the North Slope
  • Titan Alaska, which operates an LNG plant in Point MacKenzie

Hawker says if the state buys Pentex, it would eliminate competition in the private sector, which is not the role the Legislature created for AIDEA.

Walker, during his first week in office, directed his staff to begin working on a disaster declaration for Interior Alaska due to the high cost of energy. He has said repeatedly during his campaign, as well as in his State of the State address, that reducing energy costs across Alaska was one of the “highest priorities” for his administration.

One of the biggest challenges for Fairbanks is that it generates electricity with diesel fuel, which has to be imported.

On Friday, the governor responded to Hawker’s claims that the deal is a classic case of government “overreach.”

“We don’t believe we’re in any sort of overreach situation,” said Walker. “It’s time that somebody reaches out to Fairbanks, and that’s what we’re doing.”

Rep. David Guttenberg, a Fairbanks Democrat, applauded the governor for taking action.

“You don’t let this go on and on and on when you’re the chief executive of the state and you see a way out, a way forward,” said Guttenberg. “You act.”

Other Fairbanks lawmakers like Sen. Pete Kelly say they want to know more about the AIDEA deal before deciding whether or not they support it, but say, in concept, it sounds like a good thing.

House Speaker Mike Chenault said sometimes it’s a good idea for the state to subsidize industry. Chenault said he doesn’t fault with the governor for taking action but said lawmakers need to be sure the Pentex purchase will actually result in lowering the price of energy for Fairbanks.

“The last thing we want to do is increase the costs to the citizens of Fairbanks,” said Chenault.

Thus far, efforts to bring North Slope Gas to Fairbanks haven’t penciled out.

To see Pentex’s presentation to AIDEA, click here.

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