The port authority plans to issue millions in revenue bonds to buy Fairbanks Natural Gas, build a plant to convert gas to liquid form on the North Slope and develop a trucked delivery system.
The two sides said the project could be ready by the end of 2011.
"This agreement will provide for a clean, economic energy source to Interior Alaska and will provide for the opportunity to distribute substantially lower cost propane to rural Alaska," according to a joint statement.
Some energy watchers view trucked gas as a decade-long "bridge project" for the oil-dependent Fairbanks energy market until a major in-state natural gas pipeline is built.
The port authority said the bonds needed for the sale and development project, which could total $250 million, would come through its bonding power and avoid saddling member communities with financial obligations.
Voters in Fairbanks, Valdez and the North Slope established the port authority in 1999.
Fairbanks Natural Gas has more than 1,000 customers -- major ones include Fairbanks Memorial Hospital and the University of Alaska Fairbanks.
It has for a decade trucked gas from a liquefaction plant at Port MacKenzie, north of the Knik Arm near Anchorage. The company converts liquefied gas back to gas form in Fairbanks and delivers it through a 65-mile network of underground pipes.
The step toward a sale comes two months after the Fairbanks Native corporation Doyon Ltd., a potential competitor in the market for Interior Alaska gas supplies, worked with partners on a multimillion-dollar test well for natural gas near Nenana. The firms have yet to release an analysis of the test project's results.
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