Could oil-rich Alaska be forced to import natural gas? 2 utilities lean on it.

Amid warnings of dwindling natural gas supplies, utilities in Alaska, one of America’s largest fossil fuel producers, are exploring imports of liquefied natural gas from out of state to meet on-demand as contracts expire over the next decade.

Two of Anchorage’s largest utilities have hired consultants to study bringing in liquefied natural gas, or LNG, likely from British Columbia – though executives said they were also considering using renewables to help fill in the gaps.

The two utilities are Enstar, which supplies homes and businesses in Southcentral Alaska with natural gas for space heating, and Chugach Electric Association, the 90,000-member cooperative that generates electricity in the Alaska region. ‘Anchorage.

Alaska ranks fourth in oil production out of the 50 states, behind Texas, New Mexico and North Dakota.

Cook Inlet, Alaska’s primary natural gas basin for consumer generation, has met the heat and power demands of Anchorage and surrounding areas for decades.

But Hilcorp, which extracts the vast majority of gas from Cook Inlet, warned utilities this year that the company may not be able to meet future demand once supply contracts expire over the next decade. .

Those expiration dates, for most utilities, are not for at least five years, and there is no immediate risk to utility operations or residents’ ability to heat their homes.

But maintaining natural gas supply in the future will not be easy.

Experts say the Anchorage-area market size is too small and the cost of drilling exploratory wells in Cook Inlet too high to attract new industry players who could boost production. And while Alaskan lawmakers want to build an export-focused gas pipeline from the North Slope to near Anchorage that could also meet local utility demands, construction depends on commitments from Asian buyers and investors. which have not yet materialized.

“We can’t count on that. We need to find a way to close this gap between Cook Inlet gas and the future,” John Sims, president of Enstar, said in a telephone interview Thursday. “That’s really the purpose of this study.”

Enstar’s consultant, Berkeley Research Group, is investigating and evaluating “outside Alaska gas supply options,” including LNG, the company said in a Commission filing last week. Alaska Regulatory Board, or RCA.

Chugach has hired its own consultant, Black and Veatch, which is evaluating LNG as an alternative source of natural gas supply, said Chugach chief executive Arthur Miller.

“We are the largest electric utility in Alaska. And gas supply is 30% of our cost structure,” Miller said in a phone interview Thursday. “It is essential that we have the expertise and resources to effectively assess LNG as a potential option. »

Cook Inlet is Alaska’s oldest oil and gas basin, and it produced fuel for Anchorage and surrounding areas after it was first discovered in the 1950s.

The region faced looming gas shortages about a decade ago, but has attracted new business and development through a subsidy program that has cost the state more than $2 billion, according to estimates. an advocacy group.

Today, these subsidies are largely eliminated. And while there is still gas in Cook Inlet, new extraction projects face obstacles ranging from environmental permits to the relatively small size of Anchorage’s natural gas market.

The lack of major industrial customers makes projects in other regions, such as the North Slope and outside of Alaska, more attractive investments for companies, experts said.

A call for transparency

For utilities to receive and store LNG shipments, they may have to build or modify infrastructure. And Ben Boettger, who closely monitors the Cook Inlet gas industry for the advocacy organization Alaska Public Interest Research Group, said it was prudent for utilities to study the issue and assess. relative costs.

The Enstar consultant’s report should be made public, Boettger said, because Cook Inlet’s energy “affects everyone’s life”.

Meanwhile, a utilities task force with members of the state government that is reviewing Cook Inlet gas supplies held closed rather than public meetings. Its members, including Enstar and Chugach, are meeting under a “non-disclosure agreement,” according to Enstar’s regulatory filing, although participating representatives from the Alaska Department of Natural Resources have not signed, said a spokeswoman for the agency.

Boettger and Antony Scott, an analyst for the nonprofit Renewable Energy Alaska Project, both asked why the meetings aren’t public.

“These are political decisions that shouldn’t be made by private companies,” Scott said. “We really should make them collectively.”

Sims, the chairman of Enstar, said he expects the utility to make a presentation on its consultant’s findings at a public meeting and have the information shared with other members of the group. of work.

He and other utility executives said one reason for the secrecy is that details of their natural gas demands, if revealed publicly, could weaken their positions in contract negotiations with suppliers.

Scott, the renewable energy analyst, said coordination between utilities is key to the process of planning for Cook Inlet’s energy future. This is partly to avoid duplication of planning and surveying costs, and partly because Enstar, as a supplier of home heating oil, has no obvious alternative to natural gas such as utilities. ‘electricity.

Since utilities can more easily incorporate renewable energy sources into their generation mix, they should move quickly to these technologies to help preserve Cook Inlet’s gas supply, Scott said.

The cost of moving homes and businesses in south-central Alaska away from burning natural gas for home heating “is just abysmal to think about replacing it,” Scott said.

“It’s a conservation story,” he added. “We should really save these hydrocarbons as much as possible, to protect our economy for as long as possible with cheaper natural gas.”

Role of renewable energies

Utilities leaders said they are actively working to tap into energy sources such as solar and wind power, even though those sources have not emerged in public discussions or disclosures about the works. of the working group.

“It’s untenable that as a utility manager I have to rely 85% on one fuel. No other place does this,” said Tony Izzo, general manager of the Matanuska Electric Association, in an interview Wednesday. “So we have to change it.”

At the same time, said Miller, Chugach’s general manager, natural gas remains the backbone of the Anchorage-area energy industry, and stable supplies must be guaranteed.

“In no way, shape or form, should this natural gas discussion imply that efforts are not being seriously undertaken to evaluate alternative sources of production,” he said. He added, “We’re sort of doing this simultaneously, looking at utility-scale wind and solar projects, but recognizing that natural gas is critical to meeting long-term viability needs in the future.” .

Chugach and Enstar said it was too early to know how much their consultants would cost. But Enstar last week asked RCA for permission to separately track what it calls its consultant’s “potentially large” expenses. Those expenses could eventually be rolled into the rates it charges customers for gas, but only with board approval in a separate process.

This article originally appeared in Northern Journal, a newsletter published by Nathaniel Herz. Subscribe here.

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