AD Header Dropdowns

AD Main Menu

Alaska's natural gas conundrum

Patti Epler

0123-cook-inlet-lngAlaska may have trillions of cubic feet of natural gas buried in the earth on the North Slope, offshore in the Arctic, and beneath the waters of Cook Inlet, but the state may soon be importing it from Outside to keep the lights on in Southcentral.

Railbelt utilities and the Alaska Natural Gas Development Authority are studying the cost and other issues surrounding the import of liquefied natural gas (LNG). The state agency is coordinating with the utilities and expects its report to be ready before the end of the legislative session, said ANGDA chief executive Harold Heinze.

He acknowledges the idea has a "bringing coals to Newcastle" feel. "But if it's that or the lights go out, the (utilities) are pretty good with the idea of keeping the lights on," Heinze said.

Joe Griffith, general manager of Matanuska Electric Association, has been warning business groups and others that the utilities need a new supply of gas. And they need it before any long-term project -- like a big gas line from the North Slope to Valdez or a smaller line from the Slope to Southcentral -- can be put in place. Studies have shown a shortfall in gas supplies as soon as 2013.

"It's not a question of 'if' it's going to happen," Griffith said. "It's going to happen."

Anchorage Municipal Light & Power general manager Jim Posey told an Anchorage business forum last fall that his utility was studying the import of LNG and would have a report within a year. Chugach Electric Association and Enstar Natural Gas Co. also were involved in the review.

Heinze said working with the electric utilities on the issues related to bringing LNG to the Southcentral region has become one of ANGDA's main priorities. Heinze said the studies look at a wide range of issues, everything from Cook Inlet marine logistics to the possible impact on endangered beluga whales. ANGDA is involved with utilities in a cooperative group called the Natural Gas Supply Co.

ANGDA also is studying logistical and permitting issues. For instance, Heinze said, it may be possible to use the existing ConocoPhillips LNG faciltiy in Nikiski to process LNG and turn it into gas the utilities can use. But new technology also involves floating LNG tankers that can be fitted with "regasifiers" to create a portable terminal of sorts. If the need is only short-term that may be a cheaper way to go because there wouldn't be a need to invest in and build a permanent processing facility, he said.

The gas is needed to power generating facilities and natural gas plants as natural gas production in Cook Inlet falls short. But it's also needed to demonstrate to lenders that utilities have stable supplies and can finance the construction of new generation facilities, Heinze said.

The closest supply of LNG would likely be Sakhalin Island in Russia and after that Indonesia, Heinze said.

Importing resources that Alaska already has plenty of is not a new concept. South Korea last year supplied hundreds of thousands of gallons of fuel oil to the Bush after a local refinery glitch disrupted the fuel supply.

Tankers from South Korea arrived at Alaska ports and offloaded their cargo onto Crowley Maritime barges that then distributed the fuel to coastal villages and some communities upriver.

Still, the notion of importing resources Alaska is trying to develop doesn't sit well with politicians who are doubtful of public support.

"I think most Alaskans will not be real happy with the idea of importing LNG," said state Sen. Bill Wielechowski, an Anchorage Democrat who is very involved in energy and resource issues. "I think if we had to do it as a short-term bridge people would understand but not as a long term thing."

Wielechowski noted that Cook Inlet has a good supply of gas; it's just that it's not being produced because the market for it hasn't been there. Southcentral Alaska has for decades had a good supply of natural gas so prices were low and natural gas producers didn't find it economically worth their while to expand development.

State policymakers have lowered tax rates to encourage more natural gas production though incentives, including subsidizing a jack-up rig for operations in the inlet.

"It shows there are other strategies that need to be employed," Wielechowski said.

He doesn't see a role for the Legislature in overseeing or even discouraging the import of LNG. The utilities and Enstar need the gas so they'll have to get it where they can.

The Legislature could look at whether Cook Inlet producers are sitting on leases and not exploring or producing as required under the leases, he said.

And last year lawmakers considered legislation that would have supported the utilities' own efforts to find and produce gas, including hiring their own drilling companies. But the bill went nowhere, he said.

Contact Patti Epler at patti(at)alaskadispatch.com