AD Main Menu

New gas discoveries show that incentives work

Tim Bradner

Exciting things have happened with Cook Inlet oil and gas exploration over the last few weeks. Escopeta Oil Co., a small independent, announced that it found gas in an offshore well drilled with a jack-up rig in the Inlet.

There are now reports that NordAq Energy, an independent based in Alaska, has encouraging results with a test well it drilled last winter on land owned by Cook Inlet Region Inc., the Anchorage-based Alaska Native regional corporation, on the Kenai Peninsula.

A third development is Australian independent Buccaneer Energy's earlier announcement of a gas discovery in a well drilled so close to the city of Kenai that locals call it "the Wal-Mart well" because it can be seen from Wal-Mart's parking lot.

A second well drilled at the location by Buccaneer wasn't so encouraging, which illustrates that this business has its risks, but the company is optimistic and plans a third well.

Meanwhile, gas from Buccaneer's first well will flow into Enstar Natural Gas Co.'s pipelines this winter. That additional gas for Enstar should be comforting for those of us interested in keeping our houses and businesses warm.

Two other independents, Armstrong Oil and Gas and Cook Inlet Energy, will also supply Enstar this winter from Armstrong's wells on the southern Kenai Peninsula and Cook Inlet's operation on the west side of the Inlet.

All this is important because we still have a gas supply problem in Southcentral Alaska caused by the long-term depletion of gas reserves and a lack of exploration until recently.

In fact, we're particularly vulnerable this winter because it appears we won't have Conoco Phillips' liquefied natural gas, or LNG, plant at Nikiski available to shift gas to the local utilities if there's very cold weather and a supply disruption. The company plans to mothball the plant after making a last shipment of LNG to customers in Asia, although the facility will be maintained so that it could be restarted.

What's important about the new gas discoveries is that they show there's gas to be found in Cook Inlet and that policies put in place by the Legislature to grant generous state incentives to encourage new drilling are working.

We can't count on that new gas yet, however. The gas being supplied this winter by Buccaneer, Armstrong and Cook Inlet are small quantities, although everything helps.

Escopeta's and NordAq's discoveries may be important, but we won't know for sure until more work is done.

Escopeta drilled one well and was able to do some testing, but the company will have to wait until spring to do the more important tests and drill a second well to confirm its find.

The same is true for NordAq. Unusually warm weather caused the company to pull its rig off location last spring before its well could be fully tested. Further tests will be completed in the spring of 2013. A second well is also planned.

Let's wish them luck.

Meanwhile, back to the gas shortfalls. The regional utilities, Enstar and the electric utilities, have a legal responsibility to ensure we have gas and electricity. Because of that, they are being prudent and continuing to plan to import LNG by 2015 as a backstop in case the drillers are unlucky.

A state corporation, the Alaska Gasline Development Corp., is also continuing with engineering work on a possible 24-inch pipeline built from the North Slope to Southcentral. That's the ultimate backstop, but it wouldn't operate until 2018 or later.

On a third front, the Alaska Energy Authority, another state agency, is working on preliminary planning for a large hydroelectric project at Watana on the upper Susitna River. This wouldn't be operational until 2022 or so.

There's always a lot of debate about hydro. Large up-front capital costs make hydro projects less attractive, although once built they provide electricity at stable rates for decades. The state-owned Bradley Lake hydro project near Homer is now the least expensive source of power to the regional electric grid, and its cost hasn't changed since the project was built in the 1980s.

We certainly can't say that for natural gas, which today fuels most of our power generation.

The Watana project could supply about half the Southcentral and Interior Alaska power needs, reducing our need to burn gas. We could instead use that gas to manufacture products like fertilizer or liquid fuels.

Interestingly, this is what Norway does. Norway supplies almost all its own power needs with hydro and uses its oil and gas resources for revenues to its treasury, or to support local industry. That's a good model for Alaska.

We should be encouraged by the new gas discoveries in Cook Inlet, but they're not yet gas in the tank, so to speak. Meanwhile, we've adopted a wise set of energy supply options including exploration incentives, a pipeline from the North Slope as a fallback, and Watana hydro as a long-term power source. The utilities, being prudent, must also plan for LNG imports in the short term.

We need to stay the course with all those initiatives, at least until we know more about what we have in Cook Inlet. But consider how lucky we are to have these options and the financial resources to pay for them.

Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears every month in the Daily News.

"Allowing fireworks all over the city competes with their business," Harter said.

Chief Mew said enforcing the fireworks law is difficult for his officers on New Year's, one of the busiest nights of the year for police, he said.

"We respond to fireworks complaints, but the fireworks are not as high on the priority as other types of calls," Mew said. "The long and short of it is, our response to fireworks calls is often delayed."

Assembly member Dick Traini, who authored the 2010 fireworks law, said in an interview that the majority of fireworks users were safe. Traini said he plans to push for a permanent law allowing fireworks after this New Year's Eve.

"There are some people who'll never be happy," Traini said. "No matter what you do there's always going to be somebody that doesn't like it.

"You can't take into account everybody's circumstance, or nothing would ever get done."

Traini said he envisioned the sale of fireworks in Anchorage someday, perhaps with the proceeds going to charity.

Anchorage 2020 member Arlene Carle said that kind of expansion worries her the most.

"I just think it's a back-door, slippery-slope way to get us involved in something where there's no benefit, there's only risk," Carle said. "When you expand the use, you expand the risk."

Assembly member Elvi Gray-Jackson, also on the Public Safety Committee, said emails and phone calls after last New Year's indicated to her that about half the community was happy with allowing fireworks and about half were not.

"I think that maybe we can finetune the ordinance a little bit and take into consideration some of the concerns that the unhappy citizens have had," Gray-Jackson said.

Reach Casey Grove at casey.grove@adn.com or 257-4589.

"Porcupine," and only briefly showed the younger Schnabel.

Porcupine exists solely on the map. A one-street, mining boom town a century ago, it was abandoned more than 50 years ago and its last buildings were bulldozed in the 1980s.

"I think there's going to be more exposure for the town. Last year it was hard to tell where Porcupine was. If there's more mention of Haines, people may be clamoring to go on this tour. We'd hope so, anyway," Ordonez said.

Ordonez also is hoping Schnabel, as teenage heir to an active mining claim, will attract viewers. "It's a good angle, to have him working at the mine, then going back to high school. That's interesting to people."

Parker Schnabel may be the deciding factor in the tour's success. Ordonez said it's up to Schnabel to decide whether to pitch the tours to passengers off cruise ships as a "shore excursion," the most lucrative tours in the region, with a virtually guaranteed customer base.

"It's a matter of working it out with Parker. He's taking over the (mining) business. It's not strictly my decision how far we go with this thing and what size we get," Ordonez said.

A successful tour might fulfill a longtime dream of mine owner John Schnabel. Schnabel, 91, built a lodge at the mine site, erected road signs and printed brochures for gold mine tours he envisioned about 20 years ago. Ordonez is recycling some of Schnabel's brochures for his operation.

In an interview this week, Parker Schnabel declined to say whether he'd pursue the shore excursion angle. He said he hasn't discussed that with Discovery Channel's film crews, who were at his mining operation daily this year between May 1 and Oct. 1.

Schnabel also declined comment on what other scenes from Haines might be included in upcoming broadcasts of the show.

Tour operator Ordonez said the majority of clients on his tour were familiar with the show. He described an incident last summer when his tour bus encountered "Dakota" Fred Hurt, the other local miner being filmed by Discovery. "They were moving some heavy equipment and had stopped traffic and Dakota Fred was there, and they were just thrilled."

Ordonez said the tour fits into a four-hour time frame for cruise ship shore excursions originating in Skagway, but getting ships to bite is another matter. "They're not chomping at the bit to sell tours to Haines from Skagway, let me tell you."

reasons why they're finding themselves in this situation is drastically different from each other."

When Forrest, now 18, looks back at his youth, something is missing, he said.

"I threw everything away," he said. "I regret it now, because I'm a senior and it's like, 'Oh, the things I missed out on, the things I could have done.'"

Forrest was home by October 2010, rehabilitated and with a new outlook on life.

He is moving on and trying to help influence others around him.

After everything he has been through, Forrest wants to be able to help others so they don't make the same decisions he did. His ultimate goal is to become a psychologist.

"I want to help people. I know what that's like --- I've lived it," he said. "I used drugs for four years and so I have the experience to where I think, 'OK, I can help somebody and try to save their life.' "

Barry thinks Forrest's contribution will start a ripple effect throughout the community; he's already seen signs that it has.

"For Forrest, I hope he sees how little actions can have big effects," Barry said. "And it can go in the negative way or the positive way -- it depends on what you do with it."

As King said, there is no one reason why families or students may be homeless. But for those students who have run away, Forrest said it is simply not the answer.

"There's always something better out there," he said. "The support you have from a family, that's more important."


TIM BRADNER
ECONOMY