Tim Bradner: Gas storage project gets first winter of operation

Tim Bradner | Alaska Journal of Commerce

Able to keep your house warm during that long, December cold snap? Send a thank you note to state Rep. Mike Hawker, House Speaker Mike Chenault and other Southcentral legislators.

Our regional gas supply system is more secure now thanks to Hawker and his colleagues, as well as Anchorage Mayor Dan Sullivan.

Three years ago there was a near-shutdown of our gas distribution system during a winter cold snap because of a gas supply hiccup. It was a scary situation that illustrated how vulnerable our system had become.

Mayor Sullivan, with local legislators' help, started kicking you-know-what to make things happen.

The result was a gas storage project that solved part of the problem (there are others). It's an example of government acting, quickly to solve a critical public security problem.

Here's the background: In Southcentral Alaska, we heat our homes and generate electricity mostly with natural gas. The problem is that we're running low on gas in this region, at least for now.

After the near-shutdown of the gas system, and at the urging of the mayor and the region's utilities, Hawker pushed legislation cutting through complex regulatory barriers for a large natural gas storage project.

Gas storage enables a utility to purchase gas in summer, when production exceeds demand, and store it for winter. Gas storage by utilities is common in the Lower 48 but it was a new concept in Alaska.

Hawker's bill passed. The Cook Inlet Natural Gas Storage Alaska (CINGSA) project was built last year and the first gas was stored last summer.

This is its first winter of operation, and it's just in time. Without it we would have been in trouble during the December cold snap.

Our problem is that gas production in Southcentral Alaska is declining, in some fields at rates of 17 percent a year. For years there was plenty of gas, and even at peak winter demand local wells could supply enough gas to Enstar Natural Gas and the regional electric utilities.

But production gradually declined and there wasn't enough drilling and exploration to refill the tank, so to speak. Production soon dipped below what the utilities needed in winter. However, ConocoPhillips was able to divert gas to the utilities from its liquefied natural gas plant in Kenai to make up the deficit.

But this winter the plant is no longer making LNG and all of ConocoPhillips' gas goes to the utilities. There's no spare production capacity.

Lucky for us, the CINGSA gas storage was completed on time and Enstar was able to withdraw stored gas. Enstar was supplying near-record volumes of gas to customers during December's cold and actually withdrew more gas than it had planned.

It was a tense time because with a new project like CINGSA there are always uncertainties: Will it work as expected, and can gas stored last summer, for the first time, be withdrawn at the rates needed?

There were other concerns: A gas storage facility needs a certain amount of "pad gas," or gas injected to increase pressure at the facility, to allow withdrawals at the rates needed. There were delays in getting pad gas injected last fall at CINGSA at the volumes needed.

It all worked, luckily, and home and building owners were able to keep the heat on. There are more to come, I'm sure.

Our gas supply situation still isn't secure, however. By 2015 local gas fields may not produce enough gas year-around to meet all of the region's needs. Unless there's a big new gas discovery soon in Cook Inlet, we'll have to import liquefied or compressed natural gas.

The utilities are legally obligated to ensure they can serve their customers, and they are working on a plan to do this.

Importing gas is embarrassing in a resource-rich state like Alaska but the fact is that explorers busy drilling in Cook Inlet have yet to announce any discoveries.

We must have a back-up plan, and imported gas is it.

Of course the best long-term solution, if big discoveries aren't made, is gas from the North Slope, where there are huge reserves.

On this, credit Southcentral legislators are again taking the lead, with Gov. Sean Parnell's support. Chenault, of Nikiski, and Hawker are pushing a state-supported pipeline from the Slope to Southcentral Alaska.

A state corporation, the Alaska Gasline Development Corp., has been created and is working on planning and securing regulatory approvals for the project.

There's been talk for years about a big pipeline from the Slope, of course, and the major gas-producing companies are well along in the latest version of a plan. The proposal by Chenault and Hawker is insurance in case the big pipeline doesn't go.

Gas from the Slope is a long-term solution, though. It won't help secure our supplies for the next few years. We could still get lucky if an explorer makes a big find, but it hasn't happened yet.

We can't bet the heat for our homes on it.

Tim Bradner is an Alaska business writer who lives in Anchorage. His column appears once a month in the Daily News.

Tim Bradner