As legislation for a small-diameter natural gas pipeline passes the state House, Southcentral Alaska utilities still worry about having sufficient gas supply for customers during times of peak demand. Last fall, estimates showing supply would not meet demand left utilities with few options: either ramp up production, discover new wells or start importing.
In an effort to offset those concerns, lawmakers in the Alaska House of Representatives late Monday approved House Bill 4 -- legislation aimed at building a small-diameter gas pipeline that could deliver up to 500 million cubic feet of natural gas a day from Alaska's North Slope to Southcentral Alaska.
Dubbed "ASAP" by some supporters, the small-diameter line is separate from the much bigger, $65 billion-plus, large-diameter pipeline and LNG export project being considered by TransCanada, the Alaska Gasline Inducement Act licensee, and its partners BP, Exxon Mobil and ConocoPhillips. Through AGIA, the state has committed up to $500 million worth of incentive capital reimbursements to the larger project. According to Alaska's Department of Revenue, the state has paid TransCanada more than $222 million in qualified reimbursements as of Dec. 31, 2012.
The small-diameter line's main benefits will flow to the state's major urban centers. As well as providing for Southcentral, it includes built-in provisions to include a 37-mile spur line capable of delivering natural gas to Interior Alaska -- a region so gripped by high fuel prices that many residents have turned to heating their homes primarily with wood.
While the bill still needs to make its way through the Senate and to the governor's desk -- legislators expressed optimism over the bill Tuesday. Those mostly silent? Utilities who could benefit from gas line.
"We don't have much to say," said Phil Steyer, spokesman for Chugach Electric, the state's largest electric utility.
Enstar spokesman John Sims said the utility supports both potential pipeline projects, though either one would be years out, noting that even the fast-tracked small diameter pipeline isn't expected to be online before 2018 or 2019 at the earliest.
"Ultimately, we're interested in long-term supply of gas," he said.
A request for comment from Golden Valley Electric Association, the utility that provides power to much of Interior Alaska, was unavailable Tuesday night.
Thermometer roulette
Even this winter there was worry over a possible shortage in Southcentral. Sims said that cold temperatures gripping the region in mid-December caused worry that despite asking for more natural gas from producers, the pipeline was starting to stress and pressure was starting to decline. Not enough pressure in the line and failures could start.
"It was definitely nervous here," Sims said of the mood at the time.
That unease dissipated, though, as the new year brought warmer weather and temperatures didn't drop as low for the rest of the winter. The remainder of the season was so warm that the actual volume of gas moved ended up smaller than had been forecast according to numbers provided by Enstar.
But it's that lack of gas during the coldest days that still has utilities and lawmakers worried. High demand and insufficient supply could lead to failures in the system -- leaving residents who depend on the resource for heat stranded in the cold and dealing with the possibility of higher electricity bills, thanks to electric utilities switching to a more expensive fuel to power their generators.
The problem isn't that there's no gas -- according to a survey from the U.S. Geological Survey there's an estimated 19 trillion cubic feet of natural gas in the Cook Inlet region -- the problem is production isn't meeting demand. Aging wells in Cook Inlet aren't producing as much natural gas as they used to, and despite newer wells coming online, it's not enough. Estimates from Petrochemical Resources of Alaska say utilities could expect a shortfall in production needs by as early as the winter of 2014-15.
Last fall, utilities told regulators they were looking at importing either liquefied or compressed natural gas as a way to offset the potential shortfall.
How much gas and when it will need to be imported is still a question. Sims said Enstar is preparing to put out a request for proposals to local producers for gas after next winter. Those contracts will determine how much is needed moving forward.
"That will dictate and drive where we go with LNG and CNG," Sims said.
Things are looking up for next winter. Sims said that Enstar reached an agreement with Hilcorp, the Cook Inlet area's largest gas supplier, on Friday to supply 4 billion cubic feet of gas for winter 2013-14, shoring up the utility's gas needs for the coming winter.
Sims said with that contract confirmed, the utility is now looking at the following winter's contracts. How much they can get will determine how much gas -- if any -- will need to be imported.
"Obviously, we don't want to have to import," Sims said. But time will tell. That will be the indicator, and really, the only indicator we can use."
Contact Suzanna Caldwell at suzanna(at)alaskadispatch.com