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Southcentral's dwindling gas supply will mean higher prices, imports next winter

Suzanna Caldwell
Loren Holmes photo

With a natural gas shortage looming, Alaska utilities are bearing down on getting the word out.

At a Monday Anchorage Chamber of Commerce Luncheon, Enstar president and CEO Colleen Starring spoke to business owners about what's coming in terms of production for the region's only natural gas utility.

Gas production is not expected to meet demand starting next winter, so utilities are looking to import liquefied or compressed natural gas to offset the decline. Consultants at Northern Economics are preparing a report for the utilities, outlining which option would serve Southcentral Alaska better. A decision will be announced early next year.

Starring's presentation outlined what her company has done to offset shortfalls and what it plans to do as 2014 approaches.
 Recent state legislation that created tax incentives and the Cook Inlet Natural Gas Storage Facility Alaska (known as CINGSA), has encouraged more production, with new wells coming online in Cook Inlet. But they’re not enough to cover the predicted shortfall.

Homeowners already paying more

CINGSA, which can hold up to 17 billion cubic feet of gas (enough to supply Southcentral Alaska for about three months), has been stockpiling gas near the city of Kenai. The facility was projected to cost $180 million to build, but was finished on time and under budget at $164 million. Starring said it will cost customers an additional $3 per thousand cubic feet of gas.

“I'd argue we'd pay anything to make sure the furnace stays on,” she said.

Despite a slow start in storage, the facility began delivering gas to customers of the facility -- which include Chugach Electric and Municipal Light and Power -- in November. 
CINGSA is just one way companies are dealing with a potential shortfall. Others include tapping more renewable energy resources -- like hydro or wind -- and finally securing a natural gas pipeline from the North Slope. All would come online after the gap period ends.

Conservation not enough

“It's all happening, it's all good -- but it's not enough -- we can't conserve our way out of what we're finding right now,” she said. 
With natural gas production booming in the Lower 48 as shale gas explodes, Starring said it's hard to encourage the type of production needed to meet demand in Southcentral. It's expensive to explore in Alaska -- expensive equipment operated by a skilled labor force needs to make a long trip north.

Starring isn't aware of any new legislation that would help to spur production.

“It doesn't look like there's enough that can be done to bridge that three-or-four-year gap were facing,” she said.

In 2011 the U.S. Geological Survey estimated 19 trillion cubic feet of natural gas reserves in Cook Inlet. For years, Southcentral residents basked in relatively cheap natural gas prices. The wells that produced it -- some of which are close to 50 years old -- are losing pressure and delivering less gas. Many more will need to come online to meet Southcentral’s demands.

Why two solutions?

Starring noted that if a huge well was found in Cook Inlet, imported gas would be able to “feather in” to other solutions. 
Audience members asked whether Southcentral could tap into Fairbanks' plan to truck natural gas south from the North Slope.

Unlikely, said Starring. With its engineering, infrastructure and permitting challenges, that plan is “not going to sync up” with Enstar's needs.

Starring said in her view it doesn't make sense that Fairbanks would spend millions of dollars on such a project, while Anchorage, only 400 miles away, imports natural gas. Ideally, there would be one solution.

“If we both have to go those distances, at some point we'll all have to be in a room and find a solution that works for both of us,” she said.

The next chamber of commerce luncheon, set for Nov. 26, will feature representatives from three Southcentral electric utilities -- Chugach, Matanuska and Municipal Light & Power -- will give an update on how natural gas availability will impact electrical rates.

Contact Suzanna Caldwell at suzanna(at)alaskadispatch.com