Alaska’s looming natural gas crisis draws growing attention from mayors, state regulators

Alaska’s looming natural gas shortage is getting increased attention this week along with more talk about negative impacts that might occur as gas supply falls in the coming years.

On Tuesday, Anchorage Mayor Dave Bronson announced that he formed a coalition of Southcentral Alaska mayors to study solutions to the potential shortage.

And in its meeting early Wednesday, the Regulatory Commission of Alaska plans to take steps to seek more disclosure from utilities about the issue, Commissioner Robert Pickett said by phone on Tuesday.

His discussion item on the commission’s agenda mentions “forced outages, curtailment of services and rolling blackouts.” A blackout is a full interruption of power in a given area. A brownout is a partial, temporary reduction in power.

Julie Hasquet, spokeswoman for Chugach Electric Association, the state’s largest electric utility, said it is not looking at brownouts or blackouts.

“Chugach Electric is not talking about brownouts or blackouts as a result of diminishing gas,” Hasquet said. “That’s why we’re pursuing options for the future, to include importing LNG (or liquified natural gas) and renewable and clean energy projects.”

A spokeswoman with the Matanuska Electric Association said they are not discussing brownouts or blackouts, as long as Hilcorp meets its contractual obligations, something they’ve assured they’ll do.

Last year, Hilcorp warned that it might not be able to renew future gas supply contracts with utilities that will begin ending in 2024.

A small unmet demand for natural gas on the Railbelt is expected to start in 2027, steadily ramping up as producers draw from Cook Inlet’s remaining reserves.

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Homer Electric Association’s gas supply contract is set to expire early next year, followed by other Railbelt utilities, including Chugach and Matanuska electric associations with contracts set to end in 2028. The contract for gas company Enstar is set to end in 2033.

Alaska Railbelt utilities and other groups are weighing potential solutions such as imports of liquefied natural gas, though that could be a costly step leading to higher rates.

The newly formed Southcentral Mayor’s Energy Coalition, consisting of mayors from the Matanuska-Susitna Borough to Homer, will focus on ways to encourage more natural gas production, mayors told reporters in Anchorage on Tuesday.

On the table for discussion will be a variety of options, including the viability of financial incentives and the role that renewable energy projects might play, the mayors said.

“Our purpose is to get Cook Inlet natural gas as plentiful and therefore as cheap as possible for our constituents,” Bronson said, flanked by a handful of mayors, while others attended online.

The coalition will work with Assembly members, lawmakers and utilities to find solutions, Bronson said.

“And most importantly, we will support policies that ensure our communities keep the lights on and the heat on without interruption,” he said.

Bronson noted that former Anchorage Mayor Dan Sullivan formed an energy task force in 2009 as the region faced an earlier natural gas shortage.

Among other steps, that effort led to calls for voluntary reductions from residents of heating and power to conserve natural gas.

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The Legislature at the time approved now-defunct tax credits for oil and gas exploration that led to more production, though that effort cost the state more than $1.6 billion, according to an analysis by the Alaska Public Interest Research Group.

Experts have said there is more natural gas that could still be discovered and produced in Cook Inlet, but the limited payoff in Alaska’s small market makes it difficult for costly drilling efforts to pencil out.

As one possible incentive, Gov. Mike Dunleavy in October said he would introduce legislation to lower the state royalty rates paid by Hilcorp and other Cook Inlet producers.

Bronson on Wednesday declined to discuss specific incentives or related recommendations the mayor’s coalition might pursue.

Peter Micciche, mayor of the Kenai Peninsula Borough and former Alaska Senate president, told reporters at the meeting that the borough is willing to negotiate with financially challenged producers on possible incentives to get gas flowing, such as delayed property tax payments until production begins.

Micciche said that brownouts that were discussed nearly 15 years ago to prevent a major interruption in power supply could be part of the discussion today.

“We talked about rolling brownouts in the past, and we solved that problem,” he said. “Some of those solutions will remain as a part of this short-term solution.”

Micciche is former superintendent of the small liquified natural gas plant in Kenai that was previously owned by ConocoPhillips. Marathon Petroleum Corp. is looking at turning the plant into an import facility to accept liquefied natural gas to meet future demand for gas in Alaska.

Micciche said the mayor’s group might need to recommend the importation of liquefied natural gas in the short term and midterm.

He doesn’t see it as viable for the long-term, he said.

A potential long-term solution is the Alaska LNG project, he said.

That roughly $40 billion effort would pipe gas from the North Slope to Southcentral Alaska for export, while also providing gas in Alaska. The state and private companies have pursued similar plans for decades, without success.

Micciche said investor interest in that project has become more favorable as the market has changed in recent years.

“At some point, Alaskans have to pull the trigger on a long-term solution,” Micciche said.