JUNEAU — Executives from Southcentral Alaska’s natural gas utility told lawmakers on Tuesday that a critical gas storage facility was “extremely close” to being unable to deliver gas during last week’s cold snap, and a looming Cook Inlet gas shortfall is projected to impact the utility as soon as next year.
Record low temperatures last week pushed natural gas consumption in Anchorage to unusually high levels as supply was strained. Thermostats were turned down on Joint-Base Elmendorf Richardson and in city buildings as residents were urged to conserve gas.
John Sims, president of gas company Enstar, told the House Energy Committee on Tuesday that the Railbelt utilities were using a record 250 million cubic feet of gas per day during last week’s cold weather. Last Wednesday evening, CINGSA was maxed out and Hilcorp could only deliver an additional 10 million cubic feet, he said.
Electric utilities turned their diesel generators on as a backup. Every 15 minutes, the state of the gas wells was being evaluated. But eventually, the crisis was averted, and gas continued to be delivered, he said.
“I’ve been at the utility for 18 years. I’ve never been in a situation like that,” Sims said. “It was extremely close.”
The cold weather and Cook Inlet’s looming gas shortage have sparked renewed interest in the state Capitol about how to secure Southcentral’s energy production. Anchorage Republican Rep. Tom McKay, co-chair of the House Resources Committee, said on Tuesday that there are immediate and long-term challenges to consider.
Gas wells and CINGSA need to be cleaned out and repaired in case there’s another period of high gas demand in the near term, McKay said after sand entered one well. Then there’s the long-term question of how to supply more gas from Cook Inlet.
Republican Alaska Gov. Mike Dunleavy has proposed reducing royalties paid by producers from new wells to incentivize production. House and Senate members have introduced similar bills and are exploring options to subsidize more gas production to power the Railbelt and to heat homes.
“You can call it a giveaway, you can call it a subsidy, you can call it whatever you want. But we’re out of options,” McKay said.
An unusual royalty-free Cook Inlet lease sale drew a lackluster response from the industry in December. Sutton GOP Rep. George Rauscher, co-chair of the House Resources Committee, said there are discussions underway about extending royalty reductions to Cook Inlet oil production to encourage more interest.
Sims told House legislators on Tuesday that the natural gas utility is facing a supply gap starting next year — at least two years earlier than expected. The state Department of Natural Resources had expected smaller operators would produce more gas next year from Cook Inlet, but that has failed to happen, he said.
Sims said the natural gas utility could sign a less secure “interruptible” contract with Cook Inlet producers, which could see the gas supply halted at times. But even that is not certain, he said.
Enstar is planning on expanding its CINGSA storage facility to cope with periods of high demand and to be ready for shortfalls. Cost estimates have come in higher than the roughly $50 million price tag anticipated for an earlier, rejected proposal, Sims said.
Utility managers and lawmakers have increasingly spoken about the likelihood of needing to import natural gas with warnings that prices for consumers could double as a result.
Last November, the state was awarded a $206 million grant to upgrade the Railbelt’s antiquated electrical grid to build redundancies and to better integrate renewable energy production. The state is required to match those federal funds dollar-for-dollar, and the Legislature and the Dunleavy administration are discussing how to raise that money.
Tony Izzo, CEO of Matanuska Electric Association, told lawmakers that the Railbelt’s electrical grid is not a “first-world” system without redundancies. He spoke about a gas supply and electrical system that was under serious strain last week.
“I‘m not going to try to be too optimistic here,” he said. “I want to be very blunt. I think this is the new normal.”
A joint House and Senate Resources Committee hearing has been scheduled for Wednesday afternoon, starting at 3:30 p.m. Representatives from Enstar, Hilcorp, and two of the smaller Cook Inlet gas producers are set to testify about the problems with supply and potential solutions.