Warning of shortfall next year, Enstar takes step toward pipeline that could receive natural gas imports

Southcentral Alaska’s natural gas utility and a sister company are taking a cautionary but concrete step to potentially import natural gas into Alaska, as future supplies of the resource wane in the Cook Inlet basin.

Alaska Pipeline Co., an affiliate of Enstar natural gas, applied on Monday with state regulators to expand its service territory.

The expansion would give it the potential to extend a 16-mile pipeline to Port MacKenzie to receive imported gas, if that option is needed to deal with the state’s energy crisis. Port MacKenzie is located about 5 miles north of Anchorage, across Knik Arm.

Gas imports are expected to significantly boost power and heating bills across Southcentral Alaska.

Enstar forecasts a shortage of local gas supply starting next year, according to the application before the Regulatory Commission of Alaska. The application says recent drilling efforts are not producing enough new gas from Cook Inlet.

Enstar is “deeply concerned about the lack of diversity in supply sources that is jeopardizing long-term energy security for all Cook Inlet gas users,” the application says.

Enstar provides gas to heat homes and buildings across much of Southcentral Alaska. It serves 150,000 customers.


Enstar is “optimistic” things will change, but “it must act with great urgency” to meet its legal obligation to deliver safe, reliable service to its customers, according to a filing asking the agency to accelerate the eview of the application.

The pipeline would cost about $57 million and would move gas for Enstar customers, the application shows. The expanded service territory largely follows the Port Mackenzie Road, according to a map with the application.

The pipeline would extend from the Alaska Pipeline Co. network of pipes that moves Enstar gas. It would link to a “future liquefied natural gas import terminal at Port MacKenzie,” the application says.

No such terminal currently exists at Port MacKenzie.

But Enstar and other utilities are looking at a variety of options to solve the gas crisis, including importing natural gas as one solution to help resolve the looming shortage in Cook Inlet, the application says. The aging basin for decades has provided gas used for the Railbelt region from the Kenai Peninsula to Fairbanks.

The filing is essentially a precautionary move to expand the service territory in the event a pipeline needs to be built, said Lindsay Hobson, Enstar’s spokeswoman.

The application is not proposing to build the pipeline, or to build a facility to import gas, she said.

“We are still actively working with producers to continue to get more volumes out of Cook Inlet, and to the extent that we’re able to get more volumes, then that pushes this import option out into the future,” Hobson said.

“But at the same time, we have to be proactively looking at the import opportunities as well,” she said. “Because our No. 1 mission is to secure reliable, affordable gas for our customers. To do that effectively, we have to use absolutely every avenue.”

Hilcorp, the dominant gas producer in Cook Inlet, warned Enstar and other utilities in 2022 that it did not have enough natural gas reserves in the basin to provide for new gas supply contracts after existing ones expire in the coming years.

John Sims, president of both Enstar and the pipeline company, said in the request for accelerated consideration that Enstar been negotiating with “Cook Inlet producers to obtain locally-sourced gas for future years.”

“Despite this, Enstar faces significant gaps in volumes beginning as early as the winter of 2025,” he said.

The application says Cook Inlet producers are struggling to keep up with high production costs as gas reserves decline.

It says recent drilling programs “have not yielded anticipated results.”

“ENSTAR has engaged in continuous negotiations with Cook Inlet producers Hilcorp, Furie, BlueCrest, and Vision Resources to secure new gas contracts, but with limited success,” the application says.

Enstar has a contract for gas with Hilcorp, its largest gas supplier, until 2033, the application says.

But the volumes are not enough to cover Enstar’s entire demand for gas, it says.


Enstar’s annual gas demand is about 39 billion cubic feet annually.

Enstar foresees a shortfall of about 7 billion cubic feet, according to the application.

The shortfall is estimated to begin next April, but the concerns will grow in prominence the following winter, Hobson said.

“That’s why we’re so aggressively looking for gas right now,” she said.

Concerns about the gas shortage rose this past winter, when a severe cold streak boosted demand for gas and a critical gas storage facility in Cook Inlet struggled to deliver enough of the resource.

About 4 billion cubic feet of Enstar’s gas demand is required to service the Homer Electric Association, the application says. Enstar took the unusual step this year of accepting more gas from Hilcorp, in order to provide gas to the relatively small Homer utility.

Homer Electric’s gas contract with Hilcorp expired this year, making it the first electric utility to reach that deadline after Hilcorp’s warning.

The much larger Chugach and Matanuska electric associations, serving regions in Anchorage and the Matanuska Susitna Valley, are set to see their contracts with Hilcorp expire in 2028.


Larry Persily, an oil and gas analyst and former Alaska deputy commissioner of revenue, said the request for an expanded service territory is the easy step for what would be a long and costly process if gas imports are ultimately required.

A gas import facility would receive liquefied natural gas delivered by ship. Liquefied gas has been super-chilled into a liquid for oceangoing transport.

For imports to occur at Port MacKenzie, a plant must be constructed to convert the liquefied natural gas into gas that can be shipped in Enstar’s pipelines, he said.

Federal approval would be needed to build the plant, a process that can be expected to take years, he said.

In Kenai, a subsidiary of Marathon Petroleum Corp. has received federal approval to convert the old liquefied natural gas export plant there into an import terminal.

Marathon said in October that its evaluating options for the potential project to help address the state’s gas supply concerns.

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Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or