Hilcorp wants to build a Kenai Peninsula natural gas storage facility as a ‘buffer’ against shortage

A subsidiary of Hilcorp Alaska is asking state regulators to approve a gas storage facility in the Cook Inlet region that could help prevent a gas shortfall in winter in Southcentral Alaska.

A newly formed company, Hilcorp Alaska Gas Storage, filed an application on Monday with the Regulatory Commission of Alaska for permission to own and operate the storage facility at the Kenai Gas Field, south of Kenai.

It would be the second commercial facility of its kind in the region, allowing utilities to store gas in a depleted gas field, similar to Cook Inlet Natural Gas Storage Alaska that’s also on the Kenai Peninsula.

The regulatory commission would regulate gas prices at the proposed facility.

“Hilcorp is happy to be collaborating with the utilities and regulatory agencies to make our gas storage assets available for commercial use,” said Matt Shuckerow, a spokesperson for Hilcorp, the major gas producer in Cook Inlet.

The head of the Alaska House Resources Committee and an official with Chugach Electric Association said the extra storage is needed.

The 91-page filing says a second reservoir is in the public’s best interest.

It points out that utilities that are customers of Hilcorp Alaska have asked for additional gas storage options in the region.

The storage could be important if there’s another cold snap like the one in January 2024, when two of five wells at the CINGSA storage reservoir failed to deliver gas as expected.

The incident pushed the region close to running short of deliverable natural gas and entering a conservation status that would have called on residents to take specific measures to reduce energy use.

The filing also comes as utilities scramble to find new energy sources amid a looming long-term shortage of natural gas from Cook Inlet that surfaced in 2022. That’s when Hilcorp told utilities it lacked enough reserves to supply gas for new contracts in the coming years.

In one key solution, utilities are considering importing liquefied natural gas, which is expected to lead to higher costs for heat and power.

[Regulators, advocates warn of utility inaction as Alaska gas shortfall looms]

“Southcentral Alaska is facing a potential shortage of deliverable natural gas for heating and electric generation in the next few years or perhaps even sooner,” the filing says.

The gas-storage facility would provide “diversity in storage options, additional capacity to provide a sufficient buffer against an extended cold snap, and future capacity for the types of long-term solutions that will be needed, including but not limited to supporting the potential future importation of liquified natural gas (LNG). This will support Alaska’s economy and benefit all residents and businesses of Southcentral Alaska and beyond,” the filing says.

The “near miss” in January 2024 shows that more than “one option for gas storage is needed to mitigate the risk of deliverability loss due to mechanical failure when deliverability is most critical,” the filing says.

Julie Hasquet, a spokeswoman with Chugach Electric Association, which provides power in Anchorage and other areas, said the utility cannot comment on the regulatory filing.

But she said that additional natural-gas storage is needed in the region for operational challenges that can cause supply disruptions, such as production and pipeline issues.

The gas capacity of CINGSA is fully booked by Chugach and other utilities, and other storage space is needed, she said.

Additional storage is also needed if utilities import liquefied natural gas, she said.

“The fluctuating nature of LNG supply, combined with the need for continuous service, requires sufficient storage to manage both local and imported gas effectively,” she said. “Storage also allows utilities to store surplus gas during warmer months and release it when demand peaks, ensuring a stable supply. That is, it provides another mechanism to balance supply and demand.”

Anchorage Republican Rep. Tom McKay, chair of the state House Resources Committee, praised the effort in an interview Tuesday. He said the storage utility would provide a critical backup supply of gas to prevent a winter gas crisis, among other benefits.

He said two new wells have been drilled at CINGSA, which is owned by TriSummit Utilities. TriSummit owns Enstar, the natural gas utility for Anchorage and the surrounding region.

But McKay, a petroleum engineer, said various problems can develop that hurt the gas deliverability of wells.

That makes a second reservoir important, he said.

“It’s just really good common sense,” McKay said.

A second gas reservoir can also provide flexibility to help with the looming shortage of Cook Inlet gas, McKay said.

If companies can turn the gas shortfall around and produce more gas than necessary, the storage facility could hold some of their excess gas, McKay said. If utilities import liquefied natural gas to resolve the long-term gas shortfall, the reservoir could also store that gas, he said.

“The storage is one piece of the puzzle, but it’s a really strong one,” McKay said.