Most Alaskans are acutely aware of the irony of gasoline prices. Despite receiving about $1,000 a year for their share of the state's oil riches, Alaskans pay some of the highest gasoline prices in the nation. Despite an oil pipeline running just miles north of the city, Fairbanks residents struggle with exorbitant heating fuel prices. For some, it doesn't make sense.
The next irony may happen with Cook Inlet natural gas, long considered a lone holdout in rising Alaska fuel prices.
Despite increasing natural gas exploration and development in Cook Inlet, it's looking increasingly likely that the needs of Southcentral residents may be difficult to meet without importing gas.
New inlet wells are coming online, but they aren't coming fast enough, according to a new study by Petrochemical Resources of Alaska. Estimates from the Anchorage-based company show that despite an average of about six wells coming on line each year, waning production from older, deflating wells means that even more will be needed to meet demand. According to the study, 13-15 new wells a year are needed to meet the gas needs of Southcentral Alaska – and that may not happen until 2014. At a recent (Anchorage) Mayor's Energy Task Force Meeting, Chugach Electric Association proposed a plan that calls for utilities to start importing liquefied or compressed natural gas, according to Chugach Spokesman Phil Steyer.
"What we're saying is that we really hope that people drill and find gas and put it into production in Cook Inlet," he said.
"But what if they don't? What if that doesn't happen and we begin to come up short? How will we make up that gas?"
Other avenues for keeping up with demand have been touted. However, the two biggest ones couldn't be farther from each other: An in-state natural gas pipeline starting from the North Slope or a gas storage facility on the Kenai.
The pipeline is years from beginning construction and perhaps decades from coming to fruition.
But a storage facility designed to help offset periods of high natural gas consumption began operating on the Kenai Peninsula this summer. With winter looming and just a month to go before the storage facility switches from accepting gas to distributing it, the facility is a little over half full.
CINGSA not filling up?
The Cook Inlet Natural Gas Storage Alaska (CINGSA) facility has been online and injecting gas since April. It was expected to buy and store 8 billion cubic feet (bcf) of natural gas for the upcoming winter season, but so far it's stored 4.6 bcf from customers, according to facility and Enstar spokesman John Sims. Those customers include Chugach Electric, Anchorage's Municipal Light and Power and Enstar.
The facility has several owners. The majority owner is SEMCO Energy, a wholly-owned subsidiary of AltaGas, which owns Enstar, the largest customer.
Chugach and ML&P use the natural gas to produce electricity, while Enstar is the region's natural gas utility, supplying fuel to heat the homes of some 350,000 Southcentral residents.
Enstar was contracted to inject 5 bcf of gas into CINGSA before the end of the year but now is expected to reach just 80 percent of that total.
The facility, made up of five former natural gas wells, is designed to stabilize Southcentral Alaska's gas supply to better cope with times of peak demand or a system failure. While not touted as a long-term solution for Southcentral Alaska's natural gas woes, the $161 million facility should help deal with shortfalls during frigid winter months.
During a typical winter day, 150 million cubic feet of gas is distributed to customers across the system. Sims said the peak use forecast for this winter's coldest days is 280 mcf, which is more than the amount used during January's brutal cold snap -- about 235 mcf a day.
The facility will offset any problems in delivering that gas by supplying up to 140 mcf of gas a day. That's not enough to power the entire system, but it's enough to keep it pressurized if other sources can't keep up with demand.
Sims refused to say how much base gas is in the facility, but vowed there would be enough by the end of the year.
The season isn't over yet for gas injections. CINGSA Project Manager Ed Scarpace said the facility will stop injecting new gas into the facility Nov. 7. Then there will be a week-long scheduled shutdown, where an inventory will be done before gas is pumped out, just in time for chilly winter weather.
"By then it will be very cold," Scarpace said.
Levels of concern
Sims said that Enstar plans to draw on CINGSA this winter to meet customers' natural gas needs and expects no significant challenges.
In 2009, the city of Anchorage, in conjunction with the utilities, first issued "Energy Watch" warnings. Different colors describe different levels of concern.
• Yellow means use caution: Limit high-energy activities like running the dishwasher and doing laundry.
• Red means "alert": Turn the thermostat down to 60, limit activities to a few rooms and using the microwave to cook.
Neither yellow nor red alerts have ever been issued, and the utilities hope another winter passes without one.
"If we, with our tool box, can't do enough, we ask the area customers to cut back on things," Steyer said. If those cutbacks aren't enough, Steyer said rolling electrical blackouts – probably for less than an hour apiece -- will begin. But for now, Steyer said, that possibility is a long way off.
An annual test exercise for the energy watch system, where residents are asked to voluntarily act as if there a "yellow" alert, is set for Oct. 24.
Contact Suzanna Caldwell at suzanna(at)alaskadispatch.com