With natural gas future uncertain, buyers mull next steps
Energy utilities have been meeting since May to talk strategy as Cook Inlet’s top producer of natural gas warns future contracts are not a guarantee.
This week, a local sustainability group said the Kenai Peninsula Borough, too, could play a role in helping avoid an energy crisis down the road.
Bretwood Higman, of Seldovia, is a member of the borough’s 2-year-old Resilience and Security Advisory Commission, which meets monthly to brainstorm how to make the borough more sustainable.
He said Hilcorp made clear it’s not short on gas right now. The company is actively pursuing a slew of different drilling projects on the east and west sides of Cook Inlet.
But at an energy conference earlier this year, Hilcorp representative Luke Saugier said it’s urgent that users diversify where they get their energy to make sure it stays that way five or six years down the road.
“Currently where we are, we’re not in a crisis,” Higman said Tuesday. “But there’s one not very far in the future.”
Hilcorp natural gas is the largest component of local energy supply.
ENSTAR, for example, supplies gas to most of the Cook Inlet region. And about 85 percent of its supply comes from Hilcorp's Cook Inlet gas.
Lindsay Hobson is a spokesperson for ENSTAR. She said representatives from the company and other utilities have met several times since May to talk through their options together.
“The utility group is looking at a number of avenues to pursue,” Hobson said. “And certainly one of those that we’ve all identified is the need for additional storage, going into the future.”
That was the approach Alaska took in 2010, when it faced severe natural gas shortages. The state, in response, sent tax credits to oil and gas companies, and Cook Inlet Natural Gas Storage Alaska built a storage facility in Kenai. That facility became operational in 2012 and is managed and operated by ENSTAR.
“Storage has allowed ENSTAR to buy greater volumes of gas in the summer months, when demand is a little bit lower,” she said. “And so pricing is a little bit more favorable. But it also allows us to store volumes that we need to be able to serve customers through the winter."
Proponents of the long-sought Alaska LNG project say a pipeline that could get natural gas from the North Slope to Alaska’s population center could be another answer. Oil company Marathon also has the means to import at least a small amount of natural gas from producers overseas through its terminal in Nikiski.
It’s not just ENSTAR that relies heavily on Cook Inlet natural gas. Homer Electric Association is also part of the working group and uses it to meet 86 percent of its energy needs. Its contract with Hilcorp is up in 2024.
Spokesperson Keriann Baker said HEA is working to diversify its own energy portfolio so it’s not mostly dependent on one producer. The utility has made inroads for long-term hydro and tidal energy projects, and is looking into turning gas from the Central Peninsula Landfill into energy for the load, too. HEA is also in the early stages of incorporating solar and wind projects into its grid.
“A smart and strategic generation portfolio consisting of fossil fuel, renewable and clean energy generation will mitigate supply-side risks, stabilize rates and create energy security for HEA members,” Baker wrote in an email.
Neighboring utility Chugach Electric, which has members in Anchorage and parts of the Kenai Peninsula, gets half of its power supply from Cook Inlet gas. Its contract with Hilcorp is up in 2028.
As they work out next steps, utilities like HEA say they’re not worried about running out of supply just yet.
But Higman said it is crucial stakeholders like the borough start addressing the issue now — by conserving natural gas in borough facilities and encouraging private landowners to do the same, for example. He also suggested the borough open up a conversation with state and federal governments to talk through the issue.
“And while it’s really nice to assume that maybe the state will jump in and do a really great job of leading the charge here and solving this problem, I think we’ve all had experiences where when we assume someone else is going to solve the problem it’s not going to work out so well,” Higman said.
The borough assembly didn’t consider any related legislation at its Tuesday meeting.
Assembly President Brent Johnson said he plans to talk to interim Borough Mayor Mike Navarre and other members of the assembly to figure out a follow-up.
He said the borough should see if it can work with private energy companies to help them get renewable projects off the ground.
“I don’t foresee the borough starting a wind farm, or something,” Johnson said. “I think we just want to make it easy for the folks who do want to start wind farms, or who do want to create energy in some efficient manner that’s going to be helpful for the 58,000 people who live in our borough.”
The Kenai Peninsula Borough created a tax exemption earlier this year for private companies that want to create renewable projects on borough land in response to a proposed plan to build a large solar farm in Sterling. But Johnson noted businesses haven’t taken advantage of other, more general borough tax exemptions in the past.