Officials with Southcentral's natural gas utility, which relies on production from Cook Inlet, told lawmakers this week that solutions to a looming natural gas shortage could take longer than expected. In a joint House and Senate Resources Committee meeting Wednesday, an executive from natural gas company Enstar said imported natural gas likely won’t be available until at least 2030.
In 2022, primary inlet producer Hilcorp told Railbelt utilities it may not be able to fulfill gas contracts when they’re up. That will impact utilities like Homer Electric Association, and Enstar.
Wednesday’s presentation followed a weeks-long cold snap, which pushed Enstar to the brink. The utility’s president John Sims told lawmakers it almost ran out of gas to provide to Anchorage during the coldest days.
“I’ve been here for 18 years and that was the closest I’ve ever witnessed us coming to a significant incident,” he said.
Sims thanked gas producers and the governor for their help in the incident, but warned that it could be a sign of worse to come.
Enstar serves 150,000 customers in Anchorage, the Mat-Su and most of the Kenai Peninsula. Its storage facility, Cook Inlet Natural Gas Storage Alaska or CINGSA, is located in Kenai, and Sims said on cold days, it helps meet gas demands for 40% of customers.
Sims told lawmakers that Enstar and other utilities have investigated possible solutions for when their Hilcorp contracts end in 2028, like importing natural gas. But those investigations revealed a grim reality.
“But what the studies and what the contractors and the consultants told us is that, of the four projects that rose to the top and seem to be reliable, none of them can meet that timeframe,” he said. “So the earliest they expect they can get gas from an import solution is 2030.”
He said that delay is likely the result of federal permitting processes. He also warned that imported gas will come at a higher cost, about 60% higher than current rates.
But Sims said even though importing gas isn’t ideal, it will become necessary.
“Importing LNG is the second worst thing that Alaska could do. It’s bad for the economy, it’s bad for jobs, we lose our energy independence, it’s a horrible thing for Alaska,” he said. “But that’s the second worst thing. The worst thing is doing absolutely nothing, and that’s where we’re in a position to do now. We can’t do that.”
The committee also heard from companies from Hilcorp, HEX Furie and BlueCrest about their challenges producing gas in Cook Inlet. In his presentation, Hilcorp’s Senior Vice President Luke Saugier pushed back against conceptions about the producer’s waning investment in Cook Inlet.
“We’re investing today at probably the highest level we ever have, and we’re committed to fully developing our lease hold,” Saugier said. “We’re not moving to the North Slope and abandoning the basin.”
But he did say Hilcorp’s current leases do not contain enough gas to meet the Railbelt’s demands. And that’s why utilities are having to look elsewhere.
Smaller producers, including Alaska-based HEX Furie, also presented. Mark Slaughter, chief commercial officer, described struggles with some of the company’s wells, and told lawmakers it’s hard to make long-term investments in Cook Inlet under the threats of gas imports and renewable energy.
Slaughter voiced support for royalty reduction considerations — a solution that many Alaska politicians, including Gov. Mike Dunleavy, have pitched. But Saugier from Hilcorp said for the larger company, it’s not clear how much of an impact reduced royalty rates would have.
The legislature is set to have hearings on related issues in the coming weeks.
