After years of stasis, the historic Kenai Liquefied Natural Gas Terminal could be getting a second act. That’s after Harvest Alaska, a subsidiary of Hilcorp Alaska LLC, announced on Thursday its plans to acquire and redevelop the facility. The move is the latest effort to stave off Southcentral’s looming natural gas shortfall.
It’s a serene scene on the beach near Marathon’s Kenai LNG Terminal on Thursday evening. People walk dogs in the frozen surf and the low sun silhouettes the angular arm of the company’s old terminal port. Aside from the occasional sound of rocks tumbling down the nearby bluff, it’s quiet.
But that could change. On the same day, roughly 600 miles away in the state capitol building, Trish Baker makes an announcement.
“There is a solution, a potential solution, for the gas supply issue whereby Harvest would own, operate and develop an LNG facility on the Kenai Peninsula, making imported LNG available to Chugach, Marathon and other Railbelt customers,” she says.
Baker manages government and business affairs for Chugach Electric Association, one of the cooperatives that powers homes around Southcentral Alaska.
On Thursday, Chugach announced a planned partnership with Marathon Petroleum Corporation and Harvest Alaska to bring the Kenai LNG Terminal back online after a decade of dormancy. Under the new agreement, Harvest would acquire the facility from Marathon and change it to an LNG import, rather than export, hub.
Peter Micciche is the mayor of the Kenai Peninsula Borough and used to run the LNG terminal. He also recently headed a coalition of Southcentral mayors that teamed up to study the looming natural gas shortfall. He sees LNG imports meeting residents’ short-term energy needs while a long-term fix – such as the Alaska LNG pipeline project – is developed.
“I believe that a pipeline is necessary through the spine of Alaska for a lot of commerce that simply isn't occurring now because the cost of energy is so high,” he said. “This is a short term solution to keep us from going cold and dark.”
Thursday’s announcement comes at a crucial time for Southcentral. It’s been almost three years since Hilcorp, the dominant oil and gas producer in Cook Inlet, announced it wouldn’t enter into long-term contracts with regional utilities. Since then, the clock’s been ticking.
“Not having gas in 2028 is not an option for Chugach,” Baker said. “We absolutely need to have that.”
The project is distinct from a separate LNG import project that was announced last month and is being spearheaded by ENSTAR Natural Gas Company. If it’s built, ENSTAR’s project would share space with the terminus of the Alaska LNG Project, roughly one-and-a-half miles from Marathon’s terminal.
After hearing the news, lawmakers’ reactions were mixed. Some called it a significant step forward for the current crisis, while others, like Anchorage Republican Mia Costello, said she hoped it would be a short-term solution.
“We’re an energy state, and certainly that kind of goes against everything we believe about, you know, the value that we have with our resources,” she said.
Peter Ribbens worked in Nikiski’s oil and gas sector for more than two decades under Tesoro, which was bought by Marathon in 2018. In its heyday, the terminal shipped gas overseas – almost exclusively to two companies in Japan.
“It takes nat gas from the Cook Inlet basin, including the Swanson field, cools it down through a three-stage refrigeration process, puts it into those big tanks there,” he said. “And then periodically, essentially, a floating thermos bottle would bring it over to Tokyo, where it would get turned into electrons.”
Micciche says repurposing an existing facility could give this project a competitive advantage over others being proposed to address the gas shortage. He says the key new infrastructure needed to equip the facility for imports is a way to change the LNG to a gaseous form.
“What's valuable about the terminal is that the actual terminal, the place where the LNG tanker ties up, is in existence,” he said.
Ribbens is also president of the Kenai Peninsula Borough Assembly, and says the project could come with economic opportunities that would make a “major difference” for his constituents in Nikiski.
“There are the contractors who go out there and, you know, do the maintenance and any capital improvement projects, and then there are the suppliers who supply the parts for all those things, and then there are the restaurants that people go to and eat at for lunch,” he said. “So, you know, one industrial worker supports far more than just his or her own family.”
Micciche had similar thoughts.
“Breathing new life into Nikiski, first with the short-term importation of LNG, and then the eventual long-term exportation of larger volumes when AKLNG is built, is a very big deal to the Kenai Peninsula Borough,” he said. “I'm thrilled that my old plant will be coming back to life.”
The terminal revival announced Thursday isn’t a done-deal. Baker, told lawmakers that design work still needs to get done. The facility is already licensed by federal regulators for LNG imports, and Baker deferred questions about permitting to Harvest. Harvest estimates full-scale import operations at the Nikiski terminal could begin in 2028.
