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Cook Inlet Gas Storage Facilities Not Being Used

By | August 23, 2012

Two years ago,  when Governor Parnell signed the Cook Inlet Recovery Act,  prospects were bright for gas supplies in Cook Inlet.  And for the first time in several years,  residents of South Central Alaska weren’t worried about whether they would endure energy shortages during coming winters.   Now,  while some of the elements of that law are not falling into place,  and there’s a push for more certainty,  early supporters say the plan is still holding together.

The Cook Inlet Recovery Act devised a way for gas producers to build and fill an underground  gas storage facility to allow users to deposit gas during the summer – when there’s little local use for it – and withdraw it during the winter when supplies run dangerously near empty.   It offered free rent on the state land for ten years,  it also offered exploration incentives to get more gas into the system – and it offered regulatory assistance for buyers and sellers to come up with supply contracts.

The plan was sponsored by Anchorage Republican Mike Hawker.  A storage facility has been developed from an old Marathon Oil well.   And Hawker says there are enough reserves on hand to cover this coming winter.   But a problem has come up between Marathon and Enstar, Anchorage’s gas utility, over filling that facility – and the price for the gas that goes into it.  He says the supply will not be available at – quote – “peak efficiency.”

The effect on the consumer is defined as the cost of that gas at the burner tip for folks in South Central Alaska.  There’s just no question, we in our community have enjoyed some of the cheapest natural gas rates in North America, and have for many years.  And our market is starting to normalize and starting to go up.  Enstar is doing their best to protect the consumer and sign up for the price that Marathon and other producers wanted to provide gas at.

He says the negotiations are not a legislative matter but talks are going on – with an eye on market prices that fluctuate.

Marathon wants to get essentially the same price they can get for exporting the gas to the Asian markets.  Enstar wants to pay the much lower price that they paid when we had an excess of gas – the classic supply and demand.  And that really becomes the ultimate issue – negotiating a fair and reasonable market price.

Several lawmakers are trying another approach to assuring a supply for the underground storage facilities.   Anchorage Democrat Berta Gardner signed on to a letter to the governor calling on the Parnell administration to use that federal export license as a tool in directing the negotiations.  The state has the right to oppose the license.  And the absence of a federal extension could end exports.   Gardner says the state now has no legal, no statutory authority over the market – but must rely on promises that the local needs will be met.  She says the suppliers have always been able to keep that commitment,  but have never done more than agree to a non-binding term of service.  She says Democrats want at least that level of commitment again.

We support the export of gas in part because it creates a market for explorers and producers when they know the market for gas they find is bigger than just South Central Alaska.  We just want to make sure that in the event that we need it for heat here ourselves we have it, that’s a critical use.

Conoco-Phillips declined to comment on the concerns with the statement – quote- “no decisions have been made on future of the LNG plant nor its export license.”   The governor’s office replied that state officials met with the companies involved and are optimistic the issue will be resolved.

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