With Cook Inlet reaching old age as an oil and natural gas basin, concerns are being aired in the Alaska state legislature and elsewhere over the longer term adequacy of supplies to serve Southcentral Alaska, including its largest population center, Anchorage.

Historically, Alaska’s most populated area has relied 100% on Cook Inlet natural gas for residential, commercial, large industry and electric generation uses that are provided by ENSTAR, the local utility distribution company.

State Senate Resources Committee hearings have been held this month, collecting testimony on the potential problem and what can be done to head it off, including a presentation by ENSTAR officials and separately a proposed additional underground storage facility to address more immediate deliverability problems in the face of peak winter loads.

Echoing Gov. Sean Parnell’s 2012 initiative for the state to greatly step up oil/gas development on the North Slope, state Department of Natural Resources Commissioner Dan Sullivan has downplayed the long-term resource concerns raised by legislators and shared by ENSTAR officials to a certain extent.

“While there are legitimate concerns about possible contractual shortfalls of natural gas supplies in 2014-15, there are still large volumes of gas to be discovered and developed in small to intermediate size fields,” Sullivan told the state Senate committee, noting that the inlet production area is in transition from larger producers (Chevron and Marathon) to mid-size and small firms (Hilcorp, Apache and Nordaq).

The goal, Sullivan said is to “get supply chasing demand, not demand chasing supply.”

A spokesperson for ENSTAR said his utility is “looking to have a redundancy in our gas supply portfolio,” and the company’s general counsel, Moira Smith, told state lawmakers that the problem now surfaces on cold winter days when heating demand surges, threatening to exceed supply. Power generators dependent on the local gas utility for fuel echoed the concerns.

All of this is raising concerns among some state legislators who think state officials such as Sullivan may be sugar-coating the situation.

“Short-term there is definitely a deliverability problem, and long term it is supply,” the ENSTAR spokesperson said. Short term, the lawmakers have heard presentations on importing liquefied or compressed natural gas (LNG or CNG) by ship, or trucking some of the North Slope supplies to the south as LNG (see Daily GPI, Jan. 17; Dec. 11, 2012).

Total gas sendout volumes annually for ENSTAR amount to about 80 Bcf (winter peaks of 400 MMcf/d), and that itself is part of the problem because it is a relatively small demand to support local drilling or other projects. The demand was reduced somewhat in recent years by the closure of several large industrial operations, including a large fertilizer plant, that went elsewhere because of the high cost of Alaskan gas.

There is no specific legislation at this time, although the state legislature is continuing its series of hearings looking at options, including the Cook Inlet Natural Gas Storage Alaska facility to bank more surpluses of gas in the summertime for use during peak winter demand.

Currently, the gas producers have merchant storage they maintain, and an ENSTAR affiliate operates an underground storage site with a working capacity of 11 Bcf. “The latter just came online this past year,” the ENSTAR spokesperson said.

Although it is ironic given the vast gas supplies identified on the North Slope, another alternative mentioned by the state’s Sullivan is to import some of the burgeoning shale gas supplies being developed in northeast British Columbia.

As Sullivan pointed out, that option would place Alaska in the position of aiding one of the biggest competitors to its longer term proposal for a large-diameter North Slope gas pipeline and LNG export project from Alaska.

“North Slope gas would solve the long-term problem, but in the short term we still have the deliverability problem we are trying to work through,” the utility spokesperson said.

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