Alaska Gov. Sarah Palin Monday told federal energy authorities she would support a two-year extension of the Kenai liquefied natural gas (LNG) plant's export license if its owners agreed to conditions aimed at protecting the region's utility gas consumers, the economy and Cook Inlet's gas industry.

ConocoPhillips, Alaska Natural Gas Corp. and Marathon Oil Co. are joint owners of the Nikiski LNG terminal, exporting Cook Inlet gas to Japan under a federal export license due to expire in 2009. Their January application to the Department of Energy for a two-year extension, combined with recently tightening supplies and rising prices for gas, have raised fears of a gas shortage in south-central Alaska.

Palin has directed the state to intervene in the license application to ensure that conditions are imposed on an export extension to address those concerns. The Alaska Department of Law filed the necessary documents with the Department of Energy's Office of Fossil Energy Monday.

"While I support an extension of LNG export, I have concerns that the interests of Alaskans may be jeopardized in granting the blanket authorization unless several criteria are met," Palin wrote to the Office of Fossil Energy.

The governor's conditions include ensuring that the companies have binding contracts in place to guarantee adequate supplies of gas for domestic utilities; requiring the owners to continue exploring for new gas to replace depleted reserves; and allowing access for third-party gas producers to the LNG plant to encourage competition and new exploration.

"The conditions and license extension will ensure, for the long run, a reliable and secure supply of energy to the more than 300,000 Alaska residential and commercial gas users that depend on Cook Inlet natural gas resources," Palin said.

In May 2005 ENSTAR Natural Gas Co., which serves about 327,000 customers in the region, warned that it may have to begin importing LNG to meet demand due to declining output from the Cook Inlet gas fields (see Daily GPI, May 23, 2005). ENSTAR recently issued a request for proposal for new gas supplies (see Daily GPI, Feb. 13).

Cook Inlet holds an estimated 1.6 Tcf of proven gas reserves, and an estimated 1.7 Tcf in undiscovered resources. More than a third of the basin's production goes to large industrial users like the LNG plant and Agrium's fertilizer plant. With residential gas prices nearly doubling in the last five years, residents are concerned for the security of their long-term supplies of energy.

Starting operations in 1969, the Nikiski facility was the first LNG terminal in North America.

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