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Partial funding for southern Kenai gas Final budget cuts $4.5 million for line to Homer, but pays for reduction units to bring gas to Anchor Point and Nikolaevsk Eric Lidji For Petroleum News
For decades, people in the southern Kenai Peninsula have filled their fuel tanks with heating oil as they enviously watched their neighbors in the northern end of the peninsula enjoying relatively cheap supplies of natural gas produced in the nearby Cook Inlet basin.
When Armstrong Alaska sanctioned development of the North Fork unit, an undeveloped oil and gas accumulation north of Homer, many in the southern Kenai saw their dreams of natural gas finally coming true. The capital budget Gov. Sean Parnell signed on June 3, though, suggests that while those dreams might come true, it won’t happen overnight.
The Parnell administration shied away from funding larger transmission projects in favor of cheaper technical facilities also required for distributing natural gas to communities.
The budget funds two pressure reduction units. That piece of equipment makes the high-pressure gas in transmission lines suitable for the lower pressure distribution lines that go directly to homes and businesses. The units will go to Nikolaevsk and Anchor Point.
The units cost $250,000 each.
Homer wanted pipe While those units are essential for expanding the natural gas grid to the southern Kenai, they’re a far cry from what Homer, the largest city in the region, wanted from the state.
Homer got a $4.8 million line item added to the budget for 14 miles of 8-inch plastic pipe to pick up 5 million cubic feet of natural gas daily from North Fork (an amount Enstar Natural Gas said would be adequate for a 30-year build out of distribution in the city) and for a pressure reduction unit in Anchor Point, a pre-requisite for bringing gas to Homer.
Parnell, though, vetoed all but $525,000 of that line item, saying the rest would be considered in a future budget cycle. The funding covers the cost of the pressure reduction unit and leaves some money left over for studies or for laying a small section of pipeline.
“The question will be — do people want to spend money getting the pipe started towards Homer or on doing studies and planning,” Rep. Paul Seaton, R-Homer, wrote following the veto.
Some money OK’d The Office of Management and Budget said Parnell liked the project, and specifically kept some money in the budget to address four issues raised by legislative intent.
The intent requires that gas from a Homer pipeline not cost less than gas in other parts of the basin; a Homer pipeline not harm other customers across the region; state funding for the pipeline help offset rates throughout the region; and the city of Homer develop a plan for a distribution system to bring as many locals as possible onto the grid.
Seaton believes those concerns have already been addressed.
He said the supply contract between Armstrong and Enstar takes care of the first two, while the third “cannot be answered by a study” and the fourth is covered by existing municipal planning documents. “Of course a detailed identification of users could be made by the City, but Enstar already does that as part of its distribution design process for each area that wants to invest in a distribution system,” Seaton wrote.
The approved funding sets the stage for bringing natural gas to Anchor Point, a highway community with about 1,800 people, a health clinic, a school and many businesses.
Nikolaevsk, a community about 300 people with a school and a few local businesses, will get its pressure reduction unit through a different line item added by Sen. Tom Wagoner.
Having access to natural gas should reduce heating costs for both communities, neither of which gets to participate in the Power Cost Equalization subsidy for rural communities.
Homer seeking alternatives While the southern Kenai has been trying to get gas for decades, this detailed planning only became practical over the past year, when Armstrong signed a supply contract with Enstar and agreed to build a pipeline from North Fork to Anchor Point (in return for Enstar building a extension of the Kenai-Kachemak Pipeline south to Anchor Point).
While that route connects North Fork to the regional natural gas transmission system, it also bypasses Homer, a city on the south tip of the peninsula with some 5,500 people.
Homer tried a different approach during the recent legislative session, with the $4.8 million line item for a pipeline system to tap into North Fork. Schools and local governments promoted it as a way to cut energy costs paid for by the public. In late April, Seaton, the longtime representative for the Homer area, sent Parnell a letter connecting the pipeline project to publicly funded energy efforts going back 30 years.
Parnell, though, reduced the line item and decided to look at the issue again in the future.
Homer is still looking for ways to get natural gas soon. Seaton’s office recently began researching how Enstar expanded into the Mat-Su region in the early 1980s.
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