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Support, concerns for CINGSA storage Comments to RCA on Kenai Peninsula natural gas storage proposal mostly support the project, while some raise potential problems Alan Bailey Petroleum News
Comments on Cook Inlet Natural Gas Storage Alaska’s planned new gas storage facility on the south side of the city of Kenai have been landing on the desks of the Regulatory Commission of Alaska commissioners.
CINGSA, a subsidiary of Semco Energy and a joint venture with MidAmerican Energy Holdings Co., wants to fast track construction of the facility to head off potential shortfalls in Southcentral Alaska utility gas deliveries from the Cook Inlet basin in the winter of 2012-13. CINGSA has asked RCA for expedited review of an application for a certificate of public convenience and necessity and has asked for certificate approval by December, to enable the facility to go into operation in 2012.
The facility would store gas in some depleted gas sands in the Cannery Loop gas field and would hook into the Southcentral Alaska gas infrastructure through the nearby Kenai Nikiski pipeline.
Third-party customers would be able to hire the use of storage space in the facility, with the initial customers being Enstar Natural Gas Co., Chugach Electric Association and Municipal Light & Power.
General support In general, people seem to support the CINGSA project, especially given increasing concerns in Southcentral Alaska about the possibility of winter power cuts, were gas deliverability to fall short of demand during a cold snap.
Dan Sullivan, mayor of Anchorage, the most populous town in Alaska and a community that would see the immediate impact of any gas shortages, told the commissioners that he is pleased to see significant, rapid progress in developing gas storage — Sullivan encouraged the commissioners to expedite approval of CINGSA’s certificate.
And Rep. Mike Hawker, R-Anchorage, a co-sponsor of state legislation passed this year to encourage Cook Inlet gas storage development, expressed his strong support for the proposed facility and for an expedited RCA review.
Pipeline capacity concern However, Gary Orr, commercial manager of Unocal, struck a more cautious note, saying that Unocal supports the CINGSA project but is concerned that the Kenai Peninsula pipeline infrastructure may not be able to support the anticipated 150 million cubic feet per day of additional gas that the CINGSA facility could deliver into the pipeline system during periods of high gas usage.
Unocal, a subsidiary of Chevron, is a major Cook Inlet gas producer.
During a period of record gas demand in the winter of 2008-09, there were delivery bottlenecks on the east side of Cook Inlet, Orr said. Unocal understands that the pipeline system on the east side of the inlet has a 180 million to 200 million cubic feet per day throughput limit and that the gas fields on the east side of the inlet are producing at an average monthly rate of 208 million cubic feet per day, including deliveries to the LNG plant at Nikiski.
“With the infrastructure close to its maximum throughput limit, adding 150 million cubic feet per day of extra deliverability at CINGSA will only compound bottlenecks on the east side and may not result in the much needed additional gas throughput to Anchorage,” Orr said.
Questions over rates The state attorney general’s office, in its role as advocate for the state’s public interest, told the commissioners that it supports the CINGSA gas storage facility project. However, there are concerns about the rates that CINGSA anticipates charging its customers, said Daniel Patrick O’Tierney, chief assistant attorney general.
Of particular concern are initial rates for use of the facility that would be based on a five-year average of estimated investment and operating expenditure, with a lack of clarity over whether any retroactive rate adjustment once actual expenditure is known would be subject to RCA review, O’Tierney said. RCA should protect utility ratepayers by insisting that any initial rate be deemed interim and refundable, he said.
And O’Tierney also questioned some of the estimated costs used to determine that initial rate.
Matanuska Electric Association, an electric utility that buys power from Chugach Electric, expressed concern about the potential unintended consequences of sinking $180 million to $200 million in investment capital into the construction of the storage facility, given the limited capacity of the Alaska Railbelt power utilities to invest in a series of potential projects designed to address the energy issues that the region faces.
MEA: don’t expedite And, with the CINGSA application raising some complex commercial issues, including the potential impact of gas storage fees on electricity rates, the application warrants careful consideration rather than expedited treatment, said David Pease, attorney for MEA.
“In sum, the economy of Southcentral Alaska is dependent on an economical and adequate supply of natural gas, and an ill-advised decision in this matter could have disastrous consequences,” Pease said. “The commission should not be rushed to judgment.”
And MEA questioned whether there is in fact an urgent need for storage in 2012 that would justify expedited approval of the certificate application.
“CINGSA appears to be attempting to drive the commission’s process through a self-imposed deadline,” Pease said. “CINGSA’s application lacks a credible explanation of why the scheduling pressure it claims to be under should be the commission’s problem, or cause the public review process to be truncated.”
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