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Week of October 31, 2010
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New contract allows Chugach to ship gas to Beluga on Enstar line

In a move arising from the evolving Southcentral Alaska utility gas supply situation, Chugach Electric Association, a major Southcentral electric utility, has signed a new contract with gas utility Enstar Natural Gas Co. for the shipping of fuel to CEA’s gas-fired Beluga power station on the west side of Cook Inlet. The contract reflects the fact that CEA’s latest gas supply contracts with Cook Inlet gas producers require the electric utility to make its own transportation arrangements — previous supply contracts included the transportation of gas to the Beluga power plant, Phil Steyer, CEA director of government relations and corporate communications, told Petroleum News Oct. 25.

“In our new contracts … producers supply us gas and it’s up to us to figure out how to move it around and deliver it,” Steyer said.

Essentially, gas supplier Marathon Oil Co. used to have a gas transportation contract with Enstar, but CEA is now taking over that contract, CEA executive Mark Fouts explained. CEA has entered into two new supply contracts in the past year and a half, one with ConocoPhillips and the other with Marathon, with CEA being responsible for gas transportation under both contracts, Fouts said.

Interruptible delivery

But particularly telling in the context of tightening gas supplies from the Cook Inlet basin may be the fact that the new gas transportation contract is split into a winter period, from Nov. 15, 2010, to March 31, 2011, and a summer period from April 1, 2011, to Oct. 31, 2011. During the winter period, the contract is for interruptible transportation. In other words, Enstar cannot absolutely guarantee to deliver the gas that CEA requires during that period.

Enstar has requested the Regulatory Commission of Alaska to approve the new contract and in its RCA filing the gas utility commented on the issues associated with winter gas deliveries.

“Enstar cannot provide … transportation service to the Beluga power plant at the level desired by CEA year round on a firm basis without impairing its ability to serve its existing customers,” wrote Daniel Dieckgraeff, Enstar manager, rates and regulatory affairs, in an Oct. 15 letter to the commission.

Dieckgraeff said that declining production from the Beluga gas field is a key factor in compromising Enstar’s ability to deliver sufficient gas to CEA’s Beluga facility during the winter — the Beluga field, right under the power plant, is the prime source of gas for the plant. A footnote to Dieckgraeff’s letter says that Enstar expects production from the Beluga River field to drop from an average of 130 million cubic feet per day in the winter of 2007-08, and an average of about 110 million cubic feet per day in the winter of 2009-10, to an average of 105 million cubic feet per day in the coming winter.

East-side gas

A key predicament that CEA and Enstar face is that CEA’s new gas supply contracts involve the purchase of gas from gas fields on the east side of Cook Inlet, not on the west side where the Beluga power plant is located. This arrangement involves Enstar accepting CEA’s purchased gas into the gas pipeline infrastructure on the east side of the inlet and flowing an equivalent volume of gas into the power station from the Enstar pipeline system on the west side — rather than flowing gas molecules through Anchorage from the Kenai Peninsula to Beluga, east-side gas would simply be exchanged for west-side gas.

But Enstar must also maintain sufficient gas pressure in its pipelines on the west side of the inlet to ensure continuity of gas supplies to utility gas consumers. In the event of peak utility gas demand during a severe winter cold snap exceeding the ability of aging gas fields such as Beluga River to maintain that gas pressure, gas supplies to the Beluga power plant would have to be curtailed, potentially causing power outages in the region. Hence the interruptible nature of the winter period of the new transportation contract.

However, Fouts commented that CEA is making alternative contingency arrangements for obtaining gas for the power plant, should Enstar be unable to deliver at the full contracted rate.

Pressure upgrade

In addition, CEA is modifying the gas intake system at the Beluga power plant to accommodate possible fluctuations in the gas pressure in Enstar’s pipeline system during severe winter cold. As currently configured, the intake pipeline system reduces the gas pressure from the typical 750 pounds per square inch in Enstar’s pipeline to the operating pressure of about 440 pounds per square inch within the plant, said CEA executive Andrew White. After modification, the power plant will be able to receive gas from Enstar’s system at pressures down to about 525 pounds per square inch, albeit at reduced flow rates.

Fouts said that average gas consumption at the Beluga power plant is 75 million cubic feet per day, but that consumption can hit 91 million cubic feet per day in extreme winter cold. The new transportation contract with Enstar is for 20 million cubic feet per day of gas.

—Alan Bailey

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