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Vol. 14, No. 32 Week of August 09, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Gas shortage stirs pols

Governor, mayor, senator seek energy security as CI natural gas runs low

Wesley Loy

For Petroleum News

Alaska political leaders are seizing on what’s fast becoming a burning issue: the potential for electric power or heating outages this winter in the state’s population center as supplies of Cook Inlet natural gas tighten.

“Woe unto the policymaker who didn’t do something,” said state Sen. Hollis French, an Anchorage Democrat who is calling for a Strategic Gas Initiative.

Aside from French, Gov. Sean Parnell and Anchorage Mayor Dan Sullivan also have announced moves in recent days to deal with what Sullivan’s office termed a “looming energy crisis.”

Stoking the urgency was a July 29 public meeting of the Regulatory Commission of Alaska. One commissioner, Anthony Price, spoke of “a real possibility of rolling blackouts” this winter should a cold snap overtax the available gas supply and force a shutdown of gas-fired electric power plants.

Parnell announcement

The governor’s office on Aug. 4 said Parnell had directed his gas advisory team to “explore the best possible options for producing and delivering in-state natural gas.”

“We need to make gas available to Alaskans as soon as possible,” Parnell said in a press release. While efforts continue toward a major pipeline under AGIA, the Alaska Gasline Inducement Act of 2007, to carry huge volumes of North Slope gas out of state, other sources must be considered to serve the needs of Interior, Southcentral and rural Alaska, he said.

Parnell mentioned the undeveloped Gubik field in the Brooks Range Foothills, the Nenana basin and Cook Inlet, which geologists believe could yet yield significant new finds.

Parnell, who took over for former Gov. Sarah Palin on July 26, said he has directed his administration to evaluate three specific options for in-state gas. They include a standalone pipeline from the North Slope and the Foothills south to Fairbanks and Southcentral; a spur line to Southcentral off the proposed major pipeline from the North Slope to the Lower 48; and a pipeline from either Cook Inlet or one of the Interior basins through the state’s Railbelt.

“Additionally, opportunities to distribute gas to Western Alaska, and propane production and delivery will be considered,” the press release from the governor’s office said. “Economic models created by the departments of Revenue and Natural Resources will be used along with agency personnel to perform the necessary analysis and identify the tariffs and fees associated with each option.”

French, who has announced he’ll run against Republican Parnell next year, sent a letter to the governor on Aug. 5 calling for a Strategic Gas Initiative.

“In recent years there has been a growing chorus of voices warning of decreasing volumes of Cook Inlet gas available for distribution during periods of peak demand,” French’s letter said.

In an Aug. 4 interview with Petroleum News, French said his plan would emphasize developing gas storage capacity in the Cook Inlet region. Stored gas could be used to handle peak demand or deal with an emergency, he said.

French said all the industry and government players need to figure out a way to develop storage. One possibility is creation of an industry consortium, he said, or perhaps an authority of some kind.

French, who once worked for several years on a Cook Inlet oil and gas platform and later on the North Slope as a production operator in the Kuparuk field, said he hopes the administration will look at options such as reconfiguring the liquefied natural gas export terminal at Nikiski to also receive LNG, building gas storage vessels of some type, or identifying reservoirs for underground storage.

As for funding, the state might provide help such as backing a bond sale, French said.

French, who chairs the Senate Judiciary Committee and holds a seat on the Resources Committee, said he expects hearings on the Cook Inlet gas issue, and possibly legislation when the next regular session opens in January.

“Heat shut off to Anchorage homes would be shocking to the world,” French said. “It would be shameful if we were having to hustle our folks into a Superdome situation.”

A major challenge to solving the energy crunch is overcoming the relatively small market size of the Anchorage area, where roughly half the state’s population lives, French said. The minor market doesn’t give gas explorers much incentive, he said.

One idea French doesn’t favor is having the state itself drill for Cook Inlet gas.

“Wildcatting a well,” he said, “that would be way, way down on my list.”

Mayor appoints task force

On July 31, Anchorage Mayor Sullivan announced a new task force to look at keeping Southcentral energized when temperatures drop below zero.

The nine-member task force generally includes past and present energy industry, regulatory and economic development players. A press release from the mayor’s office didn’t indicate when the panel would present its report to Sullivan, who called the energy situation “one of the most pressing issues” the city faces.

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Anchorage mayor forms energy task force

Anchorage Mayor Dan Sullivan has created a task force to address a looming energy crisis.

“We look to this blue-ribbon task force to address both immediate and long-term energy needs, including making sure Anchorage residents have an uninterrupted supply of gas to heat their homes this winter,” Sullivan said in a statement.

The task force includes a range of industry representatives, along with a variety of planning and business professionals. The same panelists were part of the mayor’s transition team; indeed, they jointly authored the energy portion of the transition report.

In recent winters when temperatures dipped below zero the city has come dangerously close to failing to meet the needs of its gas customers, the mayor’s office said. The administration, including emergency management personnel, is developing contingency plans for such an event. Municipal Manager George Vakalis is examining this issue as a standalone challenge.

Immediate and long-term

The task force will develop longer-term recommendations — three to five years and 10 years and longer — separately from the immediate issue of winter deliverability. Findings and recommendations will be reported directly to the mayor.

Members of the Energy Task Force include:

• Judy Brady, former executive director, Alaska Oil and Gas Association;

• Dan Coffey, Anchorage Assembly liaison and private attorney;

• Dave Harbour, former commissioner, Regulatory Commission of Alaska;

• Tony Izzo, co-chair of TMi Consulting and former CEO of Enstar;

• Arden Page, mediator/private attorney;

• Mary Ann Pease, Knik Arm Bridge and Toll Authority;

• Bill Popp, president and CEO, Anchorage Economic Development Corp.;

• Steve Pratt, energy consultant; and

• Bob Stinson, president, Conam Construction Co., past president of the Alaska Support Industry Alliance.

—Petroleum News