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Vol. 12, No. 8 Week of February 25, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Enstar moves forward on Homer gas line

Looking at Cosmopolitan gas; drafts pipeline application for submission in March; if response favorable will start permitting

Kay Cashman

Petroleum News

Curtis Thayer, director of corporate and external affairs for Enstar Natural Gas Co., told Petroleum News Feb. 21 that his company has drafted a South Kenai Pipeline Extension Application for a gas pipeline to Homer, which the Southcentral Alaska utility hopes to submit to the Regulatory Commission of Alaska in March. If Enstar receives “a favorable response” from RCA, Thayer said it would begin permitting the line.

“We are still working on the exact right of way and once that is completed it will be made public,” he said.

In remarks to the Kenai chapter of the Alliance on Feb. 20, Thayer said if everything works out, the southern Kenai Peninsula and Homer could be consuming natural gas by the end of 2009.

“Things are moving in the right direction. A lot of things still need to happen to fall into place, but it is moving,” he said.

Thayer said his company has had to “think outside the box” in trying to bring gas to Homer, which is a tiny market. In order to support the price of infrastructure Enstar is looking at both bringing gas south to Homer and taking untapped southern Kenai Peninsula gas north to connect into the existing Cook Inlet gas grid.

Current estimates put the cost of Enstar’s transmission lines at $16 million, plus another $14 million for distribution lines (over a five year period).

“For Homer alone that’s a tough egg to crack — $30 million to bring natural gas to Homer. But if we’re able to connect this system into the Southcentral grid and into the lower Cook Inlet, there’s a good possibility that we can do what we call postage-stamp rate-making, where … all of our customers ... could help share those costs for bringing it from Anchor Point (Cosmopolitan) or Red north so we can cut the transmission costs to Homer by half, if half that gas is going to benefit our consumers on the other end.”

Enstar, he said, is hoping its proposal to build gas lines to the southern peninsula will stimulate exploration in the area, which currently has no way to get commercial quantities of natural gas to market.

One possibility Enstar is considering is connecting to Chevron’s Red well exploration area in the southern peninsula with a transmission line, and taking that gas both north to the Kenai-Kachemak Pipe Line at Ninilchik and, “depending on how much gas they have” also building a line south to Homer, a combination which would involve 23 miles of largely cross-country transmission lines.

The other possibility is to tap natural gas from the as-of-yet undeveloped offshore Cosmopolitan oil and gas prospect six miles north of Anchor Point. It would involve a longer route of about 38 miles that would follow the Sterling Highway from Ninilchik into Homer, he said.

Even though one route is substantially shorter than the other, Thayer said the costs are similar because Enstar has rights of way and roads to work off of for the longer route and would have to go across country for the shorter route.

Thayer referred to Cosmopolitan as a “new and exciting opportunity” that Pioneer Natural Resources Alaska recently brought to Enstar’s attention.

“Pioneer,” he noted, “is the primary driver behind Cosmopolitan development (see related story on page 1 of this issue) on the southern peninsula.

“Pioneer is the one that came to us and said, ‘We have gas. We don’t know how much gas we have. Are you interested?’ We were obviously interested.”

Pioneer’s offer “changed the dynamics” for Enstar, Thayer said.

Whatever the utility decides to do, Thayer said Homer would probably get gas.

He said companies exploring for gas in the area are Chevron (Unocal), Marathon, Pioneer and Aurora Gas, while three others — Escopeta, Northstar Energy, Storm Cat Energy — are developing plans to explore for natural gas in the area.

“There are a lot of players out there,” Thayer said. “It’s a matter of who can come up with the biggest discovery.”

Thayer provided a timeline for bringing natural gas to Homer. He said it would take six months for the regulatory work, 12 months for engineering, six months for permitting and the right of way, and 20 months for transmission line construction. Engineering and permitting could begin after the regulatory work was done but construction could not begin until towards the end of the permitting timetable, which would be second quarter 2008.

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