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ANGDA board approves business plan Authority’s most essential role may be in taking lead on meeting Southcentral Alaska’s future energy needs as gas runs out Kristen Nelson Petroleum News
The Alaska Natural Gas Development Authority board wrapped up work under the administration of Gov. Frank Murkowski by adopting a business plan — a plan that Chief Executive Officer Harold Heinze said will function as a transition document for the agency with the incoming administration of Gov.-elect Sarah Palin.
Heinze said the plan is not long-term, but designed for the next couple of years. “After that period of time we’d probably re-visit a number of issues,” he said at a Nov. 13 authority board meeting in Anchorage.
ANGDA will also have to pursue its budget with the new administration.
Steve Porter, deputy commissioner of the Department of Revenue, and the Murkowski administration’s liaison to the board, said only maintenance budgets were approved and each entity, each department, will have to approach the new administration. He said salaries for ANGDA were included in the budget, but a proposed regulatory position didn’t make it through. The authority’s proposed $4.6 million capital budget was not approved.
The new administration will also have some board decisions to make: the terms of three board members, David Cuddy, Bob Favretto and Andy Warwick, the board chairman, all expired June 6, 2006. Board members serve until replaced.
Economic threshold ANGDA has focused on maximizing in-state use of Alaska North Slope natural gas and its business plan, developed by Northern Economics, said the authority’s major strength is that it is benefit driven rather than profit driven while its major weakness is that it cannot compel cooperation of its stakeholders, power utilities and local gas companies.
The authority has the ability to acquire and condition ANS natural gas, and to build facilities to bring that gas to market, said Cal Kerr of Northern Economics, and intends to aggregate demand for in-state gas users and represent Alaska energy providers at the Regulatory Commission of Alaska and at the Federal Energy Regulatory Commission.
Northern Economics CEO Pat Burden said that the 30,000-foot level market analysis includes depleting Cook Inlet gas reserves — reserves which are not being replaced; extremely high rural energy prices; and growing residential and commercial energy demands.
Southcentral needs North Slope gas, but to bring a spur line to Southcentral at an economic tariff will require volumes of 200 million to 250 million British thermal units per day. To make this happen the delivered cost of the gas must be within the reach of industrial users, which are more price sensitive than residential users, because the volume from just power utilities and local gas distribution companies isn’t enough.
Without the necessary volumes, Burden said, the tariff will be very high and other energy sources will be more attractive. The gross need is large enough, Burden said, but the commitments may not be there. Enstar, for instance, could continue to use some Cook Inlet gas.
Heinze said that they ran a range of numbers: at 200-250 million Btu the numbers work, but they’re troubling at 100 million.
Call for united action by utilities Burton said that while ANGDA has no authority to compel participation, it can sponsor a coordinated effort, which ANGDA proposes to do in its business plan.
Tony Izzo, former head of Enstar, the Southcentral gas distribution company, said it will require a coordinated effort across all the utilities to make a spur line economic: One could convert to coal and kill the project, he said.
Izzo said it will take leadership and a plan to bridge the gap between now and 10 years from now — the estimated arrival of North Slope gas.
He told the board that the swing in the need for gas between a cold day in the winter and a warm day in July is 10 to 11 times: from some 300 million cubic feet down to 16 million. He said ANGDA needs to take the leadership and start a docket with the Regulatory Commission of Alaska. “If we’re disjointed we’re just throwing the dice and hoping,” he said.
Heinze said it is hard to be optimistic about exploration in Cook Inlet, and he noted that the export license for the liquefied natural gas plant at Nikiski will be up for renewal soon, and if LNG plant owners ConocoPhillips and Marathon apply for renewal of the license, approval will require an excess of gas for use locally.
The Agrium fertilizer plant, the other industrial user of natural gas in Cook Inlet, has already shut down for the winter because of insufficient natural gas for its operations.
ANGDA consultant Joe Griffith, formerly head of Chugach Electric Association, said there is a lack of leadership in finding new energy for Southcentral Alaska. Utilities haven’t had to step up to the plate in 25 years, he said, and in the mid-1980s, after the Susitna dam plan was scrapped, all the utilities opposed the Bradley Lake project, which today provides the lowest cost of power.
Griffith said the situation cries for leadership.
In 1983-84 the old power authority provided that leadership — today, he said, we have nobody.
Port authority looking for MOU Bill Walker, general counsel for the Alaska Gasline Port Authority, asked the ANGDA board to consider a memorandum of understanding between the organizations, and possibly a joint board meeting in the coming months.
The MOU, Walker said, would allow “more open discussion” between the port authority and ANGDA.
Heinze recommended using the same format as the MOU ANGDA has with Mitsubishi, and told the board that MOU has been through a thorough legal review.
“Basically all it provides in the MOU is that we can tell each other whatever we want to tell each other and if I’m told something and asked to treat it as confidential I can,” Heinze said.
There is no obligation created, he said, and such an MOU wouldn’t preclude an MOU with another project proponent.
The board agreed that Heinze should work with Walker on the MOU.
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