Murkowski looks to stimulate gas production

Pledges assistance to Agrium; says working on plan to help smaller explorers get a foothold in Cook Inlet basin

Steve Sutherlin

Petroleum News Associate Editor

Alaska Gov. Frank Murkowski said his administration is firmly behind efforts to rescue Agrium’s Kenai nitrogen fertilizer plant from a scheduled shutdown in November, when its current gas supply contract expires.

“We put together a small task force; there’s been some criticism of what the task force has done,” Murkowski said. “I assume some expect somebody to wave a wand and solve the availability of gas on the Kenai Peninsula.”

Murkowski said his recent conversations with Mike Wilson, president and CEO of Agrium, centered on what the state could do to salvage the gas supply situation at the Nikiski plant.

Murkowski said the state would try to ensure there is adequate gas storage to bank excess summertime gas flows as a reserve against the draw down that occurs each winter when the Cook Inlet system sees its peak demand.

“The reality is the draw is in the winter,” he said.

The state has a storage scheme in mind, Murkowski said, however, the plan has hit regulatory snags that the state is hoping to untangle.

Murkowski also said the state would do all it can to stimulate production of natural gas in south-central Alaska’s Cook Inlet basin, and it is evaluating whether it is in the state’s interest to participate financially to bring more production about.

The governor indicated that the state actively is working on a plan to help smaller oil and gas companies get a foothold in the Cook Inlet basin.

“There’s a couple of proposals; there’s a couple of wildcatters down there,” Murkowski said amid rumors one independent has asked for state funding for drilling. “Unfortunately the larger companies don’t have the intense interest they once had in the area; they have bigger fish to fry.”

Murkowski said conserving natural gas would help and suggested reopening the Healy clean coal plant, which he said would relieve the consumption of 10 million cubic feet of gas per day.

In the meanwhile, the gas storage idea is on the front burner.

“We’ve had conversations with the Department of the Interior about storing it in the (Kenai National Wildlife Refuge),” the governor said.

Although the plan is to store gas “in the current field that’s been under production for the last 30 years,” the state is facing a challenge in its effort to get approval because of a change in criteria for the refuge, Murkowski said.

“Previously the criteria was that nothing that would be detrimental in placing the gas in the monument,” Murkowski said. “The new procedure is, anything you add to the monument must enhance the monument.”

The Kenai National Wildlife Refuge was established as the Kenai Moose Range in 1941, but the Alaska National Interest Lands Conservation Act changed the name in 1980. And 1.35 million acres of the 1.92 million acre refuge is now set aside as federal wilderness.

ANILCA established a primary mission to conserve fish and wildlife populations and habitats in their natural diversity, according to information from the U.S. Fish and Wildlife service, manager of the refuge. Compatibility determinations are required for all economic and public-use activities, and economic uses must contribute to achieving refuge purposes and the mission of the refuge system, it said.

Despite the challenges, Murkowski said the state is in the process of working with Interior, and that prospects were reasonably good for approval of gas storage.

Murkowski said he would like to bring the players together for continued discussion.

“I would ask Mr. Wilson bring his people up to meet with folks in the Kenai, in more of a roundtable, to reaffirm their commitment that they’re not just closing the plant — that they’re simply in a position of not having enough gas to run it,” Murkowski said.

Murkowski said he would also call a meeting with the principals of Unocal, Marathon Oil, ConocoPhillips and of Anchorage natural gas distributors, to see if adjustments could be made to accommodate Agrium.

“I don’t want to see that plant close,” Murkowski said. “Once it closes, it will never reopen.”