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Chugach looking at backup contract Contract with Aurora would replace gas taken from Beluga Pipeline during compressor trips, Enstar and Beluga Pipe Line skeptical Eric Lidji Petroleum News
Chugach Electric Association is seeking approval of a supply contract it says will help keep the lights on during supply disruptions, but two other companies with a stake in the Cook Inlet gas market say the contract doesn’t go far enough to protect various interests.
Chugach is calling the contract with Aurora Gas a “Replacement Gas Contract” because it would replace volumes of gas drawn off the Beluga Pipeline during system failures.
Chugach uses Cook Inlet natural gas to make electricity for much of the Southcentral region. On any given day, the cooperative said, 60 to 100 percent of the fuel Chugach needs at its Beluga Power Plant comes through a compressor operated by ConocoPhillips.
The compressor is designed to offset declining pressure at the Beluga River field, but since being installed in April 2007, the compressor has suddenly failed, or “tripped,” at least 12 times, according to reports from Chugach and from the Beluga Pipe Line Co.
These trips typically last only a few minutes, but because electricity generation is continuous, Chugach must find an alternative source of gas to keep its turbines running.
When these trips occur, a valve in the Beluga Pipeline automatically opens, providing an alternative source of gas to fuel the Beluga Power Plant until the compressor is restored.
The Beluga Pipeline, owned and operated by Marathon, runs from the Cook Inlet Gas Gathering System, or CIGGS, at Granite Point, north to the Beluga River gas field.
Backup prevents blackouts Chugach said the natural gas taken in these cases is a “small increment” typically taken from the “line pack,” or the volume of gas stored within a pipeline at any given time.
Without this automatic backup supply, Chugach said a compressor trip “would otherwise cause Chugach’s generators to fail, with an areawide blackout as the likely result.”
The proposed contract with Aurora would give Chugach a supply of gas to replace the gas it draws from the Beluga Pipeline during these emergency situations.
Chugach said the contract favors “availability” over “volume.” The contract would provide Chugach with up to 700,000 cubic feet of natural gas each time a compressor tripped, an amount that represents less than 1 percent of daily demand, Chugach said.
Chugach is proposing to price the gas based on a methodology set out by the Regulatory Commission of Alaska during an Enstar Natural Gas supply contract case last year.
For 2009, Chugach said that price would be $8.99 per thousand cubic feet.
The RCA approved the contract on an interim basis.
Beluga and Enstar skeptical Beluga Pipe Line called the contract “a step in the right direction” and Enstar said “having some backup gas is better than having no backup gas,” but both companies said the contract didn’t go far enough to insure enough gas would be available when needed.
Beluga Pipe Line said it needs the gas taken from the pipeline to be replaced as it is being drawn in order to avoid a system outage of its own. The proposed Chugach contract only requires Aurora to replace gas to the line pack on the Beluga Pipeline within 24 hours.
Both Beluga Pipe Line and Enstar said that while Chugach claims in a letter to the RCA that the proposed contract obligates Aurora to provide gas, the language of the contract itself contains potential loopholes that could allow Aurora to get out of that obligation.
Enstar also said the proposed contract doesn’t make enough gas available, saying recent reports indicate Chugach needs between 34 million and 46 million cubic feet during a trip.
Enstar also said Chugach should factor shipping costs into the price of replacement gas.
Enstar to recover legal fees In a separate case, Enstar asked state regulators to approve a “Gas Supply Acquisition Charge” of 1.87 cents per thousand cubic feet of gas to cover legal and consulting fees related to recent efforts to secure and get approval of a natural gas supply contract.
The charge would be added to all bills for around four years, allowing Enstar to collect $2.4 million. Enstar estimated the charge would add 27 cents to an average monthly bill.
State regulators have approved similar charges for Enstar in the past, the utility said.
The RCA is taking comments on the request through May 22.
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