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DNR issues CINGSA gas storage lease State also OKs contraction of Cannery Loop unit to accommodate storage reservoir, while also approving CINGSA plan of operation Alan Bailey Petroleum News
Cook Inlet Natural Gas Storage Alaska’s plans for a new gas storage facility on Alaska’s Kenai Peninsula took another step forward July 1 when the Alaska Department of Natural Resources issued a gas storage lease for state subsurface land in the Sterling C sands of the Cannery Loop gas field, on the south side of the City of Kenai. CINGSA is fast tracking the development of its storage facility to head off a potential Southcentral Alaska utility gas delivery shortfall in the winter of 2012-13.
Concurrently with issuing the lease, DNR issued a notice that it is approving contraction of the Cannery Loop unit to remove from the unit the land incorporated in the lease. Any request for a reconsideration of the unit contraction decision must be submitted to DNR by July 21, before the department issues a final decision.
In issuing the storage lease, Bill Barron, director of Alaska’s Division of Oil and Gas, published a finding describing the potential impact of the storage facility both on the Alaska economy and on the state’s environment.
Key role With the Cook Inlet gas industry no longer able to rely on the use of gas supply interruptions to industrial users to bolster the delivery of utility gas during peak winter need, the new storage facility has the potential to fulfill a key role in assuring year-round gas deliverability in Southcentral Alaska, Barron wrote.
In addition, CINGSA’s facility will allow open access to paying customers, enabling utilities to purchase gas with separate pricing for high deliverability rates and helping gas fields to optimize year-round production rather than being tied to the extreme ups and downs of seasonal demand swings.
And, although the CINGSA project could have impacts on local wildlife, DNR has taken these potential impacts into consideration in specifying environmental mitigation measures associated with the storage lease; because of the small surface area of the CINGSA facility, DNR does not anticipate the facility having any effect on the uses of habitat, fish and wildlife, Barron wrote.
Complex ownership The subsurface land in the Cannery Loop field involves a complex mixture of state and private ownership, with the state lease only applying to state-owned land. The Regulatory Commission of Alaska, as part of its certificate of public necessity and convenience for the CINGSA facility, has granted CINGSA the power of eminent domain over land within the facility. And according to a CINGSA progress report filed with RCA July 1, the company is still negotiating the acquisition of property rights with some of the 45 owners of private land within the storage reservoir. Some land acquisition and valuation issues have been appealed to the Alaska Superior Court and the court is holding hearings July 8 to consider these issues. Meantime, the City of Kenai has granted CINGSA a right of entry to begin drilling operations in August, the progress report says.
The progress report also confirmed that, prior to obtaining the state storage lease, CINGSA completed its negotiations with Marathon Oil Co. over access to the Sterling Sands C reservoir.
CINGSA has now reached negotiated agreements covering 100 percent of the operating interest in the storage reservoir, 88 percent of the storage interests and 95 percent of the mineral interests, the report says.
Decisions appealed From the start of CINGSA’s moves to develop its storage facility, Vincent Goddard, president of Inlet Fish Producers of Kenai, whose business facilities sit over part of the proposed storage reservoir, has been raising questions over the physical integrity of the reservoir. Goddard and his companies have appealed to Superior Court over both the Alaska Oil and Gas Conservation Commission injection order for the facility and the City of Kenai’s approval for the CINGSA surface facilities, the progress report says.
Meantime, CINGSA has contracted with Conam Construction Co. to build the pipeline and gathering system for the facility, and has contracted with Nabors Alaska Drilling for drilling the facility’s wells. The driving of conductor pipe at the well pad has already begun, the progress report says.
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