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RCA OKs Hilcorp Kenai gas field public gas storage certificate
Alan Bailey for Petroleum News
On Aug. 28 the Regulatory Commission of Alaska issued an order approving the issue of a certificate of public convenience and necessity to Hilcorp Gas Storage LLC for the operation of some gas reservoirs in the Kenai gas field on the Kenai Peninsula as a public gas storage facility. The RCA's decision will enable the company, a wholly owned subsidiary of Hilcorp Alaska, to offer gas storage services to third party entities, in a similar manner to the nearby Cook Inlet Natural Gas Storage Alaska facility, the only other public gas storage facility in the Cook Inlet region.
The commission requires Hilcorp Gas Storage to file a general rate case for the storage facility by July 1, 2026. The rate case must include factors such as a cost allocation manual, a depreciation study and a description of the methodology used to determine fair market value.
Given constraints on the rate at which gas from gas and oil fields in the Cook Inlet basin can be delivered, gas producers and utilities that supply natural gas or use natural gas as fuel need to store gas during periods when gas demand is low for later use when gas demand is high. Various entities in the region have been expressing concern about the need for additional gas storage, as gas production from the basin declines.
Gas storage in the Kenai gas field The storage facilities in the Kenai gas field have been used for gas storage by the field operator since 2006, to ensure that the operator can maintain sufficient gas deliverability to meet its contractual obligations for gas supplies to customers. As a public utility Hilcorp Gas Storage will now be able to offer storage services to third party entities, subject to the constraints of the amount of storage space that is available.
According to the RCA order, operation of the gas storage facility involves the use of 15 wells in the Kenai field. The order says that the commission has thoroughly investigated and confirmed Hilcorp Gas Storage's ability to operate and manage the storage facility.
No hearing warranted In issuing its order approving the CPCN the RCA determined that a hearing into Hilcorp Gas Storage's application was not warranted, despite petitions to intervene by utilities Enstar Natural Gas Co., Matanuska Electric Association and Chugach Electric Association. The commission said that the petitions did not amount to protests against the certification.
Enstar had argued that, because Hilcorp already uses the Kenai gas field storage to ensure the producer's firm delivery of gas to Enstar, the gas utility has a duty to ensure that the public storage facility located in the same gas field as Hilcorp's private storage does not impact Hilcorp's ability to deliver its firm gas supplies to Enstar. In a further filing Enstar confirmed that it is interested in becoming a customer of Hilcorp's storage facility.
MEA expressed support for the CPCN application but asked for access to proposed tariff information that would make it possible to ensure the establishment of just and reasonable rates.
Chugach Electric also expressed support for the storage facility while also arguing that the order approving the CPCN may impact the price and availability of gas storage, thus impacting Chugach Electric's ability to serve its customers in an affordable and reliable manner.
Chugach Electric, the majority working interest owner of the Beluga River gas field on the west side of the Cook Inlet, is also investigating the possible use of depleted gas reservoirs in that field for gas storage.
--ALAN BAILEY
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