Enstar Natural Gas wants new look at North Slope “bullet” gas pipeline

Enstar Natural GAS Co., the state’s largest gas utility, wants to resume planning for a 36-inch natural gas pipeline from the North Slope. Informally known as the “bullet” line, this would be a smaller, in-state version of a larger 42-inch pipeline and liquefied natural gas export project being pushed by the state of Alaska.

Only one of these would be built, but John Sims, CEO of Enstar Natural Gas Co., said it’s important to have a backup plan in the works in case the bigger project doesn’t go.

Sims is worried because natural gas production in Cook Inlet and Southcentral will be winding down and unless gas can be brought from the North Slope, where there are large, untapped resources, importing liquefied gas as LNG is the only option.

A pipeline would also be important for the Mat-Su because its route would be through the region and it would provide a stable source of natural gas for consumers and possibly industrial use.

Sims has asked Alaska Gov. Mike Dunleavy to have the state gas corporation, the Alaska Gas Development Corp., or AGDC, return technical work Enstar did on the smaller project before turning the work over to the state in 2010. Enstar spent $4.66 million on the work before handing the project to the state.

AGDC continued development of the in-state project and secured permits and rights-of-way but then shelved it to pursue the larger Alaska LNG Project. However, key federal and state authorizations were secured for the smaller project including a U.S. Army Corps of Engineers’ Record of Decision on a Final Environmental Impact Statement.

The large Alaska LNG Project cost is estimated at about $43 billion while the smaller project cost has been put at between $10 billion to $12 billion. It is much less than the larger pipeline because it does not include an LNG export plant.

Enstar and Southcentral electric utilities are facing likely shortfalls in gas supplies as production from Cook Inlet fields decline, Sims said. The utilities need gas from other sources, either from the North Slope or imports of LNG from British Columbia.

A joint-utility study of LNG imports as a backup is underway, with Enstar coordinating the effort. Preliminary cost estimates of imports have been completed by California-based Berkeley Research Group but more detailed estimates will be completed by the end of 2024 or early 2024, Sims said.

Enstar prefers not to import LNG, he said, because it would expose customers to volatility in LNG pricing in Canada. Alaska is now isolated from world gas markets with its in-state supply from Cook Inlet and enjoys the stability in prices that come from sourcing supply in-state.

“Importing LNG is the last thing we want to do. Not only would there be jobs lost (in current regional gas production but it would expose us to spikes in prices in the world market. We’ve been very fortunate in having the security of local (Cook Inlet) supply for the last 60 years.”

Alaska’s Division of Oil and Gas projects that Cook Inlet fields will begin declining in 2027. Hilcorp Energy, the region’s major gas producer, told local utilities including Enstar last year that it cannot guarantee gas supply contracts can be renewed as they expire.

Enstar’s contract, Hilcorp’s largest at about 33 billion cubic feet per year, expires in April, 2033 but gas supply contracts with electric utilities begin expiring next year starting with Homer Electric Association, or HEA, the electric utility for the Kenai Peninsula.

Sims said Enstar is working on an agreement to supply gas HEA from its own contracted supply from Hilcorp.

Enstar is uniquely exposed among Alaska’s utilities because it provides fuel for space heating and cannot easily turn to alternatives like renewable wind and solar, unlike the electric utilities. Natural gas from Enstar heats buildings and homes in Southcentral Alaska, the state’s major population centers.

If the state agrees to return the smaller pipeline technical work Enstar would pursue it in parallel with the state’s continued work on a large state-owned gas project, Sims said.

“However, even the ‘bullet line’ is not our preferred option,” he said. The best solution would be for the large Alaska LNG Project to be built because it would deliver larger volumes of gas at less cost to Enstar and other utilities as well as LNG export customers.

The original plan for the smaller project was for a 24-inch pipeline to deliver 500 million cubic feet per day of gas that is sufficient to meet in-state demand. The diameter was later changed to 36 inches to allow the pipeline to operate with less compression, reducing costs, but to also allow for later expansion.

It’s recognized that large subsidies from the state would be needed for the 36-inch pipeline but the state does have its $70 billion-plus Alaska Permanent Fund, and the state could decide to use some of those savings to ensure the security of gas supply and pricing to its largest communities.