LNG imports to Cook Inlet? Expect political blowback

It seems all but inevitable now that imports of liquefied natural gas, most likely from western Canada, will be needed to fill a looming gap in natural gas production from Cook Inlet expected to begin in 2027.

After that, there won’t be enough gas from the Inlet to fuel all space heating and power generation needs in Southcentral Alaska.

There’s gas left in the Inlet, but not enough. There’s a lot of it on the North Slope, but a pipeline can’t be built in time. Imports of liquefied natural gas, or LNG, seem the only option to meet the near-term need.

A lot of Alaskans won’t like that, particularly since consumers will help pay for the facilities needed to import the LNG, which will be regasified for use In the region.

There will be political blowback. It’s starting already with a letter from State Sen. Bill Wielechowski to state natural resource commissioner John Boyle and state Attorney General Treg Taylor charging that Hilcorp, the main gas producer, is reneging on its commitments in state oil and gas leases to diligently explore known but undeveloped pockets of gas. Those were identified in a state Division of Oil and Gas report issued earlier this year.

Alaska U.S. Sen. Lisa Murkowski is no fan of imports, either. Last spring she told state legislators in Juneau that importing LNG is the easy way out of a complex problem. Once they begin, with infrastructure and commercial contracts in place, it will be a difficult habit to break, Murkowski said.

Still, the gas and electric utilities have a regulatory responsibility to assure consumers that natural gas and electricity mostly fueled by gas will be available despite the political optics.

John Sims, President of ENSTAR Natural Gas, recognized the difficulty of the problem: “The work we are doing now (to assess different options) represents a generational shift in the Railbelt’s energy landscape. The assessment confirms what we already know about Cook Inlet: for 60 years, we have benefited from relatively easy access to gas. But this is an aging basin and we need a solution now in order to continue to serve our customers when ENSTAR’s contracts with Hilcorp expire in 2033.”

Other regional utilities will see contracts expire sooner, including one for Homer Electric Association this year. Hilcorp has told utilities it cannot renew gas supply contracts because it cannot guarantee the delivery of gas.

It’s a public relations problem for utilities because it’s tough for the public to understand why Canadian gas must be imported, as LNG, when there are 35 trillion cubic feet of gas on the North Slope waiting for a pipeline.

If it could be built the pipeline, part of the Alaska LNG Project, could supply gas to Southcentral and Interior Alaska at stable, and low, prices.

But companies and the state have worked to tap North Slope gas for decades with no success because of huge costs – $43 million is the latest estimate – and uncertainties in U.S. and world markets for gas and LNG.

A backup plan for a smaller 36-inch gas pipeline, the so-called “bullet line,” faces even tougher problems because the only way its $8 billion estimated costs can be paid for is a massive state subsidy, most likely done through the Alaska Permanent Fund.

Customers of the utilities will also ask why more renewable energy can’t solve the problem, at least for electric utilities. There are plans for more renewable power, wind and solar as well as expansions of hydro power. Chugach Electric Association and Golden Valley Electric Association are now looking at new wind and solar projects proposed by private developers. Matanuska Electric Association will be purchasing more solar power from private projects in in Mat-Su.

But these won’t be enough to take the place of Cook Inlet natural gas, and there are questions as to how many could be done in time to meet the expected decline in gas.

The long-proposed Susitna hydro project is large enough to make a big difference, however. It could supply all the electric utilities’ needs and free up natural gas for Enstar’s space-heating customers.

But while work on the federal licensing for Susitna is advanced the project needs substantial funds to complete licensing. If it could be built, however, could be a source of long-term stable power.

But Susitna is also politically controversial including among some Mat-Su residents in the Talkeetna area near where the dam would be built on the upper Susitna River.

It’s all a complicated and challenging problem.