7:32 a.m. ADT.  Rig fire in GOM.  Coast Guard responds.  Check news outlets

White House Press Secretary says (12:28 p.m. EDT) production well not in active production – Thirteen people rescued – 100 miles offshore, federal waters 

 

DOI.  Secretary Ken Salazar appears today in Barrow.  *    DOI.  Secretary Ken Salazar appears tomorrow in Anchorage.

 

Cook Inlet Natural Gas Storage Alaska (CINGSA): for a recent, outstanding summary see Alan Bailey’s (NGP Photo-l) Petroleum News Alaska article, here.  Earlier ADN story.  KTUU‘s story today, by Ted Land.

 

Yesterday, representatives of ENSTAR Natural Gas and state regulators briefed Chairman Charisse Millett (NGP Photo-r) and her colleagues on the Alaska State House of RepresentativesCharisse Millett Special Committee on Energy about the status of the Cook Inlet Natural Gas Storage Alaska (CINGSA) project.  Senate Energy Committee Chairman Lesil McGuire (NGP Photo-lower-r) also participated.  

Millett, Chairman of the House Special Committee On Energy convened the meeting with acknowledgment of Representative Mike Hawker’s (NGP Photo-l) leadership in sponsoring passage of HB 280, providing legislative encouragement and incentives for exploration, development and storage projects that might assist Southcentral Alaska gas and electric utilities in planning for adequate power and heat deliveries during the coldest and darkest days of coming winters.  Decision makers are concerned that receding gas reservoirs and the lack of new discoveries in the most populated part of Alaska could cause severe energy shortages in the immediate future.

 

By teleconference, Hawker said that HB 280 was an effort to enable exploration and development of new gas supplies with minimum regulatory interference.

 
Enstar Natural Gas President Colleen Starring (NGP Photo-l)– assisted by CINGSA Senior Project Manager Rick Gentges (NGP Photo-Lower-l) — provided a PowerPoint briefing on the project.

Starring pointed out that the combined utility demand on natural gas is five times higher in the winter than in the summer, but that the demand for Enstar’s home heating energy is fourteen times greater in the winter than in the summer months.  She pointed out that the greatest value in having this enhanced storage capability is ‘reliability’.  "On the coldest days of winter we will be able to draw from this facility and keep our customers supplied," she said.

 
Gentges (NGP Photo) provided a general history of gas storage and more details on CINGSA.  Legislators learned that the first gas storage facility was operated in Buffalo, N.Y. 95 years ago, that 400 storage facilities span North America with capacity to store about 4 Tcf of gas.  Ninety percent of the storage reservoirs are converted from depleted production reservoirs. The balance are salt caverns and former aquifers (permeable rock water reservoirs).

Representative Chris Tuck (NGP Photo-r) asked about the loss of gas in the storage process.  Gentges said that most former reservoirs, to store gas, would have formerly kept gas reserves protected for millions of years but that a ‘real time’ SCADA (supervisory control and data acquisition) would enable operators to accurately monitor the volumes of gas going into and leaving the storage reservoir.

In response to a question from Chairman Millett, Gentges said the project required about two to 2.5 dozen state and federal permits before operations could be sanctioned.  He anticipates permitting will be completed this year, with construction ongoing through 2012 — followed by commissioning and operations.

Rep. Kyle Johansen (NGP Photo-r) was concerned about obsticles to permitting and Starring noted that when Enstar took the project over from its previous owner (TransCanada), the permit applications were "90% complete".  She talked of her optimism and the 100-200 indirect jobs that would result from the project even though, "only one or two people will be needed on site.  There is a vast amount of work ahead," she said, but we are on schedule and from our perspective we have a very well designed process."

Johanson asked about ‘organized opposition’, and Starring said there appeared to be none, and that the project goals were ‘achievable’; however, we note the intervention of and comments by interested parties in Enstar’s certification filing with the Regulatory Commission of Alaska.  Initial concerns expressed by some parties about the price of storage could become thorny roadblocks, given the voting record of some Commissioners who, in the past, have elevated the value of "cost" over the value of "secure gas supplies".  Also, the more supporting and opposing parties become involved in a proceeding, the more time is typically required to provide all with ‘due process’ and adjudicate the additional record involved.

Millett asked about Enstar’s gas supply contracts and learned that within ten years most of those contracts would terminate, even as demand is expected to increase.  "When you reach 2012-14 we may not have sufficient gas under contract to meet our requirements," she said.  "We do have concerns about peak day events beginning as soon as this winter."   

Representative Pete Petersen (NGP Photo-r) expressed concern about the cost of gas.  Starring said that the cost of storage, $180 million, would roughly produce $3 per Mcf to consumers above the cost of the gas itself.  "But if we have storage," she said, "we may be able to buy gas in the summer at cheaper rates than we must now pay during winter months.

Kevin Banks (NGP Photo-l), Director of the State’s Oil and Gas Division, briefed Members on the State’s interest in the storage project.  "We craft a storage lease," he said, "which will contain a bundle of rights allowing a storage project to go forward."

Representative Craig Johnson (NGP Photo-r) questioned Banks on the concept of gas loss in storage.  Banks said the jurisdiction of the Alaska Oil and Gas Conservation Commission (AOGCC) covered issues like the integrity of the storage reservoir.  "My experience in working with the AOGCC," he said, "is that they are the best in the country."

Millett asked about existing storage and Banks described three producer-owned storage facilities currently in operation.  Under further questioning he said of the new state reservoir lease that, "The discussion is nearly complete and we see no problem in supplying final approval to Enstar for a storage lease."

Regulatory Commission of Alaska (RCA) Chairman Bob Pickett (NGP Photo-l) described the regulatory process and timeline for adjudication.  He declined to go into substantive detail since the CINGSA matter lies in an ‘open docket’ and may only be substantively addressed on the record during commission proceedings. The RCA  is generally responsible for certifying utilities and regulating the rates they may charge customers.

On the other hand, the AOGCC’s jurisdiction is generally below the ground and assures that an operator can safely extract resources while, "…ensuring conservation practices, and increasing ultimate recovery, while protecting health, safety, the environment, and property rights."  AOGCC Chairman Dan Seamount told the committee that, "HB 280 gives AOGCC the authority to determine storage potential and we make decisions regarding drilling and workover activity.  We make sure wells have integrity and gas doesn’t leak into surrounding areas or to the surface".  In response to a question from Peterson, Seamount said that, "We make sure that all wells have integrity and have been properly capped."

Legislators closed the meeting with a discussion about the fairness and effectiveness of state bonding requirements.  They questioned Banks further about his ideas for improving internal approval processes.  

(Note: all parties named in stories or other readers are invited to send in additions or corrections since our goal is to make sure our facts are as accurate as possible.  There is no expiration date by which we will not make necessary changes.  -dh)