Mayor's Energy Task Force Vets Cook Inlet Gas Challenges

Commentary: To Solve It's Own Energy Challenges, Anchorage Will End Up Thinking Through Alaska's Overall Energy Challenges

by

Dave Harbour

Anchorage Mayor Dan Sullivan's (NGP Photo-l) Energy Task Force met yesterday at City Hall to hear an update on a plethora of energy issues competing for attention in the waining weeks of the Alaska Legislature's 2010 session in Juneau.

Larry Persily (NGP Photo-r), currently a staff advisor to Representative Mike Hawker (NGP Photo-r, below) briefed Sullivan, Task Force Chairman Judy Brady (NGP Photo-l) and members on a variety of bills, including those dealing with moving North Slope gas to in-state markets; bills designed to organize an energy policy team; create a renewable portfolio standard for Alaska and create incentives for building natural gas storage.  Persily also announced he would be leaving Alaska on Thursday for Washington, begin his job on Friday and reappear in the state in several weeks for meeting in his new role as the Obama Administration's newly appointed Federal Coordinator for the Alaska gas pipeline project.

Carrie Lockhart Marathon Oil Company's Alaska Production Manager and John Zager, Chevron's Alaska General Manager, acquainted the Task Force and mayor with a number of issues related to Sullivan's primary focus on obtaining sufficient gas supplies to satisfy Southcentral's consumer, business and industrial needs for the foreseeable future.

State Oil and Gas Director Kevin Banks (NGP Photo-l) completed the briefing, focusing for the most part on natural gas storage issues.

Some of the issues briefed by the speakers and discussed by Task Force members included:

• Effect of Regulatory Commission of Alaska decisions on exploration and development investment.
• Effect of legislation to convert all or some present and prospective natural gas underground storage to 'open access' as opposed to the current system whereby parties use depleted gas reservoirs to store high volumes of gas produced in the summer, to meet their contractual needs for delivery in the cold, dark winter months when production cannot be increased sufficiently to meet those peak demand periods.
• Effect on Cook Inlet investment when the State is actively considering support for an ANS in-state gas line to serve South Central markets.
• Effect of losing the LNG export facility which provides 'virtual storage' in the winter.  During peak periods, the Marathon and ConocoPhillips owners have traditionally diverted gas from the LNG plant for local consumer use upon request of utilities. Should the City and State appeal to the Department of Energy to extend the LNG export license at least until such time as adequate physical storage facilities in Cook Inlet are present and operating?  Would the companies be willing to continue operations were an extension possible?
• Would an LNG import process provide natural gas to Alaskan consumers at a cheaper rate than they could obtain by paying the tariff on an 800 mile pipeline from the North Slope, plus a gas price acceptable to producers?  If that conversation is engaged by this Task Force or the Legislature, it will not be complete without carefully analyzing the relatively inexpensive foreigh LNG tanker transport rates; the competitive gas costs from pacific rim exporting countries that mostly produce gas at tidewater without the liability of building into the tariff the cost of an 800 mile pipeline; the much cheaper labor costs in those areas; and the cheaper, more favorable climates of LNG exporting countries, mostly in temperate zones.

The Municipality of Anchorage has responsibly undertaken to understand energy issues affecting its citizens and those in surrounding areas, since all are linked by various utilities and since a number of utilites depend for all or some of their energy supply on larger utilities.  Not only does this interdependent web of energy supply and demand embrace all of Southcentral Alaska, it even extends to Fairbanks and Interior Alaska where residents there use natural gas from Cook Inlet and where electric utilities in both places balance electric loads via various dispatch and power sharing arrangements.  Furthermore, Alaska utilities and citizens have one more thing in common: they are not connected to the Outside electric grid or natural gas transmission network and must rely on local energy supplies, infrastructure, regulatory and statutory wisdom and political leadership to survive in a harsh environment.

The Task Force is scheduled to meet again next Tuesday.

(Note: as has been our tradition for nearly a decade, the author urges readers wishing to offer additions or corrections to any report in this webpage to email us here, or add a comment below.  -dh)