As many citizens are aware, as Cook Inlet production wanes, Southcentral Alaska is facing natural gas supply shortfalls after 2027, just two years from now. This will affect our ability to power and heat our homes, warm our water, and cook. From the public perspective, it is difficult to feel confident we will dodge the bullet.
There was a remarkable hearing before the Regulatory Commission of Alaska, or RCA, on Jan. 15. Enstar was seeking permission to start billing customers on the costs they are incurring to finance a liquefied natural gas, or LNG, import facility in Nikiski, which is a legitimate request. The hearing was striking on two fronts.
First, Enstar was requesting an expedited review. So even though they have known about the need to import LNG for a long time, they had not done this until now. A commissioner criticized them about this, opining that Enstar’s envisioned time frame for importing LNG was “too little, too late,” insofar as he could not see how LNG can be imported before 2030, while there will be gas shortages before then. Even the president of Enstar remarked that he was not comfortable with gas availability after 2028.
Last July, Enstar told the RCA they wanted to import at Point MacKenzie, rather than Nikiski. They also intended to file a gas sales agreement to purchase LNG by the end of the year, which evidently did not happen. To be clear, there are multiple utilities involved, with varied interests, and mounting a coordinated response must not be easy. All this is hardly reassuring and should be alarming to everyone.
The second notable takeaway from the hearing was the comments from the commissioners themselves. Under state law, AS 42.05.291, utilities are responsible for providing adequate, sufficient, and continuous service as a condition of their certificates that allow them to operate their monopoly businesses. However, under the same statute, it is the commission’s duty to hold the utilities accountable if they are negligent in their obligations. Thus, it was quite ironic for the commission to reprimand Enstar for “too little, too late” when the commission was also culpable of the same thing; they have known about looming gas shortages for years.
There is little doubt that LNG imports will be necessary. And it is plausible that imports that can be obtained from abundant North American or other foreign supplies at delivered costs that are not too much different than what we are paying today.
The political problem with securing gas is that there is a three-way standoff between the LNG imports, Cook Inlet production, and the Alaska Gasline Development Corp., aka AGDC, North Slope gas pipeline proposition. Each poses a threat to the other two. The latter two, the ones that aren’t LNG, have agendas within the state. Meanwhile, in an apparent conflict of interest, the unheard-of company Glenfarne is simultaneously working for both Enstar to import LNG and AGDC to export LNG.
However, Cook Inlet production had its chance and is coming up short. And the AGDC pipeline will not materialize as either a “Phase 1″ project carrying gas only for Southcentral Alaska, because it is not financeable as it will sit 95% empty; or as an LNG export project, because it is unable to compete with LNG sources elsewhere that are not dependent on an 800-mile pipeline for feedstock.
Promoting these two agendas creates unrealistic expectations, and a distraction from the planning needed for the considerable infrastructure necessary to accommodate LNG imports.
There are limits to what lawmakers can do, and much will depend on the utilities and their motivation not to fail their customers. There may be efforts going on behind the scenes, but that is not comforting.
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