Waning Cook Inlet natural gas reserves mean Alaskans will likely have to pay more for natural gas — maybe even a lot more — in a state that already has some of the highest energy costs in the country.
That left just one gas market intact — local utilities. And that market was too small to keep the big companies invested. They left, and Southcentral Alaska was left wondering if it had enough gas to keep the lights and the heat on.
Jackinsky, the retired oil and gas journalist, said those incentives were never about putting money in the state’s coffers. Officials were clear that they were meant to literally keep the lights on.In some ways, the act was a short-term success. It helped usher in a new oil and gas production company and Alaska avoided having to import gas, as lawmakers had feared.
“We have to get the Legislature to look more in advance at solutions so we don’t make sloppy decisions going forward,” he said. “You have to think about the behavior you want to see before you create an incentive.”Lindsey Hobson is a spokesperson for Enstar, the gas utility that runs the facility off Beaver Loop in Kenai. Enstar supplies gas to about half of Alaska’s population and gets all of its gas from Cook Inlet.
“And that’s an important piece, and something that we are looking for in terms of, what will that next step be? What will that major investment be?” Hobson said.When supermajor oil and gas companies lost interest in Cook Inlet and left in the early 2000s and 2010s, a new company entered — Hilcorp, a Houston, Texas-based company whose strategy of rehabilitating old oil and gas fields made them a good fit for the aging basin.
Hilcorp had a strategy that worked for the aging oil and gas basin — squeeze the last bits of production out of existing rigs and platforms and get them going again. The company’s then-CEO described it as a “quick hit, remedial program,” according to a 2012 story from the Scott said that model was more economic for Hilcorp than building big new projects, which could cost millions of dollars and take years to permit.
“What we need now are new resources,” Scott said. “And the problem with bringing on brand-new resources is that the geologic risk is much bigger. You really don’t know what you’re going to find.” it wouldn’t guarantee future contracts and that it would like utilities to be less reliant on the company to meet their energy needs.
At a State Senate hearing in January, Department of Natural Resources Commissioner John Boyle warned of low interest from new companies in the basin. Today, there are a myriad of smaller, local oil and gas companies in Cook Inlet, like HEX and Blue Crest. But they’re not producing enough to sign big contracts.
Jackinsky said Hilcorp has asked for the subsurface rights to her property — a parcel in Ninilchik passed down through generations from her homesteading ancestors.. Hilcorp won’t comment on conversations it’s had with property owners on the southern peninsula. Homer Electric Association, for example, gets 85% of its power from Cook Inlet natural gas through a contract with Hilcorp that expires next year — the soonest expiration date on the Railbelt. Last month, the utility signed a procurement agreement with Enstar to get some of its gas; Enstar’s contract with Hilcorp doesn’t expire for another decade. As a gas utility, Enstar has fewer options to diversify its power generation away from gas on a short time frame than electric utilities do.
“We think that would be a very unfortunate situation,” Miller said. “A state as rich as Alaska is with natural gas to have to import LNG. However, we recognize we need gas, and we want to have a competitive price for that gas. And if that’s what it will take to get gas, then we will pursue that.” Micciche, the Kenai Peninsula Borough mayor, said hopes enthusiasm from potential buyers abroad could finally push the Alaska LNG project across the finish line.
“I think there’s always this notion that something is going to come in and change things,’ he said. “But the fact is is that we haven’t got a gas pipeline yet, even though we’ve been talking about it for 40 years, and we’ve also never gotten a hometown discount on oil and gas in Alaska, so even though we produce oil and gas, we have some of the highest energy costs in the country.
And he said unlike LNG on the world market, energy from renewable projects in Alaska could be more stably priced.
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