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Dear Friends and Neighbors,
It's cold outside.
If I told someone in the Lower 48 that its cold today in Alaska, they would laugh.
Of course its cold outside! Its Alaska!
I know it seems unusually cold. Actually this is how the winters in Anchorage were 40 years ago, when I moved down South here from Fairbanks where I grew up.
These sub-zero temperatures were expected about 40 years ago.
There are a lot of new Alaskans here. (Statistically 1/3 of our population rotates out and new folks rotate in every 3-4 years.) The temperatures have moderated over the years. We have become unprepared for an actual Alaska winter.
Its a serious issue related to heat and light.
What is the problem right now?
The utilities are using natural gas at a high rate. There's a limited amount available.
Background
Your Anchorage lights and heat come from natural gas. The natural gas is brought out of the ground under Cook Inlet by oil & gas companies (predominately Hilcorp), using wells, drilled & operated from platforms in the Inlet or from the on-shore Beluga Gas Field.
Those natural gas wells are not producing as much gas as in the past. Several reasons contribute to this but they could be summarized in "money/costs". New wells could be drilled but its very expensive. We are a small "market" (low population and demand). Companies do the math: cost to drill/produce gas; amount of the gas they could sell; price possible to sell the gas; how much gas they can consistently sell all year.
The Cook Inlet gas is used by several "Railbelt" utilities: Homer Electric, Chugach Electric, MatSu Electric and ENSTAR. Electricity generated by Chugach and MatSu is put on the transmission system and used by Golden Valley Electric (Fairbanks). In addition, natural gas is trucked from southcentral to Fairbanks.
Digging into Cook Inlet gas realities. Petroleum News
During the summer, we don't use much natural gas; its warm and light. So the excess gas produced is stored in CINGSA (Cook Inlet Natural Gas Storage Alaska). In the winter months, the utilities and ENSTAR can withdraw gas from the storage CINGSA to meet the increased need. That's good but CINGSA sometimes can't meet the demand and can have functional challenges. CINGSA gas is being used right now to heat your home and keep the lights on. (CINGSA experiences well problemsPetroleum News).
The dominant producer of Cook Inlet gas is one company - Hilcorp.
There is also the Beluga Gas Field, partially owned by Chugach Electric, with the rest owned and operated by Hilcorp.
"Renewable Energy" from wind and solar don't work well when its cold. When its cold, the wind turbines on Fire Island don't turn. In other words, wind is very ineffective during sub-zero temperatures. Obviously we don't have much sun in the winter, making solar energy rather ineffective from about November to March (the coldest time of year). We need dependable "base load" power; that's hydro or natural gas.
Hydro generation (Bradley Lake Dam) is effective year-round and is "renewable". Those electrons travel over the transmission grid all the way to Fairbanks. More water is being added to Bradley Lake to increase the amount of power that the Dam can produce in coming years. The State of Alaska owns Bradley Lake Dam, through the Alaska Energy Authority.
We have abundant natural gas on the North Slope. There is so much gas that we could meet the entire State's needs for 100 years! But we can't get it down to the power plants and consumers. The Alaska Gasline Development Corporation (AGDC) has not been able to find investors to build the pipeline (Cost: about $45 Billion or more). The State of Alaska keeps funding AGDC, they can find investors; no investors have deemed the project economic so far. This year AGDC is asking for another $3 Million for continued operations.
This is not the first time Cook Inlet gas supplies became limited.
In 2010, this same shortage was looming. To respond, the State offered cash to pay companies to come to Cook Inlet to find and develop the gas. Companies responded and came, sending the bills for the work to the State of Alaska.
That brought more gas to market for consumers but the State couldn't afford to pay the cash as promised. The payments stopped. That left the companies without the money to pay for the loans they had gotten. Lenders were left with unpaid debt. Companies went bankrupt. It was a very bad scene! I don't want to do that again!
As the utilities and ENSTAR have seen the shortage coming at us again, they have evaluated the options. Two studies are available on options. ENSTAR did one; It looks like importing natural gas is the quickest, probably most reasonable step to take. The Railbelt Utilities did another study that came to the same conclusion: importing natural gas is probably the best option.
The foundation for making import of gas realistic is more storage. When an LNG ship arrives, it has to offload the gas promptly. That means more storage.
What's the Solution?
I believe that the utilities are best equipped to find a solution to supply. They have the knowledge and skills to do that AND they have the responsibility to keep the lights on with the least possible cost to consumers. Despite being a lifelong Alaskan, I think they should get the "import natural gas" solution going right now. It will take a couple years so we can't wait.
Additional Gas Storage should be put in place and managed just as CINGSA is, with Regulatory Commission of Alaska (RCA) certification and pricing oversight.
I believe its the State's responsibility to upgrade and modernize the transmission grid (electron highway) and manage it, through a transmission organization, using the model of Bradley Lake Dam management. We have Federal money ($206.5 Million) to begin right now, if the State will match the funds. We need to invest in this.
Everyone, including rural Alaska will benefit from stable, lowest-possible power costs. Rural Alaska, through Power Cost Equalization (PCE), will also benefit.
With this background, take a look at the information below.
Item in this Newsletter:
· Gas Supply News
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