Alaska regulators back Enstar’s plan to build $57 million pipeline to import natural gas

Alaska regulators have conditionally approved a request by Southcentral Alaska’s natural gas utility to build a pipeline that could potentially import natural gas into Alaska, as future supplies of the resource wane in the Cook Inlet basin.

The decision by the Regulatory Commission of Alaska supports a request by Alaska Pipeline Co., an affiliate of Enstar Natural Gas, to expand its service area and extend a 16-mile pipeline to Port MacKenzie to receive the imported gas. Port MacKenzie is about 5 miles north of Anchorage, across Knik Arm.

The companies requested the $57 million extension in May, in a precautionary step in case imports are needed. The pipeline would extend from the Alaska Pipeline Co. network of pipes that moves Enstar gas.

[Previous coverage: Warning of shortfall next year, Enstar takes step toward pipeline that could receive natural gas imports]

The 19-page decision says that Enstar forecasts a shortage of local gas supply starting next year. Recent drilling efforts are not producing enough new gas from Cook Inlet near Anchorage, Enstar said in its application.

We “find that the public convenience and necessity requires the diversification of natural gas supply,” the regulatory agency said in the decision. That view is based on statements about the looming shortfall from the pipeline company, utilities, analysts and Cook Inlet producers, the agency said.

Hilcorp, the dominant gas producer in Cook Inlet, warned Enstar and other utilities in 2022 that it did not have enough natural gas reserves in the basin to provide for new gas supply contracts after existing ones expire in the coming years.

Gas imports are expected to significantly boost power and heating bills across Southcentral Alaska. The imports seem increasingly likely despite efforts by electric utilities to pursue renewable power projects.

Enstar serves 150,000 customers and heats homes and buildings across Southcentral Alaska. Natural gas also provides 80% of the region’s electricity.

Enstar spokeswoman Lindsay Hobson said the agency’s decision is an important step in addressing the anticipated shortfall.

“We appreciate the acknowledgment that we need a diversified and continuous supply of natural gas, and acknowledging the hard truth that imported natural gas is a part of that,” Hobson said.

The acknowledgment of Port MacKenzie as being a potential receiving point for that gas is also appreciated, she said.

To import the liquefied natural gas, or LNG, the plans call for the use of a specialized ship that would be moored at Port MacKenzie, according to a supplemental filing provided by the pipeline company to the agency.

The ships are called “floating storage regasification units” and can expedite gas imports. They convert gas so it can be transported in pipelines after it has been shipped overseas in its super-chilled liquid form.

They’ve seen strong demand in Europe since Russia cut off gas exports to several countries following its invasion of Ukraine in 2022.

Enstar and other utilities have not made a final decision on importing liquefied natural gas, the agency’s decision points out.

The pipeline company must provide notice to the agency after Enstar, alone or with other utilities, decides that it will import gas to Port MacKenzie, according to one of the conditions set by the agency.

Enstar is moving urgently to address the shortfall, the pipeline company’s filing says.

If the decision is made to move ahead with gas imports, Enstar anticipates beginning construction of the pipeline next summer, according to the supplemental filing.

Enstar has informed the agency that by the end of this year, it intends to file a gas sales agreement with the regulatory agency to purchase liquefied natural gas.

As part of the effort, the pipeline company must evaluate the feasibility of the Port MacKenzie dock as a site for the gas-receiving terminal, the pipeline company says.

Understanding the potential sites at Port MacKenzie “is critical, as some of the engineering and permitting requirements differ depending on which site will be used,” the pipeline company says.

Larry Persily, an oil and gas analyst and former Alaska deputy commissioner of revenue, said that it could take a few years before imports can begin, assuming Enstar moves ahead with the plan.

“There’s a lot of pieces” that need to be resolved with the plan, including acquiring state and federal permits, he said.

“Where do you get the gas from and what are the terms?” he said. “Can you get a (regasification) ship in time and what are those terms? In some ways, building the pipeline is maybe the easiest step.”