Public discussion concerning natural gas supply for Southcentral and Railbelt communities has suffered from misconceptions and hype, making it difficult to see a clear answer through the fog.
For some, it appears to be a foregone conclusion that the state should build a "bullet" pipeline for $7 billion or more from the North Slope to Southcentral. Yet each week important information comes to light bringing other potential solutions to the table. The private sector has practical solutions for the short-term problems and is working on long-term concepts.
The Cook Inlet natural gas storage facility in Kenai is in progress and scheduled to begin gas injection next fall. This facility should get us by a near-term cold winter crisis. Gas utility and power companies are moving forward to import liquefied natural gas (LNG) by 2014.
On June 28 the United States Geological Survey announced probable Cook Inlet basin gas and oil reserves at 19 trillion cubic feet of gas and 599 million barrels of oil -- encouraging numbers. Cook Inlet gas exploration has been stymied by a depressed market, challenging geology and low Southcentral Alaska demand, about 125 million standard cubic feet per day (MMSCFD), significant to us but meager to gas exploration companies.
In 2010, Sen. Tom Wagoner of Kenai led a legislative effort that incentivized oil and gas exploration in Cook Inlet. We now have one jack-up exploration rig there, and another en route. Buccaneer Energy's recent Kenai Loop well is producing 10 MMSCFD, with more wells being drilled this summer. Cook Inlet Energy and Escopeta have their own exploration projects. This activity and recent lease sales indicate industry is confident they can find gas and oil in Cook Inlet.
Consider also CIRI's Cook Inlet underground coal gasification and wind-power projects, the Susitna-Watana hydroelectric project, intriguing tidal and geothermal opportunities and a promising high voltage direct current transmission project to bring electrical power from the North Slope to most of Alaska. These all could help supply Railbelt demand. In the next few years we will have more good data on Cook Inlet gas and whether these other promising energy alternatives are viable.
Fairbanks has significant winter air pollution issues and pays exorbitant prices for fuel. Currently, Fairbanks Natural Gas trucks liquefied natural gas (LNG) from Cook Inlet. Last week, GVEA and Flint Hills announced a partnership to truck LNG from the North Slope to Fairbanks, with a plan to have natural gas in Fairbanks by 2014. The partnership will provide additional gas supply to be sold locally. Fairbanks also may have the option of natural gas from the Nenana Basin, 50 miles away. This supply is unproven but should be thoroughly explored before much is spent on other options.
Fairbanks Pipeline Company (FPC) has its own plan to bring gas from the North Slope to Fairbanks via a 12-inch line with minimal state assistance and allowing for Alaska ownership. FPC co-founder Alex Gajdos states this line will supply all the gas Fairbanks would need for two generations. Additionally, FPC has a $1.2 billion 18-inch line option to extend the pipeline to Southcentral if Cook Inlet gas doesn't meet future needs.
The Alaska Gasline Port Authority has just released a Wood Mackenzie analysis of the economics of a large diameter pipeline to Valdez, with a spur to Anchorage, compared to other LNG projects being proposed and/or developed around the world. This project would also take a huge public subsidy. Yet if Alaska gas can compete on the Pacific Rim LNG market, the all-Alaska line may have an economic argument in its favor and previous work on a spur line will be very valuable.
The private sector and public utilities are answering immediate needs. While we must move expeditiously to solve long-term energy supply challenges, let's not prematurely commit billions to any project that is economically daunting and may not be necessary. State government should not hamper private-sector solutions, and we should have all options objectively analyzed by competent consultants to advise us on the best long-term solution with a rigorous selection process.
Fred Dyson, R-Eagle River, has served in the state Senate since 2003.
By SEN. FRED DYSON