Alaska’s gas-powered utilities look at importing LNG despite state’s vast, yet remote, supply

An LNG tanker fills up at the ConocoPhillips liquid natural gas export facility in Nikiski, Alaska. A state-led LNG export project would ship gas from the North Slope to a nearby facility, before exporting it to countries in Asia. (Photo courtesy of ConocoPhillips)

As temperatures have dropped and prompted many of Southcentral Alaska’s natural gas-powered furnaces to kick on more often, local utilities are talking about the need to import natural gas from abroad, rather than continuing to get it from nearby Cook Inlet.

That’s not something that’ll happen in the near term, and there’s no worry that gas utility Enstar or power utility Chugach Electric will run out of gas for people to heat and electrify their homes. Not yet anyway.

But both companies have hired consultants to explore the idea of importing liquefied natural gas, or LNG, to fulfill their customers’ needs as gas contracts expire in the next decade or so. That’s according to reporter Nat Herz, whose writing you can find at northernjournal.substack.com.

Herz says it probably seems counterintuitive that Alaska would need to import natural gas, but he says there are many reasons why it is likely to happen.

Listen:

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The following transcript has been lightly edited for clarity.

Nat Herz: Yeah, so it’s probably helpful to reassure your listeners to say that we have enough gas to get us through this winter. We have enough gas to get us through next winter. Many of the utilities in this part of the state, on the road system in Southcentral Alaska, they all have contracts mainly with Hilcorp, the big operator in Cook Inlet, that will promise to deliver them natural gas supplies for another 5, 6, 7, 8, 9, even 10 years. But Hilcorp, earlier this year called all of these utilities into a meeting and said, “Look, we’re gonna get you the gas that we are under contract to get you. But when those contracts run out, you guys probably should be doing some planning, because we’re maybe not going to be able to go find even more gas 10 years from now, there’s just not that much that’s easily accessible for us to get in Cook Inlet.”

Casey Grove: Alaska does have a lot of natural gas, right? It’s just that it’s not right here.

NH: Yeah, Alaska has a ton of natural gas. In fact, we have enough gas on the North Slope that we could supply something like 25% of the entire nation of Japan’s natural gas demand on a yearly basis. You might have heard of this project called the Alaska LNG pipeline. It’s this pipeline that people in Alaska have been talking about for 30,40, 50 years that would be built from the North Slope down down to Cook Inlet, down to the Kenai Peninsula. That pipeline would be almost exclusively, or mostly, for exporting gas to Asia, because it’s far more gas than road system Alaska needs. However, if that Alaska LNG megaproject pipeline gets built, it would basically be able to deliver us enough natural gas down here that you know, we’d be set, we wouldn’t need to ship it in from somewhere else.

The problem is, while there’s huge supplies of gas on the North Slope, that Alaska LNG project is extremely expensive, something like $35 or $40 billion, with a B. And we don’t know if it’s ever going to happen. And then there’s also gas in Cook Inlet, which is the body of water right outside Anchorage and off the Kenai Peninsula. There is more natural gas in there, but there are a couple of reasons that gas is not easy to get onto shore. Among those reasons is that, one, the gas is not as easy to get at as it once was, like the easiest gas has already been pumped out of Cook Inlet. Second, if you’re a company that is in this industry, and you might normally be in the business of going out there and extracting some gas and selling it to consumers, Anchorage and surrounding areas is actually not a very large market in the grand scheme of things. So it’s just not a place where companies are looking right now and saying, “Heck yeah, we’re gonna go in there spend a lot of money to drill wells, and then pump out not a whole lot of natural gas to sell to, you know, a couple, few hundred thousand people in Alaska. It’s just it doesn’t really make sense.

CG: Gotcha. So as much as we in Anchorage think that we are a big deal, there are not enough of us here to make it make sense for a lot of companies to be drilling for that gas in Cook Inlet that is difficult and expensive to get to. And so they want a return on their investment, it doesn’t look like that is going to happen for them, and now you have these consultants for Chugach Electric and Enstar natural gas who are at least talking about this idea of importing LNG, liquefied natural gas. How serious are they about that, though?

NH: Yeah, I mean, I think, look, this isn’t going to happen for several or, you know, whatever, twice several years is, like it’s going to be probably at least five, maybe 10 or more years until this happens. I think the utilities are trying to be prudent and responsible, because it sounds like building out the infrastructure that you would need to receive and distribute natural gas on an LNG — that’s liquefied natural gas — tanker. There’s a working group made up of the utilities and state agencies that is sort of talking about, “What are we going to do to deal with this problem?”

Well, these meetings are happening in secret. They’re not public, none of the meeting materials are public. But because the utilities have now hired some consultants to specifically look into this liquefied natural gas imports question, they’ve had to petition to do some regulatory processes with the body in Alaska that oversees utilities. And that’s sort of what brought this to our attention. But it’s really the only indication of that the public has seen so far of the work that’s being done here. And some people are asking questions of, “Look, if we know that we’re going to be running out of natural gas, and it’s probably going to be more expensive to ship it in here in, say, five or 10 years, why aren’t we also seeing the utilities studying how they can replace the power and heating that’s currently being done with natural gas with things like wind, things like solar, things like renewable energy.

Casey Grove is the host of Alaska News Nightly and a general assignment reporter at Alaska Public Media with an emphasis on crime and courts.

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