Mary Ann Pease: All options should be on the table for Southcentral and Interior energy crisis

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Mary Ann Pease

By MARY ANN PEASE

Alaskans need all options on the table as we weigh each one’s ability to deliver results for Railbelt consumers, especially given the critical timelines we face regarding gas supply.

ENSTAR, the Railbelt Utility Group, BRG, Cornerstone and other engineering firms have pooled their expertise to study these options and will soon release their final draft. The options outlined in their first draft will not change and these solutions make it clear that private sector intervention or state subsidies are needed to fill a large gap in gas supply.   

BRG recently presented its study of gas supply options for Railbelt utilities to the Regulatory Commission of Alaska (RCA). An alarm bell sounded in April 2022, when Hilcorp stated that they were not going to contract for gas supplies beyond their current commitments.   

Option A: Drill in Cook Inlet

The best option for the State and Alaska is to drill in search of new gas reserves in the Cook Inlet. The reality is that Hilcorp is the predominant supplier in the Inlet and if they do not see the economics of the Cook Inlet gas market going forward, then who will? Other major producers don’t see immediate incentive to drill, otherwise they would be doing so here rather than drilling in more complicated jurisdictions.

Alaska must turn to the smaller independents in the Inlet, but what will it take to stimulate sizable production and bring it online within the next 10 years?  Maybe two off- shore platforms and drilling success at a price tag of $1.5+ Billion.  This is capital the independents likely don’t have.

Option B: Import LNG

Using imported LNG makes total sense for Alaska’s Railbelt as a bridge solution until we have either a pipeline, new gas discoveries or other reliable alternative energy sources online.   LNG today from Fortis BC is about 1/3rd the cost of Cook Inlet gas.  Granted there are the transportation and storage components that will significantly increase the delivered cost of LNG for the Railbelt, but options for supply from Canada and elsewhere are available at fixed, long-term contracts.  

This import option is economically viable today until exploration and development in Cook Inlet produces ratable gas supply for the utilities. LNG can continue to keep the lights on and the homes warm in the near-term and can be used for peak winter demand in the future to avoid what could be a disaster for Alaskans if we have an extended cold snap like we just had with waning LNG supply. LNG can be that interim solution as we transition to more renewable clean energy solutions, when they are available at scale and an affordable pricing, without jeopardizing the quality of life and energy security we have come to expect in Southcentral.

The former Conoco Phillips LNG plant, now owned by Marathon/ Trans-Foreland Pipeline Company, LLC has filed with DOE and FERC a request to turn the facility into an import terminal. On August 16, 2022, the Federal Energy Regulatory Commission (FERC) approved a request from Trans-Foreland Pipeline Company LLC to extend the completion of its Alaska LNG import project to December 2025. 

FERC first approved Trans-Foreland’s request to build the plant in December 2020, and gave the company until December 2022 to place it into service. In July 2022, Trans-Foreland stated that uncertainty and volatility in the global LNG market had made it difficult to secure a suitable supply arrangement.

What we are witnessing here is delay and lack of urgency by Trans Foreland on a critical component to achieve gas supply security for Alaska. Expediting the re-positioning of the existing storage and marine facilities is the best solution.   As a publicly traded company, Marathon should focus on their shareholders and develop projects with the greatest benefit and return.  As Alaskans, we can ask them to open the facility for a “tolling arrangement,”. The state or the utilities need to make a suitable commercial arrangement that will get the gas coming into the state to supplement and shore up our energy requirements.

Globally, LNG has been a lifesaver. Imported LNG after the Fukushima incident in Japan replaced nuclear generation from shuttered plants, Similarly, when war in Ukraine cut off Europe’s gas supplies from Russia, LNG shipments from the global markets filled the gap. Now European countries and others have planned LNG into their energy mix, providing a bridge as they transition to clean energy, such as nuclear, solar and wind.

If we cannot use the existing Trans Foreland/Marathon facility, let’s move quickly to identify an alternate location and build onshore storage and re-gasification facilities with new cost competitive technologies. Floating storage and regas is another option, but there may be more difficult permitting and cost considerations.  It is evident after the weather in 2024 that  “we need to act now.”

Now is the time to take decisive action to secure our energy independence and security for Alaskans.  Imported LNG is the perfect bridge to a clean, secure, energy future and is the only near-term solution for Southcentral.

Mary Ann Pease is the owner of MAP Consulting LLC, an energy consulting firm specializing in Alaska, Arctic, Pacific Northwest and international energy markets.

25 COMMENTS

  1. No to importing any LNG. Dunleavy will be gone in a few short months and another governor will take on the the task and work of an Alaskan owned pipeline. Dunleavy doesn’t have the back up and the intestinal fortitude to see any project through with any good sense. Dunleavy is a accident going someplace to happen and that is the history he has created with projects, people and management of this state from the get go! So, no, importing just get on the ball and create the Alaskan owned LNG woith a new governor.

  2. Now IS the time to take decisive action. Which is why this will neither be acted upon swiftly nor decisively. The legislature doesn’t have the will or the motivation. And the legislature will crush any proposal by the governor to keep him from getting a “win.” The environmental groups and quite possibly the current administration will sue to prevent more greenhouse gasses while Alaskans face blackouts and homes without heat – and plummeting home prices. Best we can hope for is importing LNG which will quadruple our already high electric and gas rates. Anyone wishing we’d built the Susitna-Watana Dam right about now?

  3. All previous information that I have seen about importing natural gas has stated that the consumers would see their rates double and triple for energy in south central. Industry representatives presenting to the Senate Finance Committee earlier this spring all said that importing natural gas would be extremely expensive and not the best option for the consumers

  4. blah blah blah…I moved here 20+ years ago from a state that did not at that time drill for oil. Here – oil was a plenty, and with tons of natural gas by-product! And guess what! The talk-of-the-town was a LNG pipeline from the slope to the Railbelt. But guess what I heard – again-and again-and again! Talks talks talks of studies studies studies and nothing nothing nothing happened…it does not matter, one whit, if it’s a Dem or Rep governor. Nothing will happen even though we are the one state with more natural resouces up the ying-yang than any other state in the union. So DK don’t hold your breath!

  5. It is crazy to import LNG to Alaska. If the SOA is willing to pay Keith Richard’s $450,000 a year to work on the Gas Line to No Where. Surely the SOA is willing to pony up monies to get someone to find Natural Gas in Cook Inlet. From a cost benefit ration, by far the majority of Alaskans would benefit from a Natural Gas discovery in Cook Inlet. As a side issue, It was good that the energy consultant pointed out Hydro, for example Ekultna Hydro.

  6. Mary-Ann
    If we’re going to implement a “TableTop” exercise, the following should be included in the discussion:
    … Small Scale Nuclear would be a nice Base Load Generator.
    … We should use Permanent Fund to build the Susitna-Watana Dam.
    … We should fire-up that Coal Fired Plant @ Healy, burning Usibelli Coal.
    … We should ‘incentivize’ HilCorp to expand onshore // offshore E&P.
    … We should pursue that Eklutna Pumped Storage idea.

    Organization and Action is paramount, because the Natural Gas Fired Plants in South Central are indeed consuming a lot of the available Natural Gas from Cook Inlet, the same Natural Gas so many of us are heating our homes with.

    • Rob,

      Good options. Small scale Nuke isn’t quite there yet. There are a couple of projects that are “this close” but not in production yet. MAP may have more info on this, as I believe she’s involved with one of the leading players in this space.

      Yes on Hydo development. Hydroelectric is one of Alaskas natural resources. Solar in SoCal and AZ is great, but Alaska has an abundence of water resources. We’d have 7 cent/kwH retail rates right now if we’d built susitna back in the 80s. Its not a short term solution, but its a good solution. In addition to Susitna/Watana, there’s snow river, Bradley Dixon Creek diversion, and Chakachama. AEA has done a great job mapping these projects out.

      Healy is an option, as is a new clean coal project being pushed in the western susitna area. People are talking about the short term, and a copy of the west susitna project was built in casper wyoming in four years from FEED to production. It can be done.

      We need to look at options for addition long term gas from the Inlet. I don’t know all the details yet, but this may be more of a contractual issue than a “we don’t have enough gas issue”.

      Pumped storage, yes. Maybe at Bradley tho.

      Some wind and solar as the economics permit, but its only an energy resource (MWh) and not a capacity solution (MW), since you can’t count on when the wind blows or the sun shines. It should be discounted appropriately too, since it is not firm, controllable power.

      Oh – and unabashed politicing here – vote for Todd Lindley and Dan Rogers for the Chugach Board of Directors. This is an important election, if we want to turn the Board from the “wind and solar only” folks at REAP and the Alaska Center for the Environment who are backing the incumbents or if you want on the Board representation who approach engineering and planning problems from … well, and engineering and planning perspective!

      • Dan. CEA pursued a dam on Snow River and got so much negative reaction that they abandoned the idea four weeks later.

        Why? Because a dam would significantly impact salmonoid habitat downstream. Downstream is the Kenai River and it has many varied advocates as you might guess.

      • EXCELLENT reply Dan-R.
        Next step is FEED.
        Followed by:
        … Evaluation
        … Decision
        … Permitting
        … Procurement
        … Execution
        … Start-Up // Operational

        “Git-R-Done!!!”

  7. While this article presents itself as a piece advocating for what could be mistaken for a free and open energy market, it is far from that. Congress – as guided by the Murkowski-Biden co-conspiracy – has passed so much socialized energy policy and spending, the suggestion that all options should be on the table is a dare. In the food triangle menu of options, socialized solutions are leveraged by the manipulated market policy of democratic socialism. It beckons the kind of carbon dividend program presented by Mr. Scott Kendall to the Alaska Legislature on February 10, 2022 when he represented Americans for Carbon Dividends. Promotion and enablement of such socialized projects, systems, and programs will gluttonously consume revenue and capital in strong markets, and bogart labor in weak markets making development of Alaskan resources a consistently marginal prospect. Pursuing all energy options does do one thing. It is a boon for litigation. The question is, what must be done about democratic socialism and its grip on Alaska?

  8. If we are forced to buy gas I would rather have my money put Alaskans to work and drill.
    There is still plenty of gas in Cook Inlet and surrounding lands.

  9. Our state politicians on the local, state, and federal level are mediocre – at best.
    The lack of informed foresight, intestinal fortitude, and intellectual curiosity – is damning for our states future.
    In the end, because of disgustingly low voter turnout, the only action that can “right our ship” will be a replay of 1776.
    On virtually all fronts – education, economy, energy, taxation, federal over reach, moral decay, infrastructure – our elected leaders have failed – miserably.
    Sic Semper Tyrannis!

  10. Hey Mary Ann, what’s your game now can anybody play? At least she didn’t use the words “climate change” in her word salad. Are you ready to “transition”? There probably ought to be a “railbelt energy authority” layer of unaccountable beauracacy to help Alaska “transition” to “more renewable” “clean, secure energy sources”. I would like to nominate Mary Ann as it’s director.

    • And don’t forget, “state subsidies are needed to fill a large gap in gas supply”. Isn’t that fascism or something? Thank God we have the A.E.A.

  11. Thank you to Must Read Alaska for providing these piece by Mary Ann Pease. Mary Ann is an expert and it would be great to see more of her work!

    The big problem Alaska faces is the legislature has thrown money at Cook Inlet production in the past- costing Alaskans over one billion dollars. Some think that the players are not drilling now in order to extort more free money from Alaskans in various credit schemes for more Cook Inlet production. This is likely the case now. We also have failed Alaskans by creating a near monopoly. An independent drilling in Cook Inlet needs to be able to sell their gas without being bankrupted by the Cook Inlet energy monopoly.

    Finally, LNG is a real option- but a costly one. Making LNG requires a lot of energy when chilling natural gas/methane down to -260F. Even the most efficient processes such as developed by ConocoPhillips require a lot of gas to run the cascade/chilling process.

    Since the Cook Inlet has over 19 trillion cubic feet of estimated reserves- owned by Alaskans- the owners of that gas (Alaska) needs a coherent strategic plan for the proper development of that gas for the benefit of Alaskans. The legislature has failed us, again.

  12. Coal is in abundance all around Cook Inlet. Coal gasification works. Easy, cheap available. Anyone opposing can just refuse to use energy.

  13. Mary Ann says there’s a crisis, so by God there must be another damned crisis, no?
    .
    Before rushing Alaskans headlong into dependency on Fortic BC natural gas, Mary Ann might explain the risks of creating energy dependence on one (1) foreign company, which also happens to sell gas to communist China.
    .
    “BC companies making waves with Canada’s first shipment of LNG to China” (‘https://www.fortisbc.com/news-events/stories/20171214-BC-companies-making-waves-with-Canadas-first-shipment-of-LNG-to-China)
    .
    Surely MAP Consulting LLC has a contingency plan for Alaska if:
    (a) communist China acquires controlling interest in Canada’s Fortis BC,
    (b) the China-Russia-North Korea axis decide they want something from the Biden regime and are willing to get it by cutting off Alaskans’ gas from their only (foreign) supplier, or
    (c) the Greenies and Mr. Trudeau’s government succeed in curtailing Fortis BC production to the point Fortis BC have to choose between delivery to Alaska or to communist China?
    .
    Think Nord Stream 1 and Nord Stream 2, this time with boats… can’t happen here?
    .
    What if it does happen, Mary Ann, can we get a refund, maybe some candles, from MAP Consulting LLC?

      • Forgive us for offending your sensitivities, Caleb.
        .
        Having no answers to our questions is okay, asking our questions without proper reverence for this week’s flavor of crisis-mongering does seem understandably déclassé.

  14. The Permanent Fund has the available money to build a natural gas bullet line from the North Slope to Southcentral Alaska. So build it. Yes, the return on investment will not be what Permanent Fund money managers want. But there is no better reason to spend Permanent Fund than to keep Alaska alive.

  15. Interesting what Dakota Gasification Co (in Beulah, ND) has been able create, producing in-demand chemicals from mining coal reserves, as well as feeding a 900MW coal fired power plant. Seems like we could do something similar here in AK907?

    References:
    ‘https://dakotagas.com/
    ‘https://www.basinelectric.com/about-us/Generation/index?location=antelopevalleystation

  16. This article by Natural Gas and Utility expert Mary Ann Pease is a very important and timely contribution to understanding practical and logical solutions to the natural gas supply crunch coming up. Too much of the dialog has appeared to be pushed by one-sided misinformation (such as imported LNG would cost two, three times or more what Cook Inlet production would cost).

    British Columbia and Alberta have vast natural gas reserves at low prices searching for markets. The AECO (Alberta Energy Company) Hub is the western Canadian benchmark price for natural gas at point located near Calgary, Alberta. Today the AECO hub price is $0.91 USD/MMBtu. The Henry Hub (Louisiana) price is $2.25 USD/MMBtu. AECO is nearly always substantially lower than Henry Hub. Cook Inlet prices are in the $9 USD/MMBtu range. To get AECO Hub gas to Alaska will involve pipeline costs to tidewater in BC with liquefaction there, tanker shipment to Nikiski with regasification. Big customers in Asia will pay much of the capital cost moving this gas to BC tidewater. Alaska can piggyback on that.

    Can’t we please have a good faith, serious effort to bring those last leg to Nikiski transport costs down and provide Railbelt consumers a transparent, true, unsubsidized competitive market choice, rather than just another back-room brokered Alaskan political deal?

  17. This article by Natural Gas and Utility expert Mary Ann Pease is a very important and timely contribution to understanding practical and logical solutions to the natural gas supply crunch coming up. Too much of the dialog has appeared to be pushed by one-sided misinformation (such as imported LNG would cost two, three times or more what Cook Inlet production would cost).

    British Columbia and Alberta have vast natural gas reserves at low prices searching for markets. The AECO (Alberta Energy Company) Hub is the western Canadian benchmark price for natural gas at point located near Calgary, Alberta. Today the AECO hub price is $0.91 USD/MMBtu. The Henry Hub (Louisiana) price is $2.25 USD/MMBtu. AECO is nearly always substantially lower than Henry Hub. Cook Inlet prices are in the $9 USD/MMBtu range. To get AECO Hub gas to Alaska will involve pipeline costs to tidewater in BC with liquefaction there, tanker shipment to Nikiski with regasification. Big customers in Asia will pay much of the capital cost moving this gas to BC tidewater. Alaska can piggyback on that.

    Can’t we please have a good faith, serious effort to bring those last leg to Nikiski transport costs down and provide Railbelt consumers a transparent, true, unsubsidized competitive market choice, rather than just another back-room brokered Alaskan political deal?

  18. This not showing up in Chrome
    This article by Natural Gas and Utility expert Mary Ann Pease is a very important and timely contribution to understanding practical and logical solutions to the natural gas supply crunch coming up. Too much of the dialog has appeared to be pushed by one-sided misinformation (such as imported LNG would cost two, three times or more what Cook Inlet production would cost).

    British Columbia and Alberta have vast natural gas reserves at low prices searching for markets. The AECO (Alberta Energy Company) Hub is the western Canadian benchmark price for natural gas at point located near Calgary, Alberta. Today the AECO hub price is $0.91 USD/MMBtu. The Henry Hub (Louisiana) price is $2.25 USD/MMBtu. AECO is nearly always substantially lower than Henry Hub. Cook Inlet prices are in the $9 USD/MMBtu range. To get AECO Hub gas to Alaska will involve pipeline costs to tidewater in BC with liquefaction there, tanker shipment to Nikiski with regasification. Big customers in Asia will pay much of the capital cost moving this gas to BC tidewater. Alaska can piggyback on that.

    Can’t we please have a good faith, serious effort to bring those last leg to Nikiski transport costs down and provide Railbelt consumers a transparent, true, unsubsidized competitive market choice, rather than just another back-room brokered Alaskan political deal?

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