8-20-12

Again this winter, could gas supply for Alaska’s most populous area be at risk?  (See Lisa Demer’s ADN article.) 

Commentary: Over five years ago, three of five members of the Regulatory Commission of Alaska voted to reject a gas supply agreement (GSA) negotiated between Enstar and Marathon that would have provided for Enstar’s Southcentral Alaska needs through 2016 at roughly Henry Hub prices (i.e. Today, $2.19/MCF vs. current RCA-approved Enstar rates for limited volumes of Marathon gas @ $6.91 and $9.67 respectively).   Looking back, approval of the 2006 GSA could have saved Enstar ratepayers many tens of millions of dollars and consumers have no solid guarantee of firm gas supply through 2016.  As one of the two who voted to approve the agreement, I had a background in oil and gas and was convinced that this was an incredibly good deal for ratepayers and the negotiating parties.  In fact, so distraught was I when the three voted against it I seriously considered resigning from the commission which I believed had put Alaska’s ability to survive cold winters at risk.  Instead, I wrote a dissent on October 12, 2006 (followed by a final order dissent on January 10, 2007), which readers may wish to review here.  The dissents explain why the three commissioners’ action violated RCA precedent and endangered the ratepayers — and there’s not much I would change were I to rewrite it today.  In the the statement below, Representative Mike Hawker (NGP Photo, above) seems concerned with at least one Cook Inlet producer for Enstar’s lack of gas supply.  While his reaction is understandable and well-intended, perhaps this personal reference and historical dissent will assist in keeping such matters in perspective.   Enstar has worked diligently to maintain gas supply and the Cook Inlet producers have been responsible. (One notes that two of the three commissioners voting against the 2006 GSA remain on the commission but new commissioners have been appointed and GSA decisions in recent years have improved.)  -dh

On Friday, Representative Mike Hawker addressed the problem of gas shortage in the Cook Inlet area, affecting the most populous area of the state.  He said, in part:

“The Southcentral gas market has always been a tricky one. Small and isolated, with huge seasonal fluctuations in demand, limited exports have long been the foundation that gives industry incentive to produce and provides energy security for two-thirds of Alaskans.

“I support free market principles that allow those with a commodity to sell it for the highest price they can. However, there has long been an informal understanding between Cook Inlet producers, utilities and the state that local needs must be met. I am deeply disappointed that a producer would disregard what I see as a responsible corporate citizen’s obligation to the people of Alaska.

“I understand that along with a potential physical shortage of gas to supply to CINGSA and to utilities, the gas price has gone up dramatically, now generally paralleling the price of export gas. This would represent a significant increase in electricity and home heating costs to Southcentral Alaskans, one that individuals and the general economy cannot easily absorb.

“I support continued LNG exports from Cook Inlet; however, our local needs must be met first, and at reasonable rates fair to all parties. To that end, I urge the producing companies in Cook Inlet to pursue reasonable, fair supply contracts with Enstar, CINGSA and electric utilities that will provide Alaskans with energy security as we approach a critical winter.

“Meanwhile, now more than ever, we must relentlessly pursue long-term solutions offering energy stability to economies and individuals of Southcentral and all Alaska – including a natural gas pipeline from the North Slope to export at tidewater.”