Donlin Gold mine a potential new Cook Inlet gas buyer

Though a proposed gold mine would be more than 200 miles from the Kenai Peninsula, it would affect the region as a new buyer in Cook Inlet’s natural gas market, which has suffered from relatively low and seasonal gas demand.

On Monday the parent companies of the Donlin Gold project — Barrick Gold Corporation and NovaGold Resources — announced that the Army Corps of Engineers had given it permits under the Clean Water Act and the Rivers and Harbors Act. In addition, the U.S. Bureau of Land Management offered leases of the federal land through which the companies plan to build a 316-mile underground natural gas pipeline that would deliver energy during the project’s 27-year planned life.

The mine, about 10 miles north of Crooked Creek village in the Kuskokwim River area, would be powered by a 227 megawatt-capacity power plant. The pipeline to fuel it would branch from Cook Inlet’s existing natural gas pipeline system north of Beluga on the inlet’s west side. It would take about 10.8 billion cubic feet of gas per year, according to its environmental impact statement.

“We don’t have a supplier lined up at the moment, but we’ve talked to various producers about supplying gas to us, so we’re pretty confident we’ll be able to secure what we need from Cook Inlet,” Donlin Gold spokesperson Kurt Parkan said.

Gas deals remain far in the future — Donlin Gold still has more permits to receive and engineering details to work out, Parkan said.

The mine would be a significant addition to the demand for Cook Inlet natural gas, potentially encouraging the region’s hydrocarbon extractors to invest in more exploration and drilling. Presently, the region’s top gas consumer is ENSTAR, which distributes about 33 billion cubic feet of gas per year to mostly residential and small commercial customers.

Because much of this gas is used for heating, ENSTAR’s need for gas is higher in the winter and lower in the summer, making its demand a moving target. In the past, a much greater demand came from large industrial gas users that used gas steadily throughout the year, evening out the peaks and valleys created by ENSTAR’s seasonal needs. These included the former ConocoPhillips liquefied natural gas terminal — which was permitted to export a total 40 billion cubic feet of gas during its final four-year U.S Department of Energy license — and the Agrium fertilizer plant — which consumed about 55 billion cubic feet per year before closing in 2007.

“When ENSTAR’s just a blip on the radar, it’s better for everyone,” Hobson said. “The seasonal fluctuations, we like to avoid those to the extent that we can.”

The mine proposal’s effect on gas prices remains speculative, Hobson said.

“If you get into a situation where there’s an increased demand, and so the producers restart some exploration or production activities, then perhaps in that event we might find ourselves in an oversupply if there’s a big find that could only happen when we’re looking for large quantities of gas to support Donlin, or any industrial customer,” Hobson said. “If we get into a situation of oversupply, we could reasonably expect to see lower gas prices.”

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