Too many residents, business owners and politicians of Southcentral Alaska — we’re talking the state’s population center of Anchorage, the Mat-Su and Kenai Peninsula — are all agog in anticipation that a multibillion-dollar North Slope natural gas pipeline will save them from unaffordable heating and electric bills.
It’s the time of year for holiday dreams — a warm tradition like Hallmark movies, grandma’s cookies and the Budweiser Clydesdales. But the wintery cold truth about this dream is that there will be no pipeline under the tree — just bits of tinsel left over from premature and misleading celebrations.
The megaproject is too costly and too risky in a world that has plenty of easier and cheaper gas to sell. It has no credible, publicly available construction cost estimate; no long-term customer contracts to provide collateral for loans; no binding financial commitments from investors; and actually no gas under contract to sell. Other than that, it’s a great holiday package, with the lead promoter publicly talking of delivering a construction decision before the holiday season is over.
Yet, many still want to believe it’s possible, preferring to perpetuate the dream of bountiful gas, plentiful jobs and wishful thinking of billions of dollars flowing into the state treasury.
But while the notion of a pipeline delivering North Slope gas to Southcentral boilers, furnaces and power plants is consuming much of the air in the convention hall of big ideas, Southcentral utilities face the real prospect of running short of gas before the end of the decade, as Cook Inlet production declines.
Which means those utilities would need to import gas — supercooled into a liquid and delivered by tanker from Canada or elsewhere. Which means spending money to build an import facility. Which means charging ratepayers for the investment.
That’s the immediate problem, not waiting for a pipeline to ride to the rescue.
Southcentral’s largest electric utility, Chugach Electric Association, is negotiating with Harvest Midstream, an affiliate of Cook Inlet oil and gas producer Hilcorp, which plans to restore operations at the unused gas export terminal in Nikiski and turn it into an import hub. It’s a low-cost, low-risk plan — with federal authorization in hand — to use the existing dock and storage tanks to keep the state’s population center warm and well lit.
However, the same project developer that wants to build the North Slope project, a company named Glenfarne, thinks it has a better backup answer before its pipeline arrives. It proposes to spend hundreds of millions of dollars to build a gas import terminal from scratch. Southcentral gas utility ENSTAR is in on the plan.
The Glenfarne/ENSTAR project not only lacks approval from the Federal Energy Regulatory Commission, it hasn’t even applied for authorization. Glenfarne has talked of spending tens of millions of dollars just getting to a construction decision. Then more spending, and years, before it could start importing gas.
All of the Southcentral utilities need to get their collective acts together and use the lowest-cost, fastest-to-develop, most certain option to ensure their customers have the gas they need. That is repurposing the existing export plant into an import terminal.
Building an entirely new facility for a small customer base is as wasteful as spending more money on an unaffordable gas pipeline.
Any bad spending decisions by the utilities could fall on ratepayers to cover, or the state to bail out. That’s the same state that already is short of money for schools, roads and so much else needed by all 741,000 residents, not just the Southcentral population center.
Larry Persily is a longtime Alaska journalist, with breaks for federal, state and municipal public policy work in Alaska and Washington, D.C. He lives in Anchorage and is publisher of the Wrangell Sentinel weekly newspaper.
