Enstar files plans for gas storage facility

ANCHORAGE, Alaska — Enstar is planning to file with state regulators to build a natural gas storage facility near Kenai. Many are saying the plan is long overdue with worries of a natural gas shortage in Southcentral Alaska.

The economy of the area was built on cheap energy, and for decades customers haven’t had to worry about the availability of gas from Cook Inlet to meet their needs for heat and power.

The name of Denise Statz's housewares store in palmer is Non-Essentials, but one thing that is essential to her bottom line is energy.

Statz has a refrigerator for her cheeses, but wonders if it's worth it to sell them anymore.

“This summer I really have to consider whether I want to have a cooler for them, because frankly when sales are diminished, that cost of keeping them for a period of time adds to your bottom line,” Statz said.

Matanuska Electric Association is one of many utilities in Southcentral Alaska that is almost completely dependent on natural gas to generate power.

MEA’s manager, Joe Griffith, and other utility managers have warned for more than a decade that Cook Inlet gas is running out and that soon there will not be enough gas to meet peak demand during the winter.

“It's just incredible to me that we're going over the falls and no one seems to care,” Griffith said. “We gave presentations everywhere to the point that people say, ‘Here comes Chicken Little. We don't want to hear him again. We don't like his story.’”

In the winter, Southcentral natural gas customers use 12 to 14 times more than they do in the summer. Until recent years, there was always enough gas piped from Cook Inlet to meet the wild swings in demand.

“You need something to mitigate those swings. That something is storage,” said George Schreiber, Jr., the president of SEMCO Energy Inc., which is the parent company of Enstar.

SEMCO plans to spend $180 million to develop a natural storage facility in Kenai, which will inject gas into a depleted reservoir during the summer and draw it out during the coldest months.

“Gas storage is a wonderful thing. It's long overdue. And it's typical in the Lower 48 that storage is not provided by producers. We've been fortunate in Alaska for a very long time,” said Colleen Starring, the president of Enstar Natural Gas Co.

“Had we been smart years ago, we'd have probably had a storage facility,” Griffith said.

This storage does come with a price -- natural gas and power customers will have to pay for it. The alternative could be more expensive: importing liquefied natural gas.

“Every one of us believes that's going to happen before we find a sufficient supply of fuel,” Griffith said.

Griffith says if Southcentral gets to the point where it needs liquefied natural gas, the storage facility will be important, but if the liquefied gas is used to replace Cook Inlet gas, millions will have to be spent to build a regasification facility.

“There could be a whole litany of energy costs that could be added onto our energy bill,” he said.
The proposed bullet line and a spur from a natural gas line to the Lower 48 may not happen in time to make up for the shortfall of Cook Inlet gas.

“Cook Inlet reserves are declining. There isn't a lot of drilling going on in Cook Inlet today. That means there's less production capacity for us,” Griffith said.

The storage facility envisioned for Kenai is at best a stop-gap, but it's good news for business people like Denise Statz.

“Storing things is a functional idea. I think it's wise. I mean we live in a climate and a part of the world that you want to have what you need on hand, and that seems like a wise idea,” she said.

If all goes well with state regulators, storage will begin in June 2012.

The Regulatory Commission of Alaska will likely hold hearings on the storage facility this fall.

Enstar is hoping for a decision by the end of the year so they can ramp up construction next summer. Some of the prep work is already underway.

Contact Rhonda McBride at rmcbride@ktuu.com