KTUU.com | Alaska's news and information source | Study raises fear of regional energy shortage

Study raises fear of regional energy shortage

by Sean Doogan
Tuesday, Dec. 11, 2007

ANCHORAGE, Alaska -- Companies exploring for oil in Cook Inlet back in the 1960s instead discovered large quantities of natural gas. And much of Southcentral's economy has developed around this cheap, abundant and local energy source.

Those days are coming to end. Soon, Southcentral will begin using more gas than is produced in Cook Inlet. It could occur in as little as eight years, well before natural gas from the North Slope comes online.

Solutions and alternatives are abundant. But getting utilities, producers and the state and federal government to agree on which way to go is proving difficult.

Many say coordinating a way forward is the first critical step in securing the Railbelt's energy future.

More than a dozen offshore rigs out in the Inlet have been providing the clean, cheap fuel for most of Alaska's history.

"Our economy is based in no small part on natural gas," said Bill Popp, president of Anchorage Economic Development Corporation. "We would not have the city that we have today, the communities that we have today, without natural gas."

But a recent study by the U.S. Department of Energy shows local demand will  outpace the dwindling supply as early as 2014.

The future energy market has recently been foreshadowed by the closure of a profitable fertilizer plant in Nikiski.

"We've certainly seen the implication with Agrium [fertilizer plant] and the last ship has sailed. That's a metaphor, I think, for what's happening for Cook Inlet or Southcentral energy market," said energy consultant Tony Izzo, who also co-chairs the Anchorage Chamber of Commerce energy task force.

Meantime, a gas line from the North Slope is at least a decade away.

Industry insiders say there's a need for consensus amongst utility companies and different divisions of state government on where Southcentral gets its gas and how.

The region of the state uses an estimated 168 billion cubic feet of natural gas each year.

"There is no energy policy in place, no official energy policy in place that gets all divisions of state government and local government working in the same direction," Popp said.

State officials say they are gathering the expertise to make a master energy policy for Alaska.

"That's where we are. We are now at the formative stage in assembling the right people, the right resources, to make sure that we aren't ignoring opportunities for new energy production from all kinds of sources," said Kevin Banks, director of the Oil and Gas Division of the Alaska Department of Natural Resources.

Southcentral, like the rest of the state, is in a state of transition from energy supplier to consumer.

And its appetite is growing.

For the most part, Southcentral natural gas prices are lower than the rest of the U.S., providing a boon to the local economy.

But it's given little incentive to resource companies that can drill for natural gas elsewhere and make more money than they can in Cook Inlet.

Though 40 percent of natural gas supplies are exported from Cook Inlet, the resource has been channeled into local needs twice this year.

The typically exported natural gas was kept in the area to heat homes when temperatures dropped and demand rose. Without those supplies, natural gas wouldn't be available to the area when those situations arise.

Contact Sean Doogan at sdoogan@ktuu.com