What’s so complicated about that? A lot more than you might think.
Sen. Mark Begich, D-Alaska, was hoping to get a clearer understanding of what it would take for the two states to do business at a forum he held in Anchorage on Thursday.
Two representatives from Hawaii as well as industry experts weighed in. But once again, it seems that market forces, regulatory hurdles, geography and the lack of infrastructure conspire to keep Alaska’s gas from getting to where it needs to go.
One of the main barriers: Hawaii is not set-up to receive liquefied natural gas. It would have to spend about a half a billion dollars for a dock, a re-gasification plant and other facilities needed to convert LNG into power.
That’s a lot of money to spend, especially when Hawaii has set a goal of having 40 percent of its power supplied by renewable energy. A market that is already small and isolated would shrink even more.
Another issue: the source of the gas.
“It’s got to be Cook Inlet, because it’s available -- and you don’t need an 800-mile pipeline,” says Larry Persily, Alaska’s federal pipeline coordinator.
And while Cook Inlet is enjoying a renaissance of exploration, it is uncertain when there will be enough production to meet Alaska’s needs and sell the surplus to Hawaii. Industry experts at the table were cautiously optimistic about this possibility, but they also said the costs of developing Cook Inlet gas are likely to go up.
Hawaii’s representatives told the group it may be years away from buying Alaska’s LNG.
“Right now it’s hard to say what our best options are until we know what our import facilities are going to look like,” says Bob Isler, manager of Hawaii Electric Company’s generation project development.
Hawaii is under the gun from the Environmental Protection Agencies to convert to cleaner fuels. Isler says his company would likely spend money to meet these new requirements before investing in LNG.
There’s also a problem with the Jone’s Act, a federal law that is almost a hundred years old.
The law would add to the costs of transporting the gas, because it requires that ships moving cargo between any two ports in the United States be built, owned, registered and crewed by U.S. citizens.
Although Hawaii has a tropical climate, the two states have a lot in common. Hawaii’s energy picture is a lot like that of Alaska villages. Communities in both states also have some of the highest electricity costs in the nation, mainly because they use diesel fuel for transportation, heat and electricity and wind up paying a lot for the fuel to be delivered to remote locations with small populations.
Up until now, Alaska’s main export to the Aloha state has been its tourists, eager to frolic in the warm waves and sunshine. It looks like that won’t change in the immediate future.
But Bill Popp, CEO of the Anchorage Economic Development Corporation, says that shouldn’t stop the state from marketing its gas.
“Finding like-minded states, like-minded buyers, who have economic interest in reducing their energy costs, I think are a component to a larger strategy that needs to be developed to bring together industrial users, utility users, both within Alaska and outside of Alaska,” said Popp.
Sen. Begich says the congressional delegations of Alaska and Hawaii have been looking for ways to turn the energy struggles of the two states into a win-win. He told the group he’s optimistic about finding ways to get around some of the hurdles.