Utilities make first draw from gas storage


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Just in time for recent cold weather, Southcentral Alaska utilities are now making their first withdrawals from a new natural gas storage facility near Kenai.

“We’ll be depending on gas storage for 20 percent of our estimated peak needs this winter,” Chugach Electric Association spokesman Phil Steyer told the Anchorage Chamber of Commerce Nov. 26.

The storage project, completed this year, “is just in time” for the winter, Steyer said. Other utilities are withdrawing gas from storage also. Enstar Natural Gas Co. said colder weather has resulted in more gas demand from its customers.

The new Cook Inlet Natural Gas Storage Alaska, or CINGSA, facility is critically important this winter because the ConocoPhillips natural gas liquefaction plant near Kenai is no longer able to divert gas to the utilities as it has been in past winters.

“We are now selling all the gas we produce to the utilities. We are not making LNG at the plant, which is in a “warm shutdown,” ConocoPhillips spokeswoman Amy Burnett said.

Chugach Electric, Anchorage’s city-owned Municipal Light and Power and Matanuska Electric Association made presentations to the chamber on new electrical generation and power distribution projects they have under way, but uppermost of the minds of utility managers are looming long-term shortages of gas, the need to meet peak-demand periods this winter, and rate increases needed to pay for new projects and for rising prices of gas.

Steyer recommended to chamber members that they plan for electric rate increases of 5 percent to 10 percent in 2013, although final numbers won’t be known for some time.

Enstar Natural Gas Co. rates will rise, too. Although Enstar was not at the chamber Nov. 26, its spokesman John Sims said the utility has advised the Regulatory Commission of Alaska that its cost for natural gas will increase by 14 percent in the first quarter of 2013, an amount that will have to be passed on to consumers.

Enstar’s gas costs are expected to average $7.24 per thousand cubic feet, or mcf, in the first quarter of the year, up from $6.16 per mcf in the last quarter of 2012 and $6.71 per mcf in the first quarter of 2012.

The major challenge for Enstar is simply getting enough gas for its needs in 2013, however. Sims said the utility still faces a gap of about 4.2 billion cubic feet of its expected 2013 requirement of about 33 billion cubic feet, although negotiations are continuing with producers in the region.

“The fact that we are going into the new year with a gap this large puts us into an uncomfortable position,” Sims said.

If Enstar is unable to secure its supplies the utility will have to ask the electric utilities to share gas they have under an agreement between the Southcentral utilities. This would be expensive, but the electric utilities have capabilities to shift to alternatives for some of their needs, such as using diesel to some extent, halting sales of power outside the region or even importing power from Golden Valley Electric Assoc. in Fairbanks.

“The electric utilities will bear the brunt of any fuel shortage because you can shut us off,” from gas, Joe Griffith, Matanuska Electric Association’s general manager, told the Anchorage chamber. Enstar has no alternatives, however, and its system must be protected, he said.

Steyer reviewed the gas supply situation for chamber members. Although Enstar’s gap is immediate, Chugach faces its own gas supply gap in 2014 and 2015, and ML&P faces future gaps as well.

Steyer cited findings from a consulting firm hired by the utilities that has forecast an annual supply gap, between total gas demand and estimated total supply, of 6.2 billion cubic feet in 2015, 11.4 billion cubic feet in 2016 and 16.6 billion cubic feet in 2017.

The utilities are working together now to meet those gaps with either imported liquefied natural gas or compressed gas. Suppliers of LNG and compressed gas have now responded to Requests for Proposals from the utilities, and an economic consulting firm will be hired soon to compare the proposals and make recommemndations.

“Some are saying ‘no, no’ to gas imports, but we will have to have some kind of new gas in the pipeline by the winter of 2014 and 2015,” ML&P’s general manager Jim Posey said.

It’s too early to know the additional cost of importing gas but at the chamber meeting Posey said it might cost 30 percent to 40 percent more than what is now being paid to gas producers in the region.

LNG prices in Pacific markets are now trending downward.

“There’s a lot of gas on the water,” he said.

ML&P improvements ongoing

Posey reviewed ML&P’s plans with chamber members. The city utility, which is celebrating its 80th anniversary this year, serves a 20-square-mile core area of Anchorage’s downtown and midtown, including the bulk of the city’s large commercial and institutional including the midtown office, university and health care buildings.

To modernize and keep up with growth, ML&P has a $459 million five-year capital improvements program under way, Posey said. The bulk of this, $274 million, is for new power generation facilities including ML&P’s 30 percent share of the new Southcentral Power Project now being built in south Anchorage.

The new generation plants are more efficient than what they are replacing, and are expected to use 28 percent to 34 percent less natural gas to generate the same amount of power.

“This is the busiest construction year we’ve seen in the last 40 to 50 years. The work is being driven by improvements we’re making at our power plants but also to repair damage from the wind storm that hit us this fall,” Posey said.

One large project underway is construction of expanded generation facilities at ML&P’s power plant near Muldoon on the Glenn Highway. About 200,000 cubic yards of dirt were excavated this year at a site for a new power plant building adjacent to the existing plant. Three new gas turbines are on order, which will arrive in 2014 and be installed in 2015, Posey said.

ML&P is also continuing work to replace above-ground power lines with underground lines. About $2.5 million is budgeted this year for this work, Posey said.

A new, $22 million substation is also being installed so ML&P’s share of power from the new South Anchorage power plant can be moved efficiently to midtown Anchorage, the largest growth area for the utility.

“The construction of new office towers has shifting our whole load to midtown,” Posey said, and the power transmission infrastructure must meet this demand. Another major customer will be Verizon Wireless, he said.

ML&P gets most of its natural gas from the Beluga gas field, where it is the one-third owner. The field is declining at rates of about 17 percent per year but continued investments in compressors and new producing wells have offset some of that.

In 2011, the owners of the field, which include ConocoPhillips, which operates the field, Chevron (now Hilcorp Energy) and ML&P, invested $60 million and achieved an 18 percent to 20 percent production increase, Posey said, but the long-term underlying decline has continued.

New production wells drilled in the Beluga field don’t produce as much as gas, either. In the field’s early years there were wells that produced as much as 40 million cubic feet of gas per day, Posey said. Now the average daily rate per well is 15 million cubic feet, he said.

New Chugach plant to fire up in 2013

Chugach Electric Association’s largest construction project is the new $369 million, 183-megawatt Southcentral Power Project, of which it is 70 percent owner with ML&P owning the remainder. The plant is nearing completion and will be generating electricity to grid in the first quarter of 2013, Chugach’s Steyer said.

Chugach has a number of other projects also under way including replacements of transmission lines along the Seward Highway that serve Hope and Seward, and development of a stream diversion at Chugach’s Cooper Lake hydro facility, at Stetson Creek. Stream diversions have the effect of putting more water through a hydro plant, increasing the amount of power produced, Steyer said.

Things are busy in the Matanuska Electric Association service area which includes the Matanuska-Susitna Borough along with parts of north Anchorage. MEA’s biggest project is construction of its new Eklutna Generating Station at Ekutna, its manager, Joe Griffith, said. Design work is essentially done on the plant as well as site preparations and a connection to a natural gas pipeline.

Ten large engines that will produce the power are on order. They are large machines, 19 feet tall and 60 feet long, each weighing 300 tons. 

The engines use natural gas as fuel but Griffith is investigating where a propane-air mixture can also be used. They can also be switched to diesel quickly, but if that were to happen the fuel cost to MEA would triple.

MEA has other projects underway also including planning for a 37-mile new distribution line to move power more efficiently from the new generation plant at Eklutna to MEA’s main center of demand in the Wasilla area.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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