Legislators ask Parnell for local guarantees on LNG export renewal

Seven Alaska legislators asked Gov. Sean Parnell to seek explicit guarantees in a renewal of a federal license for liquefied natural gas exports from Alaska that local natural gas needs will be met by producers before gas is exported.

The request was made in a letter sent to Parnell on Aug. 24.

An LNG export license issued by the U.S. Department of Energy that is currently held by ConocoPhillips for its Kenai LNG plant will expire in March 2013.

“We anticipate the governor will soon receive requests to offer state support for applications to renew the export license,” said state Rep. Les Gara, a Democrat from Anchorage, in an interview Aug. 24.

What prompted the request was a contract dispute over commitments made by Marathon Oil to supply gas to a new gas storage facility being developed to meet local utilities’ winter peaking needs.

Cook Inlet Natural Gas Storage Alaska, or CINGSA, the company developing the facility, said it was not receiving gas pledged by Marathon in a contract agreed on in 2011, and told the Regulatory Commission of Alaska in an Aug. 13 letter that it believed Marathon sold the gas to be exported as LNG to command higher prices.

Late in the day on Aug. 24, CINGSA and Marathon announced they had resolved the dispute and enough gas would be supplied to pressurize the storage facility to allow withdrawals by utility companies at the previously agreed upon rates.

The seven lawmakers, which include three state senators and four members of the state House, asked Parnell in the letter to include language on local needs that was included in a two-year extension of the export license granted in 2008 but not included when the license was given another extension in 2010, Gara said.

“The 2008 commitment conditioned state consent (for the export license) on a binding commitment by ConocoPhillips and Marathon to meet local supply needs during the period of the export license,” Gara said.

Marathon has since sold its interest in the LNG plant to ConocoPhillips.

In 2010, Gara and other legislators asked Parnell to again condition the state’s consent on the license extension on having the local-needs language included in the license, but Parnell did not do that.

Gara said that had the language been included the potential disruption of gas supply to the storage facility would not have happened.

CINGSA spokesman John Sims said the storage facility needs 7 billion cubic feet of “pad gas” to pressurize the reservoir so that utility customers storing gas will be able to withdraw gas in winter at the rates they need.

Besides Gara, the letter to Parnell was signed by state representatives Pete Peterson, Berta Gardner, and Chris Tuck, and state senators Hollis French, Bill Wielechowski and Bettye Davis. All seven lawmakers are from Anchorage, and all are Democrats.

11/11/2016 - 11:09am