Natural gas cooperative formed to help utilities buy gas

Photo by William Tremaine and Daniil Zakharov of the King Career Center photography class

A member-owned Alaska natural gas cooperative has been formed to allow the state’s small electric utilities to negotiate and purchase gas more efficiently than the utilities could do on their own, according to Harold Heinze, one of the three founders of the co-op.

Heinze, a former Atlantic Richfield Co. senior manager, currently is the executive director of the Alaska Natural Gas Development Authority, or ANGDA, a state corporation responsible for facilitating the supply of gas to Alaska communities.

Two other founders of the co-op are Joe Griffith, retired general manager of Chugach Electric Association, and Tony Izzo, former manager of Enstar Natural Gas Co.

Heinze said the state gas authority is assisting in the startup the new co-op, called the Natural Gas Supply Corp., and will help finance purchases of gas and provide technical support. Under Alaska law, individuals must form cooperatives.

ANGDA is an independent state corporation with its own authority to sell bonds, including tax-exempt debt.

Heinze said the co-op is modeled after similar gas supply cooperatives owned by electric utilities in southeast U.S. states.

Alaska electric utilities that could join and operate the co-op say they are interested in the idea.

"We think working cooperatively with other utilities is a good idea," said Lee Phibert, senior vice president for strategic planning for Chugach Electric Association. "We’re working now to develop a memorandum of understanding with the co-op that we’ll be taking to our board soon."

Heinze said two ideas drove the formation of the co-op. "First, there is a need for some entity with resources to act as a gas supply aggregator in financing large purchases of gas for future delivery because electric utilities here, organized as co-ops themselves, are too small to afford it," Heinze said.

Secondly, the larger volumes that would be purchased by the utilities as a group would lead to volume discounts, he said.

The state gas authority could do all of this on behalf of the utilities, Heinze said, but it’s better if the utilities own and manage the supply effort themselves with ANGDA playing a support role.

"This will work a lot better if utilities who are members run the co-op themselves," Heinze said.

There is some urgency that the utilities get themselves organized because open seasons for a large-diameter North Slope gas pipeline are planned next year, Heinze said. Both TransCanada Corp. and the Denali pipeline group formed by BP and ConocoPhillips are pursuing separate and competing pipeline projects, and plan to have open seasons in 2010.

Heinze said the co-op could also tackle development of gas storage facilities to handle seasonal swings in gas requirements.

Southcentral Alaska gas producers Chevron Corp. and Marathon Oil Co. now have some capacity for gas storage in depleted gas reservoirs, but utilities may want to have their own storage, Heinze said.

The co-op could also assist utilities in negotiating and purchasing gas supplies now. Chugach Electric has been stalled in efforts to renew or secure new supplies of gas with Cook Inlet producing companies in the Cook Inlet region. The utilities current supply contracts expire in 2010 and 2011.

11/15/2016 - 1:48pm