Cook inlet gas: cost increases coming.

• Author: Bohi, Heidi
• Position: OIL & GAS

There are several solutions for solving the puzzle that, at first glance, make the level of difficulty seem as if it might be just a bit overstated. But, to realize what is possible and what is not takes more than resolve. In other words, it's not as easy as it looks--especially if you're working against the clock.

JUMBLED DEBATE

Like a Rubik's Cube, Alaska's natural gas debate is a jumbled discussion that has economists, scientists, suppliers, regulators, policy makers and producers trying to come up with a cooperative, long-term strategy while Alaskans--as they're wont to do--blast the process and the players.

There is a big swing in gas demand between summer and winter and the declining wells in Cook Inlet's 40-year-old gas fields are experiencing difficulties trying to meet the regional utility companies demands during cold snaps. At the same time, the gas that is diverted from ConocoPhillips' and Marathon's liquefied natural gas (LNG) plant to supplement declining production is a temporary solution because the LNG export license for the plant ends in 2011 and, to date, they have not applied for an extension.

At the same time, Alaska is the only place in the United States exporting natural gas overseas. If there's enough natural gas in Southcentral Alaska to sell it to Japan, most Alaskans believe, then there's enough to give them a break on price and all the talk of slowing drilling of new natural gas production wells in the region is doublespeak that will do nothing to keep their ears warm as winter temperatures continue to head toward the southern end of the thermometer.

This thinking is too linear, according to key producers. Natural gas supply is a function of geology, market demand, availability and price. All factors of the equation are equally important components of the strategy required for delivering natural gas from the reservoirs to homes, businesses, utilities and power plants in Alaska.

GAS DISTRIBUTION

ENSTAR Natural Gas Co. is responsible for the transmission and distribution of natural gas and serves approximately 350,000 Alaskans through 3,200 miles of distribution line throughout the Southcentral Region, and 450 miles of high-pressure transmission line through its sister company Alaska Pipeline Co.

Last year, it added 1,700 new residential and commercial customers to its gas distribution system. Historically, customer rates have remained among the lowest in the country, though residential gas usage is among the...