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In April 2012, utilities began reinjecting gas into five horizontal wells that make up Cook Inlet Natural Gas Storage Alaska (CINGSA). The facility in Kenai—owned by ENSTAR’s parent company, AltaGas of Calgary, Alberta (pending a sale of a 65-percent indirect interest to another Calgary company, TriSummit Utilities)—has a capacity of 11 billion cubic feet. After six months of adding gas, CINGSA began withdrawing from the reservoir to keep up with winter demand.

CINGSA hit a milestone last September, nearly filling its reservoir with 10.7 billion cubic feet, thanks to extra gas leftover from the previous winter. John Sims, president of both CINGSA and ENSTAR, says further expansion of the existing facility or adding a new one on the west side of the inlet may be in order.

Storage can’t conjure new gas, though. DNR has estimated that Cook Inlet will be depleted of extractable gas by the end of this decade. Looking for new sources, last year Chugach Electric and ENSTAR each hired consultants to study importing liquified natural gas (LNG), most likely from British Columbia. In filings with the Regulatory Commission of Alaska, Chugach Electric named Black and Veatch as its consulting firm, and ENSTAR named Berkeley Research Group. The expense of the consultants may be added to customer rates, with regulatory approval.

Sims told the Northern Journal newsletter in November that imports might be a bridge until a pipeline brings North Slope natural gas to the region. The gasline is aimed at the idled LNG export terminal in Nikiski. However, importing LNG would involve more modifications than simply attaching a hose to the spigot and reversing the valve. Thus, the utilities must explore whether the import option is worth the capital investment.

The analysis must confront the same economic factors that constrain the region’s gas supply in the first place. That is, despite hosting half of Alaska’s population, energy demand in the Cook Inlet market is marginal for companies considering whether to explore for resources. State subsidies altered the bottom-line calculation a decade ago, spurring some new interest, but those subsidies have since been phased out, sending explorers to more profitable prospects.

Exploration Interest

The forecast of Cook Inlet gas meeting demand until 2030 depends on producers extracting all of that resource. However, new activity is not attracting much interest. During the May 2022 annual Cook Inlet areawide lease sale, there were only two offers, both from Furie Operating Alaska. And after the Biden administration canceled a Cook Inlet lease sale in summer of 2022, it was rescheduled by order of Congress for late December. A state lease sale was scheduled for the same day, with DNR Deputy Commissioner John Crowther saying, “The basin still holds significant potential and an important step to unlocking it is to consistently offer open acreage to explorers.”

The December sale ended with Hilcorp submitting the sole winning bid on one federal tract out of 193 blocks offered. Hilcorp was also the high bidder on six tracts offered farther north, in state waters, but no other companies showed interest.

“The Cook Inlet basin has served as the Railbelt region’s exclusive source of natural gas for nearly sixty years,” noted the 2018 DNR study, Cook Inlet Natural Gas Availability. “As oil and gas fields in Cook Inlet continue to age, there is an ongoing need to assess the basin’s capacity to meet natural gas demand over the coming years.” The study was undertaken to evaluate the basin’s capacity to meet future demand and to find out what quantities of natural gas are recoverable through additional investment. The study concluded that “there are significant gas volumes potentially available through additional investment and development… but over time, the natural gas price required to induce additional supply increases.” Inlet gas prices, already more than 50 percent higher than in the Lower 48, would need to nearly double to $12 per thousand cubic feet for production beyond 2030 to break even.

Even as the state tries to encourage more exploration in the Cook Inlet basin, utilities are looking to other sources beyond, to diversify both supply and competition.