Homer Alaska - Business

Story last updated at 4:23 PM on Wednesday, October 26, 2011

Committee talks local energy development



By MOLLY DISCHNER
Morris News Service - Alaska

The state's Senate Resources Committee met Oct. 20 in Kenai to talk about resource development in Cook Inlet.

Kenai Republican Sen. Tom Wagoner chaired the meeting. Wagoner is co-chair of that committee with Sen. Joe Paskvan, D-Fairbanks. The committee includes Sen. Hollis French, D-Anchorage, Sen. Lesil McGuire, R-Anchorage, Sen. Bert Stedman, R-Sitka, and Sen. Gary Stevens, R-Kodiak.

Kenai Peninsula Reps. Mike Chenault, R-Nikiski, Paul Seaton, R-Homer, and Kurt Olson, R-Soldotna, also attended the meeting.

The meeting focused on Southcentral's energy needs and the potential impact of a natural gas pipeline from the North Slope, with presentations from nine different entities.

Joe Griffin, from the Alaska Railbelt Cooperative Transmission and Electric Company, gave the legislators an overview of electricity needs in Southcentral and projects working to power the area. The cooperative has been working on upgrading interties between various railbelt communities in addition to its work generating power.

Griffin said a shortage in natural gas would create major problems for Southcentral. In the case of an energy shortage, the utilities would hold rolling blackouts, he said. In addition to looking for ways to get natural gas from the North Slope to the rest of the state, Griffin said the cooperative is looking at other alternatives, including hydropower and having power plants that can run on propane as backup and more natural gas from the inlet.

"If we could get a reliable Cook Inlet supply that would be wonderful," Griffin said.

Bruce Tangeman, a deputy commissioner in the state's tax division, explained the tax structure for oil and gas in Cook Inlet and discussed various credits created to help spur development.

One of the major incentives is for a jack-up rig, an incentive that goes to the first three unrelated producers using a new rig to drill in the inlet.

Tangeman said there is currently such a rig in the inlet, but the state hasn't received paperwork to claim a credit for it yet.

Wagoner also noted the state receives royalties from some development, but those rates have to be revisited in the near future.

Representatives from ConocoPhillips, Marathon, Apache and Escopeta also talked about their efforts to develop natural gas and other products.

ConocoPhillip's Darren Meznarich said he couldn't speculate on how a natural gas pipeline could change the game for the company's Cook Inlet operations. Meznarich said the company would not have purchased the Nikiski liquefied natural gas plant it jointly owned with Marathon if it didn't see a future in the area. Any specific plans haven't been made yet, and Meznarich said he couldn't speculate without knowing the details of any proposals.

Two producers also talked about alternative energy sources.

Cook Inlet Region Inc.'s Ethan Shutt talked about that entity's efforts toward coal gasification, which would create synthetic gas through a series of underground reactions.

The project is located on the west side of Cook Inlet near the Beluga River, in the Matanuska-Susitna Borough. The synthetic gas base product could be used to create fuels, fertilizer or other petrochemical products. The coal used during reactions would likely not be mined or developed for other uses afterward, Shutt said.

Before such a project comes online, further studies and site work would have to be done.

Shutt said the synthetic gas could produce electricity at a rate comparable or lower than the current cost of electricity in Southcentral.

Paul Thomsen updated the senators on ORMAT's Mount Spurr Geothermal Project.

That project, which would develop up to 100 megawatts of geothermal power on Spurr, hit a setback this summer when the company wasn't able to drill as deep as planned. The rock and temperatures reached were not as positive for geothermal development as hoped, Thomsen said. The company now plans to drill again to see what the temperatures are like farther down.

"This project is not dead," Thomsen said.

Geothermal provides a steady baseload of power supply, Thomsen said, and could help bridge the region to a time when more natural gas could available from a line from the North Slope.

The committee met again Friday in Kenai's City Hall to hear from Buccaneer, LNG Alaska and Cook Inlet Energy.

Molly Dischner is a reporter for the Peninsula Clarion.

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