If the RCA approves the project, does that make it more possible for Enstar to bring gas to Homer? What would it take for Enstar to make good on its 12-year-old plan to serve Homer? Does the Enstar-Anchor Point Energy project make gas to Homer more likely or less likely?

Mayor James Hornaday doesn't think the chances are good, he told Enstar representatives Charlie Pierce and John Sims when they spoke to the Homer City Council last month.

"I have no confidence in Enstar ever serving Homer," Hornaday said. "Every time we talk about this we always hear about how you want to serve Homer, but it seems like the gas keeps going north."

Anchor Point Energy has agreed to sell 10 billion cubic feet of natural gas from the North Fork field over eight years to Enstar and to build a 6-inch pipeline about 9 miles to Anchor Point. In turn, Enstar will build a 20-mile 8-inch pipeline north to Ninilchik in effect, connecting the North Fork field to the southcentral natural gas distribution system operated by Enstar.

The North Fork field is operated by Denver-based Armstrong Oil and Gas, a 20-percent partner in Anchor Point Energy. The other four partners are Dale Resources at 35 percent, GMT Exploration Co. at 30 percent, Jonah Gas Co. at 7.5 percent and Nerd Gas Co. at 7.5 percent.

When Enstar first got a certificate of public convenience and necessity in 1997 from the RCA then the Alaska Public Utilities Commission to serve the lower Kenai Peninsula, APUC said Enstar had to provide service by Dec. 31, 2000. Enstar beat out Homer Electric Association for that right. HEA had proposed initially providing natural gas by trucking liquefied natural gas, or LNG, to a distribution network in downtown Homer.

Enstar got deadlines extended and extended, with the latest deadline in 2004. In August 2004, the RCA granted Enstar a request to modify its service area boundaries to include the communities served by the Kachemak-Kenai pipeline as well as Homer. That made Homer and the mid-peninsula area part of the larger southcentral Enstar service area. It also left Enstar's right to provide service to Homer in limbo pending its ability to get enough gas and transport it to Homer.

"We will not issue a certificate for Homer until gas service begins," the RCA said in its order. "We reserve the right to re-impose conditions if there are significant delays."

The original Enstar proposals were contingent on gas producers finding a deliverable supply for an estimated 3,500 customers in the Homer area. They also assumed the supply would be independent. For a 20-year contract, that would mean about 25-30 bcf of gas, said Sims, the manager of corporate communications for Enstar.

As part of the Enstar-Anchor Point Energy project, Armstrong Oil and Gas will put an existing well into production and drill two more wells within four years, Sims said.

The latest proposal changes the dynamics of natural gas on the lower Kenai Peninsula. By connecting the North Fork and Anchor Point to the Kachemak-Kenai pipeline, the lower peninsula at least to Anchor Point is now an integrated system, part of the southcentral network that heats homes and businesses and runs power plants. That system uses about 90 bcf annually.

The good news is the southcentral natural gas system could absorb the potential demand of new Homer area customers. Anchor Point Gas might not have to deliver 15-20 more bcf of gas, particularly if bullet or spur lines are built to southcentral Alaska from the North Slope.

"That's something we're looking into right now," Sims. "The dynamics of serving Homer change significantly with Homer connected to the overall system."

The bad news is that with concerns about southcentral producers being unable to meet distribution needs, the North Fork gas could get sucked north and Homer left dry.

That's the worry of Rep. Paul Seaton, R-Homer.

"Now there is this real question that they can take that gas anywhere into the service area," he said.

In January, Seaton's aide Louie Flora asked the RCA if Enstar has to provide gas to Homer first. The RCA told Seaton's office that if Homer got service, then Enstar could also sell excess gas to go north. If the gas went north without serving Homer, that could jeopardize Enstar's certificate to provide gas to Homer.

In a letter on the application by Enstar and Anchor Point Energy for its proposed project, Seaton asked the RCA to remove Homer from Enstar's service area so other gas suppliers could move in.

"Where I'm coming from is that there are other potential suppliers of gas," Seaton said.

He cited Fairbanks Natural Gas, which purchases LNG in Nikiski and drives it up north, supplying communities along the way. That could be done in Homer, too, he said and be more likely if the RCA removed Homer from Enstar's service area.

"It seems to me the playing field isn't level. We have people that are interested and have been doing commercial assessment for supplying natural gas via LNG," Seaton said.

"Should Homer be removed from Enstar's service area?" is a question the RCA also asked Enstar in its application for the Anchor Point Energy pipeline project.

Enstar told the RCA Homer should be left in. In a reply, G. Nanette Thompson, general counsel and vice president of rates for Enstar, wrote that if the pipeline project is approved, "Enstar will continue to evaluate the possibility of serving Homer Enstar will re-evaluate the economics of serving that community and begin a discussion with its leadership about adoption of a utility special assessment district."

Sims said Enstar wants to bring gas to Homer.

Charlie Pierce, manager of Enstar's Kenai office, said Enstar has already mapped out the distribution lines.

"Our upper management wants to serve Homer because we want to grow our customer base," Sims said.

Sims said he understands the frustration of Hornaday and others. Enstar might not have communicated clearly the complex economic factors that go into extending new gas infrastructure.

"Now we're stuck with a community that feels we didn't follow through on our promise," Sims said. "It's a shame that Homer feels the way they do."

For Homer to get natural gas, several things have to happen, Sims said.

First, the RCA has to approve the Enstar-Anchor Point Energy project.

Second, more gas has to be found. Sims said the supply is out there.

"It's just a matter of getting it (gas) under contract," he said. "It's not a matter of supply. It's a matter of deliverability."

Third, the cost of building the main and distribution lines and expanding to Homer has to be affordablew. Some of that cost would be absorbed by the consumer, but the economics of natural gas versus fuel oil, propane or electricity would make gas affordable and worth the investment of a new line as well as replacing appliances like hot water heaters and furnaces.

"The economics need to be taken a look at in extending the service down," Sims said.

When that could happen, Enstar doesn't know.

Seaton said he is glad Enstar at least is providing gas to Anchor Point.

"I'm supportive and happy that they are putting a tap to service to Anchor Point," he said.

"Enstar is in a position where our words are not what you want to hear," Sims told Hornaday and the city council. "I hope that the supplies can be found to serve this area, and that everything works out."

Michael Armstrong can be reached at michael. armstrong@homernews.com.