Enstar president warns of natural gas shortfall, delayed solutions for

The head of the largest utility in Southcentral Alaska expressed dire concerns this week that the state’s natural gas shortage may come quicker than people have come to expect, raising the risk for power interruptions in the future.

John Sims, president of gas company Enstar, said in an interview if everything runs smoothly — meaning no gas-supply interruptions or cold weather causing excess demand — the region should have the gas it needs for the near-term.

“But I start to get really, really concerned in, in 2027, 2028,” he said.

Enstar provides gas to heat home and buildings in the Anchorage and Matanuska-Susitna areas, and portions of the Kenai Peninsula. It serves 150,000 customers.

Sims said he’s also worried that power companies’ plans to receive imported liquefied natural gas to fill the gap may not be possible until 2028, due to permitting timelines at state and federal agencies.

That’s a year later than estimated by an initial report issued last summer by a working group involving the utilities along the Railbelt from Homer to Fairbanks, and state entities.

Members of the Regulatory Commission of Alaska have raised similar points, saying the looming gas shortfall in the region could lead to potentially catastrophic outcomes if utilities aren’t prepared.

On Wednesday, the commission began a series of meetings with power companies to hear their plans for rationing power, if needed, to protect vital facilities such as hospitals and to prevent blackouts or forced power outages. The commission met first with the relatively small Homer Electric Association, serving much of the Kenai Peninsula.

Hilcorp, producing more than 80% of the gas used in the Railbelt, warned Enstar and other utilities in 2022 that it did not have enough natural gas reserves in the basin to provide for new gas supply contracts after existing ones expire in the coming years.

The warning has sent utilities scrambling to find new sources of power, including renewable energy projects that could require lengthy timelines to complete, and potentially costly imports of liquefied natural gas. Alaska Gov. Mike Dunleavy has proposed legislation for temporary royalty rate reductions on oil and gas production from new pools, in an attempt to incentivize investments.

Electric utilities have said they are evaluating opportunities to import liquified natural gas to avoid any supply gaps.

Hilcorp said this week in a statement it will meet the obligations of its gas supply agreements with utilities. In 2024, it will spend hundreds of millions of dollars to develop its leases in the Cook Inlet basin, Hilcorp said.

[Report: Alaska’s Railbelt can shift to renewables, but that would require big capital investment]

“However, it’s important to note that the natural gas under Hilcorp’s leasehold alone cannot continue to meet nearly all Railbelt gas demand,” the company said in a statement. “Railbelt utilities and other gas producers need to identify additional sources of natural gas supply for Southcentral Alaska.”

“We will continue to collaborate with Railbelt utilities, state and local governments, and the public to find energy solutions for Alaska,” Hilcorp said.

A one-year extension for Homer Electric

Homer Electric, serving about 25,000 members, is the region’s first electric utility to have its gas contract with Hilcorp to expire.

The contract expires this spring, on March 31.

But Enstar, the region’s largest natural gas buyer, has recently worked out an arrangement that would provide Homer Electric with a one-year extension, Sims said.

Enstar’s gas-supply contract with Hilcorp is set to end in 2033, Sims said. Hilcorp provides about 90% of Enstar’s gas, said Sims.

To extend Homer Electric’s contract, Enstar amended its gas supply contract with Hilcorp to accept an additional 3.5 billion cubic feet of gas for a yearlong period, close to a 10% increase in what Enstar normally buys for its own customers.

Enstar will sell the extra gas to Homer Electric Association for the 12 months, Sims said.

A Homer Electric spokeswoman said the utility signed a contract with Enstar to buy the gas.

The changes will be submitted to the regulatory commission for approval, Enstar and Homer Electric officials said.

Sims said Hilcorp is not obligated to explain how it’s making the extra gas available. Hilcorp did not respond to that question from a reporter.

Sims said the extra gas is likely coming from Cook Inlet gas that would have been used to meet future needs.

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