Opportunities are passing us by

Posted: Sunday, February 13, 2011

Last week's news that Conoco Phillips and Marathon will be shutting down LNG exports from Cook Inlet is a staggering blow for the Peninsula and for Alaska -- and raises crucial questions for our future.

I can only imagine what this is doing for the workers and their families. I've gone to school with, know and represent some of the families affected by today's decision. Those were high-paying, family-supporting wages. Gone. It's adding insult to injury for my district, having lost the Agrium fertilizer plant three years ago. It's a terrible day for the Peninsula and Alaska.

I fear the consequences this decision will have over the next days, weeks and months, on our Kenai communities, the Railbelt energy grid, Southcentral gas supply and Inlet exploration and development. It's a sad day for the Inlet and our outlook. The problem now comes in the winter when cold, dark days hit Southcentral and we won't have gas that the plant supplied as a back-stop.

Without LNG exports, gas producers have little incentive to boost production to keep a shaky local market supplied. Deliverability already runs short in peak winter months, when electric utilities and Enstar draw most heavily on Cook Inlet supplies. To this point, the existence of LNG export options have kept producers cranking out enough to avoid utility black-outs and home heat restrictions. That's because of the extreme seasonal swing in demand in Southcentral Alaska. Producers can't adjust gas well flows to accommodate the dramatic increase between summer and winter use. For years, they've kept production ratcheted up year-round, feeding gas to export in the summer when local demand is low, and switching flows to local utilities in winter when demand skyrockets.

Without exports to balance the seasonal local market, producers won't have anywhere for their gas to go when local demand is minimal. Will they be forced to shut wells in? Will this news bring the hammer down on a few companies' work seeking out new gas finds? What incentive is there for companies to produce gas -- at ever-increasing drilling and production costs -- to feed a meager local market? Will others follow Chevron's lead and put their Cook Inlet assets on the sale block, or will they simply shut down? How many more of our neighbors will be looking for work?

The decision today reflects a continued trend of pressure on the resource extraction industry from past administrations and current legislators to score political points, which now are now having a detrimental impact on Alaska families, our community and its economy and the state's economic climate.

Whenever we shut down an export facility in Alaska knowing that we have 35tcf of gas 800 miles away on the North Slope, and decide that it's easier to import gas, it should be cause for concern. This, at the least, should serve as a wake-up call to Alaskans.

Where do we go from here? I have discussed the closure with my colleagues and Rep. Bob Herron, the chair of the House Special Committee on Economic Development, Trade and Tourism, will be conducting a hearing on Tuesday, Feb. 15, at 10:15 a.m., to examine what steps we can take as a House and Caucus to dig into this. I am personally having conversations with Conoco and Marathon, and will have discussions with the Governor, to see what can be done now, what could've been done in the past and what should we do for the future.

Now more than ever, it is time to start turning dirt on an in-state gasline. I eagerly await the report from the Alaska Gasline Development Team focused on developing a project for in-state use.

We cannot afford to wait any longer. Economic and energy opportunities will pass us by unless we take action. If we don't take action, the last person in the state needs to turn out the lights before they leave.

Rep. Mike Chenault, R-Nikiski, is Speaker of the Alaska House of Representatives.

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