Mayor stumps for Cook Inlet gas

Williams urges more exploration

Posted: Thursday, November 15, 2007

Cook Inlet's known natural gas reserves may last no more than a decade under present-day rates of use even with Agrium's Nikiski fertilizer operation in mothballs, Kenai Peninsula Borough Mayor John Williams warned during a speech in Anchorage on Wednesday.

Speaking before the 28th Annual Conference of the Resource Development Council at the Anchorage Sheraton Hotel, Williams said the gas supply dilemma "is screaming for a solution, not a Band-Aid."

Although no Clarion reporter was present in Anchorage, the paper was provided with an advance copy of the speech.

The region's gas might last as long as 14 years, Williams noted, but only if the U.S. Department of Energy turns thumbs down on an export license extension sought by ConocoPhillips and Marathon Oil, and ConocoPhillips decides to shut down its Nikiski LNG plant. That is not what the borough wants, Williams said.

According to a 2007 state Division of Oil and Gas study, Cook Inlet's known natural gas reserves stand at approximately 1.68 trillion cubic feet. However, a 2004 U.S. Department of Energy study estimates between 13 trillion and 17 trillion cubic feet of gas remain undiscovered beneath the inlet, which could be developed for a cost of about $5 billion, Williams noted.

"In the absence of getting some of the trillions of cubic feet of proved-up natural gas from the North Slope, we need to start punching exploratory gas wells in the Cook Inlet basin," he told the audience. "We need to start moving that gas from the undiscovered column to the reserves column."

Getting there would require a multi-step process, starting with development of a regional energy policy, Williams said.

"The state of Alaska does not have an energy policy and we can't wait for them to develop one," he said. "Without a policy, we cannot achieve any goals or plan for our energy future."

Many hope the Alaska Gasline Inducement Act will provide the answer, but Williams worried that AGIA might not produce a first-rate application.

"We need to have a policy, and it shouldn't be with all of our eggs in the basket of a pipeline," Williams said. "Southcentral residents, a majority of the state's population, will still face the same problem of dwindling natural gas supplies with no replacement gas coming in from (the North Slope)."

Williams said the Cook Inlet Basin isn't getting the attention it deserves to encourage gas exploration. Incentives are needed for deeper drilling, capital investment credits to upgrade existing platforms, and exploration credits, he added, echoing Anchorage Mayor Mark Begich.

Noting that large industrial plants and refineries pay a significant portion of the freight on consumer's natural gas, he warned that with Agrium shut down and the LNG plant's existence in the hands of the feds, it is vital that further exploration be undertaken.

At the moment, however, the state's official "conditional support" for the LNG plant export license extension includes conditions Williams believes will be fatal to ConocoPhillips' application. He and his staff have been working to get the state's position changed, he said.

"The latest word that I have is that they are working on it," he said. "I sure hope the governor has a plan in place if that LNG plant shuts down."

Williams, along with fellow Tri-Borough Commission mayors Begich and Matanuska-Susitna Borough Mayor Curt Menard, recently appointed members to an Energy Policy Task Force, which held its first meeting Tuesday in Anchorage. It has been charged with developing an energy policy for Southcentral Alaska that the three mayors hope will become a model for a statewide policy.

Williams said he also hopes to see a School of Energy established through the University of Alaska, focusing on the education of energy engineers.

Finally, Williams said Alaska leaders must look beyond oil, gas and coal to utilizing renewable energy sources.

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