Hawker Comments On Cingsa Storage Level News
Friday, August 17, 2012, Anchorage, Alaska – Rep. Mike Hawker, R-Anchorage, issued the following statement upon hearing that Cook Inlet Natural Gas Storage Alaska (CINGSA) is encountering difficulties obtaining enough natural gas.
“It has come to my attention that CINGSA has run into problems getting enough gas to operate its new storage facility at optimal efficiency. Apparently CINGSA believed they had sufficient gas obligated under a contract with an unnamed Cook Inlet gas producer, but the producer’s interpretation is that the contract simply allowed them the option of an exclusive sale to CINGSA.
“While this is clearly a contractual dispute that will need to be worked out in the courts, I am disappointed that a company – which I am told is no longer operating in Cook Inlet – would let Alaskans down at a time when their energy security is most in question.
“The Southcentral gas market has always been a tricky one. Small and isolated, with huge seasonal fluctuations in demand, limited exports have long been the foundation that gives industry incentive to produce and provides energy security for two-thirds of Alaskans.
“I support free market principles that allow those with a commodity to sell it for the highest price they can. However, there has long been an informal understanding between Cook Inlet producers, utilities and the state that local needs must be met. I am deeply disappointed that a producer would disregard what I see as a responsible corporate citizen’s obligation to the people of Alaska.
“I understand that along with a potential physical shortage of gas to supply to CINGSA and to utilities, the gas price has gone up dramatically, now generally paralleling the price of export gas. This would represent a significant increase in electricity and home heating costs to Southcentral Alaskans, one that individuals and the general economy cannot easily absorb.
“I support continued LNG exports from Cook Inlet; however, our local needs must be met first, and at reasonable rates fair to all parties. To that end, I urge the producing companies in Cook Inlet to pursue reasonable, fair supply contracts with Enstar, CINGSA and electric utilities that will provide Alaskans with energy security as we approach a critical winter.
“Meanwhile, now more than ever, we must relentlessly pursue long-term solutions offering energy stability to economies and individuals of Southcentral and all Alaska – including a natural gas pipeline from the North Slope to export at tidewater.”
Rep. Hawker worked diligently with Cook Inlet producers, Southcentral utilities, and regulators to develop the Cook Inlet Recovery Act (HB 280), a comprehensive legislative package passed in 2010 with widespread support. The omnibus bill created a framework for a first-of-its-kind natural gas storage facility in Alaska to meet the critical gas shortages threatening Southcentral during winter. The bill also used a combination of tax credits to encourage fresh exploration and development in Cook Inlet. While those credits have drawn new exploration, production continues to dwindle due to the difficult economics of a small, isolated local market with uncertain potential for continuing LNG exports.