Legislature(2023 - 2024)BARNES 124

03/28/2024 10:15 AM House ENERGY

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Audio Topic
10:15:46 AM Start
10:16:12 AM Presentation(s): Cook Inlet Update
11:05:42 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation: Cook Inlet Update by John Sims, TELECONFERENCED
President, ENSTAR Natural Gas
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 28, 2024                                                                                         
                           10:15 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative George Rauscher, Chair                                                                                           
Representative Tom McKay                                                                                                        
Representative Stanley Wright                                                                                                   
Representative Mike Prax                                                                                                        
Representative Jennie Armstrong                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Thomas Baker                                                                                                     
Representative Calvin Schrage                                                                                                   
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
PRESENTATION(S):  COOK INLET UPDATE                                                                                             
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
     No previous action to record                                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOHN SIMS, President                                                                                                            
ENSTAR Natural Gas Company                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Gave a Power Point presentation, titled                                                                   
"Cook Inlet Update."                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:15:46 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER called the House Special Committee on Energy                                                                     
meeting to order at 10:15 a.m.  Representatives Armstrong, Prax,                                                                
McKay, Wright, and Rauscher were present at the call to order.                                                                  
                                                                                                                                
^PRESENTATION(S):  COOK INLET UPDATE                                                                                            
              PRESENTATION(S):  COOK INLET UPDATE                                                                           
                                                                                                                                
10:16:12 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER  announced that the  only order of  business would                                                               
be the Cook Inlet Update presentation.                                                                                          
                                                                                                                                
10:17:33 AM                                                                                                                   
                                                                                                                                
JOHN  SIMS, President,  ENSTAR  Natural  Gas Company  ("ENSTAR"),                                                               
gave a  PowerPoint presentation  [hardcopy included  in committee                                                               
packet],  titled "Cook  Inlet  Update."   He  began  on slide  2,                                                               
giving a perspective  of the consumers and the duty  that the gas                                                               
supply companies hold.  He said  that there is no time to analyze                                                               
hypothetical  or  theoretical  ideas,  that there  must  be  real                                                               
solutions.  He  continued to slide 3, which displayed  a graph of                                                               
past,  current,  and  projected gas  demand  based  on  different                                                               
scenarios of  use.  He gave  further detail on what  each part of                                                               
the graph was aiming to  communicate, as well as detailed current                                                               
contracts  and agreements  between utilities  and gas  companies.                                                               
He moved  to slide  4, which  showed the  cost of  additional gas                                                               
supply  in the  Cook Inlet.   He  further explained  a previously                                                               
mentioned  contract  agreement.    He moved  to  slide  5,  which                                                               
displayed an  overview graphic of  the contract  terms previously                                                               
mentioned.  He continued to slide  6, which outlined the roles of                                                               
each  gas  supply company  in  four  different proposed  projects                                                               
around  Alaska.   He moved  to slide  7, where  he explained  the                                                               
summary  findings  based off  of  the  studies performed  on  the                                                               
proposed projects previously mentioned.   He skipped slides 8 and                                                               
9, stopping on  slide 10 to touch on how  the gas companies could                                                               
meet peak demand  with a variety of energy sources.   He moved to                                                               
slide 11,  which gave context  to the reliability of  wind power,                                                               
which led into slide 12, where  he wrapped up his hypothetical of                                                               
how the gas  companies could combat an overloaded  system with no                                                               
reserve energy.                                                                                                                 
                                                                                                                                
10:34:41 AM                                                                                                                   
                                                                                                                                
MR.  SIMS,  in  response  to Representative  McKay,  brought  his                                                               
presentation  back to  slide  8,  where he  explained  how a  gas                                                               
supply  shortage  may  be   avoided  through  thorough  planning,                                                               
minimizing  impact, and  recognizing the  impact that  gas supply                                                               
has to  customers.  He moved  forward to slide 9,  to explain how                                                               
the storage of  additional reserves of gas is  critical to energy                                                               
security in  the Cook Inlet Region.   He progressed to  slide 13,                                                               
which  displayed  an  example  of the  economic  impact  that  an                                                               
increase in gas  prices in the Cook Inlet Region  would have.  He                                                               
finished  his presentation  on slide  14,  which emphasized  that                                                               
there is  no unsubsidized  energy solution  that will  reduce the                                                               
cost of power  or space heating in  the next 10 years.   He said,                                                               
"The second-worst  thing for Alaska  is to import  LNG [Liquified                                                               
Natural Gas].  The worst thing is to do nothing."                                                                               
                                                                                                                                
10:40:55 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ARMSTRONG asked  whether the  30-percent increase                                                               
model is  assuming a  7 billion cubic  feet (Bcf)  shortfall, how                                                               
much of  each Bcf the state  is importing, and what  the economic                                                               
impact on the individual ratepayer is.                                                                                          
                                                                                                                                
MR. SIMS  responded that  most of ENSTAR's  demands are  met with                                                               
contractual agreements.   He said  if ENSTAR were to  import gas,                                                               
assuming a  $16 dollar  price per thousand  cubic feet  (Mcf), it                                                               
would result in  a 30-40 percent increase in  cost to ratepayers.                                                               
He said  that the 30-percent  number is reflected through  all of                                                               
ENSTAR's  gas  sales customers,  not  just  the Anchorage  School                                                               
District.                                                                                                                       
                                                                                                                                
REPRESENTATIVE ARMSTRONG asked how the  red parts of the graph on                                                               
slide  3  translate   to  dollar  impacts  on   customers.    She                                                               
emphasized   the  importance   of   providing   clarity  on   how                                                               
fluctuating  gas prices  and uncertainty  in energy  supply would                                                               
affect ratepayers.                                                                                                              
                                                                                                                                
10:44:32 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  PRAX referred  to  Mr.  Sim's previous  statement                                                               
that "the  second-worst thing  for Alaska is  to import  LNG, the                                                               
worst  thing is  to do  nothing," and  he asked  what the  third,                                                               
fourth, and fifth worst things to do are.                                                                                       
                                                                                                                                
MR. SIMS  said that ENSTAR must  be very clear on  what solutions                                                               
are and  what solutions  aren't.  He  said that  renewable energy                                                               
("renewables")  won't save  space  heating  challenges, but  they                                                               
would relieve  pressure from gas demand.   He gave an  example of                                                               
Homer  Electric's  energy  demand  and how  ENSTAR  handled  this                                                               
year's  cold snap.    He  said there  are  very  few options  for                                                               
handling a  crisis shortage, but  an LNG pipeline from  the North                                                               
Slope would be a real solution.                                                                                                 
                                                                                                                                
REPRESENTATIVE  PRAX asked  if an  LNG import  facility could  be                                                               
built before Cook Inlet runs short on its gas supply.                                                                           
                                                                                                                                
MR. SIMS answered  that an important distinction is  the scale of                                                               
the facility and  its importing capability and  whether the state                                                               
is  to view  that import  facility as  a short-term  or long-term                                                               
solution.                                                                                                                       
                                                                                                                                
10:50:19 AM                                                                                                                   
                                                                                                                                
CHAIR RAUSCHER asked  about the business model  of ENSTAR, giving                                                               
an  analogy  to  a  theoretical  cylinder  of  gas  to  represent                                                               
Alaska's total gas consumption.                                                                                                 
                                                                                                                                
MR.  SIMS  responded that  the  biggest  challenge with  the  gas                                                               
supply issue  is trying  to minimize  direct costs  to customers.                                                               
He  said producers  in Cook  Inlet aren't  willing to  enter into                                                               
production contracts.   He said that a  more expensive short-term                                                               
solution that leads  to a cheaper long-term solution  is okay, if                                                               
only temporarily.                                                                                                               
                                                                                                                                
10:53:35 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE PRAX  asked about  what solutions are  possible in                                                               
the  short term.   He  asked whether  bringing LNG  to Alaska  on                                                               
isotankers would be plausible.                                                                                                  
                                                                                                                                
MR.  SIMS replied  that he  has direct  oversight of  getting LNG                                                               
imported,  but he  has  zero control  over  opening new  drilling                                                               
platforms in Cook Inlet.                                                                                                        
                                                                                                                                
REPRESENTATIVE  PRAX asked  about the  feasibility of  offloading                                                               
the gas without a major port construction.                                                                                      
                                                                                                                                
MR. SIMS  said that  there is  certainly construction  that would                                                               
need to be done, but the two  main questions are where the gas is                                                               
coming from and how much the gas would cost.                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX  asked  why   ENSTAR  likes  the  option  of                                                               
importing LNG.                                                                                                                  
                                                                                                                                
MR. SIMS  answered that there are  no doubts in his  mind related                                                               
to the supply and cost of natural gas.                                                                                          
                                                                                                                                
10:57:54 AM                                                                                                                   
                                                                                                                                
CHAIR  RAUSCHER  asked if  the  legislature  has prepared  enough                                                               
legislation  or tax  credits or  incentives  to bring  businesses                                                               
that provide energy to Alaska.                                                                                                  
                                                                                                                                
REPRESENTATIVE PRAX echoed the query  by asking what ENSTAR needs                                                               
from the state to make importing a viable option.                                                                               
                                                                                                                                
MR. SIMS, in response to  both questions, said that a streamlined                                                               
permitting process would be critical.   He said if the state were                                                               
to  subsidize  costs,  it  would  be  a  direct  benefit  to  the                                                               
ratepayer.  He said once  ENSTAR begins importing LNG, most other                                                               
options will go away.  He  asked the legislature to look at other                                                               
options   for   solutions,   specifically   reliable,   realistic                                                               
projects.  In  further response to Representative  Prax and Chair                                                               
Rauscher, he  said that  there is  a lot of  work being  done and                                                               
that the  entities that would  need to work together  are already                                                               
in  some  form of  communication.  He  said  it  must be  a  more                                                               
collective effort between  government entities, supply companies,                                                               
and utilities companies to solve the problem in the long term.                                                                  
                                                                                                                                
11:05:42 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 11:05 a.m.                                                                 

Document Name Date/Time Subjects
ENSTAR PPT House Energy 3.28.24.pdf HENE 3/28/2024 10:15:00 AM
Cook Inlet