Legislature(2025 - 2026)GRUENBERG 120
01/28/2025 01:00 PM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Overview(s): Cook Inlet Energy | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
January 28, 2025
1:03 p.m.
DRAFT
MEMBERS PRESENT
Representative Ky Holland, Co-Chair
Representative Donna Mears, Co-Chair
Representative Bryce Edgmon
Representative Chuck Kopp
Representative George Rauscher
Representative Mia Costello
MEMBERS ABSENT
Representative Cathy Tilton
OTHER LEGISLATORS PRESENT
Representative Justin Ruffridge
COMMITTEE CALENDAR
OVERVIEW(S): Southcentral Mayors Energy Coalition
HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
PETER MICCICHE, Mayor
Kenai Peninsula Borough
Soldotna, Alaska
POSITION STATEMENT: Presented during the Southcentral Mayors
Energy Coalition overview.
SUZANNE LAFRANCE, Mayor
City of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Presented during the Southcentral Mayors
Energy Coalition overview.
ACTION NARRATIVE
1:03:44 PM
CO-CHAIR DONNA MEARS called the House Special Committee on
Energy meeting to order at 1:03 p.m. Representatives Costello,
Raucher, Kopp, Edgmon, Holland, and Mears were present at the
call to order. Representative Ruffridge was also present.
^OVERVIEW(S): Cook Inlet Energy
OVERVIEW(S): Cook Inlet Energy
1:05:35 PM
CO-CHAIR MEARS announced that the first order of business would
be the Southcentral Mayors Energy Coalition overview.
1:06:03 PM
PETER MICCICHE, Mayor, Kenai Peninsula Borough, showed a
PowerPoint, titled "Cook Inlet Energy Overview," during the
Southcentral Mayors Energy Coalition presentation [hard copy
included in the committee packet]. He briefly described the
work of the coalition and moved to slide 2, which described the
agenda as follows [original punctuation provided]:
- Coalition Intro and Overview of the Committee Charge
- Projected Southcentral Energy Shortfall Background
- Summary of Cook Inlet Energy Projects
- Possible Energy Outlook with New Projects
- North Slope Gas and Imported LNG
- Takeaways
MAYOR MICCICHE moved to slides 3 and 4 which listed the
Southcentral mayors involved in the task force as well as the
coalition's technical committee. He commented that "a challenge
to energy in the Railbelt is a challenge to commerce in Alaska"
and showed slide 5, titled "Committee Charge," which read as
follows [original punctuation provided]:
Goals
• Understand the nature and potential solutions
to the projected Cook Inlet natural gas/energy
shortfall
• Advocate for affordable solutions that will
keep the lights and heat on
Methodology - Invite sponsors of existing and proposed
energy and infrastructure projects to present to the
Mayors and Technical Committee. Discuss with sponsors:
• Timeframe for project to come online
• Financial backing
• Projected cost of power or natural gas
• Energy output
• Roadblocks
•Areas where advocacy by the Mayors could help
facilitate the project
MAYOR MICCICHE moved to slide 6, titled "Why is There a Natural
Gas Shortfall," which read as follows [original punctuation
provided]:
• The major Cook Inlet gas discoveries were discovered
in the late 1950's and 1960's while looking for oil.
• Large field sizes with small local market supported
industrial users (fertilizer and LNG plants).
- For decades, the market was oversupplied new
discoveries would not have a customer
- No significant discoveries/new developments in
recent years
fields are depleting - Over 12 trillion cubic
feet produced**
• USGS estimates 19 trillion cubic feet (TCF) of
"technical recoverable" natural gas remains.* However:
- Technically recoverable does not = economically
recoverable
- ~ 5 TCF from unconventional reservoirs which
have never been commercially produced in Cook
Inlet region
- Challenging permitting, regulatory environment
- Small local market
- Difficult geology
- Risk reward profile not competitive in the
portfolios of the large oil and gas companies
• Exploration and development of known resources still
ongoing by a few smaller companies.
- Has potential to defer, but not eliminate
projected natural gas shortfall
- Timing is key
1:12:33 PM
MAYOR MICCICHE responded to a question from Representative Mears
concerning density of development, geographic closeness of
wells, and declining support services. He explained that the
cost of delivery to Cook Inlet or the North Slope is more
expensive, so the density of the product becomes more important
than it is in other places.
1:14:05 PM
MAYOR MICCICHE responded to a question from Representative
Raucher regarding the Kenai agrium plant and explained that the
plant's viability depends on the available volume and the price.
He explained the previous footprint could be used and that there
was potential for hydrogen and ammonia production. He moved to
slide 7, titled "Cook Inlet Gas - ADNR Current Forecast," which
read as follows [original punctuation provided]:
DOG Cook Inlet gas forecast as presented to the Alaska
Legislature, Spring 2024
• Assumes continued drilling by Hilcorp
• Does not include known but undeveloped projects
• Truncated to reflect field economics but does not
assume market response or price changes
MAYOR MICCICHE explained that the graph on the slide showed
current use of 70 billion cubic feet (Bcf) of gas a year (BCFY)
with the top section of the chart showing the annual Bcf
required for oil and gas production as well as the annual Bcf
for heating and power generation. He explained that that the
chart showed gas production and use over time and pointed out
the challenges represented by the falling production over time.
He showed slide 8 titled, "Power Projects Reviewed," and
explained that the Southcentral Mayors' Energy Coalition had
reviewed a number of power production projects including hydro,
geothermal, wind, solar, and micro-nuclear. He said that most
of the projects were at a stopping point because they don't have
a commitment from a utility with the exception of Solstice
Energy's Puppy Dog Lake Solar in Nikiski. He added that Alaska
Marine Power Cook Inlet Wind Farm would be a world class wind
resource but that they are planning a hydrogen project rather
than an electrical generation project.
1:19:20 PM
CO-CHAIR MEARS pointed out that much of the problem solving
would occur with producers and utilities, but the legislature
could help create a regulatory environment that would nudge some
of these projects along.
MAYOR MICCICHE responded to a question by Representative Holland
regarding future uncertainty of projects, how some are waiting
for firm commitments, and how the legislature could take action
and support action. He explained that although many of the
projects being discussed are viable, provide jobs, and provide
energy diversity, some will drop off. He explained there are
agencies whose job it is to lean on the utilities, but he did
not see it as governments' role. He pointed out that people
rely on the legislature for reliable information and Alaskans
have to be bold, so they don't end up sitting in the cold and
dark.
1:24:38 PM
MAYOR MICCICHE, in response to a question from Representative
Raucher about whether renewable energy will be able to fill the
gap, pointed out that hydro is a renewable and that the Bradley
Lake Dixon diversion is a good project. He also explained that
some renewables are more economical than others and some depend
on subsidies. In addition, if the Alaska Gasline Development
Corporation (AGDC) were to move forward with a project, many of
the other projects would face challenging times.
1:25:59 PM
REPRESENTATIVE KOPP discussed the Cook Inlet Basin and the
livelihood that it has brought to the area for 70 to 80 years.
He pointed out how Cook Inlet as an energy producing basin is in
demise and the gas the area needs is more likely to be provided
by AGDG. In addition, there are pending requests by the Alaska
Energy Authority for the legislature to fund projects with the
quickest return, the lowest cost, and the affordability of
energy. He explained that dual fuel sources need to be
considered and not solely be locked into liquified natural gas
(LNG). He characterized this as a "watershed moment" for the
Cook Inlet Region being an energy producing basin.
MAYOR MICCICHE responded by explaining that the mayor's
coalition agrees it should support local production first and
the legislature should support the companies that are still
producing energy in Cook Inlet. In-state gas production is a
priority after local production. He emphasized that the price
of energy continues to stunt potential commercial growth in
Southcentral and the state of Alaska going forward. He reminded
the committee of when Southcentral residents had to turn the
heat down because of energy shortages. He said, "Hats off to
Hilcorp," whose investment in the last decade has been
beneficial to the area. He pointed out that Blue Crest is
having difficulty getting funding, that Hex/Furie has
significant reserves, and the legislature has royalty issues to
consider.
1:31:59 PM
MAYOR MICCICHE responded to a question from Representative
Costello regarding permitting challenges and delays, explaining
that the state is doing better in being caught up on permitting.
He pointed out that permits in federal waters have had different
constraints and referenced the possibility of "the Beluga
challenge." He moved to slide 10, titled "A Gas Forecast and
Demand with new Cook Inlet Projects, Actual will be Different,"
which read as follows [original punctuation provided]:
• Base production is DNR forecast Includes future
Hilcorp drilling
• Assumes Kenai Gas field storage capacity
commercially available
• All production above the black demand line is stored
and used in future years
• Undeveloped Projects
• Low side new natural gas developments (240 BCF)
starting 2025. Based on DNR forecast for known
undeveloped gas
• Shovel Creek Wind - 75MW to Southcentral 2028
• Little Susitna Wind - 120 MW 2029
• Terra Energy Center coal/biomass power plant -
400 MW 2030
• Augustine Geothermal - 200MW 2030
• Bradley Lake Dixon Diversion - 60MW 2030
• Puppy Dog Solar - 30MW 2028
Conditions precedent for new projects make it unlikely that all
projects will meet the dates/capacities listed above.
MAYOR MICCICHE showed Slide 10, which included a graph titled
"Cook Inlet Production and Demand," showing the Bcf of gas used
per year over time from 2024 to 2041.
1:34:59 PM
MAYOR MICCICHE responded to a question by Representative Mears,
explaining that the information compiled on the chart was
publicly available data. Referring to the chart, he explained
that by 2038 or 2039 it would be difficult to keep up with the
needs of space heating and the industrial use of gas, even if
all the listed projects were successful. He said he was
demonstrating the "improbability of us being okay" and that
"we're not okay."
He showed slide 11 titled "North Slope Gas" which read
as follows [original punctuation provided]:
• AGDC pursuing initial phase serving domestic power
generation and space heating
• $10.8B estimate for scaled back project with 42"
pipeline
• Delivered price to utilities estimated to be in the
$11-$13/MMBTU
• Large pipe provides the option for large scale LNG
exports could significantly lower consumer gas price
• In discussion with a large pipeline company to
complete FEED
• $50M effort supported by State of Alaska
• Option for potential State investment
• Recent announcement: Glenfarne Group partnering with
the AGDC to move project forward
• Success case - first gas in 2031
1:37:13 PM
MAYOR MICCICHE moved to the slide 12 titled "Imported LNG
Option" which read as follows [original punctuation provided]:
• Technology for importing LNG well understood
- Floating storage regasification unit (FSRU)
"Excelerate-type project"
- Onshore regasification with largely existing
infrastructure
• Gas Storage bill passed in 2024 provides for Hilcorp
to store 3rd party gas in part of the Kenai Gas Field
- Hilcorp permitting 50 BCF third party storage*
significant upside (200-500 BCF) for additional
storage
- CINGSA gas storage 11 BCF. Expanding to 13 BCF
- Gas storage a key element in managing gas
supply, for LNG imports, and meeting peak gas
demand in
the winter
• Pricing
- Will change up or down: 2024 Asian market LNG
price $11 - $16/MCF2
- Kitimat (British Columbia) coming on stream
2025 potential for less expensive LNG
• Timing depends on negotiating LNG supply contract
and permitting, construction timeframe
• Importing LNG has the potential to address the near-
term gas shortfall CEA/Enstar evaluating
MAYOR MICCICHE moved to slide 13, titled "Takeaways," which read
as follows [original punctuation provided]:
• Exploration potential may be large, but the Cook
Inlet basin is not attracting significant exploration
investment
• Reducing/eliminating the need for natural gas for
power generation does not solve the longterm natural
gas shortfall for heating
- Renewables will need backup source for high
demand, low output periods
• North Slope gas a possibility
- Timing (earliest 2031) does not meet
anticipated near-term supply gap
- Negotiations with potential partner promising
• LNG imports an option that provides certainty of
supply in near term, variability in volume and could
be phased out if other, more price competitive
solutions materialize
• Unless a strategy (likely with multiple components)
is selected and affirmatively pursued, a significant
gas shortfall is all but guaranteed
MAYOR MICCICHE pointed out that waiting is not a strategy
because a quick decision would not solve the need for advance
planning time, financing, and permitting.
1:42:43 PM
MAYOR MICCICHE responded to a question by Representative Holland
regarding population loss and the Southcentral economy by
explaining that even if the likely energy projects were
successful, there still would be a gas problem without a natural
gas solution. He pointed out it would take boldness and vision
to move beyond the outmigration problem. He stated that where
there are growing needs, renewables pick up the excess, and
there is a steady supply of gas to meet the demand.
1:46:57 PM
MAYOR MICCICHE responded to a question from Representative
Raucher regarding whether purchasing gas from overseas would
discourage exploration of Alaskan resources. He explained there
would be a continued need for all local production possible. He
emphasized that North Slope gas must be monetized, and if the
long gasline doesn't prove to be economical, other forms of
transport would work. Prices could be competitive depending on
delivery and infrastructure.
1:49:45 PM
MAYOR MICCICHE responded to several questions from
Representative Holland, describing the importance of being bold,
picking a path forward, doing the homework, reducing the risk
wherever possible, and doing what needs to be done. Regarding
the role of the Regulatory Commission of Alaska (RCA), he
explained that none of the projects work if the weight is too
heavy on the rate payers, and the utilities take this seriously.
He addressed the issue of oil and gas royalties and the
potential trade-off, explaining that the higher the rate, the
less activity will occur. He questioned how much less activity
the state can stand and still remain viable, pointing out that
would be a decision for the legislature to make.
1:59:33 PM
MAYOR MICCICHE responded to a question from Representative
Edgmon regarding the work of the coalition and what action the
committee should consider. He emphasized supporting the
utilities as they make difficult decisions. He reminded the
committee that the Cook Inlet Recovery Act did not reward people
for production, it rewarded them for existence. He explained
that the City of Fairbanks would be joining the coalition.
REPRESENTATIVE EDGMON pointed out that what is good for
Southcentral is good for the state as a whole.
2:03:19 PM
REPRESENTATIVE KOPP observed that, for the first time in
Alaska's history, the Railbelt has woken up to the cost of
energy for rural Alaskans. Rural Alaska, including Fairbanks,
has dealt with these issues every single day. The cost of
energy has made it nearly impossible for many families and
communities to continue. He expressed his belief that the state
would unify and pull together for solutions.
2:06:02 PM
The committee took an at-ease from 2:06 p.m. to 2:11 p.m.
2:11:48 PM
SUZANNE LAFRANCE, Mayor, City of Anchorage, began her portion of
the Southcentral Mayors Energy Coalition overview by explaining
that she would be reviewing concerns and opportunities around
Southcentral's energy security. In addition, she planned to
explain what she is asking for from lawmakers as well as what
Anchorage is currently doing to support those requests. She
pointed out that declining production of natural gas in Cook
Inlet is a tremendous concern and that gas shortages during
severe cold snaps are a real threat to public safety in a winter
city like Anchorage, and the possibility of importing gas comes
with a price tag. As a municipality, Anchorage has limited
influence over permitting, regulation, or financial incentives
for Cook Inlet users, but residents look to the city government
for solutions. Recent hurricane force winds in Southcentral
were a great reminder regarding the importance of effective
emergency management, especially for a crisis that shuts off
heat and power. She stated that energy security is a major
priority, and the municipality is determined to be "the best
stewards we can of our municipal footprint and to advocate for
meaningful solutions." She pointed out that progress will be a
result of partnership with utilities, the private sector, and
state government.
MAYOR LAFRANCE explained what the municipality is advocating,
explaining that energy experts, producers, utilities, labor
organizations, the Southcentral Mayors Coalition, and other
stakeholders had identified the most effective projects which
would give "the most bang for the buck." Referring to her
notes, the mayor outlined the four most critical projects as
follows:
1. Fund Railbelt transmission upgrades in the capital
budget to take full advantage of federal match funds.
Transmission upgrades would reduce bottlenecks in the
Railbelt grid to clear a path for new sources of
generation to be brought online, strengthening the
power supply.
2. Build hydroelectric power production including the
Dixon Diversion to expand Bradley Lake, creating a new
source of ready power independent of the natural gas
supply.
3. Fund weatherization, energy efficiencies, and
electrification programs through state entities like
Alaska Energy Authority (AEA) and Alaska Housing
Finance Corporation (AHFC). These efficiencies would
be a win-win, making infrastructure more resilient and
paying for themselves through cost savings.
4 Incentivize and increase natural gas production in
Cook Inlet. Well designed and targeted mechanisms
would help producers keep the pipelines full. In
addition, the Anchorage municipality would support the
type of stable energy a natural gas pipeline could
provide
MAYOR LAFRANCE referred to her notes and described several
energy projects underway in the Anchorage municipality as
follows:
1. The Anchorage Water and Wastewater Utility (AWWU)
uses gravity flow to provide water to homes and
businesses of 80 percent of the city. The flow of
water also turns turbines which produce electricity
that power some of AWWU's operations. In a
partnership, AWWU provides water for Chugach
Electric's cooling plant 2A along the Glenn Highway.
The benefit is a "double whammy" because warmer water
in the system means it takes less energy to produce
hot water at the tap while the plant improves from
improved efficiency of the turbine that the cooling
provides. This unique partnership has earned national
awards.
2. The Eklutna Hydroelectric Project at Eklutna Lake
provides 40-megawatts (MW) of power to the Railbelt
Grid. In a new phase of the project, pump-storage
hydro would use renewable power to pump water back
into the lake, restoring the river while maintaining
or even increasing power production.
3. A plan which would convert waste to energy at the
Anchorage landfill could add 30 MW of clean power to
the grid, offsetting natural gas, reducing methane
emissions, increasing the lifespan of the landfill,
and reducing toxic runoff. This would build on the
existing landfill gas-to-energy project which burns
methane from the landfill to produce power at Joint
Base Elmendorf-Richardson base (JBER).
MAYOR LAFRANCE pointed out that the team of dedicated energy
experts at the municipality of Anchorage have worked hard to
reduce waste, improve efficiency, and harness innovation as
concerns about energy security grow. They look to partnerships
with communities statewide to face these shared challenges. As
concerns about energy security grow, it becomes increasingly
important for Alaskans to work together to leverage assets as
effectively as possible to make the best use of limited
resources.
2:18:58 PM
MAYOR LAFRANCE responded to a question by Representative Holland
regarding possible gas shortages and how a community might
prepare for that. She reiterated the municipality's concern
about the lack of energy security not only in Anchorage but also
throughout the state. She emphasized the need for access to
reliable and affordable power for lighting and heat. There are
short term and long-term actions that can be taken. Short term
actions include exploring ways to reduce consumption, bolstering
the appropriate use of solar, and supporting the needs of local
utilities. Longer term actions would include the waste to
energy project and other projects.
MAYOR LAFRANCE responded to a question about Launch Alaska and
potential energy innovations by pointing out that there are
tremendous entrepreneurial opportunities which could improve
Anchorage's economy as well as the state's economy.
2:24:18 PM
MAYOR LAFRANCE responded to a question from Representative
Costello about the level of awareness of Anchorage residents
concerning energy issues and how awareness could be improved.
She explained that usually it has not been a "top of mind issue"
but that the municipal offices would address community awareness
as part of the energy strategy.
2:25:54 PM
CO-CHAIR MEARS discussed how synergy can help solve energy
problems, citing the turbines of the AWWU project, the waste
energy plant, the chemicals used in fire suppression, and
landfill space, taking into consideration that the waste from
commercial sources is about 70 percent compared to 30 percent
from residential. She encouraged the mayors to connect with
their residents regarding energy services and encourage them to
use conservation methods to reduce short term energy bills,
giving more time in the long term for converting to electricity
where necessary and preserving natural gas for heating as long
as possible.
2:28:58 PM
REPRESENTATIVE KOPP discussed the challenges of the regional
utilities, some of which have dual energy options and some which
have been committed to only one solution. He inquired whether
utilities could work together after recognizing the energy
shortage as evidenced by the municipality's rolling brownouts.
MAYOR LAFRANCE explained that there have been ongoing
conversations resulting in more collaboration between the
utilities despite their protectiveness at the regional level.
2:31:00 PM
REPRESENTATIVE KOPP directed a question to Mayor Micciche
concerning the Thirty-Third Alaska State Legislature's effort to
encourage utility companies to share risk, share power,
coordinate, and even share costs. He asked whether that was
coalescing or were the utilities pulling hard in different
directions.
MAYOR MICCICHE explained that the utility companies seemed to be
moving in a better direction. He pointed out a half dozen
utility companies serve the Kenai in an area the size of a mid-
sized city in the Lower 48, and in the past they had been pretty
protective. Spinning reserves had consumed a lot of natural gas
with one unit producing, and then "you just keep on spinning in
case you have problems with the primary unit." With continued
encouragement, there would be more improvement. He
characterized the natural gas situation as a wake-up call,
explaining that duplication and waste would no longer be an
option and coordinating resources would become more critical.
REPRESENTATIVE KOPP pointed out that under scenarios described
to the committee, the larger energy projects would probably not
be producing until 2031. He asked the mayors what the solution
would be since this is a current problem, emphasizing the
importance of Cook Inlet gas to help bridge the problem
2:35:57 PM
MAYOR MICCICHE described the importance of energy conservation
and how it should be practiced every day. He pointed to the
increased use and significance of renewable energy production in
the Railbelt but how it would not be enough in the short term.
He explained that importing LNG would be the most viable short-
term option especially considering existing infrastructure could
be used.
MAYOR LAFRANCE expressed her hope that the LNG project could be
expedited because the risk is so high and the priority to act is
great.
2:39:16 PM
CO-CHAIR HOLLAND pointed out that the Railbelt economy has been
stagnant, so the economics for companies to produce more energy
has not been attractive. He asked first what role the state
should be playing in helping the local municipalities spur
economic development making the area more attractive for
development. He discussed the "Choose Anchorage" plan and the
state's economic development strategy which would stimulate
businesses, diversify the economy, invest in emerging sectors,
and grow the economy. He asked what specifics would change the
narrative and the focus to change the economy.
MAYOR LAFRANCE explained that growth would come from ensuring
stable, basic services, including pensions for public employees,
having a fully staffed police department, addressing
homelessness, funding schools, and ensuring affordable housing.
Focusing on those core services would be key to growing the
economy and to thrive.
MAYOR MICCICHE agreed with Mayor LaFrance's assessment. He
explained that challenges to drawing people to Alaska are the
quality of education, the availability of housing, and the cost
of healthcare. He emphasized that when the state shifts costs
to the municipalities, it negatively impacts their ability to
thrive.
2:46:02 PM
MAYOR MICCHE responded to a question by Representative Edgmon
concerning community assistance by explaining that it has
allowed the power of volunteerism which results in exponential
value. For example, he cited volunteers in museums, libraries,
and firefighting. In areas without a significant tax base, it
makes those places more survivable and draws people who can
solve problems. Minimal investments such as community
assistance are required for communities to grow.
MAYOR LAFRANCE noted that state funding once made up a large
part of the Anchorage municipality's budget. In 1985 community
assistance from the state to local governments was $41 million,
and in 2024 it was about $30 million. Without those funds,
costs have shifted to taxpayers. Support from the state would
make positive changes not only in the larger municipalities but
also in the remote communities.
2:51:45 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 2:51 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| KPB Alaska House Energy Committee Presentation Jan 28, 2025.pdf |
HENE 1/28/2025 1:00:00 PM |
Energy |