Legislators want assurances on local gas needs before LNG permit

Posted: Monday, July 19, 2010

Seven Alaska legislators have asked the state attorney general to oppose a two-year extension to a federal license for LNG exports from the ConocoPhillips and Marathon Oil LNG plant near Kenai until the companies agree to fulfill local gas supply requirements before exporting, the group said in a July 8 press conference.

"We support the export of surplus gas but local needs must be met first," said state Sen. Bill Wielechowski, speaking for himself and six other Democratic lawmakers.

The seven lawmakers sent a letter to the U.S. Department of Energy asking the agency to fulfill the intent of the federal Natural Gas Act that exports of gas are not allowed if there are domestic requirements.

Wielechowski also said state Attorney General Dan Sullivan will be asked to "aggressively" oppose the extension unless the license includes a provision on meeting local needs.

The request could put Sullivan at odds with Gov. Sean Parnell, a Republican, who supports the exports, apparently without the local supply guarantee.

It is unclear just what special leverage the state may have in the Energy Department's proceedings on the license extension other than commenting.

ConocoPhillips spokeswoman Natalie Lowman said the LNG plant owners have been reliable suppliers to gas to local utilities for years and will continue to be as long as the Kenai plant is operating.

"We recently agreed to a seven-year contract to supply Chugach Electric and now have a one-year contract with Enstar. We're now in discussions with Enstar to meet their other needs," Lowman said.

ConocoPhillips and Marathon filed an application for the license extension in early June, asking to extend the period of a previous extension granted in 2009. The current license, which allows the export of about 90 billion cubic feet of gas, expires in March 2011.

The extension would not increase the amount exported, however, since by 2011 the companies will actually have exported only about half the amount approved. The request for additional time, until March 2013, would allow the balance of the 90 billion cubic feet to be exported, ConocoPhillips has said in previous briefings.

However, Wielechowski questioned whether agreements made by ConocoPhillips and Marathon to secure the state's support for the 2009 license extension have been met.

One provision: ConocoPhillips and Marathon had agreed to accept gas at the LNG plant from other companies to provide a market for independent groups now exploring in Cook Inlet. It is unclear whether this requirement has been met, Wielechowski said.

Another provision required the two companies to drill new wells and to maintain current Inlet gas reserves, and this has not been met, he said.

Lowman said this isn't true. ConocoPhillips' commitment was to drill two wells. The company has actually drilled five since then, she said.

Wielechowski said Enstar Natural Gas Co., the regional gas utility, has had difficulty securing supply commitments from Cook Inlet producers and in short for part of its requirements beginning in 2011. In 2013 Enstar will be short of as much as one-third of its needs, he said.

Signing the letter to the Energy Department, besides Wielechowski, were state Reps. Les Gara, Berta Gardner, Chris Tuck and Pete Petersen, and Sens. Hollis French and Bettye Davis.

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