Anchorage utility tries to light political fire for biggest gas line subsidy of all time- $8 billion

ENSTAR, a company owned by Canadian public pension investment funds, is trying to take over efforts to build a small diameter in-state natural gas pipeline that could require an Alaska state subsidy of $8 billion or more to keep Anchorage heating costs about the same.

Nat Herz of the Northern Journal has the story. Herz is doing a lot of good work on energy and politics and I suggest you read this one thoroughly.

ENSTAR CEO John Sims claimed to Herz last month that his company wasn’t doing “significant work” on the in-state pipeline. This contradicts the discovery by Herz that ENSTAR has asked the state to allow it to take over the so-called “bullet line.”

“In order to make it cost-competitive, unless there’s additional demand that comes on that pipeline over and above what’s existing today, it’s going to have to have about an $8 billion grant,” Sims said last month. He added: “I don’t think there’s any interest from the state Legislature to give a few billion dollars for a pipeline.”

Sims emailed Herz “that his previous statement about the need for a subsidy, and the lack of political interest in granting one, is still accurate.”

But what was not accurate was the suggestion that ENSTAR was on the sidelines. Pressuring the Dunleavy administration to allow ENSTAR to take over an in-state project is “significant work.”

It’s possible ENSTAR made the pitch to the Dunleavy administration in conjunction with an ENSTAR study that concluded a heavily subsidized in-state gas pipeline is what we need.

For decades Alaskans have dreamed of a gas pipeline that would export large volumes of natural gas to Asia and other markets, an idea that would need $40 billion or $50 billion. It remains a dream because of the huge cost.

The vision of a cheaper project focused on Alaska consumption has been dubbed a Bullet Line, In-State Line, Backup Line and Alaska Stand Alone Pipeline over the years. The price of that idea is now about $10 billion or more. It also remains a dream because of the huge cost.

More than a decade ago, the 737-mile 24-inch diameter pipeline from the North Slope to Southcentral was expected to cost $7.5 billion, plus or minus 30 percent.

That wide gap is one reason why the recent $8.8 billion cost estimate is suspect. Along with inflation, cost overruns and the worldwide push to renewables to deal with climate change, whatever can go wrong, might go wrong.

It is the $10 billion alternative that ENSTAR envisions as a solid future source of supply.

The cheapest way to deal with the pending gas shortage is to import more gas from Canada or elsewhere. The most expensive option is to build a 24-inch gas pipeline from the North Slope. The most expensive is the preferred option in the recent ENSTAR study, provided there is a $7 billion or $8 billion subsidy to lower the cost for consumers.

It’s not surprising that Sims would conceal what is happening behind the scenes.

Sims is a key figure on Gov, Mike Dunleavy’s energy task force, along with former ENSTAR officials Curtis Thayer and Tony Izzo. I wrote here June 28 that the Dunleavy task force could become the “bullet line” task force.

“It is not prudent for the state of Alaska to be ‘pens down’ on the best alternative, which could monetize North Slope gas for the benefit of Alaskans in the event the (Alaska LNG) project does not succeed,” ENSTAR said in its two-page proposal, Herz wrote.

The company has 152,000 customers in Southcentral Alaska and its economic future is tied to natural gas.

Independent economics consultant Mark Foster told Herz the cost of the in-state pipeline would be "comically large," and the $76 billion Alaska Permanent Fund is the only source big enough for the project.

ENSTAR, he said, “has a fiduciary responsibility to see how gullible the locals are.”

“And then it is incumbent on elected officials to stand up — as the people who built Alaska did in the early era of oil — and go, ‘We need our fair share. And you guys don't get to take advantage of us,’” Foster said.