Muldoon Memo - 5/5

Speaking on the House Floor

We’re doing something a little bit different with this week’s newsletter, taking a deep dive into an issue that’s been getting a lot of play around the building this year—Anchorage’s impending gas shortage. It’s a complex issue, but here’s some highlights.


Background

Over the history of gas production in the Cook Inlet, production has far outstripped the local demand from Railbelt utilities, leading producers to use export that excess gas, either to Asia as LNG, or as fertilizer. As production has declined and the pace of new development has slowed, those other uses have gone away and experts now estimate that without new production or substitutes, Railbelt utilities will be unable to meet demand for just Alaska residential and commercial uses by 2028.

This figure shows the decline of cook inlet natural gas production since 2000. The Railbelt demand for gas is roughly 70 billion cubic feet per year.

As production from existing wells continues to decline, Alaska utilities are all exploring alternate plans like importing gas from Canada, according to testimony they’ve given before the legislature this year. That’s an incredibly expensive solution. The spot price of Cook Inlet natural gas is currently$7.99/mcf (thousand cubic feet) according to the Tax Division, whereas the spot price for the LNG that we would be importing (bound for Japan otherwise) is $18/mcf, more than double the cost. We might get a discount on a long-term contract, but compared to the long-term contracts that we have today with Cook Inlet producers, importing LNG is likely to be prohibitively expensive.


There’s also been a lot of talk about new exploration in the Cook Inlet. To maintain current level of gas use we’d need to drill roughly 15 new wells/year. Although there are enormous proven gas reserves in the Cook Inlet, it would be difficult for a producer to bring that gas to market beyond the Anchorage area. Because the small size and isolation of Alaskan market for gas there isn’t much incentive for outside investment in the inlet, so the state might need to subsidize such exploration for it to actually take place. That’s why there’s only one company drilling new wells in the inlet right now, a small producer called Furie. If their plans go off without a hitch, they’ll drill 3 new wells in the next 2 years. That’s not going to fill the gap in time.


A gas pipeline from the north slope would also solve this problem, but that project remains many years and roughly $40B away. Not a solution by 2028.

This figure compares the price (per KWH) of a new solar development in Willow compared to current gas costs and the cost of importing natural gas at 3 price points. Already a new solar development provides significantly cheaper energy than even a low-cost hypothetical importation scheme. Note: CEA - Chugach Electric Association; MEA - Matanuska Electric Association; HEA - Homer Electric Association.



What’s next


Luckily, there’s a third option that would bolster Alaska’s energy independence and provide stable and affordable electricity. We can start deploying renewables at scale. Alaska has plentiful and varied resources like wind, solar, geothermal, biomass, tidal, and run-of-river power, all of which can be converted to electricity. Unlike for importing LNG, there are significant state and federal programs to assist with the deployment of renewables, one of which, the Renewable Energy Fund, just permanently reauthorized by the legislature this week.


Hawaii has successfully made this turn already. 15 years ago, Hawaii imported nearly all of its energy as fossil fuels from the continental US, facing by far the highest energy costs in the nation. But in 2011, the state began to aggressively implement renewables, and now generates nearly 30% of the power they use locally from renewable sources. Alaska, with more usable land and smaller communities, is arguably better positioned than Hawaii to make a similar transition, and a similar implementation schedule would likely allow Alaska to avoid LNG imports altogether in the coming years.


Of course, rapidly developing clean energy has capital-intensive costs that utilities shy away from like investing in grid upgrades and adding large-scale storage. That’s why it’s so important that you vote in this month’s Chugach Electric Association board election. You can vote online right now at this link. The election closes May 19 at 3pm.  


I’m working here in Juneau to force the utilities’ hand toward renewables. HB121, a bill proposed by Rep Sumner and cosponsored by me, would require regulated electric utilities to increase their renewable energy production over time in three steps—25% from renewable sources by 2027, 55% by 2035, and 80% by 2040. 29 states have already adopted renewable energy standards similar to HB 121.


Natural gas is still an important part of Southcentral Alaska’s energy landscape and will be for some time to come. Moving quickly to integrate renewables will stabilize the crisis and provide a steady mixture of energy sources. For decades Alaskans have been promised low and stably priced energy from fossil fuels and for decades they’ve not received it. It’s time for a different approach.



Things of Note

  • For the first time since COVID started, Medicaid has begun removing people from the rolls again. This will be an ongoing process for months to come so, if you are on Medicaid and haven’t done so already, call 800-478-7778 and update your address and contact information so you aren’t removed by mistake.

  • The number and extent of people experiencing hunger is very high right now due to the SNAP application backlog. Community partners that distribute food are severely strained right now. If you can, please consider a food or monetary donation to organizations that support food distribution to those that need it.

  • District 21 Community Council Meetings:

Stay Connected
You can find me at community council meetings and I’ll have more regular Coffee Chats after session ends. You can always in touch with my office--by email at rep.donna.mears@akleg.gov or by phone at 465-3438--and if you’re in Juneau please come find me in room 112 of the Capitol. If you’re on social media, please follow my
official Facebook page.

If you'd like to follow the legislature more closely on your own, I encourage you to go to http://akleg.gov and dive in. A tutorial for operating the legislature's website is available here. Feel free to call my office if you can’t find what you’re looking for.