Alaska: Court Review Ends on Kenai Gas Exports

May 18, 2009, Juneau, Alaska – Alaska Governor Sarah Palin welcomed news today that the Ninth Circuit Court of Appeals closed its review of the Department of Energy’s decision authorizing an extension of the Kenai LNG facility’s export license into 2011.

This decision resolves a long-running dispute about allowing continued export of Cook Inlet gas while also ensuring gas supplies are made available for local utilities. The foundation for the court’s decision is a recently announced agreement by ConocoPhillips to supply all of Chugach Electric’s gas supply requirements through the export term, and a large part of its needs through 2016.

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“This is a win-win for utilities that need gas to supply power and space heat to the bulk of Alaska’s population and for Cook Inlet’s oil and gas industry,” Governor Palin said.

The Kenai LNG facility is jointly owned by ConocoPhillips Alaska Natural Gas Corporation and Marathon Oil Company, and has been providing high-paying jobs to Alaskans and tax revenues to local governments since it began operation in the 1960s. The plant’s ongoing operation is also critically important because it helps ensure gas is available for high energy-demand periods in the coldest part of the winter, when its supply can be diverted from export to local utility use as needed.

The Department of Energy began its consideration of the export application in January 2007. The state intervened in the proceedings to help ensure local utility gas supply needs would be met, while also preserving a critical element of the Cook Inlet gas market, and an important part of the Kenai Peninsula’s economic base. The state’s intervention resulted in a settlement among the state, ConocoPhillips and Marathon, under which each company agreed to good-faith negotiations with local utilities to ensure a gas supply, and to the drilling of a minimum number of new gas wells.

Enstar’s gas supply needs through the export term were ensured through an agreement with both Marathon and ConocoPhillips in December 2008. Now that Chugach’s gas supply needs have been met through the recently announced agreement with ConocoPhillips, all local utility gas supply requirements are covered during the export term.

“I’d like to extend my thanks to all of the parties involved,” Governor Palin said. “The cooperative spirit demonstrated recently by the Cook Inlet oil and gas industry and local utilities has shown what we can do when we all work together.”

Source: Alaska Governor