Three years ago, I wrote that our gas-dependent utilities were looking at the problem of Cook Inlet gas scarcity “with one eye closed” and building solutions with one hand tied behind their back. Their coordinated effort to find new gas supplies wasn’t matched by equal coordination and determination to conserve gas – first and foremost, by building renewable energy. Now, as concerns about Cook Inlet gas prompt ENSTAR, our regional distributor of heating gas, to warn of possible shortages this winter, we see the futility of only trying to solve half the problem. Our leaders remain one-eyed. And that eye, the one looking out for future gas supply, is stuck on the mirage of AK LNG.
The problem shouldn’t have surprised anyone. Cook Inlet gas has fueled most of our electricity and heat since the 1960s. The earliest published forecast of its decline (that I’m aware of) came in 2004. The Alaska Department of Natural Resources released the first in a series of reports on declining Cook Inlet gas availability in 2009, with a cover memo stating that “Consumers relying upon Cook Inlet natural gas to meet their energy needs should know that while there is no need to panic, there is also no time to waste.” That was 17 years ago.
Only after Hilcorp’s spring 2022 announcement that it would no longer offer gas contracts did our region’s four electric utilities and ENSTAR begin systematically seeking answers to the gas supply question. Their coordinated effort has since collapsed into three competing LNG import proposals. One fact should be clear: every feasible option for maintaining our electrical system’s reliance on natural gas will make our energy more expensive and less secure.
- Cook Inlet gas, which we’ve relied on since the 1960s, will fall short of demand by the early 2030s. New exploration and drilling would need prohibitively high gas prices to support it – and even at more than double today’s gas prices, supply will still fall short again in the 2040s.
- Imported LNG would raise today’s already high gas prices. Cook Inlet gas is now selling for around $9-$13 per thousand cubic feet (Mcf), with a few recent sales reaching $17.50 per Mcf. Recent estimates of imported LNG prices put it in the range of $13-$17 per Mcf, although disruptions in the global market – the Russian invasion of Ukraine and the war with Iran being two recent examples — could temporarily bring much higher prices. Unfortunately, our years of slow-walking renewable energy decisions mean we will probably rely on imported LNG to fuel most of our heat and electricity in the near future. We’ve put ourselves in a place of having only bad options for gas, and this is the least-worst.
- The “Phase 1” AK LNG project – an in-state gas pipeline from the North Slope without the export infrastructure – would rely on unrealistically rapid growth of gas demand to reach the economies of scale needed for its gas prices to beat imported LNG.
Only one proposed scenario is an exception to this rule, but it doesn’t make the cut for “feasible option.” The Phase II AK LNG project promises to deliver cheaper gas by offloading most of the project’s colossal expense on overseas buyers. This requires those buyers to commit to long-term contracts to buy gas at a price that will cover the project’s cost but still be competitive in the world market. But we have only hazy guesses for how many tens of billions this project cost will be. The official estimate is $44 billion to $50 billion. In June Gov. Mike Dunleavy cited a cost of $60 to $70 billion, a range in line with estimates by independent analysts, though his office later said he misspoke. But all estimates are highly speculative, since Glenfarne doesn’t plan to start the engineering study that will firm up a price estimate until the end of this year. This is before considering that the average cost overrun for LNG projects is 59.7%.
At the same time, the world market is forecast to be oversupplied with LNG for the next several years. Betting our energy system on AK LNG’s single, slim chance for cheap gas is nothing but a continuation of the complacent wishful thinking, masquerading as leadership, that brought us to this point.
Since 2004, the state has spent just under $1 billion on a North Slope gas pipeline. Equally significant is the time and attention squandered on a project that just doesn’t work. This year in the Alaska Senate, for instance, AK LNG tax-break bills consumed 99 hours of public meeting time, not counting behind-the-scenes work. The three special sessions dedicated solely to the failed tax-break bill cost Alaskans over $1 million. It’s hard to imagine any other energy project receiving so much valuable legislative time, much less one as flimsy as AK LNG.
Compare this to Alaska’s Renewable Energy Fund grant, which has received a total $351 million from the legislature since it was created in 2008. This state grant has financed over 110 renewable energy projects operating in Alaska now. The $1 billion spent on AK LNG created nothing. If those squandered resources had supported well-planned renewable development, we likely could have reduced gas demand in pace with declining Cook Inlet production, allowing more gas to be reserved for heating demand and significantly mitigating the gas shortage facing us now.
Hindsight, of course, is 20-20. What renewable vision could we start working toward today? In 2024, the National Renewable Energy Laboratory (now renamed the National Laboratory of the Rockies) modeled an economically optimal generation scenario for the Railbelt in 2040 and produced a cost-optimized scenario of 76% renewable power. Their optimal 2040 generation mix was about 51% wind power, firmed up by some hydro and the existing gas turbine infrastructure, with a smidge of solar on top to capture some free energy when it’s available in the spring and summer. This saves a net total of $1.3 billion between now and 2040, mostly by lowering gas consumption. The estimate is based on the conservative assumption that imported LNG is around $12.6/Mcf after 2028 (again, recent estimates put it in the $13-$17 range).
The cost of building renewable generation has also risen since the 2024 study, in large part thanks to the repeal of renewable tax credits in July 2025’s Big Beautiful Bill. If the study were done today, the optimal 2040 generation mix might look different. But in general, it’s probably still true that adding a few large wind farms on the Railbelt may be one of the best ways to conserve a significant amount of gas relatively quickly.
This 76% renewable by 2040 scenario still uses gas as a backup to cover the variability of wind and solar. It has the Railbelt’s existing gas power plants continuing to run in 2040, but working less and less as renewables come online, resulting in shrinking gas demand and savings. Whether it will ever be practical to have a completely gas-free electrical system is an interesting long-term question, but not one with much policy relevance today. I think next-generation renewable technologies such as geothermal or tidal are likely to make further gas reduction attractive beyond 2040. But the more important point is that a path to dramatically reduced reliance on gas is available today.
This path doesn’t rely on a singular megaproject such as AK LNG or the Susitna Watana dam. Instead, it envisions a number of projects spread through our electric system, from Homer to Fairbanks, being developed and run in coordination. This would require significant changes to how our utilities plan and operate. Hopefully, the Integrated Resource Plan being created by the Railbelt Reliability Council will be a step in that direction.
For our electric utilities, new supplies of gas – imported LNG, unfortunately, being the only real option – solve a near-term emergency but ultimately perpetuate the underlying problem at greater cost and with less reliability. For the heating and home cooking applications that account for about 50% of our natural gas consumption today, moving away from reliance on gas will be harder. This makes it all the more important to conserve the gas now being burned for electrical generation for these more dependent uses. For our electric utilities, “more gas” is an ultimate solution to our energy struggles the way “more booze” is a solution for an alcoholic with the shakes.