Cook Inlet oil and gas development incentives go without solution BY TIM BRADNER ALASKA’S STATE LEGISLATURE HAD A MIXED RECORD ON NATURAL RESOURCES IN ITS 2024 SESSION. One big positive was passage of Gov. Mike Dunleavy’s House Bill 50, which establishes the statutory framework for injection and underground storage of carbon dioxide. The bill carried with it a number of resource-related measures that were attached and approved as the session adjourned May 15. Another positive was the removal of an amendment added to HB 50 that would have imposed new state taxes on Hilcorp Energy, a major Alaska operating company that produces most of the natural gas from Cook Inlet. A negative was the Legislature’s failure, at the end, to include new incentives for Cook Inlet oil and gas development. The looming decline in natural gas production in the Inlet is well known, but the legislation included incentives for oil as well. Oil production in the Inlet is falling fast, down from 18,000 barrels per day in 2018 on average to an average of 9,000 barrels per day in 2022. The concern for natural gas is to supply utilities like Enstar Natural Gas Co., which provides space heating in Southcentral communities. But oil production matters because it supplies crude oil to the Marathon Petroleum Co. refinery at Nikiski. Marathon provides most of the gasoline used in Alaska and a good share of the jet fuel for Ted Stevens International Airport in Anchorage, a major refueling stop for international air cargo flights. The refinery also supplies ultra-low sulfur diesel used in trucks and heavy equipment including on the North Slope. Marathon also refines North Slope crude oil, but it must be shipped from Valdez, adding expense. The lighter Cook Inlet oil is preferred at the refinery. The governor’s carbon dioxide injection and storage bill is part of a two-part package of legislation introduced in 2023 with the first part passed last year. This was a bill that allows the sale of “offset” credits for carbon dioxide absorbed and stored in state forests. Companies buy credits on trading exchanges that allow them to continue emissions but offsetting the CO2 released by storing an amount in trees. Sale of the credits will provide a new source of state income. The second part, passed in HB 50 this year, involves underground injection of CO2 in special wells for that purpose. The gas will be stored in unused space in depleted oil and gas reservoirs or in underground saline aquifers. The state will lease the reservoir space and earn revenues but must also provide monitoring to ensure the CO2 stays underground. HB 50 included language from four other resource-related bills that are now passed. These include language streamlining geothermal leasing that was taken from SB 69, also a governor’s bill. Under this, the Department of Natural Resources, or DNR, will be able to issue geothermal exploration licenses similar to exploration licenses now issued for oil and gas. LEGISLATURE’S MOVES ON RESOURCES MIXED Declining natural gas production from Cook Inlet is going to be a continuing challenge for the Rail Belt. Gov. Mike Dunleavy signing the carbon capture bill in 2023 (right). 14 ALASKA RESOURCE REVIEW SUMMER 2024
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