A Hilcorp affiliate last week filed paperwork with federal regulators to build what could become the first facility in Alaska to import liquefied natural gas to meet energy needs across much of the state.

Trans-Foreland Pipeline Company seeks to expand plans for a smaller import project that had originally received approval from the Federal Energy Regulatory Commission but had yet not been built, according to the Jan. 9 application.

The project would convert the Kenai LNG Terminal in Nikiski into an import facility to process deliveries of liquefied natural gas, or LNG, that will arrive by tanker.

The facility had long operated as an LNG export facility for decades, starting in 1969, until it was idled in 2015.

The reversal in use highlights the shift in the Cook Inlet basin, where gas production has long dropped.

The basin was once the state’s dominant source of oil and gas, with enough gas to meet local needs and support LNG shipments to Japan.

But Hilcorp, the top gas producer in the region, told utilities in 2022 that it cannot guarantee gas supply after contracts end, including for Chugach Electric in 2028 and Enstar in 2033.

Harvest Midstream, a Hilcorp affiliate, acquired the Kenai LNG facility and Trans-Foreland from its previous owner, Marathon Petroleum, last year. The federal agency had originally authorized Trans-Foreland to build an import facility in 2020. The new filing seeks to expand those plans.

An official with Harvest Midstream declined to provide comment Friday.

Today, production in Cook Inlet still largely meets the demand for gas in the region, the filing says.

Gas from storage reservoirs also supplement produced gas on cold winter days when demand rises.

[Southcentral Alaska utilities say cold snap hasn’t strained winter gas supply, despite longer-term challenges]

But declining production is forecast to cause a “supply deficit” starting next year, the filing says.

The application seeks approval by July 31 in order to beat that shortfall.

The project “is narrowly tailored to address the forecasted needs of the southcentral Alaska region” and “will enhance natural gas supply reliability and security for the Southcentral region,” the filing says.

The facility could deliver up to 20 billion cubic feet of gas annually, meeting a chunk of total demand in the region.

But the supply shortfall is expected to keep growing, to a deficit of 40 billion cubic feet by the early 2030s, the filing says.

The application does not say how that deficit may be closed.

Larry Persily, an oil and gas analyst and former Alaska deputy commissioner of revenue, said the Trans-Foreland facility could seek federal approval for expansion after it gets off the ground.

“They certainly could get the authorization for 20 (billion cubic feet) and then go back to FERC in four, five, six years and say, ‘Hey, we need to increase it,’” he said. “It’s not a number that’s hard wired for all eternity. It’s just a function of how much equipment they put there.”

It’s possible another LNG import facility could be built, also in Nikiski.

Enstar, the natural gas company for Southcentral Alaska, has teamed up with Glenfarne to study the construction of what could be a second LNG import facility in Alaska.

That project would not come online until at least 2029.

The project has not yet filed for approval from the Federal Energy Regulatory Commission, Persily said.

[Southcentral Alaska utilities move to expand gas storage, an insurance policy for severe cold and a bank for imports]

Persily said it’s increasingly likely that LNG imports may be a necessary part of the state’s future, though it’s possible more gas could be produced than expected in Cook Inlet, heading off the shortage.

Also, Glenfarne is working with the state and other companies to develop a $44 billion Alaska LNG project that could deliver natural gas to Southcentral Alaska in a first phase, if it can be built.

But the project, which proposed starting up in 2029, remains iffy.

A final investment decision on Alaska LNG has not been made, though it was expected late last year for the project’s first phase. Similar gas projects in Alaska, saddled with a costly 800-mile pipeline like Alaska LNG, have failed for decades.

Tim Fitzpatrick, a spokesperson for Glenfarne, said in an email that front-end engineering and design for phase one of Alaska LNG was completed on schedule.

He said that “we are moving forward toward FID,” or a final investment decision.

If gas imports do begin, Persily said, it’s possible that the increased price of imported gas could be a “manageable” problem.

LNG supply has grown worldwide while Cook Inlet prices for gas are high and have been rising, he said.

Chugach Electric Association, a potential customer for gas from the Trans-Foreland facility, estimated in 2024 that ratepayer bills would rise about 10% when LNG is imported in 2028.

“The fact that the global market seems to be entering an era of plentiful supply, at least through the early 2030s, bodes well for us,” Persily said.

And companies are pursuing additional gas storage, which can also stabilize prices, he said.

“They don’t have to buy LNG for next week’s cold spell,” he said. “You can buy it when the market is cheap and put in storage.”

[Utilities say Alaska needs an LNG import terminal. Here’s how consumers could end up paying for not one, but two.]

Lawmakers return to the Alaska State Capitol on Tuesday and, as always, they’ve got a long agenda to tackle, from health care and energy to the state’s persistent budget struggles.

Alaska Public Media’s state government reporter, Eric Stone, will be tracking the session in Juneau. He joined Wesley Early on Alaska News Nightly to give a sense of what the session will bring.

The following transcript has been lightly edited for clarity.

Wesley Early: So, Eric — lots to do, only four months to do it. What are lawmakers prioritizing ahead of the session?

Eric Stone: Well, Wesley, as you said, there’s a lot to do. And there will always be some surprises. But what’s not a surprise is how difficult the budget will be this year. We heard a lot last year about how this might be a painful year.

Maybe this will set the tone — last year, we had a $1,000 Permanent Fund dividend, the smallest ever when you adjust for inflation. And this year, what I keep hearing is that even a $1,000 dividend will be a challenge. Here’s Fairbanks Republican Rep. Will Stapp — he sits on the House Finance Committee.

Rep. Will Stapp, R-Fairbanks: At the current level of spending and revenue, I don’t see how that’s possible without large savings draws, and I don’t know how people are going to feel about that.

ES: This has been an issue for years, of course. Lawmakers and the governor have worked to cut state spending in a variety of areas, though there’s some dispute about how much there is left to cut.

Stapp says he’d like lawmakers to take a closer look at department budgets with something known as zero-based budgeting. Basically, rather than starting from a baseline of “what did we spend last year,” this would be starting at zero and building the budget from scratch. Stapp included an amendment in last year’s budget asking the governor’s office to try that for one department of their choice, but he says as far as he can tell, that didn’t happen.

So he says he’s renewing his efforts this year.

Stapp: Because you don’t really want to tell people the state needs a lot more money in terms of taxes … when you can’t really articulate where the money goes initially and what the money does. 

ES: Gov. Mike Dunleavy’s budget, as usual, contains what he calls a statutory PFD, $3,800 or so. But that, and the expenses they have to catch up on from this current year, mean that the governor’s budget would require spending more than half of what the state has in savings.

But it’s a bit incomplete. The governor has said he plans to introduce a fiscal plan. Last we heard, when he released his budget in December, it was still a work in progress. But the governor has his last State of the State speech this session — usually those come pretty early in the session, so a fiscal plan would be something to watch for there. Then again, a few years ago, Dunleavy said he was planning to introduce a sales tax and never did.

Democratic Anchorage Rep. Andrew Gray says he hopes Dunleavy does propose some kind of tax.

Rep. Andrew Gray, D-Anchorage: He’s not running for reelection, so he can afford to take that risk …. He could, going forward into the future, have established a reliable source of revenue to fund our state. I mean, there could be no more worthy legacy for him. It would be monumental.

ES: Gray says he’d prefer an income tax — he says that would be fairer to low-income Alaskans — but if the governor proposes a sales tax, Gray says he thinks lawmakers would have to find a way to get it passed. He says he thinks lawmakers on both sides would be willing to discuss just about any solution to secure the state’s financial future.

But it’s an election year, and a fiscal plan requires some hard votes, so it’ll take some gumption for lawmakers and the governor to actually come together rather than kick the can down the road yet again.

WE: Alright, so we have the perennial budget debate with a bit more urgency this year. That’ll be something to watch. What else is on your radar?

ES: This one came up recently — health care. You might have heard of this Rural Health Transformation Program. That’ll send more than a billion dollars to the state over the next five years to, essentially, improve health care. There are a bunch of restrictions on how it can be spent, and most of that decision-making will happen inside the executive branch in the Department of Health.

But Health Commissioner Heidi Hedberg said on a call with reporters recently that there is a role for the Legislature to play. To make Alaska’s grant application more competitive, the state said it would do a bunch of things by the end of 2027. Those include expanding what pharmacists are allowed to do, and joining a variety of “license compacts” for EMS workers, nurses and a few others. The deal is, if you’re licensed in some states, you can also practice in Alaska without a need for retraining.

That’s an issue the Legislature has not made a focus in past years, though there are some pending bills. And Gray says he could see those scrambling caucus lines.

Gray: In terms of where people land and what they support, I think that it’s not going to be clear-cut. It’s not going to be a majority-versus-minority. I think that that it’s going to be all over the place.

ES: But Gray, who is also a physician assistant, says he supports the policy changes.

Stapp, for his part, says he’s on board — he says he’s still reviewing what all is needed, but he says from what he’s seen so far, he doesn’t see why those policy changes will be a problem.

WE: Finally, Eric, what about the Alaska LNG project? Are you expecting movement on that front?

ES: That one is interesting. The gas pipeline developer, Glenfarne, has yet to announce what’s known as a final investment decision — a green light to move forward. Lawmakers heard last year from its consultants about a variety of changes they could make to ensure the project is profitable enough and stable enough to go forward. We could see some movement on that — for instance, Gov. Dunleavy says he’d like to see lawmakers offer some property tax relief to the gas line project to help it pencil out. And a lot of lawmakers say they support efforts to help the gas line move forward — but I think they’ll approach that question with some caution. They don’t want their home communities to get taken to the cleaners, so to speak.