“[T]he 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″ (Kenai, 2009, ¶1). “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,” and the precedent was set by the recent settlement between Chugach Electric Association and ConocoPhillips (Kenai, 2009, ¶2).
ConocoPhillips Alaska Natural Gas Corporation and Marathon Oil Company jointly own a Liquefied Natural Gas (LNG) plant in Kenai, which has been operating since the 1960s and providing high-paying jobs and tax revenues. The plant can export natural gas as well as supply it to local utilities (Kenai, 2009, ¶4). The matter began in January 2007, when an export application was filed with the U.S. Department of Energy (Kenai, 2009, ¶5).
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 (Kenai, 2009, ¶5).
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 (Kenai, 2009, ¶6).
Governor Palin thanked the parties involved and lauded their cooperative spirit, which helped make this outcome possible (Kenai, 2009, ¶7).
Commentary
While this is not an accomplishment item for Governor Palin directly, this settlement is indirectly. The executive sets the direction her administration is to travel. Governor Palin expects common-sense solutions and has little time for convoluted outcomes, the benefits of which are nebulous at best. This expectation filters down through her reports and across the tens of thousands of employees within her span of control.
The matter here was relatively simple. It involved an LNG facility that can supply natural gas to local utilities or export it. The dispute revolved around how much was to be exported during the winter and ensuring that local utilities did not get shut out. In most jurisdictions today, energy is de-regulated, and the result is a system where a local utility delivers the energy and another company may supply it. Energy is traded on spot market — this author’s employer has a trading floor in its corporate headquarters where electricity is sold by the megawatt. In the old days, utilities were all regulated monopolies which serviced only a local area. It was a simple, easy-to understand system, but monopolies often result in high prices and poor customer service.
Once again, Governor Palin could have taken an easy path avoiding the issue entirely and “letting the chips fall where they may,” especially on a matter that is well — not conducive to a juicy soundbite. But, that is not what leaders do and is not behavior she would tolerate.
References
Court review ends on Kenai natural gas exports. (2009, May 18). State of Alaska, Governor. Retrieved May 19, 2009 from: http://www.gov.state.ak.us/news.php?id=1851.
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