Challenges/Shortages
 

Facts/Issues

  • Average South-Central natural gas consumption in 2005 was:
    • 13.9% gas utility
    • 20.0% power generation
    • 54.3% industrial-LNG sales, oil refining, and fertilizer manufacturing
    • 7.2% field operations
    • 4.6% other
  • Due to a lack of natural gas deliverability, the Cook Inlet fertilizer plant terminated operations in May 2008.
  • LNG sales are increasingly curtailed during cold weather due to peak demand shortages. The LNG export license is up for renewal in 2011.
  • Exploration must find new reserves on the order of 500 Bcf, and that will only solve the natural gas shortage until approximately 2019.
Challenges
Natural gas in the Arctic, until recently, has been largely overlooked. Little is known about the possible breadth of the Arctic storehouse of natural gas apart from the resource associated with the currently producing oil fields In the Alaskan North Slope area, about 36 trillion cubic feet (Tcf) of natural gas awaits construction of a pipeline to the Lower 48 states, and it is estimated that another 137 Tcf of technically recoverable natural gas will be discovered. While this amounts to a little less than 10 percent of the Nation’s supply, it is significant in that much of the Arctic is still unexplored. This number does not include methane produced from hydrates which may add an estimated 85 Tcf.

Alaska’s identified coal resource is an estimated 187 billion tons, roughly half of the U.S. total. However, this resource is undeveloped as a result of the challenges imposed by the Arctic’s protected status, remoteness, higher exploration and development cost. The USGS estimates that as much as 5 trillion metric tons of coal could remain undiscovered in Alaska, 70 percent of which lies in Alaska’s North Slope Region. Alaskan coal has a low sulfur content compared to coal in the contiguous United States.

On a more regional level, over forty communities are sited near potential coal resources, yet they do not make use of the coal for electrical power generation and space heating. Given that Alaskans use 1112 Mmbtu/capita versus the United States average of 333 Mmbtu/capita, producing the Arctic’s energy resources is a challenge and a priority. Additional research is required to meet the existing and future challenges of finding, producing, and transporting these Arctic resources to market.

Shortages 
Anchorage and the rest of South-Central Alaska have been blessed with a relatively inexpensive and abundant source of natural gas from Cook Inlet. Since the 1960s, natural gas from the Cook Inlet Basin has supplied most of South-Central’s heating and electricity generation. Until recent years, natural gas finds were merely a byproduct of the search for oil. With no pipeline to transport it, the natural gas was stranded from Lower 48 or Canadian markets and their supply-and-demand based prices. This resulted in low prices for ratepayers and the localized industry on the Kenai Peninsula being built to take advantage of the then-abundant stranded gas.

The era of inexpensive natural gas is nearing an end. Gas production from the major Cook Inlet fields is in decline and known reserves are not sufficient to meet current demand—residential, commercial, and industrial—beyond 2012, at best. Natural gas prices have already risen, and even in the best scenario, this upward trend will continue. The more critical question is where future energy supplies will come from and at what price. No easy answers are available. NETL’s AEO office has been working closely with the utilities and state agencies to better understand and address the issues.

Alaska’s remote population has many different energy issues from the Lower 48. Many residents live in remote villages, beyond the end of the road, and off the grid. Therefore, diesel electric generators provide electrical power for virtually all of Alaska’s rural residents. Furthermore, as a result of having to ship diesel by barge or plane long distances and store the fuel on site, fuel costs are very high. Alaska’s rural residents pay the highest prices in the nation for electricity. In 2009, the EIA reports the national average for electricity was 9.83 cents/kW. The Regulatory Commission of Alaska reports average urban Alaska’s rate at 14.64 cents/kW and the average rate in rural Alaska is 61.46 cents/kW (and as high as $1.16/kW in some villages).

Alaska is just beginning to explore for coal bed methane and shallow gas for local use except for the North Slope and Cook Inlet Regions. A small amount of seismic data and a few exploration wells have been drilled in interior Alaska over the years but no major discoveries have been found. Fossil energy resources, particularly the huge coal deposits, are well documented around Alaska. However, few local markets are large enough to justify the necessary capital cost to develop these resources, and the lack of infrastructure and remoteness from larger markets makes market-driven development unlikely. For example, coal bed methane is likely to exist under some villages, but current costs for drilling make this resource too expensive. Reducing the cost of exploiting nearby coal and natural gas resources is a necessary step in making these projects cost effective, and NETL’s Arctic Energy Office has been sponsoring research to discover how such energy resources might be economically utilized. Completed activities include:

Rural Alaska Coalbed Methane—Local Energy Supply in Rural Alaska.
A light weight drill rig was used for the first time to drill a slimhole well through the coals, gravels, and permafrost necessary to produce natural gas from coal bed seams in a remote area. The research was used to develop an economic model to establish if coalbed methane can be used as replacement for diesel fuel in the generation of electricity, thus lowering the costs of producing electricity for Alaskan villages such as Fort Yukon where the well was drilled.

Alaska Coalbed Methane Water Disposal Methods—A Review of Available Coalbed Methane Information and Disposal and Treatment Options for Alaska.
An important issue to resolve for coalbed methane production is water disposal or treatment methods. In the frozen Arctic, water problems are magnified both in quantity and quality. The research produced data about coalbed methane formations, available water-quality, community systems which could be used for water treatment systems, and other water use and general information for each community needed for evaluating coalbed methane water management issues.

Galena Electric Power—A Situational Analysis.
Remote villages need power for basic survival. The power system in Galena was studied as a model case. Options included enhancement of the current diesel generation system, opening a small nearby coal seam and installing a coal-fired power plant, and installing a modular small-scale nuclear reactor (Toshiba 4S – 10 MW). Of these three options, the installation of the 10-MW nuclear reactor was the most economical.

Solid Oxide Fuel Cell (SOFC) System for Remote Power Generation.
Large scale SOFC (200 kW) has been demonstrated to be the most efficient and reliable of the current fuel cell technologies. However, many applications in Alaska require smaller loads. This unit, the first 5-kW SOFC to operate in the United States, was demonstrated in a year-long test run. The year of trouble free operation demonstrated that this technology can be competitive with diesel generators.

Diesel-fueled Solid Oxide Fuel Cell System for Remote Power Generation.
Solid oxide fuel cells have been demonstrated to generate electrical power at high efficiency at the 5kW range when operated on natural gas. However, natural gas is not a readily available fuel in remote locations where the value of electrical power is very high, making operation of these fuel cells on liquid fuels, preferably diesel fuel, critical to the use of fuel cells in remote locations. This program tested a SOFC on hydrogen from reformed diesel.

Nome Region Energy Assessment
Many remote Alaskan communities have installed diesel- powered plants for electrical generation in an era when the fuel was at a lower cost. Not only has fuel increased in cost but transportation of fuel has supplied a multiplier effect. The study provided planning and decision-making capability about coal as compared to alternatives including wind, geothermal, and gas.

University of Alaska – Fairbanks—Power Plant Upgrade In Progress
The University of Alaska at Fairbanks is a research institution housing the Arctic Energy Technology Development Laboratory. The need for the coal-fired power plant expansion allowed for the opportunity to explore a conceptual design to incorporate research platforms for education and research and development regarding coal gasification, biomass gasification, solid fuel to liquid, CO2 capture, and other energy related issues.

Alaska Coal Regional Assessment—In Progress
Despite the large coal resources in the Arctic, Alaska’s coal is largely categorized as hypothetical. Research is being conducted to provide a technical basis that would support characterizing more of Alaska’s estimated coal resources from hypothetical to demonstrated reserves. Once the data is collected, it will be made available in the hydrocarbon GIS system used by State, Federal, and local sources.

Beluga Coal Gasification Feasibility Study — Phase I Final Report.
The Beluga Field coal is part of a 1.4 billion short ton measured reserve in the South Central region of Alaska. The study investigated the feasibility of gasification for power generation or export. The study concluded that a sufficient coal existed to supply the needs of a plant, markets existed for product, and local plants could be retrofitted from a technical and economic stand point.

Alaska Coal Gasification Feasibility Studies—Healy Coal-to-Liquids Plant
The Usibelli Coal Mine in the interior region of Alaska has accounted for most of the 1,500,000 short tons produced on average per year in the Arctic. Combined with a shortage of natural gas to feed a manufacturing plant, gasification was investigated as a means to supply the raw materials. The study concluded that a 14,640 barrel-per-day Fischer-Tropsch liquid using 4 million tons of coal per year was technically and economically feasible.

 
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