Homer works on getting gasline

• What’s fair in state help for natural gas service expansion?
By Jenny Neyman
Redoubt Reporter

At a basic level, the point of government is to do things for the benefit of its constituents, though pooled resources, administration and oversight, that they would find challenging to do on their own. That can mean hospitals, public safety, schools, transportation and the like.
But government can’t be everything to everyone. Especially in times of recession, and/or when political winds blow toward cuts in budgets and reductions in government’s reach.
The question then becomes, where to draw the line between what government does for its constituents, and what constituents do for themselves? On the Kenai Peninsula, those lines can concern extensions of natural gas service.
Enstar, a subsidiary of Semco corporation, manages utility natural gas service on the Kenai Peninsula, moving gas through some pipelines it owns, and arranging for use of other pipelines owned by oil and gas producers. Enstar makes money by charging a fee for transporting natural gas, while the price of gas — which Enstar doesn’t have control over — is passed on to customers. Enstar-initiated capital costs, like extending the high-pressure gas transmission Kenai Kachemak Pipeline from Ninilchik to Anchor Point, are rolled into the tariff customers pay. Area-specific costs — like extending distribution lines to residential areas, service lines to homes and hooking up new meters — are passed on to customers. Tariff rates and Enstar’s areas of service are subject to approval of the Regulatory Commission of Alaska, and all Enstar customers pay the same rate, no matter where they’re located.
Where the lines curve, according to some, are in the costs of extending natural gas service to new areas. In some spots, like Girdwood, Enstar decided to install a pressure-reducing and odorization station off the high-pressure gas pipeline between Anchorage and the Kenai Peninsula to allow service to an area where the demand was forecasted to grow. The more customers Enstar has, the more gas it ships and the more money it makes. In less-populated areas, like Kasilof, where the Kenai Kachemak Pipeline is owned by producers and use is leased by Enstar, adding a pressure-reducing station to allow expansion of service is a cost residents would have to pay, on top of paying for service lines and hookups to their own homes and businesses.
That’s typically done through a utility special assessment district, a borough-administered loan process that spreads the cost out over parcel owners who would gain access to gas service, but which can be contentious if some owners don’t want to participate. Since USAD costs are assessed per lot, without consideration for whether the lot holds a mansion or a modest cabin, the cabin-dwellers may not be keen on paying any amount, much less the same amount as their neighbors with higher-value property.
Still, frustrating and feud-inducing though the USAD system may be, it might not seem as inequitable if all currently natural-gas unserved areas of the borough were in the same boat. But they’re not. Some boats get state-funded flotatio assistance, while others are left to bob on their own.
“Why do some areas get gas and not others? Why does Ninilchik, Anchor Point and Homer get gas for a pittance, and not Kasilof? Why do state tax dollars go to benefit a corporation, and pay for gas to some areas, and not here?” said Edward “Tiger” Demers, a Kasilof resident who has been crusading for natural gas service to his neighborhood off of Kalifornsky Beach Road since he and his wife, Judy, built the place in 2001.

Nice help if you can get it
The fiscal year 2008 state capital budget included $180,000 to fund a natural gas service extension project to the Nikiski Senior Center, which residents in the area could also access.
In June 2005, the governor signed off on a capital budget that included $225,000 for a pressure-reducing station to be installed in Ninilchik, allowing natural gas service to Ninilchik School, as well as area residents.
Last year’s state budget included $225,000 for a pressure-reducing station to allow natural gas service to Nikolaevsk, out North Fork Road from Anchor Point. Enstar is extending the Kenai Kachemak Pipeline from Ninilchik to Anchor Point, to hook in with a line put in by Anchor Point Energy LLC, a subsidiary of Denver-based Armstrong, out to its gas development in the North Fork unit. Another $4.8 million was included to pay for a pressure-reducing station and low-pressure pipeline extension to Anchor Point and south to serve the Homer area.
Gov. Sean Parnell vetoed $4.2 million of that project last year, wanting to see a more fleshed-out plan for the Homer extension, but spared enough money to cover a pressure-reducing station at the juncture of the newly extended KKPL and the line out to the North Fork unit, and for a low-pressure transmission line to extend into Anchor Point to serve Chapman Elementary School and the surrounding area.
Rep. Paul Seaton, who serves the Homer area in District 35, said that these sorts of infrastructure projects are a good use of state money, in that they help residents decrease heating costs. In all these projects, individual residents still pay for service lines to their property and hookups to their buildings, but having the state pay for the pressure-reducing station and/or a distribution line to bring the gas closer to their property still means a sizable reduction in the cost of accessing natural gas service.
“In some cases people say, ‘Well, why is this happening?’ We are doing a lot of energy projects to get rural residents in villages across the state off of diesel, and this is the same case here. We’ve got all these people on diesel, and if we can get to them with a small amount of capital infrastructure to help out, we should,” Seaton said. “It’s estimated that if you’re on diesel or heating oil and you’re paying $2.50 a gallon — and it’s more than that now — (natural gas) will save you half.”
Natural gas service also represents sizable cost savings for the borough and state if schools and state facilities are switched to gas, Seaton said.
“Ninilchik School, a few years ago they got gas over to the school and that saved them more than half on their heating bill — like $96,000 went to $40,000. That’s just one school, and when you start adding up the number of schools that this will serve (in the Homer area), the borough is going to save a lot of money that way. You also have the hospital, the state road maintenance shops, and those kinds of things will also be aided. So there are a lot of synergies for savings by government agencies, as well as getting gas here for residents,” he said.
Seaton expects to resubmit funding for the Homer leg of the project this legislative session. When the $4.8 million was being debated last year, the House Finance Committee attached some questions and requirements to the bill, leading to Gov. Parnell’s veto of the money.
“They wanted to see a plan. They wanted to make sure that this was going to make gas available not only within the city of Homer, but also to the people between Anchor Point and Homer, and also the people east of Homer,” Seaton said.
That planning is being done now. The proposed Homer extension will be a larger-diameter, lower-pressure transmission line from the pressure-reducing station in Anchor Point.
“They have to pay for their main-line extension — the laterals and the service lines — to the houses, just like everywhere. It’s putting the grid close enough to people that they can actually put in main lines to a subdivision,” Seaton said.
The city of Homer has formed a task force to form a plan for hooking up to the grid, smoothing the way for that to happen. One of the pieces of that plan is applying for a regional permit from the Environmental Protection Agency to dig through wetlands. This will streamline the process when it gets to that point, Seaton said.
Currently, the Kenai Kachemak Pipeline extension and the line from the North Fork unit are nearing completion. The lower-pressure line into Anchor Point has already been installed and is just waiting for gas to flow.
Elsewhere, Kachemak City is considering voting to raise the mill rate to pay to extend gas service everywhere throughout the community, Seaton said. He favors that method over the borough USAD process, since costs are aligned with people’s property value, rather than assessing each lot the same amount.
“It’s too bad there hasn’t been that availability of looking at assessments based on property values, instead of looking at per lot (in the borough USAD process). Because you can have a big lot or little lot and you can have a whole business and everything else on there, and you pay the same as someone who just has a small cabin. I think that’s where some of the contention comes from,” Seaton said. “With the mill rate they pay to the value of the property they have. It reduces contention a whole lot.”