Kenai approves $30K more for gas storage lease consulting

The Kenai City Council voted May 6 to spend $30,000 more on consultants evaluating competing natural gas storage proposals at the municipal airport. The vote brings the total contract to $60,000.

Enstar Natural Gas Company and Hilcorp Alaska both want to lease airport land for underground gas storage facilities. The city hired Alaska Marine Power in March to advise on the competing applications. The original $30,000 contract proved insufficient as the proposals grew more complex.

City Manager Terry Eubank said many Alaska oil and gas consultants had conflicts of interest because they work for Enstar or Hilcorp. The consultants bring decades of oil and gas executive experience the city lacks in-house.

"When we were looking to identify potential consultants that could assist the city, one item that was a hurdle that we had to try to work around was many of the oil and gas consultants in the state of Alaska either work for Enstar or Hilcorp and would have conflicts of interest," Eubank said. "I think we were very fortunate to find the gentlemen at Alaska Marine Power."

The consultants are advising on lease structure for industrial-scale gas storage. Kenai Municipal Code was written before the city contemplated such projects on airport land.

Council Member Daniel asked whether the additional $30,000 would be enough. Eubank said he hopes so but acknowledged the timeline depends on how prolonged lease negotiations become.

The council voted 6-0 to approve the contract amendment through Ordinance 3517-2026. Council Member Kucena was absent. The funding comes from airport revenues.

The projects would serve Southcentral Alaska's natural gas supply during winter peak demand. Underground storage on the Kenai Peninsula could help utilities manage seasonal supply gaps as Cook Inlet gas production matures.

The city released the airport land from federal aviation use restrictions after confirming with the FAA that the parcels are no longer needed for airport operations. City Attorney Scott Bloom told the council that any funds from the property would go to the airport, not to the city.

The city is scheduling individual meetings with each applicant to discuss potential lease terms. No timeline has been set for a final lease decision.