Kenai approves $30K more for gas storage lease consulting

The Kenai City Council voted May 6 to increase consulting fees by $30,000 for evaluating competing natural gas storage proposals on airport property. The vote brings the total contract to $60,000.

The council approved the additional funding for Alaska Marine Power, a consulting firm hired to advise the city on lease applications from Enstar Natural Gas Company and Hilcorp Alaska. Both companies want to lease Kenai Municipal Airport land for underground gas storage facilities. The original $30,000 contract, approved in March, proved insufficient as the city works through the complexity of the competing proposals.

City Manager Terry Eubank said the city is scheduling individual meetings with each applicant to discuss potential lease terms. He told the council the consultants bring decades of oil and gas executive experience and landman expertise that the city lacks in-house. Many Alaska-based oil and gas consultants had conflicts of interest because they work for Enstar or Hilcorp.

"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."

Council Member Daniel asked whether the additional $30,000 would be sufficient. Eubank said he hopes so but acknowledged the timeline depends on how prolonged the lease negotiation process becomes.

The consulting work addresses lease provisions not envisioned in Kenai Municipal Code. The code was written before the city contemplated industrial-scale gas storage on airport land. The consultants are advising on lease structure and negotiating leases for these types of assets, according to Eubank.

The council voted 6-0 to approve the contract amendment through Ordinance 3517-2026. Council Member Kucena was absent. The original contract amount had been below the threshold requiring council approval, but the increase to $60,000 triggered the need for council authorization of the change order. The funding comes from airport revenues.

The projects would serve Southcentral Alaska's natural gas supply, which faces deliverability constraints 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 or income from the property would go to the airport, not to the city.