Kenai City Council keeps outside lawyers for pore space gas storage deals

The Kenai City Council voted unanimously Oct. 21 to keep outside law firm Pioneer Law LLC, at up to $30,000 in fees, to help the city negotiate competing pore space gas storage leases sought by Hilcorp and ENSTAR. Pore space is the tiny gaps in underground rock where natural gas can be stored.

The city attorney had earlier retained the firm for under $15,000, and the resolution adds another $15,000. In a Sept. 14 memo, City Attorney Scott Bloom wrote that the firm has experience in oil and gas transactions and tax law, and that many other firms in the state are unavailable to the city because of ties to the other parties. At the meeting, Bloom said the firm would also provide an outside legal opinion on ownership of pore space under the city. The money comes from the Legal Department and City Manager budgets.

The council met in closed session Oct. 7 and Oct. 21 to discuss "Competing Applications for Gas Storage Space," citing city finances and confidentiality.

The two companies applied for state leases on three Cook Inlet gas storage sites, Alaska News reported June 2. On Oct. 13, the state issued a preliminary finding that proposes leasing the Kenai Loop gas storage formation to ENSTAR. The finding states that gas storage rights beneath parts of the Kenai Airport belong exclusively to the state, and it names the city as the exclusive surface owner.

On Wednesday the council is set to consider approving comments to the state on the city's subsurface and surface ownership interests. Comments on the finding are due Nov. 13.

In 2016, the Alaska Supreme Court ruled that the state and Cook Inlet Region Inc., not the city, owned the pore space and gas storage rights in a different reservoir, the Cannery Loop Sterling C, a limestone formation about a mile underground.