Southcentral Alaska gas emergency deepens as ENSTAR, producer enter emergency arbitration

ANCHORAGE, Alaska (KTUU) - The natural gas supply outlook for Southcentral Alaska has grown increasingly precarious following a newly revealed dispute between the region’s primary gas utility and a major Cook Inlet producer.

According to regulatory filings, ENSTAR Natural Gas Company has initiated emergency arbitration proceedings against HEX Operating LLC — formerly known as Furie Operating Alaska —claiming the producer abruptly cut off critical “discretionary” gas deliveries mid-summer.

The dispute comes on the heels of a major regulatory setback last month. On July 8, the Regulatory Commission of Alaska (RCA) denied ENSTAR’s request for an advance prudence determination on its proposed $240 million Kenai gas storage facility, leaving the utility with limited options to secure and store gas ahead of the upcoming winter.

In an Aug. 4 supplemental filing to the RCA, ENSTAR stated that HEX ceased all discretionary gas deliveries on July 26. ENSTAR alleges that HEX violated a contractual right of first refusal by selling gas to a third party willing to pay a higher price.

According to the filings, HEX is offering discretionary gas at $17.50 per thousand cubic feet (Mcf) — well above the $13.50 rate ENSTAR claims was previously locked in under a March 2026 side agreement. ENSTAR has continued to accept the higher-priced gas “under protest” in an effort to maintain supply.

The sudden cutoff has severe implications for Southcentral’s winter readiness. Following an unusually harsh 2025-2026 winter, ENSTAR entered the summer storage injection season with depleted gas reserves. The utility had planned to receive approximately 2.6 billion cubic feet of discretionary gas from HEX between July 2026 and March 2027 to rebuild its storage inventory.

“Continued interruption of these deliveries increases the risk of entering the upcoming winter with insufficient storage inventory and reduced deliverability,” ENSTAR warned in its commission filing.

ENSTAR is seeking an emergency order in arbitration to force HEX to resume deliveries at the agreed-upon rates and preserve all communication and contract records while the legal battle plays out.

Both ENSTAR and HEX Operating did not respond to requests for comment.

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