The Alaska Natural Gas Pipeline:
Background, Status, and Issues for Congress

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy
November 30, 2009
Congressional Research Service
7-5700
www.crs.gov
R40963
CRS Report for Congress
P
repared for Members and Committees of Congress

The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

Summary
Constructing a natural gas pipeline from Alaska’s North Slope to the lower-48 states has been a
government priority—periodically—for more than four decades. Beginning with the Alaska
Natural Gas Transportation Act of 1976, Congress has repeatedly affirmed a national need for an
Alaska gas pipeline. In remarks to the press President Obama has likewise described an Alaska
gas pipeline as “a project of great potential ... as part of a comprehensive energy strategy.”
Concerted efforts by Congress, the State of Alaska, and other stakeholders have resulted in new
momentum to proceed with an Alaska gas pipeline project. A key step in advancing the pipeline
project was the inclusion of $18 billion in federal loan guarantees for such a pipeline in the
Alaska Natural Gas Pipeline Act of 2004 (P.L. 108-324). More recent milestones were the State of
Alaska’s 2008 award to TransCanada Corporation (TransCanada) of a license to build a natural
gas pipeline from Prudhoe Bay to the lower-48 states and the concurrent announcement of a
competing pipeline proposal, the Denali project, by BP and ConocoPhillips. Both projects plan to
conduct open seasons in 2010 soliciting commitments for future gas shipments. If the open
seasons yield sufficient interest from gas shippers, either the Denali or TransCanada project could
file pipeline siting applications with the Federal Energy Regulatory Commission, Canada’s
National Energy Board, and other agencies. According to the Denali project’s developers, the
engineering, scheduling, and cost estimating work for the main pipeline and the associated gas
treatment plant are continuing on schedule. TransCanada has been engaged in similar project
activities on a comparable timeline.
Notwithstanding recent development progress, many potential obstacles to an Alaska gas pipeline
remain at this time, especially the project’s economics. A proposal in S. 1462 to increase the
pipeline’s federal loan guarantee to $30 billion, reported by the Senate Committee on Energy and
Natural Resources on July 16, 2009, reflects continuing concerns about the project’s economic
viability due to low natural gas prices stemming from increased shale gas production.
Nonetheless, the TransCanada and Denali developers indicate they are on track to begin
construction of one of the proposed projects within the next few years. Proponents maintain that,
if an Alaskan gas pipeline begins transporting gas to lower-48 markets by 2020 as anticipated, it
would result in reduced U.S. energy prices, increased energy security, and lower U.S. emissions
of carbon dioxide. They assert that the project would also create a significant number of jobs and
support regional economic development. Like other infrastructure projects in wilderness areas,
however, an Alaska gas pipeline would also involve significant environmental costs, many of
which have yet to be determined.
Ultimately, the regional effects of any pipeline development on the Alaskan/Canadian
environment must be weighed against its economic value, energy security value, and its global
benefits in reducing carbon emissions from fossil fuels. To date, the judgment of Congress has
favored construction of a pipeline—but ensuring that its public benefits continue to outweigh its
costs will likely remain a key oversight challenge for the next decade.


Congressional Research Service

The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

Contents
Introduction ................................................................................................................................ 1
Issues for Congress ............................................................................................................... 1
Background ................................................................................................................................ 2
Stalled Development ............................................................................................................. 2
Marine Transport Options ..................................................................................................... 3
Renewed Interest in the Pipeline ........................................................................................... 4
Alaska Gasline Inducement Act (AGIA)................................................................................ 5
Alaska Gas Pipeline Proposals .................................................................................................... 6
AGIA Proposals .................................................................................................................... 6
Other Proposals..................................................................................................................... 7
Project Economics ...................................................................................................................... 8
Natural Gas Price Expectations ............................................................................................. 8
Construction Costs and Cost Uncertainties .......................................................................... 10
Economic Development ...................................................................................................... 10
Current Project Status ............................................................................................................... 11
The LNG Option................................................................................................................. 12
Policy Issues for Congress ........................................................................................................ 13
Alaska Gas Pipeline Development Uncertainty.................................................................... 13
Canada’s Mackenzie Valley Pipeline ................................................................................... 14
Federal Loan Guarantee ...................................................................................................... 15
Environmental Impacts ....................................................................................................... 16
Terrorism Risks and Infrastructure Concentration................................................................ 17
Conclusion................................................................................................................................ 18
Appendix .................................................................................................................................. 20

Figures
Figure 1. Alaska Oil and Natural Gas Pipelines 2009 ................................................................... 3
Figure 2. Growth and Volatility in U.S. Natural Gas Prices .......................................................... 4
Figure 3. Annual Average U.S. Wellhead Natural Gas Prices ....................................................... 9

Tables
Table 1. Key Events in Alaska Natural Gas Pipeline Development............................................. 20

Contacts
Author Contact Information ...................................................................................................... 21

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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

Introduction
Over forty years ago, large natural gas reserves were discovered at Prudhoe Bay, Alaska. Since
that time, Congress has been encouraging the development of those natural gas resources.
Principal among its policies has been promoting the construction a natural gas pipeline from the
Alaska North Slope to the lower-48 states. Beginning with the Alaska Natural Gas Transportation
Act of 1976,1 and continuing through the Alaska Natural Gas Pipeline Act of 2004 (P.L. 108-324),
Congress has repeatedly affirmed a national need for an Alaska natural gas pipeline.2 The
presidential administrations of Jimmy Carter, Ronald Reagan, and George W. Bush also
supported an Alaska gas pipeline project. The Obama administration continues that support. In
remarks to the press during his first month in office, President Obama described an Alaska gas
pipeline as “a project of great potential ... as part of a comprehensive energy strategy.”3
While it has been on the drawing board for decades, on and off, interest in an Alaska natural gas
pipeline has recently revived because of accelerated growth in U.S. natural gas demand, price
volatility in the natural gas market, and the increased importation of liquefied natural gas (LNG)
from overseas. Moreover, many analysts expect that a national policy of carbon dioxide control
could further increase natural gas demand for electric power generation and, possibly,
transportation fuel. These factors have led legislators to revisit the potential for an Alaska natural
gas pipeline to meet future growth in U.S. demand for natural gas and to restart the process of
Alaska gas pipeline development.4 Important milestones in this activity were Alaska’s August
2008 award to TransCanada Corporation (TransCanada) of a license to build a natural gas
pipeline from Prudhoe Bay to the lower-48 states and the concurrent announcement of a
competing pipeline proposal. To date, however, despite renewed support at both the federal and
state levels, construction of an Alaska natural gas pipeline has not begun.
Issues for Congress
This report provides a brief review of the history of efforts to develop an Alaska natural gas
pipeline, including project status, recent developments, and the current project outlook. It also
discusses key policy issues related to the construction of the pipeline and its potential role in the
context of U.S. energy and climate policy.5 Specific issues of partricular interest to Congress
include the implications for U.S. energy supplies and energy prices of an Alaska gas pipeline, and
proposed legislation to raise the federal loan guarantee for the pipeline’s construction. Other
issues include an Alaska gas pipeline’s environmental impacts, its physical security, and its
relationship to the proposed Mackenzie Valley pipeline in Canada.

1 15 U.S.C. § 719 et seq.
2 For example, see P.L. 108-324 § 103(b)(2)(A) “a public need exists to construct and operate the proposed Alaska
natural gas transportation project.”
3 Erika Bolstad, “Obama Calls Alaska Gas Pipeline Promising,” Anchorage Daily News, February 11, 2009.
4 U.S. Energy Information Administration, Natural Gas Monthly, August 2009, Table 2. Full initial pipeline capacity is
4.5 billion cubic feet per day.
5 Portions of this report previously appeared in CRS Report RL34671, The Alaska Natural Gas Pipeline: Status and
Current Policy Issues
, by William F. Hederman.
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Background
Arctic Alaska has substantial natural gas resources. The U.S. Geological Survey (USGS)
estimates that conventional natural gas reserves on Alaska’s North Slope potentially exceed 100
trillion cubic feet (Tcf), over four times the total annual gas consumption of the United States.6
The agency’s assessment of undiscovered conventional gas resources across the entire Arctic
region concluded that over 1,600 Tcf of additional natural reserves gas remains to be found, with
a significant share located under U.S. territory.7 The USGS also estimates that the North Slope,
specifically, may contain up to 158 Tcf of technically recoverable natural gas in the form of
methane hydrates.8 Although methane hydrate resources cannot yet be developed because there
are no commercially viable methods to do so, future technologies may make such production
economic. Taken together, these vast natural gas resources—both proven and anticipated—in
Arctic Alaska have been the motivation for a natural gas pipeline to supply Alaskan natural gas to
the lower-48 states.
In 1976, Congress passed the Alaska Natural Gas Transportation Act (ANGTA) to provide for
sound decision-making on an Alaska Natural Gas Transportation System (ANGTS). The statute
provided for congressional and presidential participation in the pipeline planning process and
sought to expedite pipeline construction. The three main policy steps in the process were all
completed by the end of 1977. First, the Federal Power Commission recommended (equally) two
potential gas transportation options, both overland pipeline proposals along different routes
through Alaska and Canada to the lower-48 states.9 (A third, rejected, option was an overland
pipeline across Alaska combined with an LNG export terminal in the port of Valdez.) President
Carter then selected the route running along the Alaska Highway in preference to the northern
route through the Mackenzie Delta, as shown in Figure 1. Congress approved the president’s
decision through a joint resolution on November 8, 1977.10 This may have been the last time the
project proceeded according to the original plan. A timeline including passage of ANGTS and
other key events in the development of the Alaska gas pipeline project is presented in the
Appendix.
Stalled Development
In the winter of 1977-1978, the United States experienced serious shortages of interstate natural
gas supplies due to wellhead gas price controls imposed under a 1954 Supreme Court decision.11
In response to these delivery problems, Congress passed the Natural Gas Policy Act of 1978
(NGPA), which effectively reversed the court’s decision. Congress also passed the Powerplant
and Industrial Fuel Use Act of 1978 (PIFUA), which restricted the construction of gas-fired
power plants and the use of natural gas in large industrial boilers.12 In the wake of these statutes

6 David W. Houseknecht, U.S. Geological Survey, Conventional Natural Gas Resource Potential, Alaska North Slope,
Open File Report 2004-1440, December 13, 2004; U.S. Energy Information Administration, Annual Energy Outlook
2009
, DOE/EIA-0383(2009), March 2009, p. 109.
7 U.S. Geological Survey, USGS Arctic Oil and Gas Report, Fact Sheet, July 2008.
8 U.S. Geological Survey, Gas Hydrate Resource Assessment: North Slope, Alaska, Fact Sheet, October 2008
9 The Federal Power Commission (FPC) was the predecessor of the Federal Energy Regulatory Commission (FERC).
10 H.R. J. Res. 621, P.L. 95-158, 91 Stat. 1268, 95th Cong., 1st Sess., 1977.
11 Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672
12 P.L. 95-62 and P.L. 95-620.
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and related policies, a natural gas oversupply developed, causing natural gas prices to fall sharply
and persistently. At the same time, in an often repeated pattern for major U.S. energy supply
projects, cost estimates for the Alaska gas pipeline increased. As a result of these factors, the
desirability of the Alaska natural gas transportation system declined.13 Commercial attention to
the Alaska gas pipeline initiative essentially disappeared by the mid-1980s.
Figure 1. Alaska Oil and Natural Gas Pipelines 2009

Source: Adapted from CRS Report RL31278, Arctic National Wildlife Refuge: Background and Issues, Figure 6,
based on Energy Department maps.
Although the full Alaska gas pipeline system made little progress, the southernmost parts of the
project did get developed during this period to transport growing natural gas supplies from the
Western Canadian sedimentary basin. Producers from Alberta, along with Canadian authorities
and U.S. and Canadian pipeline companies, cooperated to pre-build the downstream legs of the
ANGTS. The western leg of the ANGTS was the Pacific Gas Transmission pipeline, which began
service from Alberta to California in 1981. The eastern leg, the Northern Border Pipeline, went
into service from Alberta to the Midwest in 1982 (Figure 1).
Marine Transport Options
In the 1980s, reacting to the lack of progress on the land-based pipeline system, the U.S.
Maritime Administration authorized a study of marine options for transporting Alaskan natural
gas as LNG aboard specialized tankers to determine whether they might offer U.S. shipbuilding
opportunities. Such tankers had been transporting LNG to Japan from natural gas fields in south
central Alaska (Cook Inlet) since 1969. The results of the study indicated roughly comparable
economics for pipeline and LNG transport to the U.S. west coast. LNG sales to the Pacific Rim

13 See discussion in D. Fried and W. Hederman, “The Benefits of an Alaska Natural Gas Pipeline,” The Energy
Journal
, Vol. 2, No. 1, January 1981, p. 22.
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generally had greater economic potential, but were viewed as politically untenable because they
would increase U.S. energy exports rather than increase domestic supplies.14
Renewed Interest in the Pipeline
Serious reconsideration of the construction of a natural gas pipeline from the Alaska North Slope
began around 2000. This reconsideration was prompted, in large part, by tightening gas supplies
to the lower-48 states and corresponding increases in natural gas prices and price volatility as
shown in Figure 2.
Figure 2. Growth and Volatility in U.S. Natural Gas Prices

Source: U.S. Energy Information Administration, “U.S. Natural Gas Wellhead Price,” Internet database,
October 20, 2009, http://tonto.eia.doe.gov/dnav/ng/hist/n9190us3M.htm. Prices are in nominal dol ars.
One important sign of renewed interest in an Alaska pipeline was the recommendation in the
2001 National Energy Policy report that the administration “expedite the construction of a
pipeline to deliver natural gas to the lower 48 states.”15 Nearly concurrent with the release of this
report, President George W. Bush issued Executive Order 13212, which set forth the
administration’s policy that executive departments and other federal agencies act to expedite
projects that would increase the production, transmission, or conservation of energy.16 To this end
a federal interagency task force was established in 2001, co-chaired by the Departments of
Energy and State, to identify any impediment to processing an Alaska gas pipeline permit
application and to recommend ways to streamline the process.17

14 W. F. Hederman, “A Review of Marine Systems Use in Developing Alaska Natural Gas,” SPE 11294, SPE
Hydrocarbon Economics and Evaluation Symposium
, March 2, 1983, Dallas, TX.
15 National Energy Policy Development Group, National Energy Policy, Office of the Vice President, May 16, 2001, p.
7-18.
16 E.O. 13212, “Actions to Expedite Energy-Related Projects,” 66 F.R. 28357, signed by President Bush on May 18,
2001.
17 U.S. Department of Energy, National Energy Technology Laboratory, Delivering Alaskan North Slop Gas To
Market
, June 2004, p. 8, http://www.netl.doe.gov/publications/factsheets/policy/Policy003.pdf. Other task force
members included the Department of the Interior (Bureau of Land Management and Minerals Management Service),
the Department of Transportation (Office of Pipeline Safety), and the Federal Energy Regulatory Commission.
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In 2004, Congress passed the Alaska Natural Gas Pipeline Act (P.L. 108-324, Div. C), a key step
in advancing the pipeline project. This act originated in broader national energy legislation that
was introduced in 2001, but advanced only slowly through Congress during 2002 and 2003. The
Alaska provisions were eventually removed from the broader bill and enacted separately.18
Among its key provisions, P.L. 108-324:
• clarified that, despite the passage of time since the earlier legislation, the Federal
Energy Regulatory Commission (FERC) could still accept, review, and act upon
applications for a new pipeline project under the Natural Gas Act or the Alaska Natural
Gas Transportation Act;
• created an Office of the Federal Coordinator (OFC) for the issuance by other federal
agencies of necessary pipeline permits;
• provided for a pipeline development loan guarantee of as much as $18 billion;
• established guidance for FERC to regulate the pipeline’s capacity bidding process so
that it would be available to parties beyond the three major North Slope producers—
thereby promoting competition in Alaska North Slope natural gas development.19
The American Jobs Creation Act of 2004 (P.L. 108-357 § 706) provided a 7-year cost-of-
investment recovery period for tax purposes (instead of the previously allowed 15-year period)
and a designated economic life (class life) of 22 years for the Alaska natural gas pipeline. These
provisions were intended by Congress to reduce the cost of capital for the project.20 The act also
provided a tax credit for a North Slope natural gas treatment plant required for the pipeline’s
operation. Broader, national energy legislation, which passed in 2005 (Energy Policy Act of 2005,
P.L. 109-58), also addressed the Alaska natural gas pipeline. P.L. 109-58 required FERC to submit
to Congress on a semi-annual basis progress reports about licensing and building the pipeline (§
1810).21 In June 2006, consistent with P.L. 108-324 and in accordance with E.O. 3212, fifteen
federal agencies with regulatory and other responsibilities related to an Alaska natural gas
pipeline signed a memorandum of understanding “to use best efforts to achieve early coordination
and compliance with deadlines and procedures established by relevant agencies” in support of the
pipeline’s development.22
Alaska Gasline Inducement Act (AGIA)
In 2007, Alaska passed the Alaska Gasline Inducement Act (AGIA), seeking to encourage
expedited construction of a natural gas pipeline from Alaska’s North Slope to gas markets in
Alaska and the lower-48 states.23 AGIA requires a pipeline developer to meet certain requirements
advancing the project in exchange for a license providing up to $500 million in matching funds,

18 State of Alaska, Department of Revenue, The Alaska Natural Gas Pipeline Act of 2004, undated, p. 1,
http://www.revenue.state.ak.us/gasline/Annex%201.pdf
19 The FERC issued a final rule on the open season matter on February 9, 2005 (FERC Order No. 2005).
20 U.S. Congress, Joint Committee on Taxation, General Explanation Of Tax Legislation Enacted In The 108th
Congress
, Joint committee print, JCS-5-05, May 2005, p. 330.
21 P.L. 109-58, 119 Stat. 594(2005), 42 U.S.C. Section 15801 et seq.
22U.S. Dept. of Agriculture, et al. ,Memorandum of Understanding Related to an Alaska Natural Gas Transportation
Project
, June 2006, p. 3, http://www.usace.army.mil/CECW/Documents/cecwo/reg/mou/Alaska_MOU.PDF.
23AS 43.90 et seq.
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thereby reducing the developer’s financial risks. Among other provisions, the statute requires a
developer’s commitment to: apply by a specific date for key regulatory approvals, to hold an open
season for soliciting bids from North Slope gas producers for future shipments on the pipeline,
and to expand the pipeline on rate and tariff terms that would allow gas producers to fully
develop Alaska’s North Slope natural gas resources.24 The AGIA also establishes a competitive,
public process for the evaluation and selection of pipeline proposals under specific criteria.
Alaska Gas Pipeline Proposals
Developers have proposed seven major pipeline projects to develop North Slope natural gas
reserves since 2007. Five of these proposals were filed under the AGIA process. Two have been
proposed outside that process.
AGIA Proposals
In July 2007, the State of Alaska issued a Request for Applications (RFA) seeking proposals from
any interested developer willing to meet the AGIA requirements. The state received competing
applications from five developers:
TransCanada Pipelines Ltd. (TransCanada) and Foothills Pipe Lines, Ltd.,
proposed a pipeline along a route similar to the ANGTS route for the originally approved
project. The pipeline would connect with the existing TransCanada Alberta network at the
Alberta hub. TransCanada would not construct a North Slope gas treatment plant to
process wellhead gas for pipeline transport, although the company stated a willingness to
develop such a plant if necessary. The original capacity of this pipeline would be between
4.5 to 5.0 billion cubic feet per day (Bcf/d). According to FERC staff, it would be
expandable to 5.9 Bcf/d through the use of greater compression only, and, therefore, at
relatively low added cost. 25 ExxonMobil, one of the three major Prudhoe Bay natural gas
producers, joined with TransCanada to develop this project in June 2009.26 The project
anticipates an in-service date of 2018.
Alaska Gasline Port Authority (AGPA), a municipal entity (including the City of
Valdez, Fairbanks North Star Borough, and North Slope Borough), proposed a pipeline
from the North Slope to Valdez, where the gas could be liquefied and shipped as LNG to
Asia, the West Coast of the United States, Mexico, or Hawaii. The “All Alaska
Gasline/LNG Project” would be constructed and operated by private contractors but
publicly financed.
Alaska Natural Gasline Development Authority (ANGDA) proposed a smaller
capacity lateral pipeline to link from whatever major North Slope pipeline was selected to

24State of Alaska, “Frequently Asked Questions Regarding the Alaska Gasline Inducement Act (“AGIA”) and the
AGIA Process,” November 8, 2008, p. 1, http://www.gov.state.ak.us/agia/agia_faqs_11808.pdf.
25 Federal Energy Regulatory Commission, Sixth Report to Congress on Progress Made in Licensing and Constructing
the Alaska Gas Pipeline
, August 29, 2008, p. 8.
26TransCanada Corp., “TransCanada and ExxonMobil to Work Together on Alaska Pipeline Project,” Press release,
June 11, 2009.
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South Central Alaska (Anchorage and other locations), making up for declining
production there.
• A China Petroleum and Chemical Corporation (Sinopec) subsidiary and Little
Susitna Construction Company proposed a pipeline from the North Slope to Valdez in the
south where the gas would be liquefied and exported to the Pacific Rim as LNG.
AEnergia LLC, a startup company formed by persons with large project engineering
experience, proposed a North Slope-to-Alberta pipeline jointly owned by the producers
(74%), the State of Alaska (25%), and AEnergia (1%).27
Of these applications, former Alaska Governor Sarah Palin determined that only TransCanada’s
met the AGIA requirements and was complete enough to be evaluated. In May 2008, the governor
recommended the TransCanada proposal to the state legislature. The legislature accepted this
recommendation and voted to award TransCanada the AGIA license in August 2008.28 The
Sinopec and AEnergia proposals subsequently were not pursued; the other three proposals are still
active.
Other Proposals
In addition to the proposals filed under Alaska’s AGIA process, developers have made two
alternative proposals to construct North Slope gas pipelines or otherwise bring North Slope
natural gas to market.
BP and Conoco Philips (Denali), two of the three major Prudhoe Bay natural gas
producers, have jointly proposed a 4.0 Bcf/d pipeline project outside the AGIA process
(and, thus, ineligible for the $500 million in state funds). The BP-Conoco Philips
“Denali” Pipeline would follow a route similar to that of the TransCanada project to the
Alberta hub. The Denali project, however, would include a gas treatment facility and
would consider the option of new pipelines through Alberta and to the lower-48 states if
deemed necessary. 29 The latest project schedule proposes initial pipeline service in
2018.30
Enstar Natural Gas Company has proposed a 690-mile smaller capacity (0.5 Bcf/d)
“bullet” pipeline from the North Slope to Southcentral Alaska as an alternative to the
ANGDA lateral pipeline proposal. The Enstar pipeline would not depend upon the
construction of a larger Alaska natural gas pipeline (either TransCanada’s or Denali) to
supply natural gas to in-state markets.31
Alaska Natural Resources To Liquids, LLC is one of several “gas-to-liquids”
(GTL) proposals that would convert North Slope natural gas to liquid hydrocarbon fuels
(e.g., diesel and gasoline) and then transport them via a new pipeline or through the
existing Trans Alaska Pipeline System (Figure 1) to Valdez for marine shipment out of

27 Federal Energy Regulatory Commission, Fifth Report to Congress on Progress Made in Licensing and Constructing
the Alaska Gas Pipeline
, February 19, 2008, pp. 2-3.
28 Alaska HB 3001, August 1, 2008.
29 BP and ConocoPhillips, “BP and ConocoPhillips Join on the Alaska Gas Pipeline,” Joint press release, April 8, 2008.
30 BP and ConocoPhillips, “Denali - The Alaska Gas Pipeline Project,” Web page, October 15, 2009,
http://www.denalipipeline.com/overview.php.
31 Fairbanks Economic Development Corp., In-State Gas Pipeline Supply Options Study, February 5, 2009, p. 39.
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state.32 While not intended to deliver natural gas to the lower-48 states, such a project
would develop Alaska’s North Slope gas reserves as an alternative to a natural gas
pipeline.
According to the Energy Information Administration, there are no “current” project sponsors
actively promoting a GTL project on the North Slope.33 Of the five Alaska natural gas pipeline
projects that are still actively promoted, only the TransCanada, Denali, and AGPA proposals
would transport natural gas out of Alaska. The other two proposals, ANGDA and Enstar, involve
smaller projects focused exclusively on natural gas supplies to markets within Alaska. Because
the latter two proposals are of more state interest than national interest, they are not discussed in
the remainder of this report.
Project Economics
An Alaska gas pipeline or pipeline/LNG terminal combination transporting natural gas from the
North Slope to the lower-48 states would be, by some measures, the largest civilian construction
project in the history of North America. When initially announced, the TransCanada and Denali
pipeline developers estimated total project costs of $27 billion34 and $30 billion,35 respectively.
The Energy Information Administration currently assumes total capital costs for a TransCanada or
Denali-type pipeline of approximately $28.8 billion and capital costs for a pipeline/LNG project
of approximately $35.4 billion.36 In light of these enormous capital requirements, policy makers
and investors alike have paid close attention to key factors affecting the economic viability of the
proposed projects, as well as their potential impact on regional and national economic
development.
Natural Gas Price Expectations
Future prices of natural gas will have the greatest influence, by far, on the cost effectiveness of an
Alaska natural gas pipeline. According to a 2008 study prepared for the Alaska legislature, the net
present value of the TransCanada pipeline would be positive with long-term real natural gas
prices above $5.00 per thousand cubic feet (Mcf) and potentially at lower prices.37 A federal tax
credit for the pipeline proposed in 2002 under H.R. 4 implied economic viability of the project at
a gas price of $3.25/Mcf ($3.91/Mcf in 2009 dollars).38 By comparison, the EIA’s most recent

32 Alaska Natural Resources To Liquids, LLC, “A Legacy Decision for Alaska,” Presentation to the Alaska State
Legislature, Joint Legislative Budget and Audit Committee, June 20, 2008; Tim Bradner, “Natural Gas: Exxon, BP,
Independent All Planning Gas-To-Liquids Projects,” Alaska Journal of Commerce, April 16, 2000.
33 U.S. Energy Information Administration, Annual Energy Outlook 2009, DOE/EIA-0383(2009), March 2009, p. 41.
34 TransCanada Corp., Application for License: Alaska Gasline Inducement Act, November 30, 2007, p. 2.5-2. 2007
dollars.
35 Wesley Loy, “BP, Conoco Join Forces to Pursue Gas Pipeline,” Anchorage Daily News, April 9, 2008. 2008 dollars.
36 U.S. Energy Information Administration, March 2009, p. 39. Costs are adjusted to 2009 dollars. A gas-to-liquids
option is assumed to have capital costs of approximately $60 billion.
37 Black & Veatch, Net Present Value (NPV) Analysis, Presentation to the Alaska State Legislature, Joint Legislative
Budget and Audit Committee, June 18, 2008, p. 18, http://lba.legis.state.ak.us/proposals/doclog/2008-06-
18black_veatch_npv_spec_sess_jnt_comm.pdf.
38 H.R. 4, Energy Policy Act of 2002, Engrossed Amendment as Agreed to by Senate, Section 2503. The provision was
not enacted.
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analysis (which assumes an Alaska gas pipeline is constructed) projects lower-48 wellhead
natural gas prices to rise from $4.64/Mcf in 2010 to $8.01/Mcf in 2030.39 Based on such
projections, assuming adequate gas production from North Slope fields, TransCanada expects its
pipeline project to be cost-effective, generating $475 billion in total revenue over its operating
life for distribution among gas producers and government stakeholders.40 Assuming similar
economics, the Denali project would also likely be cost effective.
Figure 3. Annual Average U.S. Wellhead Natural Gas Prices
(Nominal dollars per thousand cubic feet)
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2004
2005
2006
2007
2008
2009*

Source: U.S. Energy Information Administration, “U.S. Natural Gas Wellhead Price,” Internet
database, October 20, 2009, http://tonto.eia.doe.gov/dnav/ng/hist/n9190us3M.htm.
*2009 value is year-to-date through August
Although the EIA’s forecast of natural gas prices appears to support the construction of an Alaska
gas pipeline, such forecasts are dynamic and can change unexpectedly due to structural changes
in natural gas markets, changes in regulation, and general economic conditions. For example,
when Congress passed the Alaska Natural Gas Pipeline Act of 2004, the average annual price for
U.S. wellhead natural gas was $5.46/Mcf and rising (Figure 3). Four years later, in 2008, the
average annual gas price increased to $8.07/Mcf. This high price level, however, spurred
unexpected growth in the production of “unconventional” natural gas from shale deposits in the
lower 48-states.41 The combination of new shale gas supplies and reduced growth in gas demand
due to the recent U.S. economic downturn subsequently caused natural gas prices to plummet.
For the first eight months of 2009, wellhead natural gas prices averaged less than $4.00/Mcf.
While demand for natural gas will likely rebound as the U.S. economy resumes its growth,
independent gas producers assure strong lower-48 domestic natural gas supplies for the
foreseeable future—continuing to put downward pressure on gas prices.42 In such a price

39 U.S. Energy Information Administration, An Updated Annual Energy Outlook 2009 Reference Case, SR/OIAF/2009-
03, April 2009, p. 44. Prices are in 2007 dollars.
40 Leslie Ferron-Jones, TransCanada Corp., Projects Impacting Western Markets, Presentation to the California Energy
Commission, 2009 Integrated Energy Policy Report Workshop, Sacramento, CA, May 14, 2009, p. 8,
http://www.energy.ca.gov/2009_energypolicy/documents/2009-05-14_workshop/presentations/
13_TransCanada_Ferron_Jones.pdf.
41 U.S. Energy Information Administration, Is U.S. Natural Gas Production Increasing?, Energy Brief, June 11, 2008,
http://tonto.eia.doe.gov/energy_in_brief/natural_gas_production.cfm.
42 See, for example, Navigant Consulting, Inc., The State of North American Natural Gas Supply: Review of
Groundbreaking Findings,
Presentation to the California Energy Commission, 2009 Integrated Energy Policy Report
(continued...)
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

environment, there may be ongoing concerns as to the cost-effectiveness of an Alaska gas
pipeline; long-term pipeline economics will be a constantly moving target.43 Nonetheless, Alaska
state officials reportedly have stated that, notwithstanding unprecedented shale gas development
across North America, the outlook for the pipeline “is extremely healthy from an economic
standpoint.”44 The state’s Alaska Pipeline Project Report, released in October 2009, likewise
states that “the temporary weakness of North American natural gas demand is not a determining
factor in establishing the economic viability of an Alaska natural gas pipeline.”45
Construction Costs and Cost Uncertainties
TransCanada and Denali have estimated similar costs for their proposed projects—between $28
and $30 billion. Some analysts, however, suggest that these estimates are conservative and that
project costs could reach $40 billion.46 Infrastructure analysts point to numerous examples of cost
overruns for other recent multi-billion dollar, decade-long transportation projects, such as
Boston’s “Big Dig” Central Artery/Tunnel Project, the English Channel Tunnel, and the Oresund
Bridge from Denmark to Sweden.47 They conclude that “large construction cost escalations in
transport infrastructure projects are common and exist across different project types, different
continents, and different historical periods.”48 While the TransCanada and Denali pipeline
developers claim extensive experience managing the construction of major pipeline projects
within budget, the scale of an Alaska gas pipeline would be unprecedented, and the risk of cost
overruns may be significant. Projected costs for a similar but smaller Arctic natural gas pipeline
proposal, the Mackenzie Valley Pipeline (further discussed below), which is also still in
development, reportedly doubled between 2005 and 2007.49
Economic Development
The Alaska natural gas pipeline project has important implications for Alaska’s economy. By one
estimate commissioned by the state in 2006, the net present value of state and local government
earnings from the project, including associated North Slope natural gas production, could exceed
$29 billion over its lifetime.50 New natural gas royalty revenue could offset future declines in
ongoing oil royalties from mature North Slope oil fields, which have accounted for 85% of the

(...continued)
Workshop, Sacramento, CA, May 14, 2009, http://www.energy.ca.gov/2009_energypolicy/documents/2009-05-
14_workshop/presentations/05_Navigant_Pickering_Smead_Natural_Gas_Supply_Assessment.pdf.
43 See, for example: Elizabeth Bluemink, “Gas Pipeline Project Faces ‘Fierce’ Competition,” Anchorage Daily News,
September 15, 2009.
44 Rena Delbridge, “State Sticks by Pipeline Deal,” Alaska Dispatch, October 26, 2009.
45 Alaska Dept. of Revenue and Dept. of Natural Resource, Alaska Pipeline Project Report: Licensed under the Alaska
Gasline Inducement Act (AGIA)
, October 31, 2009. p. 21.
46 Tim Bradner, “Wobbly Market May Crimp Gas Line,” Alaska Journal of Commerce, February 2, 2009.
47 A. E. Barinov, “Systemic and Political Factors Affecting Cost Overrun in the World Economy’s Large Investment
Projects,” Studies on Russian Economic Development, Vol. 18, No. 6, 2007, pp. 650–658.
48 Bent Flyvbjerg, Mette K. Skamris Holm And Søren L. Buhl, “What Causes Cost Overrun in Transport Infrastructure
Projects?,” Transport Reviews, Vol. 24, No. 1, January 2004, p. 16.
49 “Former Canadian Official: State Gas Line Faces Numerous Hurdles,” Associated Press, April 15, 2008.
50 Information Insights, Inc., Economic, Fiscal and Workforce Impacts of Alaska Natural Gas Projects, Prepared for
Alaska Department of Revenue, May 10, 2006, p. 8. Adjusted to 2009 dollars.
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

state’s unrestricted general fund, on average, since the Trans Alaska Pipeline System began
operation.51 Although state oil revenues set a record in FY2009 due to high global oil prices, oil
production in Alaska has actually declined 63% from its peak in 1988.52
Development of an Alaska natural gas pipeline to the lower-48 states would also create many new
jobs. The Alaska-commissioned analysis concluded in 2006 that the pipeline
increases the state’s labor force needs by an average of 18,000 direct, indirect and induced
workers per year during construction. The project also creates a sustained impact of about
26,000 jobs per year after construction from both pipeline operations and jobs generated by
state and local spending of project-related oil and gas revenue.53
Throughout the nation, numerous additional jobs would be created in support of, or resulting
from, the pipeline’s construction. According to one estimate cited in 2004 by Senator Lisa
Murkowski, up to 1.1 million jobs nationwide could be created—directly and indirectly—by the
pipeline, although details of this analysis are not publicly available.54 A more recent analysis of
public infrastructure spending reported that 21,888 total jobs are created for every $1 billion in
new investment in natural gas projects.55 Based on this ratio, a $28 billion Alaska gas pipeline
would create approximately 600,000 new jobs, including jobs in Canada. These jobs include
those directly involved in constructing the new project, supplying the project (e.g., line pipe,
construction equipment), and induced by the general spending of new pipeline-related employees.
Projections of new jobs are highly uncertain, however, particularly for a project as unique as an
Alaska gas pipeline, so the actual number of jobs to be created remains somewhat speculative.
In addition to job creation, the presence of a major interstate pipeline from the North Slope to the
lower-48 could change the economics of many local energy markets within Alaska. For example,
both TransCanada and Denali have agreed to provide up to five natural gas delivery points within
Alaska, which could allow local communities near the pipeline right-of-way to provide new
natural gas service. Delivery to Anchorage and other Southcentral Alaska markets could also
offset declining natural gas supplies from gas fields at Cook Inlet. New or sustained supplies of
natural gas to these communities would be an important factor in their economic health.
Current Project Status
Because the pipeline/LNG proposals for transporting natural gas out of Alaska would involve
interstate commerce, they are subject to federal siting approval by FERC under the Natural Gas
Act of 1938.56 Additional state and local approvals for aspects of the project would be required, as

51 Resource Development Council for Alaska, Inc., “Alaska’s Oil and Gas Industry,” Web page, November 11, 2009,
http://www.akrdc.org/issues/oilgas/overview.html.
52 Ibid.
53 Information Insights, Inc., May 10, 2006, p. 82.
54 U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Energy and Air Quality, May 6,
2004, p. 10.
55 Political Economy Research Institute, How Infrastructure Investments Support the U.S. Economy: Employment,
Productivity and Growth, January, 2009, p. 25.
56 Section 7 of the Natural Gas Act authorizes FERC to issue certificates of “public convenience and necessity” for “the
construction or extension of any facilities ... for the transportation in interstate commerce of natural gas” (15 U.S.C. §
717f).
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well as approvals from Canadian federal, territorial, provincial, and First Nation agencies for the
sections of the project running through Canada.
The Denali and TransCanada pipelines, only one of which could be constructed, are proceeding
along similar tracks. Both have initiated FERC’s pre-filing process, whereby prospective pipeline
developers engage with stakeholders—including state, local, and other federal agencies—before
filing an application for a Natural Gas Act 7(c) pipeline certificate. Although Denali began the
pre-filing process in June 2008, and TransCanada in April 2009, both projects plan to conduct
open seasons in 2010 soliciting commitments for future gas shipments. If the open seasons yield
sufficient interest from gas shippers, either the Denali or TransCanada project could file pipeline
siting applications with FERC, Canada’s National Energy Board, and other agencies. According
to the Denali’s developers, the engineering, scheduling, and cost estimating work for the main
pipeline and the associated gas treatment plant are continuing on schedule.57 TransCanada has
been engaged in similar project activities on a comparable timeline.58 Based on these
development schedules, the EIA, Alaska officials, and other stakeholders anticipate that an Alaska
natural gas pipeline to the lower-48 states will be in service by approximately 2020.59
The TransCanada and Denali pipeline projects are competing and mutually exclusive proposals,
each backed by different North Slope producers. To reduce project costs and improve the
likelihood of success, some key policy makers have been encouraging the various developers to
come together on a single pipeline project. For example, Alaska Governor Sean Parnell has
stated, “Four major, international companies all working on an Alaska gas line. To me, that’s
good news. Now the challenge is to get them working on the same project.”60 To date, the projects
are continuing independently, but producer cooperation on a single pipeline is a possibility.
The LNG Option
The AGPA proposal to build a pipeline from the North Slope to Valdez, and then ship out natural
gas on LNG tankers, has not advanced to the detailed planning and project development stage.
However, TransCanada has committed to including the option of transporting natural gas for the
AGPA’s proposed LNG project within its open season for its mainline pipeline from the North
Slope to Alberta.61 According to remarks to Alaska legislators in June 2009, TransCanada has
seen “serious interest” among potential shippers for an LNG alternative to its all-land pipeline
proposal.62 Interest in advancing the LNG project has further increased since September 2009,
when the AGPA’s general counsel, Bill Walker, declared his candidacy for the Alaska
governorship with the AGPA gas pipeline/LNG project as the primary issue in his campaign.63

57 Steven Findlay, Vice President, Denali—The Alaska Gas Pipeline, LLC., September Monthly Status Report, FERC
Docket PF08-26, Accession No. 20091007-5035, October 7, 2009, p. 2.
58 TransCanada Alaska Company LLC., August Monthly Status Report, FERC Docket PF09-11, Accession No.
20090915-5025, September 15, 2009; Tim Bradner, “Gas Pipeline Plans On Schedule But Bumps Lie Ahead,” Alaska
Journal of Commerce
, September 18, 2009.
59 U.S. Energy Information Administration, March 2009, p. 77.
60 Stefan Milkowski, “Parnell Chamber Talk Focuses on Energy,” Petroleum News, Vol. 14, No. 40, October 4, 2009.
61 Federal Energy Regulatory Commission, Eighth Report to Congress on Progress Made in Licensing and
Constructing the Alaska Gas Pipeline
, August 26, 2009, p. 6.
62 Tony Palmer, Vice President, TransCanada Corp., Testimony before the Alaska House Resources Committee, June
23, 2009.
63 Bill Walker, All-Alaska Governor, Web page, October 15, 2009, http://www.billwalkerforgovernor.com.
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

Policy Issues for Congress
Congress’s last major action to promote an Alaska gas pipeline was passing the Alaska Natural
Gas Pipeline Act in 2004. Under that federal statutory framework, as well as provisions in Alaska
state law, both the TransCanada and Denali pipeline projects appear to be proceeding on schedule.
Since 2004, Congress has been monitoring progress on pipeline development, with only a few
active legislative proposals directly addressing these projects (further discussed below). As
Congress continues to oversee Alaska gas pipeline activities, several policy issues may attract
particular attention. The most important of these is continued uncertainty about whether an
Alaska gas pipeline will ultimately be constructed—and, if not, the broader implications for U.S.
energy supplies and energy prices. Other important issues are Canada’s development of a
Mackenzie Valley Pipeline, the federal loan guarantee for the Alaskan pipeline’s construction, the
environmental impact of the project, and its physical vulnerability to acts of terrorism.
Alaska Gas Pipeline Development Uncertainty
Many policy makers and developers have high expectations for the contribution of an Alaska
natural gas pipeline to U.S. energy supplies. By 2030, the EIA projects an Alaska pipeline
carrying 1.99 trillion cubic feet (Tcf) of natural gas annually, which is about 8.5% of total
projected U.S. gas supplies.64 But given the scale, investment requirements, and 10-year time
frame required to construct such a pipeline, there continues to be uncertainty regarding its
completion. As discussed above, the project faces specific risks deriving from gas prices and
pipeline construction costs—but it also faces significant risks involving natural gas production
costs, environmental impacts, interest rates, tax policies, and regulatory uncertainty. If, through
some combination of these factors, the pipeline’s development stalls (again), the anticipated
Alaskan natural gas supplies may not become available to lower-48 markets, which may have a
ripple effect on the U.S. energy sector.
Potentially higher natural gas prices. Without Alaskan gas supplies, U.S. gas
markets would have fewer supply options, and, therefore, might face higher prices.
According to the State of Alaska, EIA, and other studies, an Alaska pipeline is expected
to be economically viable supplying 1.99 Tcf of natural gas at a market price of
$4.00/Mcf to $5.00/Mcf. In the anticipated gas market environment, such a large quantity
of relatively low cost gas would help to moderate growth and volatility of natural gas
prices in the lower-48 states. This might be especially true if the alternatives for
incremental U.S. gas supplies are costlier unconventional gas supplies from North
America, or imported LNG—which has a history of price volatility in the international
market.
Increased LNG imports. If LNG requirements increase, then U.S. dependence on
overseas energy supplies must also increase, counter to a principal energy policy
objective of President Obama and many members of Congress. In its current forecast, the
EIA projects LNG imports to account for 0.81 Tcf in 2030, or about 3.5% of U.S. natural

64 U.S. Energy Information Administration, April 2009, pp. 42, 44.
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

gas supplies.65 Absent an Alaska gas pipeline, the United States will have sufficient LNG
import capacity in place to double or triple LNG imports if global gas prices warrant it.66
Carbon control challenges. Because burning natural gas produces only half as much
carbon dioxide as burning coal, and also less carbon dioxide than vehicular fuels like
gasoline, many view natural gas as the preferred fuel in the near-term for power plants
and motor vehicles under a national policy of carbon control.67 Not having Alaskan
natural gas supplies might, therefore, make it more difficult or costly to reach U.S. carbon
reduction targets by substituting natural gas for other fossil fuels in power generation or
motor vehicles.68
Canada’s Mackenzie Valley Pipeline
Because large sections of a proposed Alaska natural gas pipeline to the lower-48 states would
pass through Canada, the involvement of Canadian agencies is essential for the pipeline’s success.
Canada has cooperated with the United States for decades on a variety of general matters related
to the development of an Alaska natural gas pipeline (e.g., the pre-build segments in the early
1980s). However, Canada has been pursuing its own Artic natural gas projects as well. The
Canadian project of greatest importance, which could affect an Alaska natural gas pipeline
project, is the development of a Mackenzie Valley pipeline.
The Mackenzie River Delta region in the Canadian Arctic contains an estimated 40 Tcf of natural
gas.69 The Canadian government has been interested in developing a pipeline to transport this
natural gas to North American markets since it was first discovered in the 1970s in a process that
has, in many ways, paralleled the Alaska gas pipeline’s development. The main proposal has been
a new pipeline from the delta through the Mackenzie River Valley to the existing natural gas
pipeline network in Alberta, as illustrated earlier in Figure 1. Initially, developers also proposed
transporting North Slope gas through a spur pipeline connecting to the proposed Mackenzie
pipeline, but the Alaskan connection was rejected by a Canadian government inquiry report in
1974, three years before President Carter also rejected this option.70 The current configuration of
a stand-alone pipeline to Alberta is similar in design to the Alaska gas pipeline proposals, albeit
smaller in capacity (1.2 Bcfd) and lower in cost ($15 billion) with a projected in-service date of
2016.71

65 U.S. Energy Information Administration, April 2009, pp. 42, 44.
66 Federal Energy Regulatory Commission, “Existing LNG Terminals,” and “Approved North American LNG Import
Terminals,” Web pages, October 27, 2009, http://www.ferc.gov/industries/lng.asp.
67 See, for example: John D. Podesta and Timothy E. Wirth, Natural Gas: A Bridge Fuel for the 21st Century, Center
for American Progress, August 10, 2009, http://www.americanprogress.org/issues/2009/08/pdf/naturalgasmemo.pdf;
Rena Delbridge, “Federal Energy Commissioner Checks on Alaska Pipeline Projects,” Alaska Dispatch, September 25,
2009.
68 For further discussion and analysis of U.S. greenhouse gas policy, see CRS Report RL34513, Climate Change:
Current Issues and Policy Tools
, by Jane A. Leggett.
69 U.S. Geological Survey, “Assessment of Undiscovered Oil and Gas Resources of the Mackenzie Delta Province,
North America, 2004,” Fact Sheet 2006-3002, March, 2006.
70 Thomas R. Berger, Commissioner, Northern Frontier, Northern Homeland: The Report of the Mackenzie Valley
Pipeline Inquiry, Volume One
, Ministry of Supply and Services Canada, April 15, 1977, p. xiii.
71 Federal Energy Regulatory Commission, Seventh Report to Congress on Progress Made in Licensing and
Constructing the Alaska Gas Pipeline
, February 20, 2009, p. 6.
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Although there has been significant activity to advance the development of the Mackenzie Valley
Pipeline, the project has been controversial due to environmental impacts and escalating costs.72
According to press reports in October 2009, the Canadian government appeared to be
reconsidering the level of financial support it planned to provide the project due to “concerns
about the project’s price tag.”73 The pipeline’s developers maintain that it remains viable,
however, and the project continues to receive government support as they proceed with project
groundwork and meeting regulatory requirements.74 Canada’s National Energy Board plans to
hear final arguments regarding the pipeline’s siting application in April 2010, after which it will
render a decision as to whether the project will be allowed to proceed.75
Because the Mackenzie Valley pipeline would commercialize a major new source of North
American natural gas, and would draw on a limited pool of construction resources and materials
available for such a project, it has been viewed by some as a direct competitor to an Alaska gas
pipeline.76 For example, the demand for steel and pipe for a Mackenzie Valley project would be
significant, and it is not clear that there is adequate, large diameter pipe production capacity in the
entire world to supply both Alaska and Mackenzie Valley projects at the same time. Other
analysts anticipate that large increases in North American natural gas demand over the next
decade will support development of both pipeline projects, and that sufficient construction
materials will become available when they are needed. They view the Alaska and Mackenzie
Valley pipeline projects as complementary rather than competitive.77 While the future of natural
gas prices and the availability of construction commodities is difficult to predict, because of their
physical similarities and links to the same infrastructure, the fates of the Mackenzie and Alaska
gas pipelines may remain intertwined.
Federal Loan Guarantee
As mentioned above, to reduce the financial risks associated with the development of an Alaska
natural gas pipeline, the Alaska Natural Gas Pipeline Act of 2004 authorizes the Department of
Energy (DOE) to issue up to $18 billion of project loan guarantees for up to 80% of its capital
costs and a term of 30 years. The Consolidated Appropriations Act of 2005 (P.L. 108-447)
extended the availability of loan guarantees to developers of an LNG project, such as that
proposed by AGPA, that would transport natural gas from Southcentral Alaska to West Coast
States.78 DOE solicited comments and information from the public in 2005 in advance of a
possible rulemaking concerning the loan guarantee provisions, but has not issued such rules.79

72 Claudia Cattaneo, “Little Hope in the Pipeline,” Financial Post, July 1, 2009.
73 John Ivison and Carrie Tait, “Pipeline Dream in Peril,” National Post, October 27, 2009.
74 Jeffrey Jones, “Imperial Oil CEO ‘Dismayed’ by Mackenzie Report,” Reuters, November 3, 2009.
75 National Energy Board Canada, “National Energy Board Announces Next Steps In Mackenzie Gas Project Hearing,”
Press release, October 7, 2009.
76 See, for example: James Irwin, “Alaska Pipeline Advance Could Threaten Mackenzie Valley Pipeline,” Natural Gas
Week
, March, 7, 2005.
77 U.S. Congress, House Committee on Energy and Commerce, Subcommittee on Energy and Air Quality, Alaska
Natural Gas Pipeline Status Report
, 108th Cong., 2nd sess., May 6, 2004, 108-82 (Washington: GPO, 2004), p. 15.
78 Title I, Division J § 114.
79 U.S. Department of Energy, “Alaska Natural Gas Pipeline Loan Guarantee,” 70 Federal Register 30707-30708, May
27, 2005.
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

The agency reportedly is waiting for the developers to submit more complete project plans before
proceeding with specific loan program requirements.80
Federal loan guarantees for an Alaska natural gas pipeline have been controversial because they
are viewed by some stakeholders, especially supporters of Mackenzie Pipeline development, as
an unfair form of subsidy.81 They also expose the federal government to a significant portion of
the financial risk associated with the project. The Congressional Budget Office estimated in 2003
that the loan guarantee under P.L. 108-324 would involve a 10% subsidy and cost $2 billion over
the 2010-2013 period, although the agency acknowledged that this estimate was “quite
uncertain.”82 Some in Congress are calling for greater federal loan guarantees for an Alaska gas
pipeline. Responding to the recent fall in natural gas prices and tighter credit markets in the wake
of the U.S. banking crisis, Senators Bingaman and Murkowski have included provisions in the
American Clean Energy Leadership Act of 2009 (S. 1462) that would raise the limit from $18
billion to $30 billion (§ 353), among other provisions. The Senate Committee on Energy and
Natural Resources reported S. 1462 on July 16, 2009.
Environmental Impacts
The addition of significant natural gas resources from Alaska’s North Slope to the lower-48
states’ fuel supplies is considered by many policy makers to be environmentally beneficial
because natural gas produces much lower atmospheric emissions than other fossil fuels (although
still far more than renewables, nuclear power, and conservation). Nonetheless the immensity of
the roughly 1,750-mile construction project and associated development of North Slope natural
gas fields has caused concern about potential environmental effects on land and wildlife. These
concerns were heightened by the 2006 shutdown of North Slope oil fields following the discovery
of severe corrosion and a small spill from one of BP’s Prudhoe Bay oil pipelines.83 Broader
environmental impacts from existing North Slope oil development and the associated TAPS
pipeline have been significant and are well-documented.84
Congress has addressed the direct environmental effects of Alaska gas pipeline development by
designating FERC as the lead federal agency in preparing an environmental impact statement
under the National Environmental Policy Act of 1969 (P.L. 91-190). Under this statute, pipeline
permit applicants must prepare certain environmental reports to aid FERC in its preparation of the
environmental impact statement (18 C.F.R. § 380.3). The Environmental Protection Agency, as a
supporting agency, often assists in the review of the environmental reports and the issuance of the
environmental impact statements. In some cases, however, FERC’s environmental reviews of

80 Federal Energy Regulatory Commission, August 26, 2009, p. 8.
81 Stephen Barlas, “Energy Bill Likely to Bless Alaska NG Pipeline,” Pipeline & Gas Journal, November 2002; “U.S.
Loan Guarantees for Alaska Pipeline Worry Mackenzie Line Supporters,” CBC News, May 27, 2009.
82 Congressional Budget Office, S. 14 Energy Policy Act of 2003, As Introduced on April 30, 2003, Cost Estimate, May
7, 2003, p. 7, http://www.cbo.gov/doc.cfm?index=4206&type=0.
83 For further background see archived CRS Report RL33629, BP Alaska North Slope Pipeline Shutdowns: Regulatory
Policy Issues
, by Paul W. Parfomak.
84 National Research Council, Cumulative Environmental Effects of Oil and Gas Activities on Alaska’s North Slope,
Committee on the Cumulative Environmental Effects of Oil and Gas Activities on Alaska’s North Slope, National
Academies Press, Washington, DC, 2003.
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major natural gas projects have been challenged in the courts.85 Given the scale and uniqueness of
an Alaska gas pipeline project, future environmental controversies may arise.
One specific environmental issue that faces Alaska gas pipeline development is the potential use
of North Slope gas in Alberta’s oil (tar) sands industry. North Slope natural gas, if developed,
may be used to fuel oil sand operations in northern Alberta. These operations require large
quantities of steam to extract crude oil from regional bitumen deposits. Some stakeholders object
to the potential use of natural gas for crude oil production on the grounds that it, in their view,
consumes a “clean” fuel to produce a “dirty” one, and because oil sands projects can have
significant local environmental impacts.86 The debate over the environmental impacts and
potential energy security benefits of Canadian oil sands production is beyond the scope of this
report. Nonetheless, given that the primary rationale for federal support of an Alaska natural gas
pipeline is to increase lower-48 natural gas supplies, there is the potential for misunderstanding if
substantial volumes of North Slope gas are instead diverted to the Canadian oil sands industry as
Alaska natural gas begins flowing. This issue may require policy attention.
Terrorism Risks and Infrastructure Concentration
An Alaska natural gas pipeline would be integral to U.S. energy supply and have vital links to
other critical infrastructure, such as power plants, airports, and military bases. While an efficient
and fundamentally safe means of transport, such a pipeline would carry volatile material with the
potential to cause public injury and environmental damage—either accidentally or intentionally.
For these reasons, similar pipelines have been favored targets of terrorists in North America and
overseas. Since September 11, 2001, federal warnings about Al Qaeda have mentioned pipelines
specifically as potential terror targets in the United States.87 Congress has responded with
substantial initiatives to protect U.S. pipelines from such attacks.88 Nonetheless, due to its great
length and passage through remote areas, an Alaska gas pipeline could still be vulnerable to
vandalism and terrorist attack.
Concerns about the security of an Alaska gas pipeline are especially significant because of a
recent history of physical attacks on existing pipelines in Alaska and Canada. For example,
between October 2008 and July 2009, natural gas pipelines in British Columbia, Canada were
bombed six times by unknown perpetrators.89 In 1999, Vancouver police arrested a man planning
to blow up the Trans Alaska Pipeline System (TAPS) for personal profit in oil futures.90 In 2001, a
vandal’s attack on TAPS with a high-powered rifle forced a two-day shutdown and caused

85 For example, see Jim Springhetti, “State Asks Court to Toss Bradwood Site’s Approval,” The Oregonian, January
26, 2009.
86 IHS Cambridge Energy Research Associates, Growth in the Canadian Oil Sands: Finding the New Balance,
Cambridge, MA, 2009, pp. III-1-III-20; Andrew Nikiforuk, Dirty Oil: How the Tar Sands are Fueling the Global
Climate Crisis
, Greenpeace, September 2009.
87 “Already Hard at Work on Security, Pipelines Told of Terrorist Threat,” Inside FERC, McGraw-Hill Companies,
January 3, 2002.
88 For additional analysis of pipeline security issues, see CRS Report RL33347, Pipeline Safety and Security: Federal
Programs
, by Paul W. Parfomak.
89 Elise Stolte, “EnCana Puts Record $1M on Bomber’s Head,” Edmonton Journal, July 31, 2009.
90 D. S. Cloud, “A Former Green Beret’s Plot to Make Millions Through Terrorism,” Ottawa Citizen, December 24,
1999, p. E15.
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extensive economic and ecological damage.91 In January 2006, federal authorities acknowledged
the discovery of a detailed posting on a website purportedly linked to Al Qaeda that reportedly
encouraged attacks on U.S. pipelines, especially TAPS, using weapons or hidden explosives.92 In
November 2007 a U.S. citizen was convicted of trying to conspire with Al Qaeda to attack TAPS
and a major natural gas pipeline in the eastern United States.93 To date, there have been no known
Al Qaeda attacks on TAPS or other U.S. pipelines, but such attacks remain a possibility.
Construction of an Alaska gas pipeline directly alongside TAPS also raises concerns because it
increases the concentration of critical U.S. energy infrastructure in the same narrow geographic
corridor. When infrastructure is physically concentrated in such a limited geographic area it may
be particularly vulnerable to geographic hazards such as natural disasters and certain kinds of
terrorist attacks. Whereas a typical geographic disruption is often expected to affect infrastructure
in proportion to the size of an affected region, a disruption of concentrated infrastructure could
have greatly disproportionate—and national—effects. In 2005, Hurricanes Katrina and Rita
demonstrated this kind of geographic impact by disrupting a substantial part of the national U.S.
energy and chemical sectors, both heavily concentrated in the Gulf of Mexico. In 2008,
Hurricanes Gustav and Ike caused similar disruptions, renewing concerns about geographic
vulnerability. Adding 8.5% of U.S. natural gas supplies to a right-of-way that currently delivers
nearly 17% of the nation’s domestic oil production would be a significant increase in the physical
concentration of U.S. energy flows.94 As development of an Alaska natural gas pipeline continues,
physical threats and required security measures may be an important policy consideration.
Conclusion
Constructing an Alaska natural gas pipeline from the North Slope to the lower-48 states has been
a government priority—on and off and on again—for more than four decades. Concerted efforts
by Congress, the State of Alaska, and other stakeholders have resulted in new momentum to
proceed with the project. Many potential obstacles remain at this time, especially the project’s
economics. The proposal in S. 1462 to increase the pipeline’s federal loan guarantee reflects
continuing concerns about the project’s economic viability. Nonetheless, the developers project
the start of construction within the next few years. If the pipeline begins transporting gas to
lower-48 markets as anticipated by 2020, it could have an impact on U.S energy prices, energy
security, and U.S. emissions of carbon dioxide. The project would also create a significant
number of jobs and support regional economic development. Like other infrastructure projects in
wilderness areas, however, an Alaska gas pipeline would also involve significant environmental
costs, many of which have yet to be determined.
Ultimately, the regional effects of the pipeline’s development on the Alaskan/Canadian
environment must be weighed against its economic value, energy security value, and its global
benefits in reducing carbon emissions from fossil fuels. To date, the judgment of Congress has

91 Y. Rosen, “Alaska Critics Take Potshots at Line Security,” Houston Chronicle, February 17, 2002.
92 W. Loy, “Web Post Urges Jihadists to Attack Alaska Pipeline,” Anchorage Daily News, January 19, 2006.
93 U.S. Attorney’s Office, Middle District of Pennsylvania, “Man Convicted of Attempting to Provide Material Support
to Al-Qaeda Sentenced to 30 Years’ Imprisonment,” Press release, November 6, 2007; A. Lubrano and J. Shiffman,
“Pa. Man Accused of Terrorist Plot,” Philadelphia Inquirer, February 12, 2006, p. A1.
94 Alyeska Pipeline Service Co., Internet page, Anchorage, AK, November 2, 2009, http://www.alyeska-pipe.com/
about.html.
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favored the pipeline—but ensuring that its public benefits continue to outweigh its costs will
likely remain a key oversight challenge for the next decade. If the balance tips the other way—
either in the eyes of developers or the federal government—and the Alaska gas pipeline is not
constructed, Congress may need to redouble its support of other energy initiatives that could fill
the substantial expectations unmet by this project.
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The Alaska Natural Gas Pipeline: Background, Status, and Issues for Congress

Appendix

Table 1. Key Events in Alaska Natural Gas Pipeline Development
1968
Prudhoe Bay oil and gas discovered
1969
United States begins export of LNG to Japan from south central Alaska (Cook Inlet)
1976
Alaska Natural Gas Transportation Act (ANGTA) passed, P.L. 94-586
1977
Presidential Decision and FPC Report to Congress on ANGTS
1977
FERC (successor to FPC) issues conditional certificate for pipeline
1978
Trans-Alaskan Pipeline System (TAPS) oil pipeline into service
1981
“Western leg” of Alaska gas pipeline (Pacific Gas Transmission) into service
1982
“Eastern leg” (Northern Border Pipeline) into service
1983
Maritime Administration study of marine alternatives to ANGTS pipeline released
2001
Alaska Natural Gas Interagency Task Force established
2004
Alaska Natural Gas Pipeline Act passed, P.L. 108-324, Division C
2006
New governor announces Alaska Gasline Inducement Act (AGIA) initiative
2007
Five proposals submitted for AGIA consideration
2008
Governor determines one AGIA proposal meets AGIA criteria
2008 Conoco
Phillips and BP announce the Denali Project as an alternative to an AGIA project
2008
Alaska legislature approves governor’s AGIA recommendation and it becomes law
2009
American Clean Energy Leadership Act of 2009 (S. 1462) proposed to raise loan guarantee

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Author Contact Information

Paul W. Parfomak

Specialist in Energy and Infrastructure Policy
pparfomak@crs.loc.gov, 7-0030


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