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Summary:
On August 27, 2008, the governor of Alaska signed legislation awarding a license to TransCanada Alaska (TransCanada) to permit, develop, and build a natural gas pipeline from Prudhoe Bay, Alaska, to the gas market hub in Alberta, Canada, with $500 million of state support. Since the discovery of significant oil and gas reserves in Prudhoe Bay in 1968, Alaska state and federal policymakers have sought to accelerate bringing these important energy resources to market, especially to market in the lower-48 states. The Trans Alaska Pipeline System (TAPS) began shipping crude oil from Prudhoe Bay in 1978. Efforts to build a gas pipeline still have achieved little progress 30 years later. This report provides a brief review of efforts to develop and construct a natural gas pipeline from Prudhoe Bay, a status report on recent efforts to proceed, and an analysis of major relevant policy issues. In 1976, Congress passed the Alaska Natural Gas Transportation Act (ANGTA) as one element of a multi-pronged effort to respond to the natural gas supply problems caused by earlier wellhead price controls. Engineering work was underway on the pipeline when, in the early 1980s, the natural gas market in North America entered a prolonged period of relatively low prices for natural gas because domestic producers had responded vigorously to high prices during the phased decontrol of wellhead prices through the Natural Gas Policy Act of 1978 (NGPA). Interest in developing the pipeline waned because of the poor market prospects. In 1997, the United States became a net importer of liquefied natural gas (LNG) for the first time. In retrospect, this was a leading indicator of a tightening natural gas supply for the North American market. Congress again promoted development of the pipeline in the Alaska Natural Gas Pipeline Act (ANGPA) in 2004 and with related amendments in the Energy Policy Act of 2005 (EPAct 2005). The State of Alaska has pursued the natural gas pipeline development with a sense of urgency for several years. In 2001, Alaska established an interagency task force to move forward with a pipeline. The administration immediately preceding the current governor reached a controversial agreement with the Prudhoe Bay producers (ExxonMobil, BP, ConocoPhillips). The current governor proceeded with a new initiative, the Alaska Gasline Inducement Act (AGIA) that has led to the August 27 signing mentioned earlier. Two producers, ConocoPhillips and BP, have formed Denali Pipeline to develop a Prudhoe Bay-to-market pipeline without AGIA support. The third, and largest, producer, ExxonMobil, has not supported any currently active pipeline development initiative. Many challenges remain at this time. The key parties, however, appear constructively engaged in the effort to make available this significant energy supply option.
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