Alaska natural gas pipeline project history
BACKGROUND As Lower 48 natural gas supplies began to respond favorably to the na on’s revised energy The Prudhoe Bay oil discovery announced in policy — and higher prices — any immediate 1968 also found an es mated 26 trillion cubic need for the Alaska Natural Gas Transporta on feet of natural gas – more gas than the en re System (ANGTS) declined. Natural gas prices United States consumes in a year. later so ened as a supply bubble developed, In 1976, Congress passed the Alaska Natural Gas which persisted for years in response to Transporta on Act (ANGTA) to expedite wellhead price decontrol. Prices were too low to development of a natural gas pipeline from cover the costs of an Alaska gas line project, and Alaska’s North Slope and provide congressional commercial a en on to the Alaska pipeline and presiden al par cipa on in the process. The ini a ve essen ally disappeared during the policy steps of the process were completed in 1980s. 1977. However, southern sec ons of the system were In May 1977, the Federal Power Commission, constructed. Producers from the province of now the Federal Energy Regulatory Commission, Alberta, along with U.S. and Canadian pipeline recommended an overland pipeline route companies completed the downstream legs of through Canada to move Alaska gas to the ANGTS a er the discovery of significant Lower 48 states. In September 1977, President quan es of natural gas in the Western Jimmy Carter chose a route along the Alaska Canadian Sedimentary Basin. The western leg of Highway that the commission considered, and ANGTS (Pacific Gas Transmission) went into Congress approved the President’s decision by service from Alberta to California in 1981. The joint resolu on, taking another step toward eastern leg of ANGTS (Northern Border Pipeline) moving Alaska natural gas to customers. went into service from Alberta to the U.S. In the winter of 1977-1978, federally regulated Midwest in 1982. price controls contributed to natural gas In the 1980s, the U.S. Mari me Administra on shortages. In response, Congress passed the authorized a study of marine system op ons to Natural Gas Policy Act of 1978 and the determine whether there might be commercial Powerplant and Industrial Fuel Use Act of 1978. opportuni es for the U.S. shipbuilding industry. The Fuel Use Act restricted construc on of new The results indicated that U.S. liquefied natural power plants and boilers using natural gas and gas sales to Paci fic Rim na ons generally had oil as primary fuels, encouraging instead the use greater economic poten al than delivering LNG of coal, nuclear energy and alterna ve fuels. to U.S. West Coast markets, but Pacific Rim (The restric ons were li ed in 1987.) exports were not poli cally viable considering
October 2012 Alaska natural gas pipeline history the large domes c energy resource that would enhanced oil recovery tax credit for the cost be exported. of a North Slope gas treatment plant. PIPELINE PROJECT REVIVED Established guidance to ensure FERC would regulate the open season capacity bidding Serious reconsidera on of construc ng a natural process so that access to pipeline capacity gas pipeline from Alaska’s North Slope began would be available to par es beyond the around 2000 on both federal and state fronts for three major North Slope producers. The mul ple reasons, including rising natural gas intent was to promote compe on in North prices, long-term market projec ons of growing Slope natural gas development. U.S. demand, environmental and climate concerns, declines in Western Canadian gas FERC issued a final rule on the open season Feb. produc on and declines in Alaska oil produc on. 9, 2005 (FERC Order No. 2005). In an open season, poten al shippers on a pipeline can The 2001 Na onal Energy Plan included a compete for available capacity. recommenda on to expedite construc on of an Alaska natural gas pipeline to serve the Lower 48 In 2006, former Alaska State Sen. Drue Pearce states. Also in 2001, an Alaska natural gas was confirmed as federal coordinator; she interagency task force formed. This task force served un l January 2010. The president included the State Department, Department of nominated Larry Persily as her replacement, and the Interior (including Bureau of Land the Senateh confirmed him in March 2010. Management and Minerals Management Service In 2006, 16 federal agencies with roles and — now Bureau of Ocean Energy Management, responsibili es rela ng to the pipeline signed a Regula on and Enforcement), Department of memorandum of understanding to establish a Transporta on and Department of Energy framework for coopera on on the project (including FERC). management. Other relevant agencies were Then in 2004, Congress passed the Alaska iden fied and added to the memorandum in Natural Gas Pipeline Act (ANGPA) that: 2010. Created the Office of the Federal STATE ACTIONS Coordinator as a small, independent agency Since construc on of the trans-Alaska oil to coordinate ac vi es of other federal pipeline in the 1970s, every Alaska governor has agencies involved in the pipeline project, and tried to spur construc on of a natural gas expedite and strengthen oversight of the pipeline. The gas pipeline project has grown in project. importance for the state in recent years as North Clarified that one environmental impact Slope oil produc on has declined. statement would be wri en and used by all In 1998 the Alaska Legislature passed the Alaska agencies, and that FERC would be the lead Stranded Gas Development Act to encourage agency preparing it. North Slope producers to bring the natural gas Provided for a federal loan guarantee up to to market by allowing the state and producers to $18 billion for the project (indexed to the nego ate tax, royalty and other fiscal terms for a consumer price index from 2004). liquefied natural gas project. A new version of the law enacted in 2003 applied to any North Provided for accelerated tax deprecia on for Slope gas pipeline project. Under that new law, the pipeline (7 years versus 15 years) and an
2 Office of the Federal Coordinator, Alaska Natural Gas Transporta on Projects the state nego ated project contract terms with TransCanada and the North Slope producers the North Slope’s three major producers: more me to determine the best market for ExxonMobil, ConocoPhillips and BP. In 2006, Alaska gas and review the op on of liquefying then-Gov. Frank Murkowski presented the the gas and shipping it to Asian markets. contract to the public and legislators. The Alaska Producer involvement in the TransCanada-led Legislature rejected the contract that year. project started when ExxonMobil announced In 2007, the Alaska Legislature enacted the June 15, 2009, it had joined up with Alaska Gasline Inducement Act, another a empt TransCanada under the name Alaska Pipeline to spur gas pipeline construc on. AGIA provided Project. More informa on can be found at the 50 percent state reimbursement of a Alaska Pipeline Project’s website. developer’s qualifying expenses through the Denali—The Alaska Gas Pipeline, a joint venture ini al open season and 90 percent therea er. of North Slope producers ConocoPhillips and BP, The reimbursements are capped at $500 million. was established in April 2008 to compete with In exchange for the AGIA license, the applicant the TransCanada project. Denali entered the pre had to agree to a number of “must-haves,” -file process with FERC in 2008 and conducted including rolled-in pipeline tariffs for any project an open season in 2010. In May 2011, Denali expansions, an aggressive development announced it would no longer pursue schedule, an open season in 2010, proceeding development of the project due to lack of through full licensing by FERC, and a interest from poten al customers. commitment to use project labor agreements with unions. AGIA, however, is merely a financial THE PROJECT IN CANADA partnership with the state and does not give the Besides 803 miles of pipeline in Alaska, the licensee any exclusive right to permits or state project envisioned to serve North American rights of way, and it does not affect FERC markets would span 972 miles in Canada, with jurisdic on over the interstate gas line. the pipeline ending at the Bri sh Columbia- TransCanada’s AGIA proposal was the only one Alberta border. The Canadian sec on already deemed complete by the state. On Aug. 1, 2008, has some key government authoriza ons. the Alaska Legislature approved TransCanada as Foothills Pipe Lines Ltd. is the project sponsor in the state licensee and on Dec. 5, 2008, the AGIA Canada. Foothills is a TransCanada subsidiary, license was signed by the governor and issued to and it originally received the cri cal Canadian TransCanada. On April 23, 2009, TransCanada construc on cer ficate, a land easement in the applied to FERC to ini ate the pre-file process Yukon Territory, and other authoriza ons in the with the agency. FERC granted the request on late 1970s and early 1980s. Foothills works with May 1, 2009. TransCanada held its open season the Northern Pipeline Agency, a Canadian in 2010 and formally closed its open season in federal agency, to coordinate the permi ng, May 2012 without signing any agreements with construc on and opera on of the project in shippers. Canada. The project underwent environmental The AGIA license required TransCanada to file a and socio-economic reviews in Canada ini ally. complete applica on with FERC in October 2012 To update that work from 30 years ago, for a cer ficate to build and operate the TransCanada/ExxonMobil has been conduc ng pipeline, but the state in May 2012 agreed to summer field work in Canada. postpone that deadline for two years, giving
3 Alaska natural gas pipeline history THE ENVIRONMENTAL IMPACT ExxonMobil, ConocoPhillips and BP wrote to Alaska Gov. Sean Parnell that their companies STATEMENT had started working with TransCanada to assess On Aug. 1, 2011, FERC announced it would whether a project to export liquefied natural gas prepare an environmental impact statement on from Alaska made more sense than a pipeline the Alaska por on of the TransCanada/ into Canada because of more favorable prices in ExxonMobil gas pipeline project. Asia. An LNG project would include a pipeline On Jan. 13, 2012, TransCanada/ExxonMobil filed from the North Slope south through the state to 11 environmental reports – called dra resource a liquefac on plant at dewater. reports – on the pipeline corridor for the project THE LIQUEFIED NATURAL GAS to the Canadian border. FERC requires project applicants to provide these reports, which detail PROJECT and discuss the project's poten al impact on On March 30, 2012, the chief execu ves of soils, vegeta on, streams, lakes, wetlands, water ExxonMobil, ConocoPhillips and BP wrote to quality, wildlife, fish and other resources. The Alaska Gov. Sean Parnell that their companies final reports would be submi ed when the had started working with TransCanada to assess project developer formally applies to FERC for a whether a project to export liquefied natural gas construc on and opera ng cer ficate, and from Alaska made more sense than a pipeline would be used by FERC as it prepares the into Canada because of more favorable prices in environmental impact statement. State and Asia. An LNG project would include a pipeline federal agencies submi ed comments on the from the North Slope south through the state to dra resource reports for the project developer a liquefac on plant at dewater. to consider if it proceeds to final reports and a On Oct. 1, 2012, the four companies provided formal applica on to FERC. Gov. Parnell with an update on their ini al work In January and February 2012, FERC began assessing an LNG export project. Their early government-to-government consulta ons with concept envisions a project cos ng $45 billion to Na ve Alaska tribal en es along the pipeline more than $65 billion for a gas treatment plant, corridor and held seven public scoping mee ngs roughly 800-mile pipeline, liquefac on plant at a across Alaska to help define what environmental site to be determined, LNG storage and a tanker effects the impact statement would consider. terminal. This concept would involve exports of FERC prepared a report of issues raised during 15 million to 18 million metric tons of LNG the scoping mee ngs. annually, the equivalent of 2 billion to 2.4 billion On March 30, 2012, the chief execu ves of cubic feet a day of gas.
For more information, please visit our website: www.arcticgas.gov
Contact information: Locations: Larry Persily, Federal Coordinator OFC Washington, DC (202) 756-0179 1101 Pennsylvania Ave. NW, 7th Floor lpersily@arc cgas.gov Washington, DC 20004
General Questions: OFC Alaska info@arc cgas.gov 188 W. Northern Lights Blvd., Suite 600 Anchorage, AK 99503
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