RS21787 -- Foreign Trade Effects of an Alaskan Natural Gas Pipeline
March 30, 2004

	Background

This report examines the policy implications for the U.S. current account balance of the construction of natural gas pipeline from Alaska to the lower 48 states. The 108th Congress hasincluded in H.R. 6 , the omnibus energy bill, provisions which provide incentives for the construction of anAlaska natural gas pipeline. (8)
In contrast to the reference case forecast, the no pipeline case assumes that a natural gas pipeline from Alaska is not constructed. This is not the case, however. The unavailability of Alaskannatural gas through the pipeline leads to price increases in the naturalgas market. Based onthese values for price and quantity of imported natural gas, estimatedincreases in the value of natural gas imports as a result of lack of construction of a pipeline would be approximately$3.46 billion in 2020 and $3.09 billion in 2025. In 2020, a pipeline is projected to deliver about 1.6 tcf, reflecting the build-upof delivered gas as operation begins in 2018, but imports increase byonly 0.72 tcf in the forecasts if no pipeline is constructed.
The Energy Information Administration (EIA), in the Annual Energy Outlook 2004(AEO), projects increased demand for imported naturalgas through 2025. The AEO reference case forecast assumes a natural gas pipeline will begin delivering Alaskannatural gas to the lower 48 state consuming markets in 2018. H.R. 6, the omnibus energy bill, contains provisions to enhance the future supply of natural gas throughconstruction of a pipeline.
This report examines the effects of an Alaska natural gas pipeline on the U.S. current account balance. TheEIA finds that if the pipeline is not constructed, natural gas prices willincrease, markets will adjust, and imports of natural gas will increase. However, due to price induced marketadjustments, the increase in imports is projected to be less than the gasvolume lost from the lack of pipeline construction. As a result, if no pipeline is constructed, the effect on the currentaccount balance will be less than the value of the amount of gas thatwas projected to be delivered through a pipeline. This report will not be updated.