Pending federal legislation restricting carbon dioxide could hurt a natural gas pipeline project designed to deliver fuel that could help wean the nation off higher-emission coal.

Joe Balash, a special assistant to Gov. Sean Parnell, said the current bill before Congressional committees would add to the costs of a large-diameter natural gas pipeline, proposed by two different groups to run from the North Slope to the North American pipeline infrastructure in Alberta, Canada. Under one scenario, the cap-and-trade legislation could sink the project pegged as the only way to fuel Alaska's state treasury as oil production falls off.

Balash spoke before a group of lawyers at Law Seminars International's Energy in Alaska conference Monday in Anchorage.

The federal bill, which has passed the House of Representatives and is now being debated in the Senate, would put a price -- and a limit -- on carbon dioxide emissions. Companies emitting more than their share could buy credits from others.

The compressor stations that would push gas through the massive proposed pipeline would exceed carbon limits, Balash said. That alone wouldn't kill the project, but would add an estimated 15 cents per million British thermal units, upping the toll charged for moving gas. It's a cost consumers would likely pay.

"The toll will go up; it will become marginally more expensive to move gas," Balash said. "If that occurs, you add another layer of risk and challenge to the economics of the pipeline. Now that's the good news."

The legislation on the table isn't clear about whether North Slope producers will be exempt from the limits for carbon dioxide removed from the Prudhoe Bay gas streams before the resource is fed into the pipe. If they are not, the cost of the gas could ratchet up an estimated $14 per million Btu, according to an analysis prepared by the state's Natural Resources and Revenue departments. Balash said the federal language is unclear and represents a worst-case scenario based on federal projections of how much carbon offsets may cost.

"That is something that, frankly, is going to push the project under water," Balash acknowledged. "If those offsets (for domestic producers) are necessary, the cost for production of the gas will become uneconomic."

Prudhoe Bay's gas contains about 12 percent carbon dioxide that must be removed, substantially more than is found in gas in Cook Inlet and other locations. Much of the carbon dioxide extracted from the North Slope gas would probably be reinjected into reservoirs to boost recovery of more oil and gas.

Yet the pipeline and its gas have the potential to offer America more of a cleaner energy supply. The project is so huge that if only half of the gas were to be used for power generation, it could offset 120 to 190 coal-fired power plants, Balash said, citing a state report.

"You could meet many of the (Obama) administration's goals for reducing greenhouse gas emissions," he said.

The governor and his staff are watching closely as Congress moves toward the new regulations. Parnell submitted written testimony to several Congressional committees detailing the potential impacts not only to a natural gas pipeline, but also to other Alaska issues, which in turn could become national issues.

The administration isn't disputing the need for climate change legislation, Balash said. But Congress should avoid broad policy statements that choke out regional differences and should offer incentives to states instead of creating mandates that states will have to fund on their own.

Parnell also made the case for increased research into the Arctic, where climate changes are often first identified.

"We're the canary in the coal mine," Balash said. "We're feeling the effects first; we're going to feel them the most. It is, we think, important that Congress understand that. For a piece of legislation that is hundreds of pages long, the word ‘Arctic' is mentioned one time."

The governor's office is also concerned with how the pending federal rules will impact pressing in-state issues.