Air. Water. Earth. Fire.

These classic elements are the fundamental, essential materials of all life. Our continued existence is dependent on each. In the world of energy, natural gas is elemental to America. It uniquely answers the concerns of Americans for an energy solution – the flame that fuels our way of life – in a manner that respects the air, water and earth around us. With its singular environmental and efficiency properties, this abundant, domestic resource is Mother Nature’s best solution for meeting the energy needs of today’s generation and of those to come.

In 2009, the American public and our legislators continued to wrestle with answers for our nation’s energy needs. It’s a crucial challenge: How will we continue to meet the energy needs of our present generation while securing the energy needs of future generations in a manner that respects the world around us?

Today, one elemental solution stands out: natural gas.

While the reasons are many, perhaps the most compelling is that natural gas is available here and now to help address America’s environmental, energy and economic goals.

In terms of air quality, natural gas is the cleanest-burning fossil fuel – by far. Compared with coal, America’s leading source of electric generation, natural gas produces 44 percent less carbon emissions. Versus oil, natural gas provides energy for home heating with 27 percent less carbon emissions. And compared with propane, natural gas offers the same energy for heating, cooking and transportation with 16 percent less carbon emissions*.

100-year supply – and growing

Domestically abundant natural gas is a readily available solution for energy independence. In the past decade, proven U.S. natural gas reserves have increased approximately 45 percent to more than 244 trillion cubic feet. Beyond that – thanks to the development of new extraction technologies for natural gas shales – America now has an estimated 100 years' worth of supply at current consumption levels.

Just as important, natural gas is the ideal partner for alternative energy sources like solar and wind, thanks to its ability to provide around-the-clock backup energy when the wind doesn’t blow or the sun doesn’t shine.

Finally, a growing natural gas industry has demonstrated its ability to contribute to America’s economic health, with direct employment rising from 500,000 jobs in 2006 to 600,000 in 2008. Increased exploration and development, as well as construction and maintenance of pipelines, storage facilities and other infrastructure, would result in even more jobs, additional revenues and tax payments that would contribute to the country’s economic health.

At AGL Resources, we believe that clean-burning, domestically abundant natural gas is the answer for today and tomorrow, and we are using more than 150 years of experience in this business to ensure that natural gas is the elemental fuel of choice for our customers, our investors and our planet.

With 100 years’ worth of domestic reserves, natural gas is a readily available solution to reduce America’s reliance on imported energy.

*Industry statistics are based on information from the American Gas Association, America's Natural Gas Alliance and the U.S. Department of Energy.

**U.S. Energy Information Administration

With a century’s worth of domestic natural gas reserves, continued investment in America’s natural gas infrastructure is elemental as our nation pursues energy independence.

In November 2009, AGL Resources completed the Magnolia pipeline, providing our customers access to liquefied natural gas imports arriving at the Elba Island terminal near Savannah, Ga. The pipeline, which provides 83,000 dekatherms of daily capacity to Atlanta Gas Light customers, is an important investment that diversifies our gas supply and serves as a backup source for fuel during hurricane season, when Gulf Coast deliveries can be disrupted.

As 2009 came to a close, we were putting the finishing touches on the Hampton Roads Crossing (HRX) pipeline, linking two service areas in Virginia separated by the James River and Chesapeake Bay. HRX’s eco-sensitive construction included complex underwater directional drilling and what is believed to be a world record bore for 24-inch pipe. Today, HRX offers 207,500 dekatherms of additional daily capacity to the region.

We also continued to replace aging pipelines with plastic and coated-steel pipe in Florida, Georgia, New Jersey and Tennessee. These upgrades to improve safety and reliability have also reduced methane emissions – an accomplishment that earned AGL Resources the Environmental Protection Agency’s Natural Gas STAR Continuing Excellence award in October 2009.

Growing site for storage

At Golden Triangle Storage in Texas, we completed the first year of cavern creation deep in the Spindletop salt dome and began constructing a compressor station and dual 24-inch pipelines. Commercial availability of the first cavern is planned for the second half of 2010.

Like our pipeline projects, storage facilities are elemental components of America’s natural gas infrastructure. Today, they serve as insurance against hurricanes and other events that could impact production or delivery. In addition, storage during the low-demand summer months ensures ample supplies are available for the winter heating season. Going forward, the importance of storage facilities is expected to rise, as extraction from shale significantly increases the supply of natural gas to the market.

Infrastructure investments like Hampton Roads Crossing play a vital role in assuring the reliability of natural gas.

At AGL Resources, we responded to the most challenging economy of our generation by staying focused on the fundamentals of our business, which enabled us to grow net income attributable to AGL Resources Inc. from $217 million in 2008 to $222 million in 2009 and increase diluted earnings per share from $2.84 in 2008 to $2.88 in 2009.

While strict fiscal discipline contributed to much of our success in 2009, at AGL Resources – even in the toughest times – we also seek new ways to leverage opportunities for continued growth. This is elemental to good corporate stewardship.

Growing footprint

In July 2009, we entered into an agreement – that went into effect Jan. 1, 2010 – to increase our ownership stake in SouthStar Energy Services from 70 percent to 85 percent. This investment should provide ongoing value to our shareholders as we receive a greater share of profits from sales to retail customers of Georgia Natural Gas, the largest gas marketer in Georgia with approximately 504,000 end-use customers. SouthStar also supplies natural gas to customers in Alabama, Florida, North Carolina, Ohio, South Carolina and Tennessee.

In December 2009, we achieved a major milestone in our proposed expansion of the Jefferson Island Storage & Hub (JISH) facility: approval by the Louisiana Mineral and Energy Board of an operating agreement between JISH and the state. The agreement enables us to pursue the regulatory approvals needed to construct two additional natural gas storage caverns at the site, where the two existing caverns have operated safely since entering commercial service in 1994.

On the wholesale side of the gas marketing business, Sequent Energy Management – which entered 2010 ranked by Platts Gas Daily magazine as the 14th-largest wholesale gas marketer in North America – continued the expansion of its footprint into the western U.S. and Canada.

The relentless drive by our employees to create new ways to grow our business – in even the most challenging economic environment – is an elemental part of delivering shareholder value at AGL Resources.

Georgia Natural Gas is the first gas marketer in Georgia to include recycled natural gas from landfills as part of its natural gas supply.

Throughout 2009, AGL Resources worked with regulators who oversee our local distribution companies to craft new opportunities to bring additional benefits to the most elemental part of our business: our customers.

As proponents of a proven rate design called “decoupling,” we are working to break the traditional link between earnings and the volume of natural gas sold. This rate design separates volume from an approved rate of return for providing service and infrastructure, and it better aligns the interests of a utility and its customers. In November 2009, Chattanooga Gas filed a rate case proposal that could make Tennessee the 21st state to approve a rate design that encourages customers to pursue energy efficiency and conservation of resources while also affording the utility the ability to earn its authorized rate of return.

SMART idea

In 2009, we launched regulator-approved energySMART programs in Virginia and New Jersey. Under these programs, Virginia Natural Gas and Elizabethtown Gas educate customers about energy efficiency and conservation. The programs also provide incentives to purchase high-efficiency natural gas-fueled equipment, helping customers reduce their energy bills. Our customer-focused regulatory strategy also pursued rate-based cost recovery of infrastructure investments.

In April 2009, Elizabethtown Gas received approval from New Jersey regulators to accelerate our plan to invest $60 million in pipeline replacement over a period extending to 2011. Beyond improving the reliability of our natural gas system and creating opportunities to add customers to our service, these upgrades support the state’s economic stimulus plan by generating local jobs. In October 2009, Georgia regulators approved a multi-year system upgrade to improve Atlanta Gas Light’s ability to provide natural gas service on peak demand days. Called STRIDE (Strategic Infrastructure Development and Enhancement), one component of the program represents an investment of approximately $176 million in metropolitan Atlanta, where the growing population now extends beyond much of our interstate supply points and high-pressure transmission pipeline system. In January 2010, we received approval of a second component of STRIDE called the Integrated Customer Growth Program, which enables Atlanta Gas Light to invest up to $45 million to serve new customers currently without pipeline access and allows us to install pipelines to create new economic development corridors.

In December 2009, we opened a new customer-care call center in New Jersey. We expect the local call center will improve scheduling and service call efficiency for Elizabethtown Gas customers.

During 2009, Americans witnessed a steady stream of media coverage touting new discoveries and expanding opportunities for natural gas, bringing an increased public awareness to our business. Through customer-focused regulatory strategies and infrastructure investments, we are ensuring customers have ready access to America’s most abundant, environmentally friendly fuel … today and tomorrow.

AGL Resources and its subsidiaries have a long-standing commitment to serve the communities where we live and work.

Our efforts are guided by a corporate-wide philosophy that there is more than a good way to do business; there is a right way. Our employees embrace the belief that donating time and effort is often a more meaningful contribution than simply writing a check.

Leading by example

In 2009, our employees held many leadership positions in community organizations, including serving as the Atlanta-area chair for the local United Way and Habitat for Humanity organizations. In Texas, Sequent Energy Management expanded its support of the Juvenile Diabetes Research Foundation by serving as corporate chair of the local Walk to Cure Diabetes.

While we do not pursue good works in anticipation of rewards, we are honored that Elizabethtown Gas employees mentoring at-risk students received the 2009 Award for Excellence for Public Service from the New Jersey Business & Industry Association. The award recognizes leadership in finding solutions to pressing social or economic problems.

We are similarly proud of Atlanta Gas Light’s partnership with Cool Girls, Inc. – an earlyintervention program dedicated to the empowerment of at-risk girls. A rewarding experience in its own right, the outreach efforts also earned our employees the 2009 Community Impact Award from the Corporate Volunteer Council of Atlanta.

Across our businesses, similar stories evolved in 2009: the manning of energy-assistance phone banks by Chattanooga Gas employees to help those unable to afford winter heating … the Polar Plunge, in which Virginia Natural Gas employees brave the frigid Atlantic Ocean annually in February to raise money for Special Olympics … Jefferson Island Storage & Hub’s support of a high school near the Louisiana facility that will enable the school to purchase new uniforms and grow its award-winning marching band … and a coastal beach clean-up program that allows Florida City Gas employees to demonstrate their commitment to the environment.

It’s that genuine spirit of giving and involvement exhibited by our employees that helped AGL Resources gain recognition as one of the top-10 places to work in Atlanta in 2009 by the Atlanta Business Chronicle.

Employees embody AGL Resources’ long-time involvement with Habitat for Humanity.