Gas line assistance figures in energy bill deliberations

Posted: Thursday, June 20, 2002

FAIRBANKS (AP) -- Congressional leaders on energy issues say they will start meeting next week to work on an energy bill.

When they do, one question they will ponder is whether Americans will save or lose money on the Senate bill's proposal to give a tax credit to a natural gas line from Alaska.

Canada's national government and the Northwest Territories have warned Congress that the tax credit, which they term a subsidy, will disrupt the North American energy market and send the multibillion dollar bill to U.S. taxpayers.

Advocates of the gas line provisions say the tax credit may not cost taxpayers a dime in the long run and that, even if it does, the expense likely would be offset by lower gas prices caused by the increased supply from Alaska.

Sen. Jeff Bingaman, D-N.M., and Rep. Billy Tauzin, R-La., announced Wednesday that they had worked out the ground rules for the 61-member conference committee. Tauzin will lead the committee.

He said he did not expect to finish the job before early fall.

A report by a Northwest Territories consultant, Purvin and Gertz, last month projected that the tax credit would cost Americans $16.4 billion to $43.8 billion. Canada's ambassador, Michael Kergin, said in an opinion article published by the Wall Street Journal that the credit and loan guarantee would distort the North American energy market.

Gov. Tony Knowles fired back at the Canadian analyses earlier this month with his own assessment of the Senate bill. The Canadian government itself, he noted, has subsidized at least two major energy projects -- Alberta's oil sands and the Hibernia oil development 200 miles offshore of Newfoundland.

The Alberta sands incentives will total $820 million by 2030, he said. The Hibernia project, which began pumping oil in 1997, benefited from a $1 billion grant and $1.66 billion loan guarantee.

''Incentives for development of new resources are widely used in Canada, the U.S. and throughout the world,'' the governor's analysis said.

Pam Chappell, spokeswoman for the Canadian embassy in Washington, agreed that Canada has established subsidies in the past.

''But our policy now is much more market-oriented,'' she said. ''I think that's reflected in the piece written by the ambassador.''

The Hibernia grant and loan guarantee were given in 1988. Canadian Prime Minister Jean Chretien was first elected in 1993.

Also, Chappell said, the Hibernia subsidies were for a project whose oil would have little effect on the world market's price. In contrast, she said, the Alaska gas line's tax credit would effectively lower gas prices in the target market of North America.

John Katz, head of Knowles' Washington office, said it's the principle, not the product, that's at issue. Governments worldwide subsidize their energy projects when they think it's in their national interests, he said.

The Purvin and Gertz report was ''premised on lots of assumptions and uncertainties,'' Katz said. For one, it ignored the benefits of lower gas prices that would follow the natural gas line's construction, he said.

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