Senate Energy Bill Backs Alaska Gas Pipeline
By Dan Morgan
Washington
Post Staff Writer
Thursday, April 25, 2002; Page A08
An amendment
inserted with little fanfare into the Senate's slow-moving
energy bill this
week has revived Alaskans' hopes for a new energy boom in
their state that
could help make up for the Senate's recent rejection of oil
drilling in an
Arctic refuge.
Under the provision offered by Sen. Frank H. Murkowski
(R-Alaska), the U.S.
government would provide new incentives to companies to
build a pipeline
capable of transporting vast, unexploited reserves of
natural gas from
Alaska's Prudhoe Bay to major U.S. markets.
The plan
raises questions about the ultimate cost to U.S. taxpayers. The
incentive
would consist of an unprecedented federal guarantee of the price
that
companies would receive for the gas when it reached its destination.
If
gas prices fell below a given level, the petroleum companies would
be
entitled to a tax credit. Given the uncertainties about future gas
prices,
energy consultants say it is all but impossible to predict the
costs.
But without the price guarantees, supporters of the plan say, the
companies
will not take the risks of pipeline construction, and Alaskans will
be
unable to realize the economic potential of their gas reserves.
The
pipeline amendment, which senators adopted without debate, is perhaps
the
most sweeping of dozens in the energy bill. Most have been overshadowed
by
the debate over such high-profile issues as the proposed drilling in
the
Arctic National Wildlife Refuge (ANWR), ethanol production and
fuel
efficiency standards for vehicles.
The bill, which may reach a
final Senate vote today, contains $14 billion in
tax credits benefiting
groups ranging from makers of hybrid cars to
manufacturers of energy-saving
appliances. There are incentives for
high-temperature superconducting
technology projects, companies that
generate power by burning animal wastes
and others. New York's Democratic
senators, Charles E. Schumer and Hillary
Rodham Clinton, added an amendment
to permanently ban oil and gas drilling in
the Finger Lakes National Forest.
The bill also contains broad
initiatives that have received little
attention. One section would speed the
restructuring of the electricity
industry by giving the Federal Energy
Regulatory Commission more power over
regional electricity markets. But few
provisions have wider implications
than the one involving the proposed Alaska
pipeline.
Although Congress authorized such a pipeline more than two
decades ago,
volatile gas prices have deterred companies from investing the
$20 billion
or more needed for the formidable engineering challenge of
building one
through some of the world's most rugged terrain.
Natural
gas brought up in oil drilling is now either burned off or
reinjected into
the ground, leaving companies such as Exxon Mobil Corp.,
Phillips Petroleum
Co. and BP Amoco PLC sitting on an estimated 35 trillion
cubic feet of gas --
enough to supply the United States for more than a
year.
The
possibility of exploiting the gas and pumping it across Alaska to
a
destination in Alberta has garnered strong political support. Backing
for
this "southern route" comes from Alaskan political leaders, U.S.
labor
unions, steel companies, some environmentalists, consumers and
many
Democrats.
Senate Majority Leader Thomas A. Daschle (D-S.D.), a
strong supporter of the
project, has called it "one of the most significant
ways to improve our
nation's energy security." After last week's Senate vote
against ANWR
drilling, Democratic support for the pipeline project could
provide the
party some political protection if electricity blackouts occur
this summer,
said a Democratic energy lobbyist.
Some environmental
groups also back the project because the preferred route
across Alaska would
follow the corridor of an existing oil pipeline before
veering off near
Fairbanks and paralleling the Alaskan national highway
to
Canada.
"We're not talking about blazing a new path across public
lands," said
Melinda Pierce, a lobbyist for the Sierra Club. "We'd much
prefer to see
them go after these known gas reserves than continue to bang at
the door of
the Arctic refuge."
Both the House-passed energy bill and
the legislation before the Senate
contain identical provisions that
effectively ban pipeline routes that
bypass the Alaskan
heartland.
Nonetheless, the pipeline project faces numerous hurdles. The
Senate bill
goes well beyond the House version, providing the Murkowski tax
credit along
with a $10 billion loan guarantee to cover much of the
construction costs in
Alaska.
Sources said yesterday that it is far
from certain that House Republican
conferees -- including members from
gas-producing states -- would embrace
Senate proposals that could promote
Alaskan competition for Gulf Coast
drillers.
A competing pipeline
route, knowns as the "northern route," would bypass the
Alaskan heartland. It
would run eastward along the Alaskan coast and then
south along Canada's
Mackenzie River. It would be 400 miles shorter and less
costly because it
would not have to traverse hundreds of miles of
Alaskan
mountains.
That route is being aggressively promoted by Arctic
Resources Co., headed by
Texas oil and gas magnate Forrest Hoglund, who has
given more than $200,000
to GOP causes since 1997, according to the Center
for Public Integrity, a
campaign watchdog group.
Hoglund said this
week that he outlined his pipeline plan in a meeting with
Vice President
Cheney last year. The administration's national energy plan
supports the
concept of a gas pipeline but does not specify a preferred
route.
Both
the House and Senate energy bills prohibit the consideration of the
Mackenzie
River route. But Hoglund said he doubts the Canadian authorities
would
approve extending the proposed trans-Alaskan pipeline to their gas hub
in
Alberta, the connecting point for U.S. markets.
Bruce Hall, Arctic
Resources vice president, predicted that U.S. price
guarantees would be
costly in the long run. Over the past decade, he said,
prices in Alberta have
averaged about $1.95 per thousand cubic feet, well
below the $3.25 floor
price that would trigger the tax credit in the
Murkowski
provision.
"The U.S. guarantee would raise prices and keep them
artificially high and
would kill Canadian gas exploration because they
wouldn't have the benefit
of the floor price," Hall said.
© 2002
The Washington Post Company
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