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VANCOUVER (CP) - The Yukon and Northwest Territories are lining up on opposite sides of the fence in a brewing dispute over northern gas pipeline developments. The U.S. Senate recently passed a bill that - if it becomes law - would guarantee a floor price for natural gas carried by an Alaska Highway pipeline, which would run from Alaska's North Slope, across the Yukon and into Alberta.

The bill grants a tax credit for all gas shipped through the pipeline that sells at a price lower than $3.25 (US) a thousand cubic feet.

But the bill also ensure the pipeline runs through the Yukon, not the Northwest Territories, another route option for a pipeline.

Northwest Territories Premier Stephen Kakfwi has denounced that action as an unfair subsidy to U.S. producers.

His territory's proposed pipeline would run from the Canadian gas fields of the Mackenzie Delta down the Mackenzie River.

"In the Northwest Territories, we think it's going to completely wipe out the exploration commitments made," Kakfwi said in a weekend interview.

"(U.S. officials) are assuming they can just build an (Alaska Highway) pipeline right through Canadian territory and subsidize the pipe and strand Canadian gas for two decades or more," he said.

Some analysts have agreed the proposed U.S. regulation could set back the N.W.T. pipeline project, which could also benefit Canadian gas resources.

In a prepared speech delivered in Vancouver on Friday, Kakfwi argued the federal government should "forcefully express its opposition at the highest levels to these measures being proposed in Alaska and the U.S. Senate initiatives."

Federal Natural Resources Minister Herb Dhaliwal seemed to support this position last week when he implied Ottawa could delay any southbound U.S. pipeline forced to cut through Canadian soil.

He told reporters that Ottawa would not allow Canadian gas to be remain untapped due to U.S. subsidies.

But the Yukon government supports the proposed U.S. bill, said Scott Kent, Minister for Energy, Mines and Resources.

"We're supportive of those types of actions," said Kent.

"Canada has to remember there were an awful lot of public dollars that went into (Newfoundland's Hibernia offshore drilling project) as well."

Greg Komaromi, director of oil and gas development for the Yukon government, said northern pipeline development has been wrongly painted as a Canadian versus American scenario.

He said the Yukon would be able to ship its own gas through the pipeline.

"I start to see colours of red when I hear these references to Canadian gas," Komaromi said.

"What about natural gas in the Yukon? This is going to be an open-access expandable pipeline.

"Since when did the Yukon secede from Canada?"

It has been estimated that the Yukon has about nine trillion cubic feet of natural gas reserves, he said.

"We think those are vastly conservative estimates because the success rates in exploration in Yukon have been so high," he said.

Kakfwi said there are roughly eight trillion cubic feet in proven reserves located onshore in the Mackenzie Delta.

Komaromi said Saturday he was on his way to Ottawa to present the results of a study showing the Alaska Highway project's potential billion-dollar benefits for Canada.

The study, funded by the Yukon government and conducted by Informetrica, an Ottawa-based research group, said the project would create an average of 6,600 jobs a year throughout the country between 2002-2012.

It also found the pipeline could inject $31.4 billion to Canada's GDP over the next 24 years and contribute up to $28 billion to government revenues.

An earlier study by the Northwest Territories government suggested a Mackenzie pipeline could pump $77 billion into the Canadian economy, including the value of and royalties for the gas shipped.

The Yukon government maintains there is room enough in the natural gas industry for two northern pipelines.

"The fact of the matter is that demand for natural gas is increasing every year and that is combined with declines in the traditional producing areas in North America," said Komaromi.

"Alaska gas is only about a third of what the market will need over the next seven or eight years."

Kent cautioned against linking the ongoing U.S.-Canada softwood lumber dispute to northern pipeline developments.

"I don't agree that anything should be linked," said the minister. "I believe it's dangerous when you start to link different sectors of the economy.

"It's important that we resolve the softwood lumber issue . . . but I don't believe anything should be linked."