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Alaska gas price support in energy bill But controversial pipeline measure not expected to survive in energy bill Larry Persily Petroleum News Government Affairs Editor
Not only is the energy bill still alive but at least for a few weeks so is the Alaska natural gas line commodity-risk provision, or price-support guarantee, back in play in the legislation waiting for a vote in the U.S. Senate.
The latest Senate Energy Committee version of the bill includes last year’s provision for using federal tax credits to guarantee North Slope producers that if the wellhead value of their natural gas ever drops below $1.35 per thousand cubic feet the federal treasury will chip in penny for penny up to a maximum support of 52 cents per mcf.
The price support would remain at 52 cents, even if the wellhead value drops below 83 cents per mcf.
The provision, key to taking the $20 billion plunge to building a North Slope natural gas pipeline, according to two of the three major producers, was dropped from the energy bill last fall in a House-Senate conference committee. The House passed the compromise bill but it stalled in the Senate before the Thanksgiving break and has sat there ever since, waiting to gather enough votes for passage.
Senate leaders Feb. 10 released a revised version of the bill, hoping to win more votes than the stripped-down bill will lose. They dropped billions of dollars in tax incentives for energy companies and, perhaps more importantly, the controversial liability waiver for manufacturers of the octane-enhancing gasoline additive methyl tertiary butyl ether, or MTBE. MTBE liability waiver still a problem But House leaders have always insisted that the final bill include the waiver to protect MTBE manufacturers in their home states, putting a high hurdle in front of efforts to find a compromise acceptable to both chambers.
“The bad news is a lot of the dynamics around the energy bill have not changed,” said John Katz, director of Alaska’s Washington, D.C., office. “The supporters of the (MTBE) waiver in the House have shown no sign of changing their position.”
Another political reality that has not changed is the opposition of the president and the House leadership to the Alaska gas line commodity-risk provision, Katz said.
Lower 48 gas producers, including those in the president’s home state of Texas, have lobbied against the price support for Alaska gas, as have Canadian producers and fiscal conservatives in Congress who don’t believe the federal government should take the risk. The legislation does not include a payback provision at high prices, although a 2002 proposal for a different price support mechanism included a payback clause.
“We are realistic there was previously opposition,” said Chuck Kleeschulte, spokesman for Sen. Lisa Murkowski, R-Alaska. No press release on gas line provision Aware of the strong opposition and the low probability the provision will stay in the final energy bill, the senator’s office did not even issue a press release announcing the Energy Committee version includes the price support language.
Kleeschulte explained that the Energy Committee, in its effort to craft a new version of the bill acceptable to enough senators to win passage, simply took the tax provisions of last year’s committee bill and rolled them into the new package.
Senators could be voting on the bill sometime in March. Senator Majority Leader Bill Frist, R-Tenn., has calendared the bill for Senate action, meaning all it will take is a simple motion to bring it to the floor when Republican leaders think they have enough votes for passage. Senate bill includes other gas line incentives Regardless of the controversy over price supports, there is no vocal opposition to the energy bill’s other provisions to encourage construction of the Alaska gas line project. The Senate Energy Committee version includes the same tax credits, accelerated depreciation, federal loan guarantee and expedited permitting as the House-Senate conference committee bill that failed to pass the full Senate.
The trimmed-down Senate committee bill includes $14 billion of tax incentives and direct appropriations to help promote domestic energy production and conservation, although the total is more than the $8 billion the president said he wanted. The House-Senate conference committee version is closer to $30 billion.
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