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Canadian opposition to tax credits may ease Alaska’s acknowledgement that Mackenzie gas will go first helps Larry Persily PN Juneau Correspondent
As Alaska continues to lobby domestic opponents of federal tax credits for a natural gas pipeline from the North Slope, the state expects less of a problem with Canadians this time around on the energy bill before Congress.
Though still an issue in the energy bill discussions, Canadian opposition is not expected to be a “major factor” this month, said John Katz, director of Alaska Gov. Frank Murkowski’s Washington, D.C. office. The likelihood that the proposed Mackenzie gas pipeline will get to market ahead of an Alaska project has eased Canadian concerns over the Alaska line, he said.
When Alaska Sen. Lisa Murkowski met with Canada’s ambassador to the United States and its minister of Indian and Northern Affairs before Congress left town for its August recess, they asked her what could be done to start working together toward the countries’ mutual benefit.
“We talk about everything but the Canadian component of the line,” and need to remember that hundreds of miles of pipeline will run through Canada, she said. Permitting work needed, too An example of work to undertake between the two countries, the Alaska Republican said, is dealing with expedited permitting issues. The energy bill before a House-Senate conference committee this month requires such expedited review in the United States, but its jurisdiction stops at the border.
Discussions on the Alaska project need to move beyond the debate over tax credits and into addressing other concerns, the senator said.
Murkowski helped ease Canadian worries over financial incentives for the Alaska project when she succeeded in convincing some of her colleagues to state on the record that the Mackenzie project will be first, said Greg Stringham, a vice president for the Canadian Association of Petroleum Producers in Calgary.
“I think that was really positive and politically smart for her,” Stringham said.
The Senate Energy and Natural Resources Committee adopted Murkowski’s “Sense of the Congress” provision in its version of a national energy bill, though the committee version was later abandoned when the Senate ran out of time at its summer recess and adopted last year’s bill just to move the issue to the conference committee. Less objection to wellhead credits Canadian government and industry officials were vocal in their opposition to last year’s proposed energy bill provisions that would have tied tax credits for Alaska natural gas to the market price at the AECO hub in Alberta. This year’s preferred Alaska option — tax credits linked to the wellhead value on the North Slope — is meeting somewhat less resistance from Alaska’s northern neighbor.
Alaska is pushing hard to have the wellhead-based tax credits written into the final energy bill, which some expect could emerge from the conference committee early this fall.
Murkowski’s committee amendment stated that federal and state officials should work with Canada to ensure that both the Mackenzie and Alaska projects move forward, while acknowledging that the Mackenzie line likely will be built first.
As a result of growing demand in North America, the amendment stated, “Alaska’s North Slope gas will not displace or reduce the commercial viability of Canadian natural gas produced from the Mackenzie Delta.” The Mackenzie project is expected to carry between 1 billion to 1.5 billion cubic feet of gas a day. No one wants to be ‘stranded’ Although such “Sense of the Congress” statements do not carry the force of law, and Murkowski’s amendment was not in the Senate bill that passed, her attempt reassures Canadian gas producers that Alaskans understand the issue, Stringham said. Canadians do not want to see Mackenzie gas stranded by 4 billion cubic feet of gas a day or more from Alaska, he said. “That was the biggest concern overall.”
Despite the improved comfort level that Canadian gas will not be stranded by an Alaska project, Stringham said producers still don’t want to see federal tax credits for Alaska gas in the energy bill. “We really would like the market to decide this.”
The wellhead tax credit is “less objectionable” than the market-price tax credit, he said, and Canadians would like it even better if it included a provision for the Alaska producers to repay the credits when prices are high.
Still, it’s better than last year’s proposal, he said. “I think you’ll hear a quite vocal response” from Canada, Stringham said, if the energy bill conference committee tries to adopt last year’s tax credit to provide a floor price for Alaska gas tied to the Alberta market.
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