White House opposes tax credit for gas line

Tax credit considered key in moving project forward

Posted: Monday, July 01, 2002

FAIRBANKS - Energy Secretary Spencer Abraham said the Bush administration objects to a tax credit for the proposed Alaska natural gas line.

Abraham made his comments in a letter sent last week to lawmakers on a conference committee working out differences between the House and Senate energy bills.

Abraham said the administration supports building the line.

"However, the administration strongly opposes the price-floor tax subsidy provision in the Senate bill and any similar provision because it would distort markets, could cost well over $1 billion in annual lost revenue and would likely undermine Canada's support for construction of the pipeline," Abraham said.

Sen. Frank Murkowski, an Alaska Republican, convinced the Senate to put the tax credit in its version of the energy bill. The bill says gas producers from northern Alaska should get a tax credit when gas prices fall below $3.25 per million British thermal units at a distribution hub in Alberta, Canada.

In his letter, Abraham also criticized language in both the Senate and House bills that prohibits a pipeline across the North Slope into Canada. The provision was put in at the request of the Alaska delegation and Gov. Tony Knowles, who want the line to follow the existing oil pipeline to Fairbanks and parallel the Alaska Highway into Canada.

The administration "believes market forces should select the route of the pipeline," Abraham wrote.

The gas line provisions make up just one small part of the bill, which ran to 997 pages in the Senate version. Abraham was generally complimentary of the remainder of the bill.

President Bush, if he gets a bill with the gas line provisions, would have to weigh whether they merited vetoing the entire measure.

"There were no veto threats attached to the administrations' comments in this area, so that's good news," said John Katz, head of Knowles' office in Washington, D.C.

Katz also saw reason for hope in another Abraham comment urging energy bill conference committee members to "develop alternative provisions to bring the gas to market without resorting to similar provisions that would distort markets, could undermine fiscal responsibility, and might jeopardize the expeditious construction of a natural gas pipeline."

"The administration at least recognizes that some sort of incentive is important to pipeline construction," Katz said.

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