Bush administration restates its opposition to natural gas tax credit

White House said it still wants to encourage proposed pipeline

Posted: Friday, September 12, 2003

WASHINGTON - The Bush administration has restated its opposition to tax credits for North Slope natural gas but said it would accept other financial measures to encourage a proposed pipeline to the Lower 48.

Secretary of Energy Spencer Abraham, in a letter Wednesday to Sen. Pete Domenici, R-N.M., also said the administration believes the pipeline's route should be selected by market forces rather than legislation.

Abraham's letter comes as House and Senate members on a conference committee try to merge their versions of national energy legislation.

The committee has met once to offer initial statements and dozens of staff met Tuesday to discuss procedures.

Domenici told the Fairbanks Daily News-Miner and other media that he wants to have a conference committee version of the energy bill done by early October. Domenici is the conference chairman.

Committee staff on Tuesday, though, were still working out procedures for second-tier issues - those that can be resolved without getting members of Congress too involved.

Domenici's top aide on the Senate Energy and Natural Resources Committee said last week that the tax credit for North Slope natural gas is a first-tier issue that will require greater effort to resolve. That's in part because of opposition from the House leadership and the administration.

"The administration strongly opposes the price-floor tax credit provision in the Senate bill and any similar provision because it would distort markets, could undermine fiscal responsibility and would likely undermine Canada's support for construction of the pipeline," Abraham told Domenici.

The wording was almost identical to language Abraham issued last year when a different conference committee was working on energy issues.

The most-discussed Senate proposal, which has not been formally added to any bill, would give natural gas producers tax credits of up to 52 cents per thousand cubic feet of gas sold at North Slope wellhead prices below $1.35.

Adding expected pipeline costs to the wellhead price means the tax credit would kick in at prices below $3.25 at distribution hubs.

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