Canadian Ambassador Michael Kergin said last week that he was “disappointed” the revised U.S. Senate energy bill has “resuscitated” a proposed price floor to encourage the construction of a 3,600-mile natural gas transportation pipeline from the North Slope to the Lower 48 states. He should be happy to learn then that the shelf life of the proposed subsidy will be short.

“It’s not staying in the bill,” said Marnie Funk, spokeswoman for Chairman Pete Domenici (R-NM) of the Senate Energy and Natural Resources Committee. She noted the price floor proposal, which the Bush administration opposes as well, probably will be taken out by amendment when the Senate begins debate on the reconfigured energy bill (S. 2095).

“The proposal was opposed by Canada in previous versions of the [energy] bill. Our opinion has not changed,” Kergin wrote in a letter last Wednesday to Domenici.

“Canada welcomes private sector plans to build new natural gas pipelines from Alaska’s North Slope and Canada’s Mackenzie Delta. We are of the view that both pipelines should be built without subsidies and without the route being determined by legislation,” he said. “Subsidies, especially a price floor, …would distort our North American natural gas market, to the detriment of Lower 48 and Canadian producers.”

The price-floor issue was extremely controversial last year, and in the end it was stripped out of the final conference report on the energy bill (HR 6). Under that proposal, which is unchanged in S. 2095, Alaska producers would receive a maximum tax credit of 52 cents/MMBtu as protection in the event the wellhead value of natural gas dips below $1.35/MMBtu.

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