Canada’s Ambassador to the United States, Michael Kergin, urged Congress last week to reject the Alaska pipeline route restrictions that were approved the prior week by the Energy Conference Committee as part of the energy bill (see NGI, Sept. 16). Speaking at RBC Financial Group’s Distinguished Speakers Series at the Metropolitan Club in Washington, DC, on Wednesday, the ambassador also expressed Canada’s opposition to proposed subsidies for Alaskan gas production. A vote on the subsidies and other tax-related provisions will be the committee’s last major task on the bill.

“Canada provides an unfettered, free market source that flows every day without political interference or cartel economics and we want to keep it that way,” said Kergin. “However, certain legislation in Congress threatens to have government intrude into the marketplace in ways which could have a negative impact on our energy trade.”

Kergin noted that the committee approved legislation that basically restricts the gas industry to building a pipeline only along the Alaska Highway. It prohibits a northern route through the Beaufort Sea and down the Mackenzie River in Canada. The latter route is expected to be less expensive. The committee also is considering a subsidy for Alaskan gas that is expected to cost more than $1 billion/year.

“By artificially distorting price signals on which investors rely to make their capital decisions, this price subsidy proposal could well retard North American natural gas development, both in Canada and the rest of the United States,” said Kergin, noting that the Bush administration opposes the measure “because it costs too much, because it will distort markets and because, they believe, it will have an impact on the Canada-U.S. energy relationship.

“We hope Congress will ultimately conclude that it is the marketplace, not government subsidies, which will ensure Americans receive secure clean burning gas at the lowest possible price.”

Kergin noted that despite the excellent trade relationship between the two countries, there are areas of disagreement, some of which have been around for more than 200 years. When disagreements arise, Canada has appealed to the World Trade Organization and the North American Free Trade Agreement. He said political agreement is much more preferable than lengthy litigation.

Weighing in on the Alaska pipeline debate, Jim Antoine, Minister of Resources Wildlife and Economic Development for the Northwest Territories, said treaties, agreements and statutes identified to support gas development 25 years ago are no longer applicable to today’s discussions surrounding an Alaska natural gas pipe. On Sept. 17, Antoine formally asked federal Minister of Natural Resources, Herb Dhaliwal to confirm the legal status of the 25-year-old agreements.

In the past, Dhaliwal has warned American lawmakers that a pipeline will not pass through Canada without the support of the Canadian government. Each time, Antoine said officials and legislators have suggested that Canadians are already “handcuffed” by the 1977 treaties.

“The Alaskan gas project is not the same,” Antoine argued. “The natural gas industry has been transformed and age-old understandings regarding the role of private financing versus public guarantees are being challenged as I speak. Canada did not agree to these conditions 25 years ago. We are certainly not bound by them now.”

While Canadian and U.S. politicians jockey back and forth, FERC Chairman Pat Wood is just itching to start the certification process on an Alaska pipeline. “One of them [items on his to-do list] was to get that damned pipeline certificated, and I’m a year down folks, and I’m looking forward to [an] application on our desk so we can get to work,” he said during the Natural Gas Roundtable in Washington, DC, Thursday.

Wood, who has a background in civil engineering, acknowledged the pipeline project will be mammoth in scope. It will be “probably the biggest civil engineering project since the pyramids.”

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