Canadian Ambassador Michael Kergin said this week that he was “disappointed” the revised U.S. Senate energy bill has “resuscitated” a proposed price floor to encourage the construction of a long-line natural gas transportation system from the North Slope to the Lower 48 states.

“The proposal was opposed by Canada in previous versions of the bill. Our opinion has not changed,” he wrote in a letter Wednesday to Chairman Pete Domenici (R-NM) of the Senate Energy and Natural Resources Committee.

“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,” Kergin said.

“Subsidies, especially a price floor, however, would distort our North American natural gas market, to the detriment of Lower 48 and Canadian producers,” he said in urging Domenici to strip the provision from the reconfigured energy bill (S. 2095).

The tax credit would take effect when the wellhead price of natural gas produced on Alaska’s North Slope falls below $1.35/Mcf. Under the proposal, producers would be permitted to reduce their taxes to account for the money they lost when gas prices dipped below the price floor.

The price-floor issue was extremely controversial last year, and in the end was stripped out of the final conference report on the energy bill (HR 6). While some lawmakers, such as Sen. Lisa Murkowski of Alaska, are hoping that the subsidy will remain in the recast Senate energy bill, a number believe it will be doomed to the same fate as last year.

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