House and Senate negotiators made some progress last week on broad energy legislation — mostly on issues unrelated to crude oil and natural gas — but they had their work interrupted for two days by the arrival of Hurricane Isabel. Negotiators met with President Bush before leaving town ahead of the storm, and assured him an energy bill would be on his desk by mid-October.

At a briefing with reporters following the session, Bush was asked point blank whether he would be willing to sacrifice development of the Arctic National Wildlife Refuge (ANWR) oil and gas resources in order to get a comprehensive energy bill, but he sidestepped the question. “That’s certainly a contentious issue, and you’ll find strong opinions around the table about this.” ANWR development has been at the center of the Bush administration’s national energy policy.

The House energy bill proposes to open ANWR to oil and gas drilling, while the Senate measure does not. Senate Democrats and a handful of Republicans have vowed to filibuster any energy bill that includes ANWR. Sen. Pete Domenici (R-NM), chairman of the committee that is trying to reconcile the differences in the energy bills, has said he supports opening ANWR to exploration and development, but he will not put it in the energy bill if it would jeopardize its passage by the full Senate.

A discussion draft of several provisions of the energy bill, which negotiators released early last week, makes no mention of ANWR, but mandates a southern route through Alaska for a new Alaska natural gas pipeline — a move that is widely opposed by the Bush administration and Canadian officials. Discussion language on other key energy issues, including electricity and tax provisions, are expected to be released this week.

The draft measure on the Alaska pipe mirrored a provision voted out in the Senate bill, but it did not include loan guarantees. House-Senate negotiators said that item would be addressed in the financial tax incentive portion of the bill.

The Alaska language clearly caters to Alaska politicians, who have pushed for the pipeline to be constructed for the most part through Alaska, along the Alaska Highway, rather than using a route that would put more of the line through Canada. The discussion draft would specifically prohibit authorization of any pipeline to transport gas from Prudhoe Bay through or along the Beaufort Sea or any pipeline that enters Canada at any point north of 68 degrees north latitude.

In a letter to the energy bill negotiators earlier this month, Energy Secretary Spencer Abraham called for them to let the market decide the pipeline route. To do otherwise, “would likely undermine Canada’s support for construction of the pipeline and thus set back broader bilateral energy integration.”

Separately, Canadian Ambassador Michael Kergin wrote to the legislators: “Canada is of the opinion that the Alaska pipeline should be built without subsidies and without the route being determined by legislation….The subsidies proposed in the draft legislation would skew the North American natural gas market and would discourage investments in natural gas development in other regions of North America.”

The letter said the private sector has recently submitted preliminary plans for a Mackenzie Valley pipeline that will have no government subsidies.

The discussion draft provides for a federal coordinator to expedite permitting for an Alaska pipeline; calls for promulgation within 120 days of enactment of the new law of regulations for an open season for Alaska natural gas transportation projects; requires FERC to issue a certificate for the project within 60 days of the issuance of the final environmental impact statement; provides for expansion of lower 48 pipelines to receive Alaska gas; and sets FERC as the lead agency for environmental review.

Kergin also said Canada was opposed to opening part of ANWR to oil and gas development. He cited the 1987 bilateral agreement between the two countries to protect the calving grounds of the Porcupine Caribou herd, “on which the Gwich’in, the indigenous First Nations people of both Canada and the U.S. depend for their sustenance, culture and way of life.”

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