The long-awaited energy legislation introduced by Senate Democrats last Wednesday offers a huge financial carrot to the company or group of companies that is first in line to build a long-line natural gas pipeline to deliver more than 30 Tcf from Alaska’s North Slope to the continental United States.

The bill proposes to award a loan guarantee of up to $10 billion to the “entity” that submits an application before November 2002 to build the Alaska gas pipeline. Although the measure won immediate praise from the pipeline industry, it is likely to come under fire from some Republicans senators who are against the federal government giving any kind of assistance to pipeline sponsors.

In addition to the loan guarantee, the legislation calls for a streamlined, market-based approval process for the U.S. portion of the pipeline from Alaska’s North Slope to the Alberta Hub, but it still will require regular Natural Gas Act (NGA) approval for the Alberta-to-Lower 48 segment. It also seeks to create the Office of Federal Coordinator for Alaska Natural Gas Transportation to harmonize the activities of the federal agencies in order to expedite the project.

“I think the bill is a pretty positive step forward,” said Martin Edwards, director of legislative affairs for the Interstate Natural Gas Association of America, which represents interstate gas pipelines. He admitted that he was taken aback by the size of the loan guarantee. But the incentive itself was not unexpected, given that Senate Energy Committee Chairman Jeff Bingaman (D-NM), who drafted the nearly 400-page bill, is an avowed proponent of an Alaska pipeline. He believes it would go a long way in reducing the nation’s growing dependence on imported liquefied natural gas (LNG), which is a key concern of his.

The measure was introduced last Wednesday by Senate Majority Leader Tom Daschle (D-SD), who has promised to take up the Democrat bill and Republican energy proposals when Congress reconvenes in January.

In the meantime, Sen. Frank Murkowski (R-AK) apparently hasn’t given up on trying to attach an energy amendment to moving legislation, possibly the economic-stimulus bill, before the Senate adjourns for the year. While many doubt he has a prayer, he is bent on getting an up-or-down vote in the Senate on an amendment to open the Arctic National Wildlife Refuge (ANWR) to oil and gas drilling. Not surprisingly, the Daschle bill does not include a provision on ANWR drilling, but favors energy efficiency, conservation and ther demand-reduction measures instead.

The Democrat-crafted bill also calls for the development of an interagency memorandum of understanding (MOU) to expedite environmental review and permitting of pipeline projects, Edwards pointed out. In addition, it would bar the practice of placing operating gas pipelines on the National Register of Historic Places, which often delays safety upgrades or other needed pipe improvements.

The legislation does not provide any direct tax credits or incentives to encourage domestic production of oil and natural gas. This issue is expected to be tackled in a separate bill by the Senate Finance Committee next year.

Indirectly, however, it calls for additional funding to hire more personnel at the Department of Interior to speed up the environmental review process related to oil and gas production on public lands. Moreover, the bill would exclude producing leases on federal lands from statewide acreage caps. “This provides an incentive for producers to keep domestic acreage in production or to turn the leases over to another operator who will,” according to the legislation.

The initiative would place the responsibility for onshore energy infrastructure security under the Department of Energy (DOE). It authorizes the DOE secretary to establish “financial, technical and administrative assistance” programs to ensure the security of critical energy facilities, and calls on the secretary to support private-sector efforts to develop best practices and standards for security.

But the security of the Outer Continental Shelf (OCS) energy infrastructure would fall to the Interior Department, according to the bill. Under a proposed program, offshore states — Alaska, Alabama, California, Florida, Louisiana, Mississippi and Texas — would receive funding based on their share of OCS production to carry out activities “pursuant to approved plans” to secure critical OCS energy facilities from “human or natural threats, or to meet public service or transportation needs…”

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