Senate Democrats Tom Daschle (D-SD), Jeff Bingman (D-NM) and John Breaux (D-LA) are urging the Bush administration to reconsider its opposition to the natural gas price-floor tax subsidy provision for Alaska producers in the Senate energy bill and the mandated southern route for the Alaska pipeline. Without these measures the Alaska pipeline will not be built, the Democrats said in a letter to Bush.

The Office of Management and Budget’s May 8 Statement of Administration Policy said that “market forces should select the route and timing” of the Alaska pipeline. It also stated that the administration opposes a natural gas price floor provision and associated tax credits because that would “distort markets and could be very costly.” The price floor would grant tax credits to producers if natural gas prices fell to less than a set amount per MMBtu.

“Given the inevitable volatility of gas prices over the 50 year life of this project, this administration position effectively means that no pipeline will be built, an outcome that risks higher natural gas prices and the loss of American jobs,” the Senate Democrats said.

They also quoted estimates that construction of the Alaska pipeline along the southern route through Alaska, rather than across to Canada and down the Mackenzie River, would generate 400,000 jobs, use an estimated five million tons of U.S. steel, and generate over $90 billion in government revenues over the course of the project.

“And, most importantly, the pipeline would add 4.5 Bcf/d of gas to U.S. supplies and needed flexibility to the flow of natural gas in the United States to ensure that natural gas is marketed in the most economical manner.

“We continue to support language in the energy bill to ensure that the pipeline is built along the ‘southern route’ through Alaska and to address the producers’ and investors concerns about potential price volatility. And we respectfully request that your Office of Management and Budget reconsider its opposition to the Alaska gas pipeline provisions being debated as part of S. 14, the Senate Energy bill. With your support, we can avert a potential natural gas price crisis by encouraging construction of the Alaska Natural Gas Pipeline.”

The Senators quoted a recent study by Cambridge Energy Research Associates (CERA) that predicts that by 2010 the natural gas supply deficit may be as much as 4.5 Bcf/d, “the exact figure the Alaska producers want to ship to the United States, and that higher prices for natural gas will limit economic growth.

“There are 35 Tcf of known natural gas reserves on the North Slope of Alaska that can prevent these negative impacts to the U.S. economy. Right now, however, that gas is being pumped back into the ground because there is no way of getting it to consumers in the lower 48 states who need it.”

Currently, the Senate energy bill also contains federal loan guarantees for up to $18 billion in pipeline construction costs. Floor debate is scheduled to resume next week.

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