The Senate on Monday approved a proposal that would authorize the construction of a mega-natural gas pipeline from Alaska’s North Slope to the lower 48 states, and a sweeping corporate tax cut bill that contains a number of energy-related tax credits. Both bills were passed by the House and are expected to be signed by President Bush.

The Alaska pipe proposal by Sen. Ted Stevens (R-AK), a member of the Senate Appropriations Committee and conferee, was added to the conference report on the $10 billion fiscal 2005 military construction appropriations bill (H.R. 4837), which unanimously cleared both houses before lawmakers adjourned to campaign for November elections.

“After working for more than 20 years…we have finally taken steps to make the Alaska natural gas pipeline happen,” Stevens said. Stevens and Sen. Lisa Murkowski (R-AK) “did something we have been working on for 21 years; their teamwork got this legislation into a position where we can make it law,” noted Rep. Don Young (R-AK).

Stevens was able to secure enabling language and a loan guarantee in the conference report that includes the authorization necessary to make the Alaska gas pipeline a reality. The proposed pipeline would transport 4.5 Bcf/d over 3,600 miles from Alaska’s North Slope to lower 48 markets. Most experts do not expect the pipeline will be built and placed into service until the latter part of the next decade.

The bill authorizes the secretary of the Department of Energy to enter into agreements with builders of the long-line system to provide loans not to exceed 80% of the total capital costs of construction, to be capped at $18 billion, a spokeswoman for Stevens said. The pipeline would be the largest private construction project ever undertaken in the United States.

The proposal is identical to the language contained in the 2003 energy bill, which failed to clear Congress.

By 69 to 17, the Senate on Monday voted out the conference report on a $136 billion corporate tax cut bill, which calls for a seven-year depreciation for certain Alaska pipeline property placed in service after 2013, and an extension of the enhanced oil recovery credit to Alaskan gas treatment plants. The measure also has a number of other energy-related tax provisions, including tax credits for marginal oil and gas wells and alternative fuels. The House passed the conference report last Thursday (see Daily GPI, Oct. 11).

The military spending bill does not include the controversial price supports for Alaska gas production, which some producers, notably Alaska producer ConocoPhillips, contend are critical to the construction of such a mammoth pipeline. In the 2003 energy bill, ConocoPhillips supported a proposal to create a floor price of $1.35/MMBtu at the wellhead for gas transported over the proposed Alaska gas pipeline, providing Alaska producers with a “penny-for-penny” credit up to a maximum of 52 cents if wellhead prices would fall below the established floor.

But other natural gas holders in Alaska are divided over whether such a price floor is necessary now in light of the tripling in gas prices over the past couple of years, according to Congressional Green Sheets.

The proposal in the military appropriations conference report directs the Federal Energy Regulatory Commission to quickly permit the proposed Alaska pipeline once certain requirements have been met; designates FERC as the lead agency for the National Environmental Policy Act process; creates a federal coordinator within the executive branch to coordinate the federal agencies involved with the pipeline; requires a single environmental impact study; and expedites judicial review and allows for future expansions.

The proposed pipeline, which is expected to take at least 10 years to permit and construct, will cut U.S. dependency on foreign gas and imports of liquefied natural gas (LNG), generate more than $40 billion in revenues for the federal government and create more than 400,000 jobs, according to Stevens.

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