A GAS PIPELINE project to bring gas from Alaska to the lower 48 states is expected to receive special tax subsidies from the US government.

A GAS PIPELINE project to bring gas from Alaska to the lower 48 states is expected to receive special tax subsidies from the US government.

August 01, 2002
A GAS PIPELINE project to bring gas from Alaska to the lower 48 states is expected to receive special tax subsidies from the US government.

The project would carry up to 4.5 billion cubic feet a day, or about 7% of US gas demand. It is expected to cost $15 to $20 billion.

The Bush administration appears committed to working out a package of tax incentives to help the project. Top energy and tax officials met with the Alaska Congressional delegation at the White House on July 18. They oppose tax subsidies that the Senate voted for the project in April, but discussed alternatives that would pose less risk of distorting gas prices.

The Senate voted in April for a special tax credit that would effectively guarantee gas producers who ship via the pipeline that they will receive at least $3.25 an mmBtu for their gas. The credit would be available for the first 15 years after the pipeline starts operating. Gas producers would be able to claim a credit for any shortfall in the average monthly price for Alaskan natural gas at the Alberta hub below $3.25 an mmBtu. If gas prices are higher than $4.88 an mmBtu, then the credits would begin to be recaptured. The Canadian government is up in arms about the proposal.

The Senate also voted to have the federal government guarantee repayment of up to $8 billion in debt to build the project.

Keith Martin