Terry Halifax
Northern News Services

Yellowknife (July 12/02) - A senior executive of the Bush administration has all but killed a proposed tax credit offered to producers as incentive to build an Alaska gas pipeline.

U.S. secretary of energy Spencer Abraham wrote a letter to committee chair W.J. Tauzin dated June 27, saying he was opposed to a tax credit for gas shipped through an Alaskan pipeline.

Abraham wrote that the proposed credit would "distort markets, could cost American taxpayers well over $1 billion in annual lost revenue, and would likely undermine Canada's support for construction of the pipeline, and thus set back broader bilateral energy integration."

Last week at a Yellowknife press conference, NWT Premier Stephen Kakfwi said the U.S. administration's opposition to the subsidy all but guarantees that a Mackenzie Valley route will proceed first.

"The main producers are categorically against (the tax credit), the Canadian government is categorically against it, and the U.S. administration is against it," said Kakfwi.

"The debate seems to be over." The Yukon has long been a supporter of the Alaska line, not only for the jobs created by the line passing through the territory, but also to tie in natural gas from Yukon fields.

'Disservice to Northerners'

Minister of Energy, Mines and Resources Scott Kent said Kakfwi's lobby for the Mackenzie-only line is a disservice to Northerners and Canadians.

"I cannot stand idly by and listen to the rhetoric coming from some supporters of the Mackenzie Valley pipeline that insist that the Alaska pipeline project is dead," Kent said. "There's room for two Northern pipelines."

Natural Resources Minister Herb Dhaliwal told The Canadian Press last week he was pleased with the U.S. administration's position.

"I think they've basically accepted the Canadian position, which is to subsidize the Alaska Highway (pipeline route), really doesn't benefit anyone in the long term," said Dhaliwal. Kent said that Dhaliwal and Kakfwi are not looking out for the best interests of Canada.

"Threatening to use the regulatory system as sanctions against billions of foreign investment does a disservice to this country and to Canadians," he said.

He says the entire country has a stake in seeing both lines go through, from the transportation industry, to the Ontario steel mills.

Double standards

He accuses Kakfwi and Dhaliwal of using double standards to discredit the Alaska tax credit.

"Governments often use tax incentives to encourage frontier development," Kent said. "I know Mr. Kakfwi has been asking for loan guarantees and subsidies on the Mackenzie Valley pipeline on one hand, and then criticizing these tax mechanisms in the United States on the other."

He also pointed to Hibernia, the tar sands and the flow-through shares issued by NWT diamond mines. He added that it was the Tax Incentive Program that built much of Inuvik.

"The TIP led to a lot of the development in the '70s and '80s that the Yukon and the NWT are benefitting from today," Kent said. The National Energy Board has estimated some nine trillion cubic feet (tcf) of gas reserves in the Yukon, and Kent said exploration and export of that resource, hinges on a transportation system.

"Yukon gas, coupled with Mackenzie Delta gas and the huge reserves on the North Slope of Alaska are crucial to feed the growing market and we should all be working together to see the development of those resources," he said.

- with files from Mike W. Bryant