Canada will be detrimentally affected by subsidised Alaska pipeline

The U.S. Senate version of the energy bill contains a potentially staggering subsidy of Alaskan natural gas that could handicap gas exploration anywhere else in North America, including Texas, warns the Canadian ambassador to the United States, Michael Kergin.

To ensure the commercial viability of a pipeline from Alaska to the south, the Senate bill would in effect guarantee a minimum price for Alaska gas producers, creating an incentive to maximise production in Alaska while minimising production elsewhere, particularly when prices are low.

It would have the perverse result of encouraging production first in high-cost Alaska, slowing exploration and development in Texas, Louisiana, Oklahoma and other low-cost areas.

Subsidised Alaskan gas entering the North American market would depress prices, slowing Canadian exploration and production and offsetting gains in production from developing Alaskan gas.

Canada is the largest energy supplier to the United States, with exports totalling $37.5 billion last year.

Canada provides about 15 percent of all U.S. natural gas consumption and more crude and refined oil products than Saudi Arabia, or about 9 percent of all the oil consumed in the United States.

The United States relies on foreign energy for upward of 53 percent of its consumption, but that figure falls to 44 percent if Canada is included under the continental umbrella.

In 2000, the U.S. Commerce Department found that reliable, secure Canadian energy imports actually enhance U.S. energy security. The marketplace, not government regulation, will ensure Americans receive secure, clean burning gas at the lowest possible price.

Source: Ambassador Michael Kergin, Subsidy for Alaskan gas would distort market, Dallas Morning News, May 24, 2002.

For text
http://www.dallasnews.com/opinion/viewpoints/stories/052402dnedikergin.1fded.html
For more on National Energy Policy http://www.ncpa.org/iss/ene/

FMF Policy Bulletin\4 June 2002