Canada may consider giving assistance to the proposed Mackenzie Valley natural gas pipeline project if the U.S. offers subsidies to Alaskan natural gas producers to build a rival line, Canada's energy minister warned Thursday.
Speaking to reporters at the G-8 Energy Ministers Conference in Detroit, Natural Resources Minister Herb Dhaliwal said a U.S. Senate bill passed last month may force Canada to reconsider its neutral stance on which pipeline project gets built.
That would be new for the government, which has refused to say if it would prefer a Mackenzie Valley line be built, tapping Canadian gas reserves in the Mackenzie Delta, over an Alaskan line that would bring gas from northern Alaska through Canada.
However that neutrality is now being questioned in Ottawa, following passage of a Senate energy bill last month.
The bill, which isn't yet law, offers $10 billion US in subsidies to U.S. petroleum companies to build an Alaska Highway natural gas pipeline.
It also proposes to give Alaska's natural gas producers tax credits if the price of gas falls below $3.25 per thousand cubic feet to encourage construction of the line.
"We have an agreement which said both countries will be route neutral," Dhaliwal said. "If they move away from that we will have to reconsider our position to make sure we don't allow our gas to be stranded. If that means looking at other measures, be assured that we will look at them."
Dhaliwal called the Senate proposals a subsidy for ExxonMobil Corp. and other Alaska gas producers and said the plans run counter to free trade.
"Are they really interested in free trade?" the minister asked. "They talk about it but their actions indicate otherwise."
Dhaliwal said he had brought up the federal government's concerns with the Senate energy bill with U.S. Energy Secretary Spencer Abraham. But the Canadian government isn't the only one worried.
Earlier this week, Ron Brenneman, Petro-Canada's chief executive, said he believed the proposed subsidies would distort continental gas markets and put unsubsidized Canadian natural gas at a disadvantage. It's also been attacked by Northwest Territories Premier Stephen Kakfwi, who's worried the proposals would mean plans for a Mackenzie Valley line, now in preliminary stages, would be shelved.
The Senate bill is a long way from becoming law. It first must be merged with another bill from the House of Representatives and then be endorsed by U.S. President George W. Bush.
"It's still very preliminary," said Greg Stringham, vice-president of the Canadian Association of Petroleum Producers. "But Canada has to watch this very closely. . . . The government's role isn't to pick winners and losers."
Dhaliwal used the G-8 meeting, the first such gathering of energy ministers in four years, to state Canada's desire to be regarded as the major single supplier of reliable energy to the U.S.
Speaking to an energy forum prior to a meeting of G-8 energy ministers, Dhaliwal said Canada must get ready for new demand in North America and abroad. Not only will industrialized countries increase their energy consumption, but developing countries will expect equal access as their economies grow, the forum was told.
Dhaliwal also pressed Canada's case to be given credits under the Kyoto protocol for exports of clean energy. The government wants natural gas shipments to the United States to be counted as part of the country's agreement to cut the emission of greenhouse gases.
The Europeans are refusing to allow the exports to be considered when adding up emission cuts towards the accord's goals but Dhaliwal said he will continue to press.
The accord is opposed by many businesses and provincial premiers, including Alberta's Ralph Klein, who fears the energy industry would bear the brunt of moves to cut greenhouse gas emissions. That's because most emissions come from the burning of fossil fuels such as coal and oil.
However Dhaliwal said he wasn't ready to consider Klein's proposal for a Canadian greenhouse-gas reduction plan that's independent of the Kyoto protocol. He said Canada must first decide if its going to ratify the Kyoto accord before deciding to go it alone.
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