A plan to tap huge energy resources in Alaska to head off future shortages in the rest of the United States is being revived in Congress. But this time, the energy is natural gas, not the protected and contested oil reserves of the Arctic National Wildlife Refuge.
Alaskan legislators and two major oil companies are asking Congress to underwrite part of the estimated $20 billion cost of constructing a 3,600-mile pipeline connecting Alaska's North Slope with the U.S. heartland.
The project could deliver as much as 4.5 billion cubic feet of gas daily -- equal to 8 percent of today's U.S. gas production -- to the Midwest after completion in 2012.
The project has been almost ignored in public debate, compared with the furious battle over opening the arctic refuge. The Bush administration fought for the refuge venture, which was shelved by the Senate earlier this month. It has not made the pipeline a top priority.
But experts say the Alaskan gas may be far more important to the nation's energy future than Alaska's oil would be if gas production from wells in the lower 48 states continues to fall off. Gas is the fuel of choice for new power-plant construction and an essential home-heating source.
ConocoPhillips Co. and BP LLC, which own two-thirds of the natural gas on Alaska's North Slope oil fields, say they are ready to begin the project -- but only if Congress approves a package of tax incentives that limit the financial risk of the mammoth venture.
Although the Senate approved the project last year, it died when Congress failed to enact energy legislation in December. And despite the passionate backing of Alaska's Republican senators, Ted Stevens and Lisa Murkowski, the project's chances now are in doubt as the Senate Finance Committee prepares to consider it again, next week.
The gas itself is there for the taking, mixed in with the oil pumped from beneath the North Slope and shipped south on the Trans-Alaska pipeline. Today, the gas is separated from the oil and injected back underground.
The gas pipeline would carry the gas south, paralleling the oil pipeline to Fairbanks, Alaska, then head through Canada to the United States -- a route mandated by the Senate last year to secure the greatest possible number of construction jobs for Alaskans.
Stevens and Murkowski are proposing about $700 million in federal support for the pipeline, including a federal loan guarantee and several tax credits.
But a "safety net" subsidy, whose potential cost is elusive, is the most important and controversial. It would give the North Slope companies tax credits to offset a possible steep drop in natural-gas market prices.
The subsidy would kick in if gas prices a decade from now were below about $3.75 per thousand cubic feet in today's dollars. Gas prices have ranged between $5 and $6 per thousand cubic feet recently, but averaged $2.87 in 2002, government data show.
In theory, the safety net subsidy could come to $850 million a year if gas prices slumped severely, but would cost taxpayers nothing if gas prices climb, as industry analysts predict.
John E. Lowe, ConocoPhillips's executive vice president for planning and strategy, said his company's one-third share of the $20 billion investment "is too big a bet for our company. . . . We need to have some sort of safety net or insurance, and federal legislation is the only place that can provide that support."
But Exxon Mobil Corp., the third owner of the North Slope gas, says it opposes subsidies for the project, saying it should be built when it can stand on its own feet financially. Right now, it can't, a company spokesman said.
A more politically potent attack is coming from some leading independent oil and gas producers, who say the subsidy gives the Alaskan producers an unfair competitive advantage.
"We're opposed to any subsidy that would discriminate against other gas producers," said Urban F. O'Brien III, director of governmental and regulatory affairs for Apache Corp., a large Houston independent producer. If the subsidy is paid, he asked, "Who's going to buy Apache's gas?"
Apache and other independents are trying to persuade influential lawmakers from gas producing states like Texas and Louisiana to oppose the pipeline.
The issue moves next to the Senate Finance Committee, which will soon take up a long list of proposed tax subsidies introduced by lawmakers representing all sorts of U.S. energy producers.
The estimated cost of these benefits now stands at $20 billion over the next 10 years, about $5 billion more than allowed for in the budget legislation now before Congress. And that total does not count the costs of tax subsidies for the pipeline.