- The Washington Times - Wednesday, September 18, 2002

Canada's natural resources minister, Herb Dhaliwal, was in D.C. last week with a clear message for the United States Congress regarding our energy future do as we say, not as we do.

Mr. Dhaliwal met with a number of my Senate colleagues trying to convince them that our national energy plan and its provisions to increase domestic energy production are bad for energy markets. Based on Canada's long history of incentives and tax credits to create more favorable market conditions, I am convinced Mr. Dhaliwal is not so much concerned about the U.S. energy bill's effect on energy markets, but the impact of U.S. energy development on Canada's profits.

While U.S.-Canadian relations are strong and fruitful, the U.S. should not allow anyone to derail our efforts to strengthen our energy security and further ensure national and hemispheric security.

If the U.S. can spur domestic energy production we can reduce our dangerous dependence on foreign sources of energy from places like Iraq, reducing the cash flow that keeps terrorists like Saddam Hussein in power. Our energy plan the first in a generation promotes conservation, encourages the use of advanced alternative fuels, and helps increase American energy supplies of all kinds.

The plan also includes federal provisions to help make a $20 billion pipeline linking Alaska's natural gas with markets in the Lower 48 part of our energy future. A unique tax credit I have offered creates a "safety net" for developers if the price of gas falls and a payback provision if the price increases, ensuring the plan will not cost taxpayers.

The House-Senate energy bill also directs that the natural gas pipeline will follow a southern route from Alaska to the Lower 48, a route agreed to by treaty more than 25 years ago and strongly advocated by the Yukon government. Mr. Dhailiwal says Congress should not pre-empt market decisions, when in fact the decision to pursue the southern route has already been reached.

While Mr. Dhaliwal says these provisions are wrong, it is important to remember the billions of dollars in direct and indirect incentives to explore for oil and gas across Canada:

To encourage development of oil and gas off Eastern Canada in Hibernia, grants and tax exemptions total more than $285 million while loans and loan guarantees equal more than $2.5 billion. None of these tax credits are ever phased out, nor are they paid back to the taxpayer.

In the oil sands of Western Canada, all capital, exploration and development costs are deductible on a 25 percent declining basis with full royalty deductibility in place of the resource allowance. Over the course of development, federal income tax revenues will reach $9 billion and tax incentives will reach $820 million.

In the Northwest Territory, royalty relief allows low royalty payments while recovering initial investment. The program starts at just 1 percent and rises every 18 months until the maximum of just 5 percent. This too, has no payback mechanism.

Mr. Dhailiwal's trip last week is not the first time Canada has lobbied against increased domestic energy production. The Canadian ambassador to the U.S. has joined with environmental fund-raising groups in the U.S. to strongly oppose exploration on 2,000 acres of the Arctic National Wildlife Refuge (ANWR) while oil drilling and mining accelerates just miles across the border.

Canada uses opposition by the Canadian Gwich'in Indians on behalf of caribou as its defense, even as the Gwich'in Indians have formed their own oil-field service company and Canadians lease vast new areas in the critical breeding grounds of the Porcupine Caribou Herd. The Gwich'in's have lobbied successfully to open the only highway in the area to "road hunting," allowing them to harvest caribou without getting out of their cars, while at the same time urging ANWR remain closed to "protect the caribou."

Developing Alaska's vast energy reserves is a critical part of ensuring our national and economic security as evidenced by President Bush's National Energy Policy and the recent votes in the Senate in support of the Alaska natural gas pipeline provisions.

The Canadians need to remember that every dollar we spend overseas for energy is one less dollar that could go into our economies, putting hundreds of thousands of North Americans to work producing and delivering the energy. It's one more dollar spent to prop up uncertain and unstable regimes in energy-producing nations like Nigeria, Columbia and Indonesia. And most concerning, it's money used to fund the terror that keeps Saddam Hussein in power and gives him the tools to cause great harm outside his borders.

I want to work together to help make the U.S. and Canada more secure through the use of our abundant energy resources. We will verify our continuing friendship and cooperation by our deeds, rather than just our words.


Frank H. Murkowski is a Republican member of the U.S. Senate from Alaska.


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