Associated Press

Dec. 10, 2004

WASHINGTON -- Alaska's natural gas line may need more incentives to be feasible, energy experts say in a new report.

The National Commission on Energy Policy report released Wednesday was largely funded by the William and Flora Hewlett Foundation. Other contributors included the Pew Charitable Trusts, the John D. and Catherine T. MacArthur Foundation, the David and Lucile Packard Foundation and the Energy Foundation.

The commission's goal, with $5 million in research money, was to conduct an independent study of long-term energy policies.

The commissioners included people from the industry, academia and the environmental community.

The report opens with a recommendation to improve oil security. It recommends "increasing and diversifying world oil production," but makes no specific mention of the Arctic National Wildlife Refuge in that context.

While domestic oil development is "highly important to the nation's economy and energy security," it can't keep up with demand, the report's executive summary stated. Therefore, a sole focus on achieving U.S. energy independence would be "misplaced," it said.

Another chapter, devoted to expanding energy supplies, talks about natural gas, coal, nuclear and renewable energy, but not oil.

In the natural gas discussion, the report recommends "adopting effective public incentives for the construction of an Alaska natural gas pipeline."

Alaska gas could lower prices in the United States by 10 percent during the line's first decade, the report said.

"Support for a pipeline in the form of loan guarantees, accelerated depreciation and tax credits was included in legislation passed by Congress late in 2004, but the commission believes that additional incentives are likely to be necessary given the high cost, lengthy construction period, uncertainty about future gas prices, and other siting and financing hurdles associated with the project," the report said.

Last year, while Congress debated incentives for the Alaska gas line, the commission endorsed a tax credit that would kick in during low gas prices.

At that time, commissioner Archie Dunham, the chairman of Conoco Phillips, said in a separate letter that without the low-price tax credit provision, the pipeline will not be built. Conoco Phillips is a major North Slope gas owner.

Congress, faced with opposition from the Bush administration and some elements of the natural gas industry, did not adopt the low-price tax credit in October when it passed a variety of other incentives.

Since then, officials with Conoco Phillips have not repeated their previous assertions about the necessity of the credit. They have praised the incentives that passed and pledged to continue working to develop a gas project.

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National Commission on Energy Policy