EnCanada In Pipeline Wars

EnCana Corp. the world's top independent oil explorer, is ready to use the Canadian regulatory system to oppose any subsidies for a $20 billion pipeline to bring Alaskan natural gas to southern markets, its chief executive said on Tuesday.

Canadian and U.S. governments are officially route neutral over competing pipeline projects to tap Arctic gas reserves, an issue that has gained prominence in the wake of the Sept. 11 attacks.

Some Canadian politicians and executives fear U.S. financial aid could jeopardize a C$4 billion ($2.6 billion) proposal to connect Canadian gas in the Mackenzie Delta to southern consumers. The project is being spearheaded by Imperial Oil Ltd. an arm of Exxon Mobil Corp.

As currently structured, the U.S. subsidy would push down North American gas prices and discourage drilling and production in conventional areas such as Western Canada.

The proposed tax credit would kick in if gas prices fell below $3.25 per thousand cubic feet, although the money would have to be paid back if gas prices approached $5.

There are other ways the U.S. government could encourage an Alaskan pipeline that would be more acceptable to Canadian producers and governments, such as offering loan guarantees.

The subsidy's expense, potentially costing Washington billions of dollars every year, makes it unlikely a bitter and messy fight would occur before Canadian regulators, Morgan said. They have to give their blessing since more than half the Alaskan line would run through Canada.

Ralph Klein, the premier of Alberta, where about 80 percent of Canada's natural gas is produced, was in Alaska to sign an agreement with the state to co-operate on energy issues.

One of the few Canadian production firms owning land in Alaska, EnCana picked up another exploration lease in the state earlier this week at a federal land sale