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Sullivan proposes taxing tar-sands oil to boost spill fund after tiff with Canada

A year after threatening to punish Canada amid claims it had lobbied against drilling in the Arctic National Wildlife Refuge, U.S. Sen. Dan Sullivan on Monday proposed taxing that nation’s tar-sands oil to help boost the Oil Spill Liability Trust Fund.

This is not “payback" for Canada, just good environmental policy, Sullivan said.

The language is part of Sullivan’s newly introduced bill to update and permanently reauthorize the federal trust fund that provides money to clean up and help prevent oil spills, including when derelict ships at risk of leaking oil or gas must be removed from U.S. waters.

The tax on oil companies lapsed early this year, said Sullivan, a Republican.

His measure retains the 9 cents per-barrel tax on domestic crude oil, but also slaps it on the Canadian imports from Alberta’s oil-sands deposits.

Sullivan’s measure was introduced a day after the 30th anniversary of the Exxon Valdez oil spill, when the infamous oil tanker’s crew struck a reef in Prince William Sound, releasing 11 million gallons of crude oil.

The fund now holds more than $5 billion, said Donna Schantz, executive director of the Prince William Sound Regional Citizens Advisory Council.

The fund was authorized for use after the 1989 spill, which also led to the creation of the watchdog group.

“We’re really pleased,” Schantz said of Sullivan’s proposal.

The council and related organization Cook Inlet Regional Citizens Advisory Council worked with Sullivan on the legislation, Sullivan’s office said.

Importantly, the bill sets a floor of $5 billion for the fund and a maximum of $7 billion (both indexed for inflation), Schantz said. That will help ensure there’s always money available to clean up an oil spill if the responsible company fails to do so.

The Government Accountability Office in 2010, when the fund had dropped to $1.6 billion, found that a single big spill at the time would threaten the fund’s viability.

Sullivan said the Exxon Valdez spill showed that preparation, and emergency funding in place, can mean the difference between a small incident and a massive disaster.

“It is fitting that on the 30-year anniversary of that devastating spill in Prince William Sound, we introduce legislation to permanently replenish and silo the federal fund that enables government agencies to quickly and capably deploy vessels and response measures" in the event of a spill, he said in a prepared statement.

The fund can also “help make whole” any affected communities and individuals, and provides certainty to the oil industry, Sullivan said.

Schantz said other important measures in the bill include doubling the potential payout to up to $2 billion for a single incident, providing $25 million for prevention programs to at-risk states including Alaska each year, and providing $10 million for research and technological development every two years.

Sullivan early last year said Canadian officials had lobbied, unsuccessfully, to stop Congress from passing the provision in late 2017 to allow drilling in ANWR. He called the country’s efforts “outrageous," and said their actions helped convince him that tar-sands oil should be taxed to help support the fund.

Canadian officials at the time had said they were concerned about the impact of oil drilling on the Porcupine Caribou herd that crosses the Alaska-Canadian border, according to news accounts. Officials with the Canadian Embassy could not be reached for comment on Monday.

Sullivan on Monday said the bottom line is his measure is good for the environment, and provides certainty to oil companies. He acknowledged he was less sympathetic to pleas from Canadian officials for an exemption to the tax, after they fought drilling in the refuge.

If a tax on tar-sands oil was in place in 2016, it would have generated $47 million that year, the Congressional Research Service reported.

Rep. Don Young and Sen. Lisa Murkowski could not immediately be reached for comment on the measure Monday.

Sullivan said he’s working with prominent Democratic lawmakers to win bipartisan support and boost the chance his measure will pass.

“I’m optimistic,” he said.

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