Senator eyes oil tax to punish Canada over Alaska drilling clash

The Canadian government was concerned about the pristine wilderness on the country’s Porcupine caribou herd, named for the river that spans its range into Alaska. So its embassy in Washington lobbied U.S. lawmakers to vote against the Republican bid to add a refuge-drilling measure to the tax-cut package.

They lost the gamble. The tax cuts passed and drilling is set to resume after a 40-year hiatus.

Now one lawmaker has a plan to punish the North American neighbor with what amounts to a new tax on hundreds of millions of barrels of Canadian oil imported annually into the U.S.

Alaska Republican Senator Dan Sullivan said he will introduce legislation to end a loophole through which imported oil from Alberta’s oil sands deposits doesn’t come with a 9-cent-per-barrel tax to fund clean up of oil spills. Such a change would have generated about $47 million for the U.S. in 2016, according to the Congressional Research Service.

“It was outrageous,” Sullivan, a former Alaska attorney general and natural resources commissioner, said. “They were going to every office in the Senate.”

“It was not a smart move,” he added. “It’s a loophole and we intend to close it.”

Sullivan said the language ending the exemption for tar sands and other forms of “synthetic petroleum” will be included in a broader bill reinstating a per-barrel fee on domestic and imported oil to fund spill cleanups. The U.S. tax, which generates hundreds of millions of dollars a year for what’s known as the Oil Spill Liability Trust Fund, expired at the beginning of this year.

Colin Shonk, a spokesman for the Canadian embassy, said the country remains committed to protecting the habitat for the Porcupine caribou herd. He didn’t address a question about potential changes in U.S. taxes on Canadian oil sands.

“Canada continues to engage the U.S., other partners, and indigenous peoples on the protection of land from resource development and the management of the Porcupine caribou herd,” he sad in an email.

But Sullivan and other members of Alaska’s three-person congressional delegation say their position is hypocritical given Canada drilled hundreds of oil and gas wells in neighboring Yukon Territory including ones directly in the path of herd migration routes.