other much-needed pipelines and electrical transmission lines throughout the Nation. This will help to meet the growing national need for energy, but it will do so in a way that still preserves the national responsibility for the environment.

Mr. Chairman, it is crucial to Alaska's future well-being as well as the Nation's that the Trans-Alaska pipeline project move ahead.

When Alaska became a State in 1959 it did not have the extensive agriculture, manufacturing, transportation, industry, trade, and commerce, and population that have been the greatest sources of revenues to other States in our Nation. In conferring statehood, Congress acted recognizing that Alaska could become a self-sustaining economic unit only by the careful management and timely development of her rich natural resource potential. The promise of statehood was not only a promise that Alaskans would be free from the yoke of a territorial form of government in shaping their destiny; it was also a promise by Alaska to the Federal Government that Alaska could develop her resources wisely, so that she would not always be the poor stepchild of the States, but could stand on her own, independent of an extraordinary amount of Federal support.

While we have made a substantial amount of progress toward that end since 1959, the need for providing Government services, both State and Federal, remains particularly acute in Alaska. The very lack of the usual agricultural, commercial, and industrial underpinnings of a modern economy has resulted in a continuing battle against unemployment, poverty, and human misery, as well as a continuing effort to offer all Alaskans the opportunity to have a quality of life equal to that available in the other States.

By Social Security Administration standards, 14 percent of Alaskan families, and 50 percent of Alaska's Native families had incomes below the poverty level in 1969. Alaska remains an Arctic and subArctic area, generally undeveloped economically in comparison to the rest of the country, in which much remains to be done.

Over the years, the State's expenditures have grown under the pressure of human needs that cannot be met except by Government. Education, the administration of justice and welfare absorb more than 75 percent of the State's budget. Alaskans are not slow to make their own out-of-pocket contributions. Alaska's State income tax, for instance, is fully 16 percent of the Federal level. Under pressure from the transfer of responsibilities borne by the Federal Government before statehood, the annual general fund expenditures of Alaska's State government have grown from $41 million in 1959 to more than $300 million in 1972. Without adding any significant new programs, that figure is projected to reach $581 million in 1981, merely to meet inflation and population growth.

In itself that may not seem either impressive or serious to those of you familiar with the budgets of larger States. But because of Alaska's general lack of a developed, diversified economy upon which to build a tax base, it has meant a serious problem for us since 1969, a problem that threatens to grow worse at a perilous rate as construction of a Trans-Alaska pipeline is postponed."

Since 1969 there has been a growing gap between State expenditures and the State's recurring revenues, generated by State taxes and fees.

In the current year alone, Alaska is operating with a $118 million deficit. This growing deficit is being financed with the principal and interest in the $900 million the State received in the 1969 North Slope oil lease sale. But the principal is declining, the amount of interest income shrinking, and the deficit growing at an inevitably alarming rate. If the deficit continues to grow as projected, the State's ability to offset it with money from bonus sale fund will be extremely precarious in the later part of 1977.

We have been hoping that we would be relieved of a budgetary catastrophe by revenues from the State's royalty interest in and severance tax on North Slope oil. To realize those revenues within the next few years, the Trans-Alaska pipeline must be built and put into operation, moving North Slope oil to market. Delay in construction of the line increases the danger eventually to the point of a certainty-that Alaska will be forced into a fiscally intolerable position.

At the present moment, substantial reduction in State expenditures is nearly unthinkable, for Alaska's already serious problems are aggravated by cutbacks and threatened further cutbacks in Federal spending. Revenue sharing does not provide anything near the amount Alaska needs in Federal support of human resource programs. The Nation's largest State is also the least populous with the highest per capita costs. Revenue sharing and the proposed so-called special revenue sharing in place of categorical grants would leave Alaska, large in area and needs, with an untenable reduction in funding necessary to meet those needs.

As only one example, we appear to face a cut of perhaps $12 million to $14 million in Federal impact funds for education. If educational programs and other vital programs are only to be maintained at their present level, Alaska must pick up the slack and spend more, not less, in the near future. Whatever our budgetary hopes, our State's economy remains closely tied to the Federal budget, and we suffer more than other States in a period of wholesale Federal budget reductions.

Delay in construction of the Trans-Alaska pipeline will force painful cuts in many vital areas where human needs are only beginning to be met adequately. Delay will also reduce the revenues that the State ultimately receives, since the State's North Slope revenues are calculated on "well-head value," which is the price of oil at the refinery, less the cost of transporting it from the North Slope to market. Delay in construction, with its attendant increases in the expected cost of construction, has already shrunk of the revenues that the State can fairly expect, and the amount could become still less as further delay forces pipeline costs higher.

Finally, Alaska's neediest-probably the Nation's neediest-group will suffer particularly from further delay in constructing the pipeline. I am speaking of Alaska's Natives. Under the Alaska Native Claims Settlement Act, our State's Native peoples are to receive $500 million from the State as part of the extinguishment of their aboriginal land claims. This sum is to be paid from a 2 percent overriding royalty on States leases of mineral resources, including the North Slope oil

resources.

Under current plans Alaska's Natives would realize $5,575,000 from the North Slop oil production in fiscal year 1976, $21,625,000 in fiscal

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year 1977, and $27,273,000 in fiscal year 1978. Considering the past pace of progress on the project, a delay in production until at least fiscal year 1977 is a reasonable estimate. This means a postponement of $5,575,000 of their anticipated income over the expectation of a year ago. A 2-year delay would mean the postponement of $27,200,000, while a three-year delay would amount to $54,473,000.

Alaska's Native groups have already begun to organize effectively to take greater control over their own future and to improve the lot of some of their people. You cannot really appreciate the conditions in which some rural Alaskans live unless you have seen them, as you have Senator Jackson; poor housing, no running water or sewers, no electricity, an inadequate diet gained mostly from subsistence hunting and fishing. A delay in receiving anticipated North Slope revenues puts a serious strain on these people's hopes of improving their own condition. Each additional year will seem twice as long as the year before, while the amount of the deferred income shrinks and is able to buy less and less. The congressional commitment to Alaska's Natives in the Alaska Native Claims Settlement Act is a commitment to reasonably prompt mineral production as we testified to in hearings on the Settlement Act so that these people may start to receive a more useful share of the compensation due to them.

While, as I said earlier, I do not think the Canadian route is germane to the legislative purpose recommended to this committee, since it will come up some note might be made of the impact on Alaska of the Canadian route proposal. First of all, the effects of delay on State finances and on moneys due Alaska's Natives would be magnified tremendously. The engineering for a line three times as long as the TransAlaska pipeline has not even been started, let alone completed. The actual time of construction would be greater, and the possibility of delay while the claims of Canadian natives to aboriginal title are resolved could protract. things even further. A Canadian line might well take as much as 7 years longer to come into use than the TransAlaska line.

There are also other effects besides those caused by delay. It is a certainty that Canada will require a substantial part of the capacity of any Trans-Canadian line for Canadian oil. Some Canadian officials have said that part will be 51 percent, so that Canada may retain control of the line. This would mean that the maximum flow of Alaskan oil to the United States could be held to 49 percent of the pipeline's capacity.

This lower capacity would mean a lower rate of North Slope production, yielding Alaskan Natives and the State of Alaska perhaps half the yearly amount of revenue now anticipated, over twice as long a period of time. For the State, this would further aggravate a potentially precarious fiscal position.

In addition, the cost of a Canadian oil line will be much higher than one crossing Alaska, since the length is far greater and much of the terrain is similar to the most costly segment of the Alaskan line, the Permafrost Crossing. Mr. William P. Wilder, chairman of Canadian Arctic Gas Study Ltd., in late February put the price of a gasline from the North Slope and the MacKenzie Delta to the United States

at $5 billion. Because of the different thermal and hydraulic characteristics, an oil pipeline can be expected to cost much more. The State has estimated the cost of a Trans-Canadian oil line at between roughly $7.5 billion and $8 billion. Since the market price for oil in the Midwest is not enough higher than the west coast to offset the much greater cost of such a line, this can only have a negative effect on the State's and the Native's anticipated revenues from North Slope production. A higher transportation cost, deducted from an only slightly higher market price, means significantly less revenue because of the manner in which royalty and severance tax are calculated.

Mr. Chairman, I was pleased to see that the press noted the announcement of your introduction of general legislation to provide for an energy transportation corridor network in the United States. It is certainly in keeping with your continuing work in the formulation and articulation of national energy policy and other work on materials policy upon which the future of our children depends. This effort is of invaluable significance to the Nation, and a national corridor program deserves careful consideration.

It is my hope as we move toward these ultimate goals and their implementation that the existing process for making development decisions, complex, sensitive, and laborious as it is, will not choke up before we have a working, comprehensive substitute. The technical and restrictive interpretation by the circuit court of the Secretary's special land-use permit authority has had such a choking effect. We now need your help in removing this impediment without disturbing the process of environmental review and without ad hoc disruption of the market allocation process.

I appreciate the opportunity of being able to appear before you here today to discuss this matter, which is so very crucial to Alaska's future well-being and has implications for the well-being of the Nation as a whole.

If you have any questions I will be happy to answer them.

I want to say again, Mr. Chairman, that I hope the remarks I have made-I hope it is understood that they are in the context for the need to the amendment of the 1920 Mineral Leasing Act.

Mr. Chairman, I have Senator Clifford Groh, who is the chairman of our State Senate Finance Committee, and I wonder if he could be heard as a courtesy.

Senator HASKELL [presiding]. Certainly.

STATEMENT OF CLIFFORD GROH, CHAIRMAN, ALASKA SENATE FINANCE COMMITTEE

Mr. GROH. Thank you, very much.

I will only take a very few minutes, as a designated representative of the legislature of the State of Alaska, to add the weight of State legislative opinion to what Governor Egan has stated so well.

The mood throughout the State, reflected in unanimous State legislature opinion, is frustration with seemingly endless procedural obstacles which bear little visible relation to the environment and carry the suspicion of invisible relation to economic forces inimicable to Alaska.

We will continue to comply with the procedures of the Environmental Policy Act as interpreted by the courts for so long as this seems reasonable to you and the Nation, but we need your helping hand now in removing a technical obstacle which has been discussed.

I hope that that can be done cleanly and quickly without accidentally raising new obstacles of interpretation, but this is certainly a matter for your expert legislative judgment

Let me assure you that the people of Alaska and we in the State legislature will be deeply grateful for anything you can do to bring this project to a safe and early fruition.

I can only add parenthetically, as the Governor has, that with the problems that we have in Alaska, which are very substantial, and we plead with many of my environmentalist friends legislating these issues to come to Alaska and help us endeavor to develop that country rather than do it in the courts here.

Thank you, very much.

Senator HASKELL. Thank you both, very much.

For myself, I have no question that legislation is needed.

To block a project merely because of a 25-foot limitation put in, in 1920, doesn't seem reasonable.

I am making absolutely no judgment at all on the relative merits of the Alaskan pipeline versus any other pipeline.

We have four bills before us-two by the administration, one by Senators Fannin and Hansen, and one by Senator Jackson.

I understand, Governor, that somebody from your office will submit for the record a technical analysis of these bills and recommendations. Mr. EGAN. Yes, we have with us today John Havelock, the attorney general. He will evaluate all the bills from the technical standpoint. Senator HASKELL. Thank you very much, Mr. Havelock, have you anything you would like to say?

Mr. HAVELOCK. No, sir; I think it would be better if I submitted a written statement within the next few days.

Senator HASKELL. We would appreciate it very much.

I have no questions.

Senator Hansen.

Senator HANSEN. I have no questions, Mr. Chairman.

[Subsequent to the hearing Mr. Havelock submitted the following statement:]