Mister Chairman, I would like permission to place in the Record at this point our analysis of projected West Coast needs in the 1980's. (Appendix A.) The crude oil deficit on the West Coast in the early 1980's, when TAPS comes fully on stream, will be in the range of 2 million barrels a day, almost exactly the capacity of the pipeline. This gap in domestic production-vs.-demand is not as great as in PAD II, but here again our critics seem caught on a point of flawed logic. If the West Coast can absorb the entire North Slope production totally at the expense of foreign crude, and the producing companies can get it there for the least cost, most quickly, what national interests are served by delivering it to another market twice as far away five years later? There is no price benefit to the consumer, and the national energy situation is certainly not enhanced in the meantime. All interests would be better served by bringing the energy to market as soon as possible and finding better ways to meet Midwestern demands.

As to the assertion that the Alaskan route is being supported by oil companies because they want to sell a portion of their production to Japan, I can only repeat what my company has said for many years: We have absoultely no plans to sell North Slope oil abroad so long as there is a need for it in the United States. Our Cherry Point, Washington refinery represents, I believe, a concrete proof of our commitment. It was designed and built to process Alaskan crude for American customers.

Atlantic Richfield has recently undertaken studies to see how the greatest number of domestic markets can be assured of access to North Slope oil via the Trans-Alaskan pipeline. This will become increasingly important if further exploration and development produce substantial additional reserves in Alaska. Any surplus above PAD V (West Coast) needs must be transported to other domestic customers. One possibility is a pipeline system directly to Chicago from the West Coast. Another, tanker deliveries through the Panama Canal to Gulf and East Coast ports. A third proposal is a trans-Mexico pipeline from the Gulf of California to Texas.

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Basically, the key arguments against the Trans-Canadian pipeline are delay and cost. A U.S. balance-of-payments loss of between $2.5 billion and $12.5 billion would be brought about through the Canadian option. Most of this would go to Middle Eastern nations whose dollar reserves are beginning to cause concern in western capitals. In addition, our studies indicate errors in calculation of pipeline costs have been made by proponents of the trans-Canadian system that result in gross underestimates. Recent testimony has placed the cost of the total trans-Canada MacKenzie Valley route at about $3.5 billion, compared to about $3.1 billion for the trans-Alaskan route. (Both figures in 1972 dollars.)

Our analysis indicates that the cost of the trans-Canadian line if built to the exacting environmental and engineering standards of the TAPS line would cost approximately $5.6 billion. (Appendix B of my statement, which is attached, gives the justification for these adjustments.) Why this great disparity? Principally because advocates of the MacKenzie Valley route are quoting from a preliminary project report, which is not a precise accounting of engineering design, but merely a feasibility study.

The most crucial element in the equation of the transCanadian line, however, is financing. TAPS is a $3.4 billion joint venture in which each of the seven owners will finance their individually owned undivided interests on their own credit capacity, which is considerable and adequate to do the job.

In contrast, a Canadian line may require twice as much capital, and the politically imposed requirement that Canadians own half of the venture presents a financing problem for which there is no present solution, inasmuch as Canadian companies do not have the necessary financial capacity to support their share. To solve the many and complex financing problems and form a combination of participants would require many years, if indeed it could be accomplished at all.

In summary, Mister Chairman, the Congress should allow construction of the Trans-Alaskan pipeline to go forward as soon as possible because it provides the quickest and most effective access to the 10 billion barrels of proven oil reserves on the North Slope and to the natural gas associated with it.

It will, in short, get us on with the task we are in business to undertake: supplying domestic energy to the U.S. market.

###

Supply:

West Coast and So. Alaska production-1.4 million B/
Other domestic

Imports

Supply/Demand Balance

-01.9 million B/

3.3 million B/

Following the present expansion plan for the Trans Alaskan Pipe-
line, its thru-put would not reach the yearly average rate of
1.9 or 2.0 million barrels/day until about the fifth year which
would be in the early 1980's at which time the cumulative effect
of demand growth of about 150M barrels/day/year on the West
Coast would be more than sufficient to accommodate the North
Slope oil.

The 3.3 million B/D total demand for 1980 is the same as pro-
jected by Secretary Morton. Critics of TAPS have rejected it
for an earlier estimate of 3.0 million B/D by the National Petro-
leum Council and used by the Department of Interior. The basis
for this rejection is that the 3.3 million B/D estimate required
a 5.4% annual growth rate between 1972 and 1980, higher than
the 4.7% rate of the early and mid-1960's. The NPC estimate
which is referred to was made some time ago as part of their
initial appraisal of the U.S. energy situation. It is now out
of date. On a national basis the growth in petroleum demand
between 1970 and 1972 was 50% of the amount that NPC study
projected for the entire period 1970 to 1975. It is evident
that the growth projected by the NPC study was too low.

Specifically, with regard to the West Coast, domestic product demand grew 6.0% in 1972 and crude runs increased about the

required 5.4%.

Further, EPA standards are increasing energy requirements, not decreasing them as claimed, and a shortage of natural gas is placing a heavier burden on oil as a substitute. If these recent trends are accounted for the demand could be as high as 3.6 million B/D in 1980.