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been doing for many years, will solve the immediate problem raised by the court decision and reduce the possibility of time-consuming litigation.
Now, we are all aware that advocates of a Trans-Canadian pipeline system have been trying in the last several months to stop the Alaskan pipeline. They want to see North Slope oil diverted from the nearest, most accessible market the West Coast - to bring it many hundred miles to the east, to supply a market in which they have a greater interest. Those of us who have been involved in the Alaskan oil venture since the beginning are unanimous in feeling that this diversion would run counter to the national interest. In behalf of our argument we have repeatedly cited the reasons we believe a Trans-Alaskan pipeline is preferable:
* It has been carefully designed and engineered to meet the rigorous challenges of the Arctic topography.
* It is the most expeditious way to bring North Slope oil to market.
* It has adequate financing, all from the private sector.
* It will save the United States from $5 billion to $12.5 billion in foreign exchange over any alternative delivery system.
* It puts North Slope oil where it will do the most good in relation to the total u.s. energy picture.
Nevertheless, the proponents of a Canadian alternative persist in painting their proposal as an ideal and seemingly flawless one. The arguments, as we have also repeatedly shown, are deficient in several respects:
* The Canadian pipeline, as even exist on paper.
an engineering entity, does not
* Its preliminary environmental work is far from complete.
* It still has all the regulatory and legal problems to clear, including the complex and lengthy one of native claims settlements.
* No one has yet come forward with a financial plan for the pipeline that takes into account questions of treaty requirements, taxes, equity ownership and rights to the oil transported.
It will be almost twice as expensive.
The Canadians themselves have shown only minimal interest in the line.
Many of the arguments supporting the trans-Canada route are based on a sense of regional competition pitting one part of the country against another. But the energy crisis now facing us is a national, not a regional phenomenon. We need every barrel of American oil that we can produce and deliver domestically. Each dollar we save helps our balance of payments and strengthens the dollar that is spent in Chicago as well as the one spent in Los Angeles.
Tempting though it may be to focus on a regional need, such as that in the Midwest, and seek an expedient remedy, such as North Slope oil, we should ask ourselves whether this really serves our long-run interests. On one point alone the U.S. Gross National Product our studies with the Wharton Long Range Econometric Model indicate a cumulative loss to our economy of around $19 billion (1973 dollars) through construction of a Canadian pipeline, with all its attendant costs of delay, flight of capital, etc. And this is predicated on the transCanada option delaying us only two years. The actual additional delay might run as long as five.
Let me deal for a moment with the very serious matter of a Midwest energy shortage. I think it is possible to demonstrate that the delays involved in building a trans-Canadian oil pipeline to answer Midwest needs will be counterproductive not only to the total u.s. energy picture, but actually to the long-range requirements of the midcontinent area. There are three potential domestic energy resources, exclusive of initial North Slope oil, that can be used to alleviate Midwestern needs.
2) "Second-phase" North Slope crude oil -- i.e., production that will result from renewed exploration in the area once oil is on stream to the Lower 48.
3) Synthetic hydrocarbons (tar sands, crude oil from coal, oil shale).
The first two of these resources depend entirely on construction of a delivery system for the 10 billion barrels of oil now known to exist under the North Slope. We cannot produce gas until oil production is started. To do so would result in a loss in recoverable oil reserves of as much as 20%. The gas, therefore, can be made available for the U.S. market much sooner with construction of the Trans-Alaskan pipeline. Atlantic Richfield Company is at present a participant with approximately 25 other companies (both u.s. and Canadian) in a study to determine the feasibility of bringing North Slope gas through Canada to the Midwest. This group is known as Gas Arctic Northwest Study Group.
Likewise, we cannot economically justify further exploration of the North Slope until we have some assurance we can get out oil we have already discovered and are ready to produce. If our expectations prove correct, new discoveries could provide a vast new resource that might then justify a trans-Canadian system to the Midwest.
The third element, synthetic hydrocarbons, holds perhaps the greatest promise for easing energy shortages, in the Midwest and elsewhere. By the mid-1980's we expect to have crude oil on stream from the Athabasca tar sands deposits in Alberta, Canada. These contain 200 billion to 300 billion barrels of potentially recoverable oil, the recovery of which has already been demonstrated. The Athabasca reserves could supply the petroleum needs of the Midwest at current rates of consumption for more than 100 years. Wyoming low-sulfur coal will soon be available. In every case, the Midwest is the natural marketplace. But I should point out that as long as the transCanadian pipeline is a serious subject of debate, plans to move this synthetic crude into the marketplace of the Midwest are measurably retarded.
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.