shore. I may be wrong, but I think that inference may worry some people.

If there were to be substantial discoveries in Santa Barbara and the Gulf of Alaska, I think that would be a wonderful thing because with the availability, refiners would be willing to expand and build refineries on the west coast. I think it is worth observing there is a pipeline network that originates in west Texas and New Mexico, and goes eastward. As those lines have extra capacity, it is available for other use. They have multiple line rights, so right-of-way would not be a problem. Also there is one line going from New Mexico westward to the Los Angeles area. That line-I am not sure of this-has multiple line rights, at least most of the way.

Mr. REAM. Yes. Supplementing what Mr. Spahr is saying, my submission indicates we are looking at these very alternatives.

Mr. SPAHR. I hadn't completed my point yet. I would think, in the eventuality of the development of surplus production in the western area of the country, the oil that has been flowing to the West and Four Corners Area could be turned around to those lines I have mentioned that already go eastward and I think the Four Corners line could be supplemented as well, so you can easily move excess oil to the East without substantial requirement of an investment of a totally new line. In the beginning, sir, when we contemplated completion of the trans-Alaska facility in 1972 and 1973, it was apparent to me that we were going to have oil, Sohio would have oil that couldn't be marketed on the west coast immediately, and we turned our attention to the question, how are we going to get into the Midwest, through a new line out of Seattle, for example, or through another system? This is not a new thought. It is a matter that is of real interest.

Senator MCCLURE. I am sure both of you are aware of the legislation submitted by the administration to prohibit drilling in the Santa Barbara Channel. I am sure you are aware of the stated intent to renew that request with the passage of that legislation. If that is passed, then I understand both of your comments would be that the production estimated presented by the Interior or you individually for the west coast would be substantially less; is that correct?

Mr. REAM. Yes.

Senator MCCLURE. Then the imbalance between supply and demand, with a shortage of Alaskan oil, will be a larger shortage.

Mr. REAM. Yes. On the Santa Barbara Channel, I believe, there has been a holding off of drilling, and the President's message really continued that ban on drilling in the channel, pending a determination that further drilling will be environmentally safe. I don't anticipate whether it will be determined to be environmentally safe or not. We have assumed it might be, and therefore have taken from this point of view a caution

Mr. SPAHR. Secretary Morton included Alaskan production from the North Slope in his figures.

Mr. REAM. Our figures include South Alaska on a decline curve— that is existing south Alaska-and we have 2,000 barrels a day from the Gulf of Alaska.

Mr. MADAR. If my notes are correct, and I have not examined his testimony, I believe he commented 2.6 million in 1982, including 2 mil

lion barrels per day of North Slope production at that time, and the base numbers

Senator MCCLURE. I was comparing the 1980 figure, rather than the 1982. I don't know whether that changes the situation or not.

Mr. MADAR. I am not sure it does. In looking at 1982, as a base, that would leave approximately 2,000 barrels a day for the internal California production, and that corresponds fairly well with the estimates submitted by the California State Resource Commission, and sort of looking back towards 1980 and, trying to fill in the missing numbers, the 1.9 million would be a very drastic step down to the 600 of 1982.

Senator MCCLURE. Thank you very much.

Moving to another point, Mr. Ream, you said that your company has become convinced that the Mackenzie Report estimates being published were understated?

Mr. REAM. Yes.

Senator MCCLURE. What led you to that conclusion?

Mr. REAM. Detailed knowledge of the basis of the estimate. I would use two examples, and by no means am I implying other than that the Mackenzie group was in the same early stage as the Alyeska was. As one learns about the difficulties of building this type of line, under environmental constraints, the higher the price goes. The Mackenzie Valley line has been designed for a settlement of 3 feet and the Alyeska line was designed for 1-foot settlement. That is an example of the very nature of an assumption that has a signal impact on the stress ratio in the pipe and can affect the amount of pipe above and below ground, which adds considerably to cost. It is these types of assumptions here that led us to the conclusion that the figures were unrealistically low.

Senator MCCLURE. The Mackenzie group confessed that particular omission from their study, and estimated a $75 million addition to the cost. Would that sound reasonable or would you have any opinion on that?

Mr. REAM. I don't believe I have an opinion on that item.

Senator MCCLURE. It has been charged that the companies involved in Alyeska completely ignored the 1920 Mineral Leasing Act with regard to the right-of-way. Do you have any comments on that?

Mr. REAM. Yes, speaking from a legal point of view-and I am not a lawyer-my understanding is that there has been an administrative practice over the years that said one could use construction rights-ofway that extended beyond the 25-foot limitation on either side and these were granted then as special land use permits on the basis they were not permanent parts of the pipeline, and our legal advisers had told us with considerable research and review that they believe there was this possibility of not running from a legal point of view, but they felt there was a legitimate risk, other pipelines had been built in the United States since 1920. Of course, it is this relief which was turned over by the Court of Appeals.

My answer then is we didn't think we were breaking the law, obviously.

Senator MCCLURE. Is there anything you would like to add to that, Mr. Spahr?

Mr. SPAHR. Not really, sir. Our lawyers were in consultation with each other on this. I think it is accurate to point out that the problem of interpretation of the law fell into the hands of the Secretary of the Interior. We are a third party, somewhat, as I see it, sir, at the mercy of the interpretations of the law by the courts, and somewhat at the mercy of determinations of what proper action should be taken in getting ready to issue you a permit by the Department of Interior. Not to criticize in any way at all, as Mr. Ream has indicated there was a considerable assurance arising out of practice for many years that we didn't have a problem.

Mr. REAM. The key point here is, no one in any of our companies had this feeling that this was a question of breaking the law. It was a question of highly technical interpretation, supported by the degree in a pump station it is all right, but a pipeline is not.

Senator MCCLURE. One further question. If you proceed far enough in your contacts with the Canadian Government do you have any idea of the operating constraints of the tankers in the coastal waters?

Mr. REAM. We have had extensive discussions of an informal nature with the Canadians. We do operate tankers in Puget Sound. We have both foreign flags and United States going through our ports. We have had indication of concern. We have had no formal discussions because there is no basis in fact or in law at the moment for any regulations. We are abiding by the laws that exist between the United States and Canada in U.S. waters. We abide by the operation of our tankers in and out. There is no issue.

Senator MCCLURE. You have heard the statements made by some that your tankers will not be permitted to operate within the coastal waters of Canada?

Mr. REAM. They do not presently, nor do we intend they do. Senator MCCLURE. So the north-south traffic will be outside of their waters?

Mr. REAM. Yes.

Senator MCCLURE. Thank you both very much. I appreciate your

answers.

Mr. SPAHR. Might I say one other additional thing, Senator, on a subject not touched upon here, but earlier the question was discussed among you briefly about considering some legislation on where the oil from Alaska might go, for example, a prohibition against us going offshore. All I want to say is when you think of this consider what kind of latitude the Government ought to have in times of national or international emergency. As I say this I recall there have been situations resulting from international traffic in the Suez Canal, and other Middle Eastern sources, in the past and during those times when Europe was in difficulty, and the United States aided it in its difficulty by arranging for oil that otherwise would have come from Venezuela, to go to Europe. There is some oil from the United States that went offshore from the gulf coast to Europe. I just feel that you should leave latitude for operation in unusual times.

Senator HASKELL. Thank you, gentlemen. I am sorry I was not here when you made your presentation. Therefore, I have no questions. Thank you very much.

STATEMENT OF WILBER MACK, CHAIRMAN AND CHIEF EXECUTIVE, AMERICAN GAS SYSTEM, REPRESENTING THE AMERICAN GAS ASSOCIATION AND THE INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA

Senator HASKELL. Mr. Mack, due to the lateness of the hour, I would appreciate your summarizing, if you could, and then submit your full statement, which will be incorporated in the record.

Mr. MACK. I shall do that, Senator.

May I say I am Wilber Mack, chief executive officer of the American Natural Gas System, which includes Michigan and Wisconsin Pipeline Co. Associates, and I have two of my associates with me, Mr. Cedar and Mr. Smith, the chairman of the technical committee of the gas Arctic project about which I will be talking.

We have submitted a detailed statement and you said that will be made part of the record. I have a summary here which will take a short time, 10 minutes, and I think it is an added dimension to what you heard today. I believe you will believe it important to be given.

American Natural is the principal supplier of gas to consumers in the States of Michigan and Wisconsin and also serves customers in other States through the Midwest.

I am appearing on behalf of the two trade associations that represent virtually the entire natural gas industry, the American Gas Association and the Independent Natural Gas Association of America. Together, they include over 300 gas transmission and distribution companies which deliver some 92 percent of the gas ultimately consumed in this country.

I have filed a statement with the committee detailing the importance of natural gas to the Nation's householders and to the industry and commerce generally, and the critical need for prompt development and utilization of the vast gas reserves that have been discovered on the North Slope of Alaska.

In my oral presentation, I would like to emphasize just one point that has so far been overlooked or ignored in the entire controversy over the routing of the oil line. That point is that if the oil line were to be diverted from the trans-Alaskan route to an overland route across Canada, construction of the natural gas pipeline from Prudhoe Bay to the lower 48 States, which is now targeted for completion in 1978, would be delayed until the mid-1980's or beyond. Such a delay would not only deprive gas consumers of vitally needed supplies but would increase the delivered cost of Alaskan gas by hundreds of millions of dollars.

The gas industry is therefore strongly opposed to S. 993 and S. 1565 and to all other proposals to route the oil line from Alaska overland through Canada. We support legislation whose purpose and effect is to permit the prompt construction of the TAPS line across Alaska. I might add that a resolution adopted by the NARUC, which represents all State public utility commissions, endorsing the same position is appended to my prepared statement.

First, let me describe the Arctic gas pipeline project and its present status.

I, personally, and my company have been working on this project since the Prudhoe Bay field was discovered in 1968. At that time we teamed up with the Peoples Gas System, which serves Illinois and Iowa, and Trans-Canada Pipelines Ltd., the principal gas pipeline system in Canada, to conduct a study of the technical and economic feasibility of a gas pipeline from northern Alaska to eastern Canada and the Midwestern United States. We were later joined by the principal producers in the Prudhoe Bay field, and last year our group merged with another group which was conducting similar studies to form the gas Arctic-Northwest project study group.

That study group has now grown to some 25 Canadian and U.S. member companies, and we have spent a total of over $25 million in technical, environmental, economic, and financial studies in preparation for the filing of applications with the Canadian and U.S. Government agencies for authority to build a gas pipeline from the north slope of Alaska and the Mackenize Delta to points on the Canadian border in the Midwest and west coast areas. The pipeline would be 48 inches in diameter and would deliver 4 billion cubic feet of gas per day when fully powered.

We anticipate that the requisite applications will be filed this fall, and our plans call for a 3-year construction program leading to completion of the pipeline in 1978. Additional compressor stations would be added in each of the next 2 years to boost throughput to the 4 billion cubic feet per day figure by 1980. The estimated cost of the Alaskan and Canadian facilities is approximately $5 billion.

Predicated on those dates separate groups have been formed to plan and construct the facilities necessary to transport the Arctic gas from the Canadian border to market areas on the west coast and in the Middle West and East, respectively. The latter group, of which my company is a member, plans a $1 billion pipeline from the Canadian border west of Lake Superior to the Chicago area and thence east to Ohio and Pennsylvania.

Our plans, and particularly the timing of our project, assume that the trans-Alaska oil line will be authorized and constructed promptly. Gas in the Prudhoe Bay field is found in association with the oil and cannot be produced until oil production begins. Accordingly, the TAPS line must be authorized and construction well advanced before we can go forward with construction of the gas pipeline.

What, then, would be the effect on the gas pipeline project of a decision requiring that the oil line be routed overland through Canada to the Midwest? I can only say that it would be catastrophic, both from the standpoint of the delay in bringing urgently needed supplies of gas to consumers in the lower 48 States and from the standpoint of the increased costs they would pay when the gas finally arrived. Let me explain.

First, the Alyeska group has estimated that it would take 9 or 10 years from the date a trans-Canadian oil pipeline route was mandated until North Slope crude oil production could begin. From our experience in planning a natural gas pipeline through the same area, I would say that is an entirely realistic estimate. Since, as I have said, gas production from Prudhoe Bay cannot begin until after oil production has been established, adoption of the Canadian alternate for the oil line would delay completion of the gas pipeline until the