early 1980's even assuming both projects could be constructed simultaneously. The fact is, however, that both projects could not be constructed through Canada at the same time for a number of very practical reasons. Construction of either the oil pipeline or the gas pipeline will require all the construction equipment, construction personnel, transport, supply, and communications facilities that can possibly be assembled. You must remember that either one of those projects would be the largest and most difficult pipeline project ever constructed and that much of the area being traversed is a trackless wilderness; and that weather conditions will substantially reduce the productivity of both men and machines. For that reason, construction of the gas pipeline could not proceed until after the oil pipeline has been completed. Second, gas pipeline could not be constructed through Canada at the same time as the oil line because of financial considerations. We have been advised that financing of the gas pipeline alone, which will cost about $5 billion for the Alaskan and Canadian facilities and another $1 billion for facilities in the lower 48 States, will be a very difficult undertaking which will strain the capability of both Canadian and U.S. capital markets. There is no likelihood, in our view, that the gas pipeline and an even more expensive oil pipeline could be financed. at the same time. Furthermore, while we are convinced that construction of the gas pipeline alone will not have a disruptive effect upon the Canadian economy, simultaneous construction of two such projects in Canada having a total cost of well over $10 billion, in the neighborhood of $12 billion, would involve such a massive influx of capital as to threaten a severe increase in the value of the Canadian dollar and a massive dislocation of the Canadian economy. Since the two projects could not be constructed simultaneously, this means that adoption of a trans-Canadian route for the oil pipeline would not only delay the gas pipeline, by the 9 or 10 years required to design, engineer, and construct the oil line, but would add an additional 3 or 4 years beyond that for construction of the gas pipeline. The result is that selection of a trans-Canadian route for the oil line would postpone completion of the gas pipeline until sometime in the mid-1980's or thereafter. If the TAPS line is promptly constructed across Alaska, on the other hand, construction of the gas pipeline across Canada can proceed very much as now scheduled. The bulk of the oil line construction will have been completed during the period that the gas pipeline project is obtaining necessary Canadian and U.S. Government authorizations, the necessary pipe and materials are being manufactured and essential supply and logistical support facilities are being readied. There will be little or no overlapping of the construction or financing requirements of the two projects, and since the two pipelines will be traversing widely separated areas, the transportation and support facilities available in the respective areas will not be overloaded. What would be the result of such a delay in terms of meeting the needs of U.S. consumers for clean burning natural gas and in terms of the cost of the delivered product? I don't need to remind this committee of the seriousness of the natural gas shortage. During the last 5 years, 1968–72, the production and consumption of gas in the United States exceeded the volume of new discoveries, excluding the Prudhoe Bay field, in every single year by a cumulative total of 54 trillion cubic feet, or approximately 18 percent of the total U.S. proven reserves at the beginning of that period. We desperately need the Alaskan gas, not only the 30-plus trillion of reserves already proven in the Prudhoe Bay field and surrounding areas. but the vast potential reserves in Alaska, which have been estimated at over 300 trillion. That potential will not begin to be developed until the gas pipeline becomes a reality. The cost consequences of the delay are equally staggering. Our studies indicate that the gas pipeline through Alaska and Canada will cost about $5 billion based on the construction schedule I mentioned earlier, which contemplates that the pipeline will be completed in 1978 and will be fully powered in 1980. This estimate is based on the assumption that overall costs will escalate 4 percent per year. If the project were delayed for between 5 and 10 years, therefore, the increase in total project costs would amount to between $1 and $2 billion. Translated into the costs the consumer would have to pay for Alaskan gas, this delay would mean that U.S. consumers would have to pay between $250 million and $500 million more each year than would be the case if the present schedule were maintained. Stated another way, for each working day that the project is delayed, the cost of the gas pipeline goes up about $1 million, and the annual cost of gas to U.S. consumers goes up by about $200,000 per day. While I represent the gas industry in this hearing, therefore. I feel that I speak for the gas consumer as well in saying that the delay of the gas pipeline that would result from rerouting the oil pipeline through Canada would simply intensify present gas shortages and would lead to intolerable increases in gas costs. I should think, too, that since gas is so essential to combating air pollution, those truly interested in the quality of our environment particularly in the urban areas, where most of us live, would be as anxious as we are that the gas pipeline be constructed with the utmost expedition. That can only be done if the TAPS line is promptly authorized and constructed. We therefore support S. 970 and all other legislation having that purpose and effect. That concludes my statement, Mr. Chairman. We are ready to answer any questions you may have. Senator FANNIN. Thank you, Mr. Mack, for a very comprehensive statement on the gas program. In calculating these potential reserves in Alaska, what sources was utilized? Mr. MACK. This is a committee formed by the industry called the Potential Gas Supply Committee. And the figures I gave you were taken from a report gotten out in 1971. Senator FANNIN. 300 trillion? Mr. MACK. 327 trillion is the figure, I believe. Senator FANNIN. Do you have a compilation of those figures? Do you have any other statement that would break down those figures in any way? me. Mr. MACK. I have a breakdown. I don't know whether I have it with Senator FANNIN. We would appreciate it very much if you could supply that for the record. [Subsequent to the hearing, Mr. Mack submitted the following information:] Hon. HENRY M. JACKSON, Washington, D.C. MICHIGAN WISCONSIN PIPE LINE CO., DEAR SENATOR JACKSON: When I appeared at hearings on the Trans-Alaska oil pipeline bills before the Interior and Insular Affairs Committee on May 3, I was asked a question by Senator Fannin regarding the source and makeup of the estimate of 327 trillion cubic feet of potential gas reserves in the State of Alaska. This will advise you, in confirmation of my answer, that the source of the 327 trillion estimate is a Potential Gas Committee Report dated October 1971, entitled "Potential Supply of Natural Gas in the United States," prepared by an industry committee. The breakdown of the 327 trillion cubic feet potential gas supply in Alaska as of December 31, 1970 is as follows: Probable Speculative 39 61 227 327 In addition to the above, the Committee reports 31 trillion cubic feet of proven reserves. A copy of the Committee's report is enclosed for your information. Your attention is called to pages 15 and 20 for the information referred to above. Very truly yours, WILBER H. MACK, Chairman. NOTE. The "report" is filed in the Committee's Official Files. Mr. MACK. I think actually, you have 31 proven, 61 probable and 327 as the potential. I think those are the figures, but we will be glad to supply the report or figures taken from the report to make sure my answer is correct. Senator FANNIN. That would be very much appreciated. There may be some other questions that other members may wish to ask, and I may have some questions after I have had an opportunity to review your statement. We would appreciate it if you would be willing to answer any questions that would be mailed to you. Mr. MACK. By all means, Mr. Chairman, by all means. Senator FANNIN. Thank you, gentlemen, very much, I appreciate your testimony and I appreciate your waiting to this late hour to give the testimony. Mr. MACK. Thank you for the opportunity for appearing here, Mr. Chairman. Senator FANNIN. Thank you, kindly. [The complete statement and summary of Mr. Mack follows:] AMERICAN GAS ASSOCIATION INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA STATEMENT OF WILBER H. MACK before the INTERIOR AND INSULAR AFFAIRS COMMITTEE in hearings regarding TRANS-ALASKA PIPELINE LEGISLATION May 3, 1973 Mr. Chairman, my name is Wilber Mack. I am Chairman of the Board of Directors and Chief Executive Officer of the American Natural Gas system, and I appear today on behalf of the American Gas Association and the Independent Natural Gas Association of America. These national industry associations include over 300 transmission and distribution companies which deliver some 92 percent of the gas ultimately consumed in our country and serve about 150,000,000 consumers in all 50 states. Natural gas provides one-third of our nation's total energy requirements, including some 43 percent of that used by industry. Also, when energy for transportation is excluded, natural gas accounts for 43% of our national stationary energy needs compared with 27.5% for oil, 23% for coal and 6.5% for hydropower and nuclear. Not only is it important because of the predominant role in the energy market, but natural gas is universally recognized as the most favorable fuel to counteract the many ecological problems with which we are faced today. These facts, together with the serious natural gas shortage confronting our nation, underscore our support for legislation that will permit construction of the Trans-Alaska pipeline at the earliest possible date. This in turn will enable the huge natural gas supplies of the North Slope to be made available to consumers in the Lower 48 States with a minimum of delay. First, a word about my own company and its special interest in gas supplies from Alaska and the Canadian Arctic. The American Natural Gas system is an integrated natural gas operation which transports gas from the three largest producing areas of North America. Its gas supply subsidiary, Michigan Wisconsin Pipe Line Company, owns and operates an extensive natural gas pipeline system supplying gas to 53 gas distributing utilities serving market areas whose population exceeds 5,700,000 in the states of Michigan, Wisconsin, Iowa, Illinois, Indiana, Kansas, Missouri, Ohio and Tennessee. In 1972 the American Natural system sold 954 billion cubic feet of gas to its distribution customers. American Natural's supply subsidiary, Michigan Wisconsin Pipe Line Company, long ago recognized the need to meet the rapidly increasing demand for gas and to replace current production. Consequently, Michigan Wisconsin and a consortium of 25 other energy companies--U. S. and Canadian--are finalizing plans to construct a natural gas pipeline through Canada to the Lower 48 States. This group, known as the Gas Arctic-Northwest Project Study Group, is completing extensive technical, financial and environmental studies and research prior to filing applications with United States and Canadian Government agencies this fall for authority to construct and operate the proposed pipeline facilities. To date, this Study Group has expended in excess of $25 million toward that end. The Gas Arctic-Northwest Project Study Group is concerned only with the construction of the gas pipeline in Alaska and Canada. Construction |