Alaska's Line Starts Piping

Priced at $9 billion, the Alaska oil pipeline is the most expensive privately financed construction project in history. In keeping with its grandeur and technical sophistication, it has produced unprecedented engineering, financial, environmental and legal headaches. Not all have been alleviated; surprisingly, in view of the U.S. energy pinch, the pipeline's operators are most uncertain where they can market all the oil that the line will transport (there has even been talk of shipping some to Japan). Nonetheless, this week--nearly a decade after the project's conception and more than three years after construction started--the Alaska pipeline begins carrying its first oil through nearly 800 miles of forbidding wilderness, from Prudhoe Bay north of the Arctic Circle to the warm-water port of Valdez, which is 120 miles east of Anchorage.

It will be a slow, carefully monitored journey. First, 6 million cu. ft. of nitrogen will be blown through the pipeline to purge air from the system, reducing the threat of oil-vapor explosions. Next, a cylindrical plug, called a "pig," will be shoved into the line. Finally, after a signal from Valdez, workmen will open valves at Prudhoe, allowing long-capped crude to fill the line behind the pig. The moving oil will push the pig through the 48-in.-diameter steel pipe at 1 m.p.h. As it goes, the cylinder will shove out of the pipe any refuse that may be contained (for example, tools left behind by forgetful workmen) and emit beeps indicating its location. Eight pumping stations will help the oil push the pig along, and walking inspection crews will escort the cylinder, monitoring its signals.

The oil will pass over or under 800 streams and rivers, including the Yukon. It will rise 4,800 ft. into the Brooks Mountain Range, swoop down east of Fairbanks, rise 3,300 ft. in the Alaska Range, and eventually drop into half-million-bbl. storage tanks in Valdez to await loading on tankers. The trip will take a month, longer if trouble turns up. But if all goes well, an uninterrupted ribbon of oil--9 million bbl. just to fill the pipeline--should stretch across the Alaskan tundra by mid-July. The flow will be stepped up gradually, reaching 600,000 bbl. daily by August, 1.2 million bbl. in October.

That would be enough to cut U.S. dependence on foreign oil by 14%--assuming all the oil is used in the U.S.--and reduce the nation's bill for imported crude by $6 billion in 1978. Currently, the U.S. uses 17.2 million bbl. daily, of which slightly more than half is imported. The proven reserves of Prudhoe Bay are 9.6 billion bbl., enough to keep the pipeline busy for 20 years. The line will not be formally dedicated until Oct. 8, when it will be in full operation and a number of tankers will have been loaded.

Pipes Under Pipes. First proposed in 1969, more than a year after the Atlantic Richfield Co. (Arco) struck oil at Prudhoe Bay, the pipeline ran into one delaying tactic after another. Alaska's natives--Eskimos, Aleuts and Indians --pressed for and won a federal law guaranteeing them a share of the pipeline's riches. Environmentalists insisted that the wildest of America's frontiers be protected, its delicate balance of nature left undisturbed. Not until the spring of 1974 did the bulldozers start moving; they began then only because the Arab oil embargo pressured Congress into passing a law giving the go-ahead.

The actual pipeline is sounder and more intelligently conceived than the one originally planned. It does not please everyone. Says Guy Martin, Assistant Secretary of the Interior for Land and Water Resources: "The major environmental effect of this pipeline and the road that parallels it is that they're there." With them come nightmares of a pipeline road spotted with McDonald's drive-ins, Exxon stations, Holiday Inns, 7-Eleven stores and the other trappings of mobile America.

The line bristles with care for its surroundings. About half of the line is elevated, protecting Alaska's fragile permafrost from melting under the 180DEGF. temperature of the oil as it leaves the ground at Prudhoe. More than four miles of the underground sections are specially insulated. Refrigerated brine is pumped through pipes beneath the pipeline to protect the permafrost.

Four hundred underpasses and pathways over buried pipe are provided for migrating Alaskan wildlife. Some sectors of the pipe are flexible enough to withstand earthquakes that register 8.5 on the Richter scale--greater than the devastating 1964 Alaska quake that destroyed 30 blocks of downtown Anchorage. The entire system can be shut down in ten minutes if the pipeline breaks. A maximum of 50,000 bbl. can spill; valves at various intervals can be turned to stop the flow.

Strangely, now that the pipeline is completed, there is no place for all the oil to go. Government officials and executives of Alyeska Pipeline Service Co., the eight-company consortium* that built the line, overestimated demand for the oil's natural market: the West Coast. Between the time that oil was discovered and this week's turn-on, the nation went through two recessions, and the growth of oil demand has slowed, especially in California. Existing West Coast refineries could handle only a little more than half the pipeline's output by year's end --and they would require expensive adjustments to do even that.

What to do with the surplus? Half a dozen plans have been proposed. One is to land the crude at Long Beach, Calif., and pump it into Sohio's idle California-Texas gas pipeline, which would feed pipeline systems in the energy-short Midwest. Environmentalists object that vapors from unloading tankers would further foul California's air.

Even if the objections could be overcome, there would still be an oil overflow until one or another of the schemes could go into effect. As a temporary, though unlikely, patch, it has been suggested that the U.S. export Alaskan crude to Japan, swapping it for part of Japan's supply of oil from the Middle East. But that would require presidential approval and congressional concurrence. The President's decision is expected this week or next. The only other immediate way to use all the oil would be to ship it by tanker through the Panama Canal to the U.S. Gulf Coast, a long and expensive haul.

Whoever buys the oil, the companies that discovered it and built the pipeline stand to earn staggering revenues from their investment--$5 billion annually if the U.S. economy continues to recover. The companies with the largest stake in the pipeline would be Sohio, Arco and Exxon. Already, seven of the eight consortium companies have filed proposed shipping charges with the Interstate Commerce Commission. They are stiff, ranging from $6.04 to $6.44 per bbl. just to get the crude from Prudhoe Bay to Valdez.

Camps for Sale. Last week the Justice Department complained to the ICC that the charges could be as much as $2 too high. If the commission orders a cut, it would benefit not the consumer but the state of Alaska. The consumer will probably wind up paying the same price as for imported oil, now $13.50 per bbl. If the pipeline tariff goes down, the companies that own the line can make up most of the difference by paying their producing subsidiaries a higher price at the wellhead to pump the oil out of the North Slope. And their arrangement with the state declares that the higher the price at the wellhead, the higher the revenue payments to Alaska.

The state could collect up to $431 million in royalties and taxes on the oil operations next year but still could use more. With the end of the pipeline building boom, Alaska's unemployment rate has doubled, to 15.4%. Gone are the weekly wages of $1,000 and more. The high pay kept labor strife down but drove pipeline costs up. As Assistant Secretary Martin acknowledges, "The pipeline traded money for time." Some $250 million worth of campsites along the route have been shut down and put up for sale. Only about 1,000 people will continue to manage the line and the drilling equipment at Prudhoe Bay.

Another great pipeline project is on the horizon. Three groups are vying to build a line to carry out the North Slope's vast natural gas reserves. One line would parallel the oil pipe; the other two would swing across Canada into the U.S. The Canadian government is expected to decide in August whether to approve one, or neither, of these routes, and the Carter Administration has until Dec. 1 to choose one of the three. Each carries a price tag of $8 billion to $ 11 billion, but nobody doubts that by the time the job is finished--probably before 1985--it will comfortably exceed the big oil line as the costliest private building project in history.

* Amerada Hess, Arco, Sohio, Exxon, Mobil, Phillips. Union and British Petroleum.

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