California, There They Go

Sohio bows out of Long Beach

" This foreign multinational has pulled out. I'd like to know why very quickly." So snapped California Governor Jerry Brown last week, when he heard about the startling decision made by Standard Oil of Ohio. After five years, $50 million in expenses and submission of more than 700 permits and applications, the company, which is part owned by British Petroleum, was abandoning its ill-starred effort to launch a $1 billion project that would have been of value to the entire nation. Sohio wanted to convert an unused 700-mile natural-gas pipeline to move Alaskan oil from Long Beach, Calif, to Midland, Texas, for further delivery to the energy-hungry Midwest.

The project would have enabled Alaskan production, presently set at 1.2 million bbl., daily, to increase to a full 1.6 million bbl., and thus help reduce dependence on foreign oil. Without the pipeline, it would be difficult to raise the North Slope output: the West Coast is already overflowing with Alaskan crude, and Sohio is having to ship some 350,000 bbls. a day of it via tanker through the Panama Canal, a process that adds up to $1 per bbl. to the cost. What is more, oil companies are barred from exporting Alaskan oil, even if the purpose is to swap it for foreign oil that can be brought more easily to East Coast ports.

The pipeline project would have sharply reduced the problems, but California's superardent environmental officials yelped that it would befoul Long Beach harbor with oil spills and seriously worsen the local smog problem, because merely unloading the oil would release hydrocarbon fumes into the atmosphere. Among other requirements. Sohio had to agree to achieve a net reduction in air pollution by paying $78 million to install antipollution gear at a Long Beach utility plant.

As the delays dragged on, new complications arose. By the time that the environmental hurdles were overcome, inflation had pushed up the cost of the project so much that it no longer seemed attractive. Meanwhile, El Paso Natural Gas, the pipeline's owner, began hinting that Sohio might have to pay much more than it had expected for the line.

When Sohio finally called it quits, California officials were stunned. Governor Brown's office sputtered that "only two final permits" were needed, and that approval could be expected within a week. Sohio officials were unimpressed. Said one: "We've been hearing that sort of thing for years now."

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