Decision for the Northwest

OIL & GAS

For more than a year the most active stocks on the American Stock Exchange have been Canadian oil and gas issues.

Spurred on by the hope that Canada would soon be piping gas into the Pacific Northwest--the only major area in the U.S. without natural gas--speculators ran prices upward. Last week the bubble burst.

U.S. gas, instead of Canadian, ruled the Federal Power Commission, will go into the Northwest. On the American Exchange some Canadian issues dropped by a third, and trading was suspended for a time in Pacific Petroleums Ltd., down 3 1/2 points to 7 1/4. The Vancouver Stock Exchange was hit even harder; Inland Natural Gas tumbled from $2.50 to $1.15, Peace River Natural Gas from $6.15 to $3.75.

The FPC decision followed a five-year battle that had narrowed down to two leading contenders. Winner was the Pacific Northwest Pipe Line Corp.. headed by Pipeline Builder Ray Fish, who plans to run a line 1,466 miles from the San Juan Basin of Colorado and New Mexico to Bellingham. Wash. Fish has had plenty of experience. His Fish Engineering Corp. built two of the world's longest pipelines: the Transcontinental, from Texas to New York, and the Texas Illinois, serving the Chicago area. He plans to finance the new $160 million line with common and preferred stocks and by selling bonds to insurance companies.

Loser was the Westcoast Transmission Co., Ltd., of Calgary, Ont., headed by Canadian Oilman Frank McMahon. He wanted to bring gas to the Northwest through a 930-mile pipeline from Canada's Peace River section in northern Alberta and British Columbia, where his Pacific Petroleums has sunk millions into a huge, new gas field. Losers also were the Canadian provinces of Alberta and British Colum bia, which had hoped for big, new indus trial developments along the gas line. Cried one provincial cabinet minister: "This is disastrous."

Penalty for Stalling. But Canada's western provinces had only themselves to blame. Five years ago, Alberta might have won permission to pipe its gas to the U.S. But it wanted to hold on to enough gas to supply Canada for the next 50 years, decided that Alberta gas should first be piped to eastern Canadian markets. Not until the big Peace River Field was proved did Canada decide that it had more than enough for its own needs, and give an export permit to Westcoast. By then. Pacific Northwest was well along with its plans for an all-U.S. pipeline.

One big argument for U.S. gas. said FPC in its decision, was that the consumer's interests would not be protected if he were "wholly dependent upon an exclusive source of supply entirely beyond the control of agencies of the U.S." Another point: the U.S. pipeline would encourage development of large sedimentary basins in Colorado, Utah and Wyoming, which probably contain gas.

Glimmer of Hope. Faced with the loss of a market for its gas, British Columbian authorities were busy casting up new plans. One of them was to furnish provincial government help to finance Westcoast's $80 million to $90 million pipeline as far as Vancouver, near the U.S. border. Economically, the idea was unsound. British Columbia can use only an estimated 20% of the capacity of such a pipeline. The only market that could make the pipeline pay would be the more populous U.S. Northwest. There was still a glimmer of hope that the FPC might reconsider, if the pipeline quickly reached the southern edge of Canada, where it would be a simple matter to extend it into the U.S. Lending support to that hope, FPC Chairman Jerome Kuykendall had urged that Pacific Northwest's certificate be deferred while waiting to see whether Canada might authorize "an adequate supply" from southern Alberta.

There were signs this week that the certificate might be held up indefinitely, anyhow. Westcoast Transmission's lawyers recommended a rehearing before the FPC, and possible court action if it fails. Canada also has strong allies in the state of California, who think that the San Juan field should be reserved for its own future use, and that the Northwest should be supplied by imports. Even if the courts uphold the FPC, chances are still good that the U.S. will welcome Canadian gas to supplement domestic supplies.

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