Alaska's Frustrating Freeze in Oil

Three years have lapsed since drillers struck oil on Alaska's North Slope, touching off a black-gold rush that promised to make the relatively poor state the "Kuwait of the North." What has happened to the promise? To find out, TIME Correspondent Patricia Delaney spent ten days trekking across Alaska. Her report:

SUMMER is settling in on the North Slope, and the Arctic yellow poppy blooms in riotous abundance at Prudhoe Bay. Near a lone British Petroleum Co. rig, indifferent caribou graze. At the base camp, oil workers grow restless in the 24-hour daylight. Another idle crew waits 60 miles south, near Galbraith Lake, where $4,500,000 worth of unused Cat tractors, bulldozers, graders and pickup trucks stand in precise rows, as in a toyshop at Christmas. Hundreds of miles farther south, at the port of Valdez, workers are beginning to coat stacks of rusting pipeline--400 miles of it--to prevent corrosion. Three years after one of history's richest oil discoveries, production is as bogged down as a truck convoy in tundra. The cause of the delay is the Department of Interior's refusal to grant a pipeline permit until the requirements of the 1970 Environmental Protection Act are met.

Safeguards Demanded. Few Alaskans foresaw the delay in 1968, when Atlantic Richfield (ARCO) and Humble Oil brought in spectacularly successful wildcat wells at Prudhoe Bay. Reserves were initially estimated at 10 billion barrels, but are now figured to be 15 billion, fully one-third of the nation's total. In the race to begin drilling, supplies were airlifted round the clock by huge Hercules "stretch" freighters from Fairbanks. Adding to the "boomer" spirit, ARCO, Humble and British Petroleum announced plans to spend $900 million to build a 789-mile pipeline from the North Slope to Valdez. In a frenzy of competition, oilmen bought leases for $900 million--enough to cover all state expenditures at the 1968 rate for 41 years. Delirious Alaskans were told that when production reached maximum levels, the state would receive $200 million a year in oil royalties and taxes. University of Alaska economists have since increased the estimate to $350 million annually.

Such hopes now seem to be foundering in an Arctic white-out of problems. Some 57,000 Aleuts, Indians and Eskimos, protesting that the pipeline would pass through 641 miles of federal lands claimed to be theirs, demanded compensation. This has forced the Department of Interior to delay construction until the land claims can be settled. Then there were the complaints that the pipeline would ravage Alaska's ecology. The pipeline would traverse three rugged mountain ranges, 23 rivers and three active earthquake zones. Much of the terrain is delicate permafrost, which could become a bog if its surface cover is disturbed.

The Interior Department has demanded a detailed environmental-safeguard report before construction can begin. Last month Interior Secretary Rogers Morton visited Alaska to see the route for himself. Oilmen, business leaders and Governor William Egan pleaded for a decision, but the permit is still not forthcoming. The angry Governor told TIME: "Oil was to be the catalyst to solve our economic difficulties. We are being kept from using our resources and controlling our own future." In turn, Morton recently complained about another delay: "The monkey is on the oil companies' back. I've been two-weeked and two-weeked to death waiting for their safeguard report." By last week, he finally got part of it--16 boxes of data, standing 5 ft. high. Once Morton receives the complete report, he is expected to approve the pipeline permit, probably in midautumn, laying down a host of conditions on construction. But environmentalists and land claimants are likely to try to stall the project further in the courts.

Payoff Zero. Meanwhile, the boomer spirit has given way to despair. Near Anchorage, construction of the new Forum Hotel has halted. At the Anchorage airport, the Red Dodge Aviation Co. has abandoned its partially finished $2,000,000 freight terminal and has filed for reorganization under the bankruptcy law. Interior Airlines has also gone to court to stave off creditors. Alaska Airlines is in dire financial straits, as are several construction companies. Many corporations have overextended themselves. Bankers have begun to dry up financial pipelines that were once easily accessible to entrepreneurs. The Alaskan unemployment rate is 13.8%. The state has put up booths at the border and at airports in Seattle, Blaine and Sumas, Wash., and Sunburst, Mont., where representatives warn would-be immigrants not to go north in search of work and riches.

So far, the oil companies are the biggest losers. They have invested $1.5 billion on the North Slope. Because the oil has not yet begun to flow out, the companies are losing $300 million to $400 million in annual revenues. Complains Ed Patton, president of Alyeska Pipeline, an oil-company consortium: "The costs are increasing dramatically each month. The interest alone on our investment runs to some $90 million annually." Moreover, the final cost of the pipeline may well be double the original estimate and hit $2 billion, owing to inflation and some highly complex engineering difficulties.

Fighting Pollution. The companies have derived some unexpected benefits from the delay. Oilmen confess that if they had crash-built the pipeline two years ago, they would have made horrendous mistakes. Since then, they have learned how to deal more expertly with the fierce conditions of climate and geography. To protect the swampy tundra terrain, the companies use offshore drilling techniques. They have developed new strains of grass to grow on disturbed tundra, and they plan to install monitoring devices that would automatically turn off oil flow minutes after a leak is detected. The port of Valdez will have probably the most advanced antipollution system in the world. Problems remain, but University of Alaska Ecologist Vic Fischer says: "The basic environmental questions have been faced, and engineering can solve them."

Concern is nonetheless growing about the effect on the Alaskan economy if the pipeline is further delayed. Donald L. Mellish, president of the National Bank of Alaska, says: "Most businesses have not yet been hurt, but if the pipeline permit is turned down, it will practically kill our hope of getting outside investment." Unless pipeline construction starts quickly, Alaskans at the very least will face a crisis of falling expectations.

This file is automatically generated by a robot program, so reader's discretion is required.