Tapping Alaska for More Energy

Congress paves the way for the natural gas pipeline

At a cost that could exceed $43 billion, the 4,800-mile Alaska-Canada natural gas pipeline will be the most expensive privately financed construction project in history, surpassing by far the $9 billion spent on the 789-mile Alaskan oil pipeline during the 1970s. Last week the U.S. House of Representatives passed a bill already approved by the Senate that could make the project the most controversial as well.

By a 230-to-188 vote, the lawmakers approved a package of waivers to the Alaska Natural Gas Transportation Act, which set the ground rules for the project as early as 1976. The three U.S. natural gas producers involved in the deal--Exxon, Standard Oil of Ohio and Atlantic Richfield--will be allowed to share ownership in the pipeline with the Alaskan Northwest Natural Gas Transportation Co., the ten-company consortium that plans to build it. A1977 presidential decision barred such an agreement on antitrust grounds, but the backers argued that the change was needed to pay for the project.

Another part of the legislation will allow the pipeline's owners to begin sending gas bills to consumers even before the pipeline is completed and fuel starts flowing. The companies insisted that this was necessary to protect investors should the pipeline be delayed or blocked by legal action in the U.S. or Canada. Construction on the Alaskan oil pipeline was halted for five years because of an avalanche of court cases by environmentalists.

The bill allows the Federal Energy Regulatory Commission to set a deadline for the construction of the pipeline. If this is not met, the companies could begin billing consumers in 42 states for the cost of the project. A House Energy Committee study estimates that those bills could range from zero to $191 a year for household customers and up to $25,000 annually for industrial users. One clause in the bill would permit the companies to make such charges even if the pipeline is never completed.

Critics say that these prebilling conditions are no more than a way to put the risks of building the pipeline on the shoulders of consumers. Said House Democrat Harold Volkmer of Missouri: "This is one big rip-off."

Actor Paul Newman, a founder of Energy Action, a consumer group, said in Washington last week that the whole operation makes "the railroad robber barons look like cheap stuff." Ralph Nader claimed that consumers were being forced to pay for the pipeline without having a say in management.

The rationale for the pipeline has been that the country needs Alaska's gas in order to become more energy independent. The 26 trillion cu. ft. under Alaska's North Slope are equal to 13% of U.S. proven reserves and could reduce foreign-oil imports by at least 400,000 bbl. a day.

President Reagan has already said he will sign the bill when Congress passes it, but the pipeline will still face some serious hurdles. Arranging the huge amounts of necessary bank financing will be difficult in view of current tight credit, and a Reagan Administration decision to speed up the decontrol of natural gas prices might also complicate the issue. Such a step would make Alaskan gas more expensive than projected and would dim the attractiveness of gas from under the midnight sun.

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