The Carter administration's plan to "provide maximum incentives" for oil companies to develop untapped oil resources on Alaska's North Slope came under sharp questning in Congress yesterday.
Sen. Howard M. Metzenbaum (D- Ohio) said a Federal Energy Administration proposal, which would mean an estimated $2 billion in added profits for the oil companies, was based on "the same oil line" that such profits are necessary to stimulate new production. He questioned whether these profits would represent an excessive rate of return on investment.
Sen. J. Bennett Johnston (D-La.), who chairs the Senate Subcommittee on Energy Conservation And Regulation, asked whether the administration had any assurances that the profits would induce the companies to develop North Slope fields.
FEA Administrator John F. O'Leary defended the proposal, saying, "The Alaskan crude coming tin could be a flash in the pan unless we develop further resources." He said the profits its are necessary to stimulate development of two undeveloped fields on the North Slope.
At stake is a proposed FEA ruling that, in one respect, would treat Alaskan oil like imported oil.
FEA has a program to equalize the cost domestic refiners pay for variously priced crude oil. Oil companies that must buy oil at such prices as $11.28 and $13.50 a barrel are entitled, under the FEA program, to a payment from those companies that have access to lower-priced oil.
FEA's new proposal would give Alaskan producers so-called "foreign oil entitlements treatment," meaning they would not have to pay entitlements.
O'Leary said that FEA's plan "will not result in higher prices than the consumer is now paying, since North Slope oil will not sell at a price higher than the price of the imported oil it is displacing."
The Congressional Budget Office estimates that FEA's ruling would increase Alaskan oil producer revenues by $5.54 billion over the next four years. About $1.38 billion of that would go to the state of Alaska; the rest would be divided between the companies and the U.S. treasury.
Sen. Ted Stevens (R-Alaska) who is not a member of Johnston's subcommittee, supported the administration's proposal because of the added revenues it would bring to Alaska.
"If we don't get a fair value for that oil, you won't get it at all," Stevens said.
Earlier, O'Leary criticized a Washington Post article last Friday that cited a CBO study saying FEA's plan would result in $2 billion in additional oil company profits.
"The thrust of the article was that, under FEA's proposed rules for the pricing of North Slope crude oil, we intend to give the North Slope producers $2 billion of revenues they do not deserve, and that these revenues will result in higher consumer prices," O'Leary said.
The Post article quoted Douglas G. Robinson, an FEA official in charge of Alaskan oil policy, as saying the administration plan would not result in price increases.