The trans-Alaska oil pipeline cost much more than estimated to build, and cost of shipping oil through it also will be higher, two oil companies have told the Interstate Commerce Commission.
The new estimates come from Atlantic Richfield and Amerada Hess, two of the eight members of the consortium that built the pipeline.
The estimates are disputed by the state of Alaska, which could lose millions of dollars in royalty revenue if the ICC accepts the oil company figures.
The ICC has jurisdiction over the rates that can be charged for shipping crude oil through the pipeline. Essentially, those rates are supposed to allow the builders to recover the pipeline's cost over a number of years and make some profit.
Thus, the higher the construction costs allowed by the ICC the higher the shipment charges.
These higher charges would not affect the price consumers pay for Alaska oil at this end of the pipeline; that price is limited by federal crude oil price controls.
What is at stake instead is how the money paid for oil is to be divided - how much allocated to production costs and how much to shipping costs.
This is important even though the producing companies are also the shipping companies; they own the pipeline.
The reason: they pay royalties to Alaska on the wellhead value of the oil, which is determined largely by production cost. The lower the wellhead value the lower the royalty - and the higher the shipping charge, the lower the welhead value, under the companies' accounting system.
That is why Alaska's deputy attorney general, Wilson L. Conden, said yesterday the state will file a formal protest with the ICC later this month accusing the companies of "impermissible double counting" and "cost overruns" for the 800-mile, $9.2 billion pipeline.
Alyeska Pipeline Service Co., the pipeline consortium, estimated in 1974 that the pipeline would cost $6 billion. Government experts later estimated it would be $7.7 billion or higher.
The Federal Energy Administration earlier this year projected that it would cost about $5.50 a barrel to ship oil through the pipe, giving the pipeline company the standard rate of return.
Now, however, Atlantic Richfield says the figure should be $6.04 under traditional ICC rules, and Hess says it should be $6.44 a barrel.
Other members of the pipeline consortium include Standard Oil Co. of Ohio, Exxon Corp., British Petroleum Inc., Mobil Oil Corp., Union Oil Co., and Phillips Petroleum Co.
ICC Chairman Daniel O'Neal said, "The ICC will analyze the traiffs submitted by the companies with an eye toward fairness to the producers, the consumers, and the state of Alaska."
Under ICC rules, O'Neal said, the 11-member commission can deny the protest, or suspend operation of the pipeline for as long as seven months.
Alyeska is expected to start testing the pipeline around June 20, and send the first commercial shipment south in mid-August.