Undaunted by controversy, occasional scandal, spiraling overruns and a widening snarl of lawsuits, the first trickle of North Slope oil will enter the Trans Alaska Pipeline this morning on an 800-mile trip to Valdez and an uncertain future.
Nobody knows where the oil at peak flow is going, what it will cost, or what kind of tariff the eight companies making up the Alyeska Pipeline Service Co. consortium can charge for the 1.2 million barrels of oil a day the 48-inch line will carry later this year.
"Taps," as oilmen call the largest privately financed construction project in history, will start pumping shortly after 9 a.m.
The almost $9-billion pipeline will open without ceremony, capping a chain of events sparked by Atlantic Richfield Co.'s 1968 oil strike on the desolate North Slope.
Although the final flurry of Interior Department meetings ended over the weekend and Secretary Cecil D. Andrus has made his final decision to give Alyeska the go-ahead to start pumping, a number of questions remain unanswered.
Nixon's Interior Secretary, Rogers C.B. Morton, justified his May, 1972 right-of-way finding by saying that "Alaskan North Slope oil will be a timely contribution to the needs of the West Coast - a region that does not have the diversity and flexibility of supply available to the Midwest."
Things have changed. Import patterns have shifted so dramatically that the Midwest is not short of crude oil, while the West Coast is faced with a glut, and Carter is faced with a prickly political decision.
Two of the biggest oil companies holding Alaskan oil rights, Exxon and Standard Oil Co. of Ohio (Sohio), by October will have more crude oil than West Coast refineries or markets can absorb.
"Shutting-in," or simply not producing oil above West Coast needs, is one option Carter energy planners are considering, but uninviting. It would deprive the United States of part of the estimated $5 billion reduction in foreign oil payments the Alaskan oil is expected to allow.
Sending Alaskan oil to Japan in exchange for Japanese-bought oil shipped from the Persian Gulf to Eastern Seaboard and Gulf Coast states is said to be favored by presidential energy adviser James R. Schlesinger Jr. Standard Oil Co. of California estimates that such a swap would save about $1 per barrel or about 2 cents per gallon in transportation costs.
The decision, which Carter will have to make before the expected surplus in October, poses an awkward dilemma for the President.
"How can he approve exporting oil to Japan from a pipeline built for national security reasons and still convince the American people that there is an energy crisis?" a top administration energy official asked.
A Carter choice to exchange off with Japan could face strong congressional opposition, typified by a recent House vote amending the Export Administration Act. The amendment would allow a one-house veto 60 days after a presidential decision to swap.
The other alternatives are to ship it to the lower 48 states.
One proposal offered by Sohis is to pipe the oil from Long Beach, Calif., to Midland, Tex., where vast transportation and refinery nets which serve the Midwest already exist.
The California Air Resources Board, however, opposes it because of the impact the pipeline operation would have on the Los Angeles basin's already poor air quality. The unloading operations state officials say, would result in a sharp increase in hydrocarbon and sulfur dioxide air emissions.
Sohio has offered to guarantee a reduction in air pollutants equivalent to the amount the pipeline operation would add by financing the relocation or upgrading of other polluters, a proposal still under consideration. But even if Sohio's $500 million, 500,000-barrel-a-day pipeline were approved today, it would not be in operation until 1980.
Atlantic Richfield, which has a fifth of the Alaskan oil imput, has proposed using the Trans Mountain Pipeline. This route would carry only about 175,000 barrels a day from the Puget Sound to Edmonton, Alberta, through Canada's Interprovincial pipeline to oil-short markets in the Midwest northern-tier states.
The plan faces environmental hurdles, including adding new shipping facilities in Washington, and would require upgrading pipeline capacity.
The remaining alternatives are to ship the oil around Cape Horn in supertankers, which are too large to pass through the Panama Canal, or to ship the oil in tankers to Panama, transfer it to smaller vessels to transit the canal, and further ship it to the Gulf Coast ports.
Both are expensive, running up costs by as much as $2.70 per barrell, the Federal Energy Administration estimates.
Members of the administration's Alaskan Energy Planning Group, headed by Douglas Robinson, privately admit that West Coast oil glut represents a failure in both government and industry planning over the last nine years.
It is a particular irony for Carter, whose Vice President, Walter F. Mondale, during the heated 1973 Senate debate, predicted that there would be a 500,000-to 600,000-barrel-a-day surplus on the West Coast if the Alaskan route were chosen to favor of a Canadian line. He turns out to be right.
Pricing is another major problem.
Although the administration published proposed rulings on pricing for Alaskan oil in April, the final rules have not been set.
Under FEA's complex regulatory program, the most significant decision effecting company profits will not be the wellhead price at Prudhoe Bay - now proposed to be about $11.28, the price of so-called upper-tier oil - but the "entitlement's" treatment.
FEA's entitlements program is set up to equalize the cost refiners pay for the mix of domestic price-controlled oil and imported, high cost oil.
In short, company profits under the FEA program, like Milo Minderbinder's commercial ventures in "Catch 22," have little relation to acquistian costs or selling prices.
The FEA proposes entitlements benefits, treating Alaskan oil like foreign oil imports, which would give the producers over $2 billion in profits by 1981. FEA argues that this is necessary because of the high costs of shipping, and the need to give the producers added revenues to further develop North Slope oil.
Sen. J. Bennett Johnston (D-La.) asked FEA administrator John F. O'Leary last month what assurance FEA had that the companies would use that $2 billion for new development. O'Leary's response was that the companies had provided no head commitment.
FEA aides say that it is unlikely the administration will change its proposed pricing policy.
Nevertheless, as the first oil begins to flow today, it is unclear what price Alaskan oil is to be sold at, and what impact it will have the American consumer. At the least, however, Alaskan oil will not be more expensive than imported oil.
At the seat of the convoluted pricing decision Carter faces are the high transportation costs, up to $8 per barrel or more - depending on the destination - compared with $1.25 per barrel for Middle Eastern Oil.
Key to the pipeline tariff - shipping charge - decision is the spiraling escalation in costs which have surge upward from $900 million to over $9 billion today since plans were first announced in February, 1969, for a smaller diameter pipeline.
Some of the overruns are due to the hazardous conditions posed by constructing the line in one of the world's most remote areas. Alyeska chairman Edward L. Patton labels a four-year delay to meet environmental criteria as the major culprit, resulting in an increase of $3.2 billion. The above-ground support system then added to avoid damage to the tundra from the pipeline's hot oil added another $1.1 billion, he says.
But it is in the companies' interests in part, to have a high pipeline tariff because the way the state of Alaska computes its royalties is to take the price the federal government allows per barrel at Prudhoe - say about $11 a barrel, subtract the transportation costs, including the tariff, then apply its 12.5 per cent tax on the remainer.
A cent per barrel at the wellhead, FEA officials estimate, is worth $50 million in revenues to Alaska over the life of the oil fields.
The largest share of shipping costs will go toward the pipeline tariff. Seven of the eight consortium members have filed proposed tariffs with the Interstate Commerce Commission which is expected to make a final ruling later this year. The weighted average proposed tariff - the charge for shipping was $6.20 per barrel, well above FEA's estimate of $5.10 to $5.50 a barrel.
Last week the Justice Department and the Interstate Commerce Commission's Bureau of Investigations and Enforcement filed protests against the company's proposed tariffs, the highest of which was $6.44 filed by Amerada Hess.
"The rates are exorbitant . . . it's a ripoff," says John Cleary, a Washington attorney representing the state of Alaska. "What the companies are looking for is a 100 per cent rate of return on equity after taxes," he says.
One thing that is evident is that the pipeline tariff litigation promise to be monumental.
Although the pipeline has received the go-ahead, the administration still faces the legacy of controversy surrounding the line's more than 100,000 welds.
When he signed the right-of-way for the pipeline corridor with Alyeska, Morton had the companies agree to a final audit of X-rays of the welds. To date two accounting companies, Arthur Anderson and Lester Witte have refused to signoff on an audit verifying that each weld had been X-rayed and found safe.
Assistant Interior Secretary buy Martin brushes aside the audit question, saying "Audit in the technical sense may not apply to this situation."
"Still another Interior official says, "There has been legal compliance in an imperfect world."
Martin says, "Our preliminary conclusion is that the integrity of the pipelines significant to start pumping." Martin, who is former commissioner of Natural Resources in Alaska, points out that during water testing the pipeline did not leak.
It will be far clearer to the nation next year when the pipeline is supposed to be carrying 15 per cent of our domestic oil production, whether or not Russell E. Train, the former head of the Environmental Protection Agency, was right when recently asked about the wisdom of the Nixon administration's decision to grant a right-of-way for the pipeline.
"The nation," Train said "probably made the wrong decision."