The Northern Tier Pipeline Co. is sticking to its vow to fight for approval to build a 1,500-mile pipeline to carry Alaskan crude oil from Washington's coast to the Midwest, despite renewed questions about the project's economic soundness.
Critics of the pipeline, which Gov. John Spellman rejected last week on environmental grounds, say it is unnecessary, not to mention outlandishly expensive. Even Northern Tier's potential competitor has shelved a similar pipeline plan, citing economic uncertainties and a drop in demand for oil.
And despite the Reagan administration's support for the pipeline on national security grounds, area congressmen say they doubt Congress will step in to override Spellman's decision.
"I don't know what keeps Northern Tier going," said Rep. Don Bonker (D-Wash.). "It's a pipeline that has no oil. There is not a major oil company that supports it. The refineries don't need it. Yet the project just keeps rolling along."
"I've never felt Northern Tier was financially feasible even if it got a permit," said Sen. Slade Gorton (R-Wash.).
Rep. Arlan Stangeland (R-Minn.) announced his intention to introduce federal legislation to reverse Spellman's action--a possibility Spellman called "illegal and probably immoral."
Sen. Henry M. Jackson (D-Wash.), up for reelection this year, has stayed neutral on the pipeline, but said federal intervention would be inappropriate.
"It would be a vast preemption of state authority that would establish a precedent right across the board which would not be acceptable to the governors of this country nor to the Congress of the United States," he said.
The Senate Energy and Natural Resources Committee, with Jackson as its chairman, studied the need for the pipeline two years ago.
Rick Cocker, an aide to Jackson, said the committee "found there was excess refining capacity on the West Coast and refiners couldn't buy all the Alaskan oil that they wanted to. And that's the situation that exists today."
The administration says the pipeline is needed to avoid the possibility of a cutoff of Alaskan oil supplies to the Midwest by instability in Central America. Alaskan crude reaches Midwest refineries now by way of the Panama Canal.
Northern Tier argues the oil is needed in the Midwest and says flatly it can finance its $2.7 billion pipeline even at today's high interest rates. The company's board of directors plans to meet later this month to consider what action to take next.
Other companies have thrown in the towel on similar projects. Sohio scrapped a proposal to build an oil pipeline from southern California to Texas. Backers of the Alaskan gas pipeline had to ask Congress for special financing considerations last year.
Even Northern Tier's direct competitor, the Trans Mountain Oil Pipeline Co., of Vancouver, British Columbia, has held up plans to build a 700-mile pipeline because of economic uncertainty.
Ken Hall, president of Trans Mountain, said that because of the drop in the demand for oil, "It is clear to me that there is no justifiable economic support within the oil industry for investing $3 billion in the Northern Tier Pipeline."
Trans Mountain has shelved its plans to build a pipeline beginning west of Port Angeles, near Washington's coast. The pipeline would travel north into Canada and east to Edmonton, Alberta, where it would hook up with an existing pipeline to Midwest refineries.
The Trans Mountain pipeline, which would travel under Puget Sound for only 2.3 miles, rather than the 30 miles envisioned for the Northern Tier project, would also need Spellman's approval. But Trans Mountain withdrew its application for permits from the state's Energy Facility Siting Council and has until July to decide whether to proceed or ask for an indefinite postponement.
"At this time, I don't think anyone is going to build a pipeline," Hall said. "In three years the situation could be quite different."
Only one oil company has made a commitment to Northern Tier: Getty Oil, a major shareholder in the project. But Northern Tier's spokesman says it didn't expect any oil company to sign up for the pipeline until the company had approval to build the project.
"That's putting the cart before the horse," said Chris Carlson, a public-relations consultant to the pipeline consortium. "You have to get your permits before you seek agreements with refiners along the route. No major oil company will sign a through-put agreement until the project's sponsors have secured all the permits and they know what the actual cost of the crude oil will be."
At full capacity, the pipeline could carry 933,000 barrels of oil a day, but critics say a projected decline in oil production at Alaska's Prudhoe and Kuparuck oil fields will reduce the likely flow.
James McDonald, former general manager of the western division of Getty Oil, argues that a pipeline for Alaskan oil may be too late.
"I think it's a mistake," said McDonald, now an independent oil industry consultant in Los Angeles. "It probably wasn't a mistake when they first proposed it but there's only so many barrels to push through it. The later they start, the worse it gets."
Northern Tier's financial experts told Washington state in its application that the project could carry as little as 400,000 barrels a day and still operate at a profit. And Northern Tier is banking on recent and future discoveries in Alaska.
"The so-called Prudhoe Bay decline was in fact a myth, Carlson said. "Production is going to remain higher than previously anticipated. There would not be this decline that many people are predicting."