The Big Poker Game

Even after Canadian Oilman Frank McMahon lost out in his fight to pipe natural gas from the vast Peace River Basin* of Alberta and British Columbia into the U.S. Northwest (TIME, June 28), he refused to concede defeat. Although the Federal Power Commission awarded the franchise to rival Ray Fish's Pacific Northwest Pipeline Corp. (see map), nature had spotted McMahon's untapped gas supplies some 400 miles closer to Seattle than the San Juan Basin along the Colorado-New Mexico border, from which Fish planned to get his gas.

A chance-taking-ex-driller, McMahon climbed into his private plane (in which he flies 200,000 miles yearly), set out on a tour of U.S. gas capitals to persuade Fish and his associates to let Canada into the deal. Since pipeliners and oilmen continually drift around the North American continent in their private planes, the negotiations drifted, like some gigantic floating poker game, between Houston, Washington, New York, Chicago and San Francisco. Finally the oilmen came to terms, and last week the private planes converged on Tulsa (it happened to be the most central spot that day) to sign a $400 million contract, probably the biggest gas deal in history. The terms :

P: Fish's Pacific Northwest will go ahead early next year with its FPC-approved plan to build a 1,466-mile, $168 million pipeline from the San Juan Basin to Bellingham, Wash., start pumping gas through the line by the summer of 1956. Pacific Northwest will also extend the pipeline 20 miles to the Canadian border, build a major transfer station at Mt. Home, Idaho.

P: McMahon's Westcoast Transmission Co. Ltd. will build a 670-mile, $120 million pipeline from the Peace River Basin to the U.S. border, sell Pacific 300 million cu. ft. of gas a day at 22-c- per thousand cu. ft., pipe an additional 50 million cu. ft. a day to Vancouver.

P: El Paso Natural Gas Co. will build a 370-mile, $35 million pipeline from Pacific Northwest's Mt. Home terminal to the California-Nevada border, there sell California's big power companies 250 million cu. ft. a day.

End of the Line. To swing the deal, McMahon was aided by some potent allies. El Paso Natural Gas wanted Canadian gas brought in to prolong the life of the San Juan Basin. Californians, whose daily gas consumption (1,400,000,000 cu. ft.) is growing 11% yearly, were worried that 2,800,000 new gas customers in the Northwestern U.S. would exhaust San Juan, thus shut off California's major source. Phillips Petroleum Co., which has big gas reserves in San Juan, also has gas-fields in Peace River that it wants to open.

In addition, Fish heard from his future customers. Portland Gas & Coke Co. President Charles Gueffroy flatly refused to sign a contract for San Juan gas until he knew the price. Complained Gueffroy: "We are on the expensive tail end of the pipeline."

Nobody Loses. It was a deal that seemed to make everybody happy. The $40 million yearly gross that Pacific Northwest originally expected will go up $20 million. The U.S. Northwest could be assured of 219 million cu. ft. of gas a day, v. the 169 million cu. ft. Fish could guarantee from San Juan. California and Denver will get more gas. For Canadians it meant the opening of the biggest and closest market for their gas, new prospecting, a 25% rate cut in Vancouver.

The new gas pact has not been formally approved by FPC, which originally rejected Canadian gas on the ground that no area of the U.S. should be dependent solely on foreign supplies. At the same time FPC left the door wide open for Canada to supplement U.S. supplies. Thus oilmen thought FPC would now be glad to put its blessing on the import of Canadian gas.

*Proven reserves: 5 trillion cu. ft., enough to blanket all of Texas with a 6-in. layer of gas.

*His first gamble on Broadway was a 17% investment in Pajama Game. To date, his $34,000 has been returned several times over; his shares may be worth upwards of $100,000 more.

This file is automatically generated by a robot program, so reader's discretion is required.