Oil Compromise in California

Even the biggest petroleum finds do little good if the oil cannot be moved to market. One year after the completion of the $9 billion Alaska pipeline, this remains the great embarrassment of the riches promised by North Slope crude. Congress says it cannot be sold to other countries, but the Pacific Coast states already have ample supplies of their own. Alaska's oil is much needed in the energy-hungry East, but shipping it to Texas via the Panama Canal is not only wildly expensive but logistically almost impossible: law requires the stuff to be carried only by U.S. flag tankers, yet there are hardly enough of these around to do the job.

Finally, a solution to all this--another pipeline--now seems at hand. After months of haggling, Standard Oil Co. of Ohio (Sohio) has now accepted an agreement on a pollution trade-off deal suggested by California environmental officials. This clears away the one remaining major obstacle to the company's $575 million proposal to pipe about half a million barrels of mostly Alaskan crude a day from a yet-to-be-built terminal near Los Angeles to Midland, Texas. Existing pipelines would then take oil farther east.

Sohio started thinking about the proj ect in 1974, when it became evident that energy conservation measures had cut California's demand for oil. When Alaskan oil began to add to the West Coast glut, Sohio's plan seemed even more sensible: the company wanted to buy 800 miles of underused pipelines that had been built to carry natural gas from Texas to California and convert them to pump oil in the other direction. Since Sohio's project involved a minimum of new pipeline construction (250 miles), it seemed like an ideal quick fix.

Instead, the project quickly turned into what exasperated company officials called a "procedural nightmare," as they began seeking the more than 700 required federal, state and local permits. The strongest objections came from California environmental officials, who were concerned about the large complex Sohio planned to build at Long Beach to unload tankers. State officials argued heatedly that tanker and pumping-station emissions would cause as much air pollution as an extra 3 million autos. Federal energy officials grumbled about the "long, difficult, bitter" negotiations.

The core of the dispute was a California rule--which has since, with some modifications, become part of federal environmental law--that no new industry could set up in an already polluted area unless it agreed to remove more pollutants than its activities would put in.

Sohio scouted up a group of 13 local dry-cleaning plants, of all things, and said it would be willing to spend $5 million to cut down their hydrocarbon emissions. But, understandably, the company balked when the California Air Resources Board said it might also have to pay up to $100 million to install a sulfur dioxide scrubber in a Southern California Edison smokestack. SoCal was not enthusiastic about the idea either. The utility, whose stack emissions were breaking no laws, worried lest it might have to pay taxes on such a gift horse from Sohio. Also, it wondered who would be responsible for maintenance costs and what would happen if the scrubber broke down. Would it have to stop producing electricity? Or would Sohio have to stop pumping oil?

In the compromise reached two weeks ago, Sohio agreed to pay $78 million for construction, operation and maintenance of the SoCal scrubber for 15 years, after which it becomes the utility's problem. If the deal survives other hurdles, including a November referendum in Long Beach on the city's proposal to lease space to Sohio for its terminal, work on the project could begin early next year. Even if it does, the pipeline will still not be ready to start pumping oil to those Texas refineries before 1981.

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