the present time some foreign oil is being delivered to the United States at prices higher than domestic oil prices.

If this is their collective response a second question must be asked. At the present time the Japaneae are paying more than $1.50 less per barrel of oil with qualities similar to North Slope crude (see Appendix A for a recent comparison of lighter crudes). The Japanese are being supplied with low cost Middle East oil, while the largest oil producing and consuming country, the United States, has higher domestic prices and many government and industry spokesmen soon predict we will be paying more for imported crude oil than these high domestic prices. I suggest we learn a lesson from the Japanese and start requiring our oil companies to bargain with producing countries for lower prices and stop the foolish practice of having our domestic oil companies serve as tax collectors for producing nations by ending the foreign tax credit on royalty and severance.

I stated earlier that the prices that existed at the time that I undertook my analysis were such that the midwest price was about 65¢ (and the east coast 90¢) more per barrel than the west coast for oil similar in quality to North Slope oil. In the few weeks since the President's energy message prices have been changing in this nation. They are not changing in the direction predicted by Mr. Simon, Mr. Egan or SOHIO, however. Instead as the recent issues of the Oil and Gas Journal, week after week (especially the April 30 edition), point out prices in the east of the Rockies market have been increasing by between 25¢ and 50¢ per barrel, while west coast prices did not show any movements until this past week, when a 25¢ per barrel increase was announced. This means that relative prices have either not changed or have increased to the detriment of midwest and east coast conumers, who now may be paying as much as 90¢ per barrel more in the midwest and $1.15 per barrel more on the east coast.

West coast oversupply and lower prices make the selection of TAP over TCP a very poor choice for midwest and east coast consumers. Finally, I would like to comment on a related aspect that has been raised by my critics, who have recently questioned my own objectivity for using a 50-50 mix of domestic and foreign crude oil in the midwest and a 17-83 mix on the west coast. For those who take the time to read my book, they will realize that it was not my biases that were behind these different percentages. Instead, the more than 15 years of bias in national policy that resulted in much higher prices for midwest and east coast oil was the bias that was being computed. The bias that these percentages were reflecting was similar to that the New England Governor's and recently the Governor of my own state, Wisconsin, were opposed to when they challenged the use of a different import quota system east of the Rockies than on the West coast. The bias that prevented the development of Canadian tarsands and which placed a limit on other Canadian oil coming into the midwest is another type of bias, that these calculations were meant to reflect.

When the new data are examined it seems that the economic case against TAP is greater than ever. The final fall back of TAP's proponents may be that prices don't matter, it is resource costs that are the key. This would only be true for those who do not think that vastly different prices and security of supply of oil in different parts of the country do not matter. I do not think this Congress should be so callous and narrow minded.

B. THE PRESIDENT'S ENERGY MESSAGE

Last month the President issued executive proclamation 3279, which ended direct quantity controls. This change has an important impact on the selection of the optimal transportation system for Alaskan oil. By ending direct quantity controls the financial advantage of the import for export sale of oil to Japan and the Virgin Islands-Central American Pipeline plans are virtually eliminated. (Note some avoidance of the import license fee may still be possible.) As a result all three measures of comparison: economic, environmental and oil company profits now point to the Trans Canadian routes as superior to the Alaskan-tanker system.

New information on a second factor has recently come to light. It is related to regional supply-demand imbalance in the future in the United States. The President proposed a speedy increase in oil leasing in off shore areas. Two of these areas, the Gulf of Alaska and California, if developed will only com

pound the present regional imbalances in domestic oil supply and demand. In addition oil production in the areas of Western South America and South East Asia would benefit the west coast. A recent study prepared by the State Resource Agency of California indicates that even without any North Slope or Gulf of Alaska oil, PADV, the west coast, could be "essentially independent from unstable foreign supplies through 1985."

By following a proposal similar to the president's, the report concluded California production would exceed two million barrels per day by 1985. The midwest and east coast on the other hand have no alternative but to become heavily dependent on these same so-called "unstable foreign supplies" unless Alaskan and Canadian oil and gas are brought into these regions in increasing quantitites.

It is important to consider other aspects of the President's energy message. In it were two major proposals, western coal and oil shale, for domestic energy self-sufficiency. Both are located in the Rocky Mountain region of the nation. Technology to convert these resources either to oil or gas has been given some priority. However, a very important limitation on these developments is the availability of sufficient quantitites of water. It is simply impossible to expect a full development of such resources without Canadian-U.S. cooperation.

The need for a North American Energy Policy has never been greater. The economic and environmental benefits to the U.S. and Canada will be maximized only by cooperating and engaging in long run planning. Developing tarsands in Alberta, locating electric plants on the Great Lakes, developing western coal and oil shale are very much interrelated to one another as well as to Arctic oil and gas development. There is probably no better way to scuttle a North American energy policy before it even begins than to allow a single private concern like the cash flow of two U.S. and one British oil company to dominate such a major international and domestic decision. Quite simply Canada cannot be expected to be ignored on the initial Arctic oil transportation system decision and then be expected to cooperate on future energy developments.

C. SOME PROPOSALS TO PLUG THE LOOPHOLES

Two weeks ago I made a series of proposals to your Senate counterparts. I repeat them here today. They are aimed at my critics, who will say that present conditions have changed oil company plans and that my analysis is based upon out moded calculations. I think they should be answered by recommending the following 10 point program, which I think should be amended to any legislation which makes it possible to build the Trans Alaska Pipeline. If my previous findings are still correct the reaction to these proposals will be hostile, if I am now wrong most of these proposals will be unimportant.

I. No oil can be exported from Alaska to a foreign country as long as import restrictions of any type are imposed in other parts of the nation.

II. If any oil is exported royalty and severance taxes must be treated as expenses and not credited against federal corporate income taxes.

III. If oil imports are increased on the east coast or in the midwest because TAP backs them out of PADV, then these should either be charged the new license fee or be sold to the highest bidder with revenues going to the federal treasury and not used to bring windfalls to oil companies.

IV. In order to control both the safety requirements and mode of operations of the necessary tankers moving oil out of Alaska only U.S. built owned and operated tankers should be permitted even if foreign ports are the ultimate destination.

V. Full agreements concerning routes and operations along Canada's west coast and Puget Sound should be resolved before TAP is begun.

VI. In order to protect the state of Alaska from various international marketing schemes a minimum posted price for the purposes of calculating royalty and severance tax should be set, thus ending the oil companies attempt to use the courts to overturn Alaska's new legislation.

VII. Final marketing destinations for all Alaskan oil should be made available to Congress and the economic and environmental impact of such flows of oil should be compared to alternative transportation systems.

VIII. Plans for a natural gas pipeline must be documented before TAP is built so Congress can guarantee each system is compatible with maximizing collective welfare and having a minimum impact on the environment.

IX. Resale of the pipeline to future oil consortiums for the purpose of reducing taxes in the future should be declared illegal.

X. A committee of Congress should hold an inquiry to determine the present position of the Canadian government concerning various natural gas and oil transportation systems.

This controversy has shown us the great importance of the National Environmental Policy Act. By requiring full public disclosure of the decision making process we have determined that a very narrow private interest has sought to sacrifice the Alaskan environment, oil consumers, taxpayers of the state of Alaska and the nation, the U.S. Maritime industry and doubtless others. The important juncture we find ourselves in today is whether we shall let this narrow private interest to proceed unfettered by a broader national concern for the greatest number of citizens of both Canada and the United States. I urge this Congress to assert its authority in these matters and to reject the apparent decision of the executive branch to make its decision purely on the basis of oil company demands. Thank you.

APPENDIX A.-Recent Japanese versus New York prices

Fob price Abu Dhabi Crude (Mar. 19, 1973, OGJ) equal:

To Japan..

$2.38

Less markup over other Japanese imports (it is also typical for discounts on fob to Japan)_

12. 3

THE TRANS ALASKA PIPELINE: A BENEFIT COST ANALYSIS OF ALTERNATIVES (By Charles J. Cicchetti, Working Paper 10, University of Wisconsin-Madison; Institute for Environmental Studies, January 1973)

This paper is based upon research conducted at Resources for the Future. Its current form has been supported by the Institute for Environmental Studies at the University of Wisconsin and the Public Interest Economics-Center, Washington, D.C. It was presented at the annual meeting of the American Association for the Advancement of Science, Washington, D.C., in December 1972.

I. INTRODUCTION AND PROBLEM

From the vantage point of 1972 we can identify two unrelated developments in the latter part of the previous decade, which are now intertwined into one of the nation's most significant environmental preservation and energy development controversies. In the period of 1968 to 1970, successful exploratory efforts resulted in the discovery of a major oil field on the North Slope of Alaska. By the end of 1970, the American Petroleum Institute estimated the proved reserves in this Prudhoe Bay field to be approximately 9.6 billion barrels. A field of such size makes this discovery one of the single most important in the history of the domestic crude oil industry.

At about the same time that oil explorations were being undertaken in Alaska, the Congress of the United States enacted the National Environmental Policy Act of 1969 (NEPA, PL 91-190). One of the requirements of this Act is that agencies of the federal government undertaking actions that might have an impact on the environment, must file an Environmental Impact Statement (frequently called a 102 (C) statement). This requirement includes agencies issuing permits to private developers as in the Alaskan oil case. In these statements the agencies must analyze and quantify the expected impact of the proposed action on the environment. Furthermore, when irreversible deleterious impacts on the environment are found, a consideration of alternatives, including but not restricted to nondevelopment, must also be undertaken by the agency. The consideration of alternatives has been interpreted to include both an environmental and economic comparison of alternative actions. This present paper will concentrate on the economic comparison of the Trans Alaska Pipeline and its principal alternatives. Initially, the Department of Interior did not file the required Environmental Impact Statement and subsequently the claim was made that the statement was inadequate, in part because it did not consider the alternatives to the proposed pipeline. Environmentalists used these facts to delay the construction of the pipeline. The principal but not the only concerns of environmentalists were and continue to be related to the following factors:

(1) The impact of production and the proposed pipeline on the ecology of the North Slope, particularly the caribou herds which inhabit it.

(2) The possibility of pipeline leaks and/or breaks caused either by (a) melting permafrost, (b) seismic activity or (c) avalanches.

(3) The physical disruption of the nation's largest remaining wilderness and the impact of construction and operation of the pipeline on this wilderness and the many rivers and streams crossed by the pipeline.

(4) The impact of "normal" tanker loading operations in Prince William Sound at the Port City of Valdez and West Coast ports.

(5) The prospects of possible tanker accidents caused either by (a) collisions, (b) earthquakes, or (c) tidal waves.

As stated above this paper will concentrate on an economic comparison of alternatives. However, a short digression to define the alternatives and to describe their different environmental impacts will be undertaken first.

II. AN ENVIRONMENTAL COMPARISON

This paper will consider the economic effect of three alternative policy options. The proposed Trans Alaska Pipeline and tanker system (TAPS) and two all land Trans Canadian Pipelines (TCP) are the alternatives that will be considered in this analysis. The environmental effects of each have been analyzed by various public and private agencies including the Department of Interior in response to the initial legal action taken by environmentalists.

The route, which is currently proposed by the consortium of oil companies,1 would move in a north-south direction across Alaska crossing two major mountain ranges and in its southern half would cross the most seismically active region in North America. The pipeline would terminate in the port city of Valdez where storage and terminal facilities will be constructed to ship the North Slope oil to final markets. In Figure 1 this route is labeled TAP. A second alternative would be to construct a pipeline from the North Slope to the Canadian city of Edmonton following the natural corridor of the Mackenzie River. This route is labeled MVP in Figure 1. There are two routes which have been proposed for the Mackenzie Valley. These are labeled I and II in Figure 1. Finally, a third alternative would follow the TAP route to the Alaskan city of Fairbanks and follow the man-made corridor of the Alaska Highway and, in some portions, previous pipeline routes to the Canadian City of Edmonton. This route is labeled AHP in Figure 1. The all-land pipeline alternatives will not stop in Edmonton. However, pipelines already connect Edmonton with the Pacific Northwest and the U.S. Midwest. Therefore, the new environmental impact would be minimal.

Footnotes at end of article.

The Department of Interior undertook an environmental comparison and concluded that: "No single generalized route appears to be superior in all (environmental) respects to any other." 2 However, the department concluded that TAP was superior to the Trans Alaska Canada routes only from the standpoint of its impact on the abiotic or nonliving environment and it pointed out this advantage was also lost, if a natural gas pipeline were to be considered as part of the Arctic development plan. Second, it concluded that from the standpoint of the impact on the overall biotic environment, MVP-I was superior. Third, the Department of Interior concluded that from the standpoint of the unavoidable impact upon "socioeconomic systems, . . . recreation, aesthetic, wilderness, communities, and native culture and substance," the MVP-I route was superior. Fourth, the department concluded that routes MVP-II and AHP would probably have the least impact on the marine environment. From the standpoint of risk, or threatened environmental impact, the Department of Interior concluded that both of the Trans Alaska Canada routes were superior to TAP for both the terrestrial and marine environment.3 Since TAP is environmentally inferior, in the next sections of this paper we will examine its economic advantages to determine the social tradeoffs that are necessary to select the optimal route.

Footnotes at end of article.