Arco Pulls Out of Disputed Oil Pipeline Project

Already imperiled by lawsuits and political opposition, plans for a major crude oil pipeline running beneath metropolitan Los Angeles suffered a financial blow Monday when Atlantic Richfield Co. announced its withdrawal from the project.

Arco’s decision leaves the proposed Angeles Pipeline with three investors--Chevron USA, Shell Oil Co. and Texaco Refining & Marketing Inc.

“As it stands right now, the remaining partners are going to stick with it,” George Marich, public affairs manager for Chevron and spokesman for the consortium, said in an interview.

Arco’s decision means that if the project is built, the three remaining firms each must shoulder one-third, instead of one-fourth, of the estimated $225-million cost.

Evaluating Project

“We are continually evaluating it from an economic standpoint,” Marich said.

He emphasized that the firms are engaged in a review of “all aspects” of the pipeline project.

The consortium has already spent more than $7 million in planning and promoting the planned 135-mile pipeline, which would transport 330,000 barrels of crude oil a day from Kern County to Los Angeles Basin refineries.

The Angeles Pipeline would start south of Bakersfield, in a farming area dotted with oil derricks and storage tanks. The site is a collection point for both Kern County oil and oil piped from offshore wells near Santa Barbara.

Opponents have voiced concerns of oil spills, fires, traffic congestion during construction and worsened air quality from refinement of the “heavier, tar-like” Santa Barbara crude oil that would be delivered through the line.

The cities of Los Angeles, Burbank and Glendale, the Metropolitan Water District and the Tejon Ranch Co. have all filed suits challenging the environmental impact studies. Los Angeles Mayor Tom Bradley and the 15 City Council members have all gone on record opposing the project.

Action Explained

Scott Loll, an Arco spokesman, said the company was not “frightened away” by the opposition but rather concluded that the project would not be profitable for Arco.

When Arco joined with the other oil companies in announcing the project in late 1983, the firm anticipated it would be a major producer from drilling sites off the coast of California, Loll said. But Arco’s California production has remained small, about 23,000 barrels a day. The company, Loll said, continues to rely primarily on shipping crude in tankers from Alaska’s North Slope to its Carson refinery.

Facing a Dec. 31 expiration date on a cost-sharing agreement, Arco decided against renewal, Loll said.

As far back as June, 1986, Arco had acknowledged it was considering pulling out of the project.

“I don’t think we caught the other partners off guard,” Loll said.

He stressed that despite the company’s withdrawal, Arco strongly advocates development of the pipeline.

“We believe the pipeline is important for meeting Southern California’s energy needs,” Loll said.

Moving Crude

Said Marich: “There is just no question it’s the most economic and, from an environmental standpoint, the safest way of bringing crude oil into the Los Angeles Basin.”

Marich said the consortium expects to address the environmental concerns raised by opponents within the next six months, depending on the speed of the courts.

Pipeline opponents said they were pleased with Arco’s decision.

“For whatever reasons they give, it’s fine with me,” said Los Angeles City Councilman Nate Holden, who introduced the motion opposing the project. “This is a project the community is against. I hope the other members of the consortium find a reason to do the same thing.”

“They have a lot of money and a lot of opportunity to use it,” said Sebie Brown, a leader of the Coalition Against the Pipeline. “I wouldn’t consider it dead until they’ve exhausted every avenue and it has been ultimately killed.”