More Delays Block Start of Oil Pipeline

Pacific Texas Pipeline Co., which plans to build a 1,000-mile pipeline to carry crude oil from the Los Angeles Harbor to Texas, must seek an extension of its permit from the California Coastal Commission because it has failed to begin construction on the $1.7-billion project.

Officials of Pac-Tex, as the Long Beach-based company is called, say that obtaining the one-year extension is simply another in a series of obstacles--including a brush with the Securities and Exchange Commission last year and the procurement of hundreds of government permits--that the firm has had to overcome since proposing the pipeline more than five years ago.

But some observers, like Coastal Commission Chairman Michael Wornum and Peter Grenell, executive officer of the California Coastal Conservancy, say the delays are a signal that the pipeline may never be built.

“I just have grave doubts that it will ever happen,” Wornum said in a recent interview. He said that he does not object to granting Pac-Tex an extension.

“I certainly don’t see any immediate activity,” said Grenell, whose agency, along with a state bonding authority on which he serves, gave Pac-Tex preliminary approval for a $500-million bond issue several years ago. “Frankly, I don’t know what the company is up to at this point.”

“The company’s response,” replied Pac-Tex spokesman Phillip Myers, “is that it has been working on this project for several years, and, after going through the process of obtaining all of these permits, it intends to go through with the project.”

The 42-inch wide, 1,030-mile long underground pipeline, which Myers said would take about a year to build, could carry 900,000 barrels of crude oil per day to Midland, Tex., where it would enter 14 other pipeline systems for transportation to Gulf Coast, Midwestern and Eastern refineries.

The oil would come primarily from Alaska’s North Slope but also from the California outer continental shelf, onshore sources and Pacific Rim countries, according to a recent statement by Pac-Tex.

Noting the political instability in Panama, where tankers transport crude oil through the canal, the statement declared that the Pac-Tex pipeline “would safeguard the transportation of Alaska North Slope oil without possible interruption by a foreign power.”

The release added that 12,000 American jobs would be created when construction begins.

However, Myers acknowledged that the company does not know when construction will begin because Pac-Tex cannot obtain financing until it obtains one more agreement from an oil company to use the pipeline.

Myers said the company already has one such agreement and is negotiating for a second, as well as for financing with “some major financial institutions.” He would not disclose particulars.

Yet, as early as December, 1982, Pac-Tex said it was in the final stages of securing financing for its project, which at that time called for the pipeline to begin at Long Beach Harbor rather than in Los Angeles.

Setbacks for Company

At that time, company President Cecil B. Owens said the company hoped to begin construction in early 1984 and complete it as soon as 14 months later. In June, 1986, the company said that construction would begin in the third quarter of that year and that the pipeline would begin receiving crude oil by late 1987.

The company has had some setbacks since then. Last September, the Securities and Exchange Commission accused Owens and Pac-Tex of committing stock fraud by allegedly raising $2 million from investors by selling unregistered stock. The complaint was settled immediately, without a denial or admission of guilt by Pac-Tex.

The project is “taking a little bit longer” than expected, Myers acknowledged in an interview on Thursday. “The (oil company) agreement has taken a little bit longer than expected, and also it took a long time to obtain all of these various permits.”

Myers said Pac-Tex has obtained all of the major permits it needs to begin construction, accounting for about 70% of the total right of way required. The remainder of the permits will be obtained during construction, he said.

One of those permits came from the California Coastal Commission, which two years ago approved the company’s plans to construct a 106-acre landfill in the harbor for its operations and lay 4 miles of pipeline in the coastal zone. The permit stipulated that construction had to begin within two years.

Year Extension

When that did not happen, the Coastal Commission staff tentatively approved a one-year extension on the grounds that there has been no change in circumstances since the original permit was issued.

The public has a right to object to that decision; the objection period ends Tuesday. Two objections, one lodged by a group of San Pedro homeowners and the other by a Wilmington activist who fears the project will have an adverse impact on the community, have already been filed.

The objections mean the commission must hold a hearing on the matter, which it will do in May, according to Milton Phegley, ports coordinator for the commission. If a majority of the commission members find that circumstances have changed, Pac-Tex will have to apply for a new permit. That would mean a new set of hearings and possibly different conditions of approval, or even denial of the project.

Some officials are concerned that if the Pac-Tex pipeline is not built, other projects that hinge on it--particularly the restoration of the Batiquitos Lagoon in Carlsbad--will also fall by the wayside.

As part of its agreement with the Coastal Commission, Pac-Tex must pay up to $20 million to restore the lagoon, which dries up and emits foul odors in the summer because its mouth is cut off from the ocean. The restoration is a so-called “mitigation project,” intended to offset the damage to the marine habitat Pac-Tex will cause when it builds the 106-acre landfill in the Los Angeles Harbor.

Port officials have said that if the Pac-Tex project does not go through, they will finance the lagoon restoration. However, Lillian Kawasaki, who is managing the Batiquitos project for the port, noted that the Board of Harbor Commissioners has reserved the right to make future decisions about whether to continue.

Another mitigation project tied to the pipeline are plans for Pac-Tex to provide help for San Pedro’s struggling fishing industry. In approving the permit, the Coastal Commission ordered Pac-Tex to provide help for the fishermen. Industry leaders were negotiating for about $1 million.

The money is due before the construction begins and has not yet been paid, Myers said.