L.A. to Texas : Oil Firm Gets More Time to Build Pipeline

Pacific Texas Pipeline Co., which proposes to build a 1,000-mile pipeline to carry crude oil from Los Angeles Harbor to Texas, won a crucial battle on Wednesday before the California Coastal Commission, which voted to extend the company’s permit for one year.

The extension was approved despite the objections of several critics who argued, among other things, that the pipeline is not financially feasible and that a proposed project to compensate for its environmental damage would do more harm than good.

The commission approval, by a 9-2 vote, was essential for Pac-Tex, which needed the extension because it has failed to begin construction on the $1.7-billion pipeline within the two-year time frame stipulated in the original permit.

Under commission rules, had just one more member voted no, the extension would have been denied and the project would have required an entirely new permit--which would have necessitated a lengthy hearing process.

106-Acre Landfill

The permit, which was approved in March, 1986, allows the company to construct a 106-acre landfill in the harbor for its operations and to lay 4 miles of pipeline in the coastal zone, an area where the commission has some say over construction. The extension will expire in March, 1989.

Several commissioners expressed reservations that the project will ever be built, citing the delays and Pac-Tex’s financial problems, which included allegations by the Securities and Exchange Commission that resulted in a settlement last year.

“I am very concerned about the fact that there has been no fiscal evidence of progress,” said Commissioner Madelyn Glickfeld.

In an interview last month, Coastal Commission Chairman Michael Wornum said he had “grave doubts” that the pipeline would be constructed. However, both voted for the extension.

Pac-Tex President Cecil Owens told the commissioners that he expects to complete the project.

“We are still viable, ready, willing and able to accomplish our purpose,” he said.

Pac-Tex, based in San Pedro, has had to apply for hundreds of local, state and federal permits to move forward with its project. Company officials have said they have obtained all the major permits they need to begin construction.

But the work cannot begin until Pac-Tex secures financing. In the past, company officials said they had obtained an agreement from only one oil company to use the pipeline and that agreement with two companies was crucial to its feasibility.

‘Happy With Arrangements’

In an interview on Wednesday, Owens would say only that “we are very happy with our financial arrangements.”

The 42-inch wide, 1,030-mile long underground pipeline, which company officials estimate would take about a year to build, could carry up to 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 by ship 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.

Had the Coastal Commission denied the extension, Pac-Tex would have been required to apply for a new permit to go ahead with its project. That would have generated a new hearing process, which could have raised a broad range of issues about the proposal.

Extensions, on the other hand, may be granted on narrow grounds, so long as the Coastal Commission finds there has been no “substantial change in circumstances” since the original permit was issued.

No Change

In recommending approval of the extension, the Coastal Commission staff argued that there had been no change in circumstances. Critics of the pipeline project, four of whom submitted written objections, disagreed.

The critics contended, among other things, that the company has not proved the project is financially viable, that oil tankers coming to the port will pollute the air and that a proposed environmental mitigation project actually will hurt more than help.

Delores Welty, a Leucadia resident, wrote the commission that Owens “does not appear to be a good business risk,” an apparent reference to complaints from Pac-Tex investors that resulted in the company’s brush with the Securities and Exchange Commission last year.

The SEC 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 either defendant. Pac-Tex and Owens were enjoined from selling unregistered stock.

Welty’s main complaint, however, had to do with the mitigation project, which involves the Batiquitos Lagoon in Carlsbad.

Under its agreement with the Coastal Commission, Pac-Tex is to pay up to $20 million to restore the lagoon, a wetland that dries up and emits foul odors in the summer because it is cut off from the ocean. The project calls for engineers to dredge a portion of the lagoon and to install a mechanical system that would allow “tidal flushing”--daily infusions of salt water--to resume.

However, Welty and another critic, Carlsbad resident Inez Yoder, who is president of a nonprofit agency that researches environmental issues, say the project will destroy the wetland by converting the lagoon into a shallow harbor. They are particularly concerned that the shore birds that visit Batiquitos will no longer be attracted to the lagoon.

“We have a virgin lagoon down here that hasn’t been touched at all,” Yoder said in an interview. “It is frequented by 150 to 200 species of birds. . . . The proposal is to make a sub-tidal habitat, and that would be good for fishing, but it may not be good at all for the birds.”

One of the commissioners who voted against the extension, Mary Lou Howard, said she believes the mitigation project should be closer to the site of the environmental damage.