Loss of Permit Snags L.A.-Texas Oil Pipeline

A long-delayed plan to build a 1,030-mile oil pipeline from the Los Angeles Harbor to Texas hit yet another bureaucratic snag last week when the federal government revoked a crucial permit.

Complaining that the San Pedro-based Pacific Texas Pipeline Co. had failed to pay nearly $100,000 in fees, the U.S. Bureau of Land Management rescinded its 1986 decision to let the company run the pipe under federal land in four states.

The line cannot be built without the permit, but Pac-Tex, as the pipeline company is called, can apply for a new permit if it pays the $99,538 it owes the bureau for rental of those federal lands.

“The only thing that prevented them from going forward was (that) they didn’t pay the bill,” said Jim Woodworth, a spokesman for the bureau’s California office.

Pac-Tex President Cecil R. Owens was reported to be ill and not available for comment.

The proposed 42-inch-wide underground pipeline would carry up to 900,000 barrels of crude oil per day. The oil would arrive at the Los Angeles Harbor by tanker and travel via the pipeline to Midland, Tex., where it would enter 14 other pipeline systems for transportation to refineries in the Midwest, East and Gulf Coast.

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

The pipeline would have to cross 269 miles of federal land in California, Arizona, New Mexico and Texas, according to Woodworth. He said the money owed to the government is for rental of those lands since May 1986, when the permit was granted.

Hundreds of Permits

The permit was one of hundreds of local, state and federal approvals that Pac-Tex must obtain to begin construction. Skeptics have often predicted that the company would be unable to get so many permits, and a similar pipeline proposal by Standard Oil of Ohio was dropped a decade ago for that reason.

Pac-Tex officials, however, have said they have nearly all the permits needed. The long delays have been due to lack of financial backing for the project, according to several sources.

As early as December, 1982, Owens said he was in the final stages of securing financing for the project, which he then hoped to complete in 1985. He has made similar statements several times since then but has never identified potential financiers.

The company has come under scrutiny from the U.S. Securities and Exchange Commission, which in September, 1987, accused Owens and Pac-Tex of committing stock fraud by allegedly selling unregistered stock to raise $2 million for the project. The complaint was settled without a denial or admission of guilt by Pac-Tex.

In order to get financing for the project, Pac-Tex needs so-called “throughput agreements”--promises from oil companies that they will use the pipeline. So far, no major company has acknowledged giving Pac-Tex such an agreement.

Several industry experts interviewed this week attributed the lack of throughput agreements and financing to various factors, chief among them predictions that the supply of crude oil from Alaska’s North Slope will drop soon, eliminating the need for a major west-to-east pipeline.

‘Not in the Cards’

“Analysts for a number of years have predicted that unless dramatic new finds were discovered (in Alaska), production would diminish,” said Ken Leonard of the American Petroleum Institute, the national trade association for the oil industry.

Said Jim McDonald, a Los Angeles-based oil industry consultant: “He’d have to be counting on continual finds of more oil in Alaska, which at this point is not in the cards.”

At the Los Angeles Harbor Department, which has supported the pipeline concept and agreed to provide a terminal for tankers if the project goes through, officials said they are taking a wait-and-see attitude toward the bureau’s permit revocation and the future of the project.

Vern Hall, the chief harbor engineer, said there is “some evidence” that the company has taken delivery of some pipe and is installing it in Texas, although he said he could not speak for Pac-Tex.

As for revocation of the permit, he said: “If Cecil were able to put together the financing for the project, which he has been trying to do for some time, I’m sure that he would get it un-revoked.”