Industry: Paying the Piper

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Man has taken to burying many of the things that are important to him: his business records, the gold that backs his money, his nuclear missiles, and in some instances even his factories and food supply. Beneath a land that is be coming increasingly crowded on the sur face, he has also buried the tubes through which flow much of his source of energy. Nowhere is this truer than in the U.S., where underground pipes now carry 42% of all the nation's energy fuels in a vast network that stretches four times the length of all its railroads and 31 times that of its airline routes.

The oil and natural gas that flow through this network (see map, over leaf) eventually turn turbines, heat buildings, power automobiles, and cook the food of the U.S. The whole process has produced a thriving pipeline industry.

Nearly 125 companies in the U.S. now transport energy by pipe. Last year they pumped 14.8 trillion cu. ft. of gas and 3.7 billion bbl. of crude oil or refined products. Snaking more pipe over rivers and bays, deserts and mountains, the industry this year will lay another 28,200 miles at a cost of $1.8 billion.

The biggest of the new, the 1,600-mile Colonial Pipeline up the East Coast, last week advanced to within 500 ft. of its terminus at Linden, N.J. Trans-Canada Pipe Lines has just applied to the Federal Power Commission for approval to build a $200 million pipeline that will dip over the border into Minnesota, Wisconsin and Michigan. Three companies are competing to build a second gas line to link Texas and southern California at a cost exceeding $300 million. In Washington State the Olympic oil products pipeline is pushing southward to serve Seattle and Portland with oil from the rich fields of Canada's Alberta.

Cost & Controversy. The pipeline companies, which mostly have their headquarters in oil-rich Houston or Tulsa, are essentially transportation companies that shy from outright owner ship of production facilities. The 92 major oil pipeline companies that move 75% of all U.S. crude oil shipments and 45% of all finished products — ranging from jet fuels to tractor fuels — are owned either by individual oil companies or by consortiums. Service Pipe Line Co., "the largest (14,000 miles of pipe), is a Standard Oil of Indiana subsidiary, and runner-up Humble Pipe Line Co. (11,700 miles) does two-thirds of its business with parent Humble Oil.

On the other hand, the 28 natural gas pipeline companies — led by Tennessee Gas Transmission (11,540 miles of main line) and El Paso Natural Gas (10,719 miles) — are almost all publicly owned.

With a few exceptions, pipelines are usually very profitable, although as common carriers they are closely regulated — oil lines by the Interstate Commerce Commission and gas by the Federal Power Commission. The industry's rising revenues reached $4.5 billion last year. The oil lines' share of this profit comes from simply carrying other companies' crude or products for a fee, but gas pipelines buy natural gas at the wellhead, resell it at the far end at cost, plus an intricately figured fee. Because of recurring battles over rate increases with the consumer-minded FPC, the gas lines are usually involved in controversy. In a recent rate case, El Paso Natural Gas was ordered to give back $155 million with interest to California utilities.