Paying the Piper

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.

Bigger & Thinner. The pipelines are also battling with the railroads, which hope to remedy loss of shipments to pipelines with pipeline systems of their own. Southern Pacific operates 1,700 miles of line along its right of way from El Paso to Oregon, and the Pennsylvania, Great Northern and Missouri-Kansas-Texas all have sizable pipeline investments. To offset such inroads, the larger pipeline companies are diversifying. Tennessee Gas owns an insurance company (Tennessee Life), two Houston skyscrapers, three chemical companies and a bank; El Paso is half owner with Rexall Drug of a plastics company.

The brightest hope for improved earnings, however, lies in technological advance. Pipeline companies this year will buy 1,600,000 tons of pipe from steel companies, which have steadily made their pipes longer, stronger and thinner-walled. The proposed Trans-Canada line, for example, would safely cross 45 miles of current in the Straits of Mackinac with improved pipe, and pipe has been laid 170 ft. deep in the Gulf of Mexico. By developing underground storage vaults, gas companies have also been able to keep up with heavy winter demand and prop up summer prices. In the marshy New Jersey meadows, Transcontinental Gas Pipe Line Corp. is freezing thousands of yards of mud, scooping a hole out of the middle and filling it with gas chilled to --258DEG F. to liquefy it.

That Charcoal Aroma. The U.S. is nearly saturated with main lines now, but the rush to build distribution lines continues. The cost: from $100,000 a mile in rural Alabama to $1,000,000 a mile in suburban New York. The oil v. gas competition is also heating up. The oil industry already pipelines directly to such airports as Washington's Dulles, New York's Kennedy and Chicago's O'Hare, where jet fuel demand is heavy; it is also planning lines directly into neighborhood service stations to replace tank trucks, considering community tanks from which metered home oil burners could draw directly as gas burners do. For its part, the gas industry is pushing a "total energy concept," in which pipelined gas will do everything from generate electricity to cool air and heat water. Gas companies are already demonstrating a backyard barbecue that is fired by natural gas. It includes, they insist, even the charcoal aroma.

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