developed for controlling the destruction. This is the Machiasport

proposal.

III. Economic Justification

The first, and chief justification for Machiasport is that it will "aid New England by halting the rising price trend for #2 heating oil and by guaranteeing the region a more dependable supply of #2 heating oil."57 Toward this, Occidental has "clearly stated a commitment to reduce posted prices a minimum of 10% over Boston Harbor prices."58 In addition,

Occidental has promised to contribute 20¢ a barrel to a Marine Resources Foundation for New England.5

59

Thus, counting this latter as a direct

economic benefit to New England, the region would receive a total benefit of 20¢ plus 10% of Boston Harbor prices. In March, 1968, the retail price 60 of #2 Heating Oil in Boston Harbor was 17.7¢ a gallon, or $7.43 per

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barrel. The total benefit, then, would be 94.3¢ per barrel.62

This substantial benefit, New England obviously welcomes. But when we examine just how Occidental attains such savings, it becomes clear that they depend in no significant measure upon a refinery and deep water port at Machiasport. Perhaps the advantage to Occidental Petroleum Corp. rests on such; but not to New England.

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Some figures tell the story. According to a recent article on the oil import quota in Fortune, the delivered price of similar U.S. and Middle Eastern crude oil at Philadelphia differed by $1.50, the U.S. oil costing approximately $3.75 per barrel, the Middle Eastern costing-and this cost includes both shipping and, for the foreign oil, a 10¢ per barrel duty--approximately $2.25 per barrel. Thus, by circumventing the existing restrictions which prevent that cheaper foreign oil from actually being sold in Philadelphia (or New England) to any great extent, Occidental

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would save approximately $1.50, or two thirds more than the benefits it offers New England for the privilege. A sceptic might maintain, however, that the real benefit comes from the use of 300,000 ton tankers at Machiasport. These ships certainly afford great savings for the oil companies. Let us consider the figures, however, not from their point, but from that of the consumer.

An approximate formula for the shipping cost of oil from the Persian gulf to Europe--a distance equivalent to that from Libya or Venezuela to Machiasport--has been derived in the leading paper on oil shipment costs, The Economics of Transporting Oil to and within Europe, by Michael Hubbard. 64 Under this formula, shipping costs equal approximately $280,000 plus $4.20 per dead weight ton. So let us compare the shipping cost of a 300,000 ton tankers with that of a 150,000 ton tanker, which a number of east coast ports can accommodate. The Tokyo Maru, 150,000 tons, carries approximately 1.2 million barrels of crude oil;6 65 Universe Ire

land, a 312,000 ton Gulf Oil Tanker which recently entered service, carries 2,250,000 barrels.66 Consequently, we have the following calculations:67 Cost/bbl in 150,000 ton tanker = $280,000+ $630,000, or $910,000 1.2 million = $.75

Cost/bbl in 312,000 ton tanker = $280,000 1,310,400, or $1,590,400 2.25 million = $.71. $.75 - $.71 =

$.04 saving per barrel.

For an oil company shipping two million barrels, of course, this amounts to $80,000, per shipment. But four cents per barrel for the consumer is trivial when each barrel contains 42 gallons. To save $1, the consumer would have to use approximately 1050 gallons of heating oil. This saving then, dwindles next to any reasonable estimate of the damage to be caused by Machiasport. In effect, only the continued existence of the present oil import restrictions justify Machiasport to

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New England consumers. But these quota-related savings do not require any specific port location. Consequently, by either locating the

free port in an existing port, or abolishing the import restrictions, the same or even greater advantages could be secured for the New England consumer.

Another economic argument attributes New England's pricing dis

advantage to lack of an oil refinery; Machiasport would bring it that refinery. Those who make this argument, however, have not shown specifically how much the lack of a refinery costs New England, if anything. Indeed, it is difficult to see how the lack of a refinery causes any substantial loss at all. A refinery in Machiasport would still have to get its product to market, and mostly by ship, the cheapest transport method. Loading and unloading accounts for the major costs in shipping so it should make little difference to the consumer in Portland, Boston, or Hartford whether the oil comes from Machiasport or from Newark. While the reasons for New England's present high fuel prices are not clear, no one has shown the lack of a refinery to be one. It is reasonable to conclude, therefore, that Machiasport provides very few benefits to the New England consumer in return for the devastation it may well bring to the Maine coast.

The justifications for Machiasport which relate specifically to Maine raise different problems, however. Maine officials point out that the refinery and resulting economic development will provide jobs in the most depressed county of the Northeast, and will contribute millions of 68 dollars to the State through direct taxes. These immediate benefits are undeniable, even though the project threatens economic harm of similar or greater magnitude. Yet, officials under political pressure and anxious to spur economic development, understandable ignore the possible danger for the sure benefit.

As this report has indicated that danger is so substantial that Maine should not risk it--particularly since many of the benefits the project promises to consumers can be achieved in other ways. But Machiasport hurts the interests of the nation as a whole, as well as those of Maine. The economic benefits of the tourist business may be Maine's, but the ability to explore and savor a protected, unpolluted northern Maine coast, belongs to the nation. While possibly Maine's self-interest should forbid the Machiasport development, not every present and potential plan to develop the northern Maine coast would prove uneconomical to Maine upon closer examination. In preventing these, Maine would sacrifice economic development only at cost to itself, and for the benefit, at least in part, of the American people as a whole. Under these circumstances, it would be unfair for the nation to ask Maine to bear this sacrifice by itself. Conservationists, while opposing Machiasport, should at the same time support some arrangement whereby the economic burden of foregoing development of the Northern coast is shared by the nation as a whole. While there can properly be no burden on conservationists to come forward with such a proposal--their efforts are largely voluntary, and they lack the governmental resources to formulate such plans as a rule--one possibility is suggested in Appendix C.

Conclusion

The Occidental Petroleum Corporation's proposal for a deep-water port and oil refinery at Machiasport would establish a huge industrial complex on a particularly lovely and isolated portion of the Maine coast. Because no controls over resulting development in the area exist, and little can be done to limit the harm of oil pollution at this particularly difficult location, the proposal is likely to cause great and lasting

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1

damage to the Northern Maine coast. The principal gain from this project,-lower oil prices--can be achieved in other, less obnoxious ways, such as

using smaller ships in existing harbors, or reducing the oil import

barrier. For these reasons, there should be no development of a port and refinery at Machiasport.*

• See Appendix C for a brief discussion of other proposals to use Machiasport for Alaskan oil.