Foreign Relations of the United States, 1977–1980, Volume XXIX, Panama

108. Memorandum From the Director of the Office of Management and Budget (McIntyre) to President Carter¹

Washington, October 6, 1977

SUBJECT

• Sea-level Panama Canal Study

ISSUE

Should the Administration support legislation to authorize a restudy by the Corps of Engineers of the feasibility of a sea-level Panama Canal?

BACKGROUND

Attached is a copy of Article XII of the Panama Canal Treaty,² which commits the U.S. and Panama to study jointly the feasibility of a sea-level canal in Panama. The costs and legislative requirements for such a study to be conducted now by the U.S. Army Corps of Engineers are discussed below. This proposal would be perhaps one way to carry out that commitment.

As you consider it, the proposal should be viewed in the larger context of (a) the impact of the proposal upon obtaining Senate consent on the Treaties and (b) how the proposal would be received in Panama. For example,

Would proposing legislation for the study, while ratification is pending, assist or retard progress toward Senate acceptance of the Treaties? Should the proposal be held up until after ratification?

Does this study proposal meet the commitment for a joint study? What should be Panama’s role? Is not a great deal more consultation needed with Panama before getting too far out ahead on the legislation?

These are questions we urge you to take up with Ambassadors Bunker and Linowitz and Secretary Vance before you decide the issue discussed below.

DISCUSSION

The Corps of Engineers—acting as agent for the Atlantic-Pacific Interoceanic Canal Study Commission—completed a study of a sea-level canal in 1970.³ The sea-level canal would have been located in the Republic of Panama with an estimated construction cost of $2.9 billion at 1970 prices. The Commission, chaired by former Treasury Secretary Robert Anderson—concluded at that time that the construction of the canal should be initiated 15 years before the existing canal reached its capacity—then estimated to be around the end of this century.

The inability of the current canal to accommodate large tankers to transport Alaskan oil directly to the east coast has led to proposals for a reexamination of the feasibility of a sea-level canal by the Corps of Engineers. The Corps estimates that such a canal would cost about $6.2 billion at today’s prices. The Corps could prepare an updated three-year study of the canal at a cost of $7 million, including a full estimate of the environmental impacts. Of this, $2 million would be needed for on-site investigations in Panama which would, of course, require the agreement of the Government of Panama.

Authorizing legislation would be needed if the Corps were to undertake this assignment. We would then ask the Corps to reprogram sufficient funds to initiate the study, with first-year costs estimated at $1.5 million. We understand you will be asked by Senator Gravel to seek specific appropriation for these costs. We do not believe that such appropriations are necessary.

Arguments for a restudy

—$7 million is a relatively small price to pay for an informed assessment of the current engineering, economic and environmental feasibility of a sea-level canal.

—A study is not a commitment to construct, so no irrevocable decision regarding a sea-level canal is involved.

—If current changes in the economics of energy transportation continue, construction of a sea-level canal could prove to be in the national interest and the availability of a current feasibility study would then be highly desirable.

Arguments against a restudy

—Administration support for a sea-level canal study by the Corps—even though not a commitment to construct—will be strongly resisted by environmentalists who are concerned about potential adverse environmental and ecological effects from mixing waters from the Pacific and Atlantic Oceans, e.g., introduction of poisonous Pacific sea snakes into the Atlantic. You have received a memorandum from Frank Press on this topic.⁴

—In the short run, it is likely that the existing canal with special arrangements for lightering petroleum to smaller vessels will be satisfactory to meet our needs.

—Many transportation economists question whether the costs of a sea-level canal could be recovered from tolls even if the energy transportation problem worsens.

PRESIDENTIAL DECISION

Propose legislation to authorize study of sea-level canal by Corps of Engineers.

Do not support legislation to authorize study.⁵

1. Source: Carter Library, White House Central Files, Subject File, FO 3–1, Panama Canal, 11. No classification marking. Sent for action. A stamped notation on the document reads: “The President has seen.” Carter initialed the top-right corner of the memorandum.
2. Attached but not printed.
3. See footnote 4, Document 76.
4. Not found.
5. Carter checked this option and initialed below the decision options.