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Settlement judge to hear pipeline dispute Regulatory Commission of Alaska hopes for resolution of complaints about CIPL’s rate hike; Cook Inlet oil producer reports growth Wesley Loy For Petroleum News
The Regulatory Commission of Alaska has taken action to try to settle protests over a Cook Inlet oil pipeline operator’s recent 259 percent rate increase.
In a 12-page order issued March 22, the RCA appointed a settlement judge, Blythe Marston, to hear the controversy over Cook Inlet Pipe Line Co.’s new rate.
Three parties had asked to intervene in the matter of CIPL’s tariff revision, and the RCA granted the petitions from Anchorage-based oil and gas producer Cook Inlet Energy LLC and overriding royalty interest owners Daniel K. Donkel and Donkel Oil & Gas LLC.
In its order, the RCA said it wants the parties to engage in “meaningful settlement discussions.” Barring a resolution, the commission said the parties should identify those issues that can be resolved by mediation and those, if any, requiring commissioners to decide.
The RCA scheduled an initial settlement conference for April 21-22 at RCA offices in downtown Anchorage.
Volcanic rate hike CIPL’s rate hike took effect at the beginning of the year. The RCA is allowing the pipeline operator to collect the rate temporarily and subject to refunds.
The current transportation rate is $14.57 per barrel of oil, a 259 percent increase from the previous rate of $4.06.
Texas-based CIPL operates a 20-inch pipeline that runs 42 miles from Granite Point down the western side of Cook Inlet to the Drift River Oil Terminal, which also belongs to CIPL. The pipeline was installed in 1966.
Cook Inlet Energy, in its formal complaint filed in January, argued the rate hike was excessive and “could not have come at a worse time” for the fledgling company, which in late 2009 bought oil and gas assets on the west side of Cook Inlet from Pacific Energy Resources Ltd., a California firm undergoing bankruptcy liquidation. The assets include the West McArthur River oil field.
CIPL has attributed much of its rate increase to damage and disruption the erupting Redoubt volcano caused in 2009, idling west Cook Inlet oil production and the pipeline for months.
In filings with the RCA, the pipeline operator has defended its higher rate as “entirely reasonable,” allowing for recovery of actual costs plus a reasonable return. CIPL added it “has no responsibility to subsidize the recent investment” Cook Inlet Energy made in the oil and gas properties.
Cook Inlet Energy’s growth Despite the rising transportation cost for moving its oil, Cook Inlet Energy is plowing ahead with efforts to grow its production from wells that previously were shut-in.
The company is a subsidiary of Tennessee-based Miller Energy Resources, which announced in an April 5 press release that its Cook Inlet production now exceeds 1,100 barrels of oil equivalent per day.
“This increase in production is the result of the successful rework of its West McArthur River Unit-6 well which tested at a flowing rate of 584 BOED,” Miller said. “The rework included replacing tubing and adding new perforations targeting previously untapped oil-bearing sands.”
Another well, the West McArthur River Unit-5, was successfully worked over earlier this year, Miller said.
Scott Boruff, Miller’s chief executive, said the company originally thought it would take much longer, until the fourth quarter of this year, to reach its goal of 1,100 barrels per day.
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