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Providing coverage of Alaska and northern Canada's oil and gas industry
February 2014

Vol. 19, No. 7 Week of February 16, 2014

RCA investigating Quality Bank

Following the lead set by federal regulators, the Regulatory Commission of Alaska is investigating the system used to equalize the value of North Slope oil shipments.

The commission dismissed a complaint by Flint Hills Resources Alaska LLC about the Quality Bank methodology, but took up the matter in an independent investigation. The Federal Energy Regulatory Commission took a similar approach to a separate federal complaint in a November 2013 ruling and expects to reach a decision this coming May.

The RCA said it followed suit because it prefers to be “in the same procedural posture as the FERC to ensure that there is an opportunity for the two commissions to establish, each in its own discretion, identical interstate and intrastate quality adjustments.”

To keep the various parties from having to be in two places at once, the RCA plans to formally begin its investigation after FERC has reached a conclusion on the matter.

The case will include Flint Hills, the producers BP, ConocoPhillips and ExxonMobil, the refiner Petro Star and a partnership of Tesoro and Anadarko, and the State of Alaska.

The crude oil moving through the trans-Alaska oil pipeline contains supplies from many producers and each individual shipment might be more or less valuable than the pipeline average. To compensate one another for deliveries of differing values, shippers use a system called the Quality Bank. The system has changed several times over the years as the various stakeholders have tried to set the “value” of crude oil by different standards.

Flint Hills believes the formula currently undervalues Resid, or the residual product that is left behind after all the lighter petroleum products have been distilled from crude oil.

—Eric Lidji






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