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BP seeks approval for new cost method Trans-Alaska oil pipeline carriers want FERC’s help with rates; settlement efforts fail in long-running interstate tariffs dispute Rose Ragsdale For Petroleum News
Fed up with losing money, the company with the largest ownership stake in the trans-Alaska oil pipeline has asked the Federal Energy Regulatory Commission to approve a new method for allocating the cost of operating the 800-mile conduit in interstate shipping rates.
BP Pipelines (Alaska) Inc., which owns slightly more than a 50 percent interest in the Alaska pipeline, filed the request Dec. 29, saying it was intended to comply with the commission’s June 30 order directing the pipeline’s owners to develop a pooling mechanism that re-allocates all of the carriers’ costs based on throughput or usage.
The pipeline transports oil produced in fields on Alaska’s Arctic coast region known as the North Slope. Currently, the line carries an average of about 700,000 barrels per day of oil and other petroleum liquids, down substantially from an average of more than 2 million bpd at peak flow in the late 1980s.
FERC, which regulates interstate shipping rates for oil pipelines, is currently hearing a prolonged dispute over the Alaska pipeline’s interstate tariffs.
Effort to reach agreement BP said it has made significant efforts over the course of more than a year to reach agreement with the other four carriers on a pooling arrangement that would comply with the commission’s orders.
“Despite those efforts, the (pipeline) carriers have not reached an agreement, and BPPA believes that no agreement is possible at this time,” the company said. “In the meantime, as required by the Commission, the (pipeline) carriers are continuing to charge rates that are calculated on a uniform basis, with the result that some (pipeline) carriers, including BPPA, are under-recovering their costs, while others are over-recovering their costs. In fact, BPPA has under-recovered its costs by ($113 million in 2009, or) an average of about $9.4 million per month since Jan. 1, 2009.”
In its filing, BP also asked the commission to require the other carriers — ConocoPhillips Transportation Alaska Inc., ExxonMobil Pipeline Co., Koch Alaska Pipeline Co. LLC and Unocal Pipeline Co. — to incorporate the cost allocation mechanism that BP proposes into their respective tariffs on an interim basis, subject to investigation and adjustment.
The carrier said that doing so would enable the carriers to comply with the commission’s orders and avoid prolonging “the significant hardship being experienced by BPPA.”
The company also asked the commission to refer any challenges to its proposal to the administrative law judge assigned to investigate and review other issues in the broader tariffs dispute.
Koch, Unocal seek interstate rate changes One day earlier, FERC issued an order that granted waivers requested by Koch and Unocal in November and accepted and suspended their tariffs, subject to refund, to become effective Jan. 1, 2010, as proposed. The commission also added the proceeding to the consolidated proceedings in Docket Nos. IS09-348-000 et al., which concern prospective rates filed by the pipeline carriers and shippers.
Koch and Unocal both proposed changing the interstate shipping rates for transportation of crude oil on their share of the pipeline’s capacity using base period and test period adjustments and cost, revenue and throughput data that are consistent with data reflected in other the carriers’ recent tariff filings. They said the requests were consistent with a 2008 Commission order that requires the carriers to charge a uniform rate for interstate transportation.
Settlement proceedings fizzle Meanwhile, the consolidated case has undergone a few significant twists and turns in recent months.
In October, Chief Administrative Law Judge Curtis L. Wagner Jr. ordered the consolidated case to go to settlement procedures and appointed a settlement judge to handle the matter.
After two meetings with all parties in the case in November and December, FERC Settlement Judge H. Peter Young reported to the Commission and the chief judge Dec. 17 that parties in the case said they were unable to close the gaps between their various positions concerning appropriate return on equity for the pipeline.
“They reported further that they did not anticipate being able to resolve these or any other issues involved in these dockets going forward in a settlement judge posture. They unanimously requested that the hearing procedures previously held in abeyance be re-activated and that these settlement judge proceedings be terminated,” Young wrote in his report, before personally endorsing the request.
Wagner then appointed Administrative Law Judge Michael Cianci Jr. to hear the consolidated case and established a schedule calling for Cianci to reach an initial decision in the consolidated case by March 9, 2011.
Cianci has scheduled a pre-hearing conference for Jan. 20.
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