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Shippers, state praise ‘first step’
Alaska officials and shippers Anadarko Petroleum Corp. and Tesoro Alaska Co. have hailed a federal judge’s decision to lower tariffs for the trans-Alaska oil pipeline as “important” and beneficial.
But the ruling by Administrative Law Judge Carmen Cintron of the Federal Energy Regulatory Commission “is nonbinding and reflects her opinion only,” said Daren Beaudo, a spokesman for BP Exploration (Alaska) Inc., which owns slightly more than 50 percent of the pipeline.
“The commission has yet to decide the case. This is still in the early stages, and the decision when it comes likely will be appealed by one or more of the parties,” Beaudo said May 23.
“It is an important issue, and we are confident that we’ve complied with our agreement with the state and that we’ve followed the law,” he added.
FERC’s five commissioners are expected to review the case and render a final opinion by year’s end or in early 2008.
Gov. Sarah Palin immediately praised the ruling May 17, saying that it “reaffirms the need to ensure low tariffs on oil and gas lines.”
“This is why we spent a great deal of time working on structuring the Alaska Gasline Inducement Act to maximize value for the state and ensure low tariffs. We’re pleased with the FERC decision, and we look forward to continued progress on this issue,” Palin said.
State could collect $600 million “It’s certainly a good thing, both in terms of moving forward with AGIA and oil revenues for the state,” said John Iverson, director of the Division of Tax at the Alaska Department of Revenue.
If Cintron’s ruling prevails, state auditors estimate Alaska will collect millions.
“We’re looking at the assumption that the case will be resolved in 2010,” Iverson said. “The refund amount, itself, to the state would be around $500 million, with about $100 million more in interest.”
The figures are based on state auditors’ estimates of tariff overcharges from 2005 through 2008.
For non-owner oil shippers on the pipeline, the judge’s decision will significantly improve the economics of doing business in Alaska, and in turn, significantly improve the state’s oil and gas investment climate,” said Antony Scott of the Alaska Department of Natural Resources Division of Oil and Gas.
“The difference is on the order of $3 a barrel. It’s the equivalent of raising a company’s stress price for making investment decisions. If a company decides to do business based on a stress price of $30, then $3 would be 10 percent. And that’s a big deal!” he said. Scott recalled Conoco Inc.’s chairman and CEO complaining in the mid-1990s about the TAPS tariffs before that company pulled out of Alaska after developing the Milne Point field.
Conoco sued the pipeline owners over the tariffs, and did not return to Alaska until it merged with Phillips Petroleum Co. and became one of the pipeline’s owners.
Scott said industry executives often question him “intensely” about the tariffs and their future direction.
Shippers make their point “Judge Cintron’s ruling supported our contention that the TAPS rates were excessive,” said Mark Hanley, a spokesman for Anadarko. “Compared to this year’s (tariff), which on average is $5.11 a barrel, that’s a considerable difference. It’s a big first step.
The ruling also reinforces the Regulatory Commission of Alaska’s decision several years ago to lower in-state tariffs to the $2 a barrel range, Hanley said May 22.
The five pipeline owners appealed the RCA decision, which was upheld in a lower court and now awaits a decision by the Alaska Supreme Court.
—Rose Ragsdale
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