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Regulators to revise TAPS Quality Bank State commissioners, federal judges hear testimony in concurrent hearings on proposed cost adjustment to value of ANS crude Rose Ragsdale For Petroleum News
The Regulatory Commission of Alaska and Federal Energy Regulatory Commission wrapped up more than a week of concurrent hearings July 18 on how best to revise the processing cost adjustment to the heavy distillate component of the Trans-Alaska Pipeline System Quality Bank.
The TAPS Quality Bank is a method the regulators use to make monetary adjustments among shippers to the value of petroleum in the trans-Alaska oil pipeline to account for differences between the quality of petroleum shippers tender at Pump Station 1 and the quality of commingled petroleum they load into tankers 800 miles to the south at the Valdez Terminal.
The Quality Bank separates each component in the petroleum stream and assigns each a value. For the heavy distillate component, the Quality Bank uses a reference price, minus a processing adjustment. In an earlier proceeding, the RCA and FERC jointly determined that the reference price for valuing the heavy distillate component on the West Coast is Platts’ West Coast spot quote for Los Angeles Pipeline (EPA) Diesel.
LA Pipeline (EPA) Diesel has a specified sulfur content of 500 parts per million. An adjustment of 6.4302 cents per gallon is deducted to reduce the sulfur content from 5,000 ppm to 500 ppm to meet the sulfur specification for the referenced product.
Effective June 1, 2006, Platts changed its diesel reference price to an ultra-low sulfur diesel with a sulfur content of only 8 ppm. This product is now listed in Platts as ULS (EPA) Diesel.
Hearings held in Anchorage RCA and FERC administrative law judges held the hearings in Anchorage July 9-18 to resolve issues related to cost elements that increase or change as a result of the more severe processing required to meet sulfur specifications associated with the new ultra-low sulfur diesel price used to value heavy distillate, the RCA said in a statement July 18.
The hearings culminated a year of legal filings before the commissions by owners of the trans-Alaska oil pipeline and the line’s shippers, including the State of Alaska. In the filings, the parties shared ideas for dealing with the change in the West Coast heavy distillate price quotation and recommendations for a replacement price.
Individuals who testified at the hearings included William J. Sanderson on behalf of Flint Hills Resources Alaska Inc.; Tom A. Schneider and David I. Toof for Exxon Mobil Corp. and Tesoro Alaska Co.; John O’Brien for ConocoPhillips Alaska Inc.; William R. Engibous for Chevron USA Inc. and Union Oil Co. of California; Charles Miller for the State of Alaska; James T. Mitchell for owners of the trans-Alaska oil pipeline; and Steven McGovern for BP Exploration (Alaska) Inc./ BP Oil Supply Co.
Administrative law judges at the RCA and the FERC are expected to make a joint recommendation no later than the first week of September 2007, according to RCA spokeswoman Grace Salazar. The commissions will then issue an order adopting, accepting, rejecting or modifying the judges’ recommendations, she added.
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