HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
August 2010

Vol. 15, No. 34 Week of August 22, 2010

RCA agrees to consolidate rate cases

Regulators fold four 2009 rate cases into previously consolidated 2008 rate cases; parties proposing concurrent FERC-RCA hearing

Eric Lidji

For Petroleum News

State regulators are consolidating eight cases on trans-Alaska oil pipeline shipping rates.

In a bid to simplify what is becoming an increasingly complicated situation, the Regulatory Commission of Alaska agreed to fold a series of rate increases requested by the owners of the pipeline in 2009 into a previously consolidated series from 2008.

The owners and several third parties, including the state, proposed the consolidation idea in January. The move allows the state and third parties that asked to be part of individual cases to participate in the larger rate case. The owners and the third parties, however, did not reach a decision about what information should be kept confidential during hearings. RCA plans to issue a decision on that matter in a future ruling.

The owners of the pipeline also said they intend to ask RCA and the Federal Energy Regulatory Commission to hold a concurrent hearing to decide whether costs associated with a major upgrade project on the pipeline should be included in shipping rates.

FERC regulates shipping rates on oil bound for markets outside of Alaska.

Transportation subsidiaries of BP, ConocoPhillips, ExxonMobil, Chevron and Koch each own an undivided stake in the 800-mile pipeline that goes from Prudhoe Bay to Valdez.

Nine cases in 20 months

While shipping rates are always a major regulatory issue for the pipeline owners, the past three years have brought an increasingly complicated tone to the usual proceedings.

Until 2008, the five companies that own stakes in the pipeline asked for rate increases using a methodology struck down in a landmark court ruling in 2002.

Every year, RCA in turn rejected those requests.

Starting in 2008, however, the companies began using the new methodology, saying that declining throughput and increasing operating costs justified higher shipping rates.

That year, four of the five owners asked the commission for permission to increase shipping rates on oil bound for Alaska markets by 57 percent. BP did not ask for a rate increase.

RCA approved those increases on a temporary basis while it looked into whether the increases should be set in place permanently. But In 2009, before RCA reached a decision, the four owners asked for an additional 29 percent increase. RCA also approved those increases on a temporary basis, creating eight similar rate cases.

The commission previously consolidated the four 2008 cases into one docket. The new order consolidates the 2009 cases into the 2008 case, making one docket for all eight cases.

ConocoPhillips recently requested a third rate increase. RCA has not decided whether or not to allow those new rates to go into effect on a temporary basis.

A big SR question mark

One of the big points of debate in the rate cases is whether and how the owners should be allowed to include the costs from Strategic Reconfiguration in shipping rates.

The Strategic Reconfiguration project is a major upgrade to the pipeline and the pump stations along it that has been late and over budget. The state and several third parties don’t believe the full cost of the program should be included in the rates paid by shippers.

RCA previously held off on setting hearings about the rate cases while it waited for FERC to set a timetable to deal with the Strategic Reconfiguration question.

The parties originally proposed the idea of phasing the rate cases, letting RCA consider everything not connected to Strategic Reconfiguration now while it waits for FERC to look at the Strategic Reconfiguration question. Now, though, the parties are proposing a concurrent hearing where state and federal regulators can hear the issues.

While the same companies that own the pipeline also own much of the oil moving through it, shipping rates impact other companies like independent North Slope producers and third-party refiners, and the state, which gets smaller royalties when shipping rates go up because royalties are calculated after tariffs have been paid.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.