|
Coalition asks to uphold Quality Bank Three producers, a refiner and FERC staff believe FERC was right in preserving the existing methodology despite protests Eric Lidji For Petroleum News
The three owners of the trans-Alaska oil pipeline, a pair of third-party users of the pipeline and Federal Energy Regulatory Commission staff want regulators to uphold their decision to keep the existing methodology for determining payments to the Quality Bank.
The state of Alaska and refiners Flint Hills Resources Alaska Inc. and PetroStar Inc. had opposed the FERC decision, saying it would distort the Alaska refining market.
The case stemmed from a complaint Flint Hills made against the three owners of the pipeline, saying the existing method for determining Quality Bank payments was outdated because it undervalued Resid, a residual product left behind after lighter petroleum products have been distilled from crude oil. FERC dismissed the complaint on technical grounds, but launched an investigation into the matters Flint Hills raised.
The investigation, though, upheld the existing Quality Bank methodology.
The 800-mile pipeline co-mingles shipments from numerous companies. The Quality Bank system prevents oil companies from profiting when they ship lower quality crude through the pipeline. Without such a mechanism, a company shipping less-than-average crude through the pipeline would unfairly collect average crude from the other end.
Alternative can’t be proposed According to the state, the FERC administrative law judge overseeing the case determined that the parties could not challenge the Quality Bank methodology by proposing a superior alternative, but only by highlighting existing deficiencies. The state worried this would codify “competitive distortions” in an already fragile industry.
The three parties also challenged how the methodology values Resid, which involves a series of actual and hypothetical appraisals of processing costs and market conditions.
BP Exploration (Alaska) Inc., ConocoPhillips Alaska Inc. and Exxon Mobil Corp., in separate filings, and the producer Anadarko Petroleum Corp. and the refiner Tesoro Alaska Corp. in a joint filing and FERC trial staff all opposed the challenge, saying Flint Hills bears the burden of proof for determining that the methodology needs to be updated.
“We are the only participant without a financial (or similar) interest at stake,” Kenneth M. Ende, counsel for the commission trial staff, wrote in a June 30 filing, responding to criticisms that FERC staff “took a passive role” in the proceedings. “We represent only the public interest. Our role is objectively to review and evaluate the evidence and develop a position on the issues consistent with applicable Commission and judicial precedent. That objective review led to the conclusion that the Exxon Mobil Corporation, ConocoPhillips Alaska Inc. and Tesoro Alaska Company and Anadarko Petroleum Corporation presented overwhelming evidence that (Flint Hills Resources) and (PetroStar) failed to demonstrate that the existing (Quality Bank) Formula is unjust and unreasonable.
| 