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FERC acts on 2009 rates for TAPS Federal regulator orders public hearing on state, shipper protests once earlier challenge to 2008 interstate tariffs is resolved Rose Ragsdale For Petroleum News
The Federal Energy Regulatory Commission has ordered an administrative law judge to help trans-Alaska oil pipeline carriers and shippers resolve a new dispute that is brewing over interstate shipping rates for 2009.
In an order issued April 29, the commission responded to a March 31 filing by ExxonMobil Pipeline Co. in which the carrier proposed to change its 2009 interstate shipping rate for its share of capacity on the 800-mile pipeline from Alaska’s North Slope to tidewater in Valdez to $4.01 per barrel, effective May 1. The change reflected an 86-cent-per-barrel reduction from the $4.87 per-barrel rate that ExxonMobil proposed for the 2008 calendar year on Jan. 1, 2008.
The commission ruled last year in a June 2008 order known as Opinion No. 502 that interstate shipping rates calculated using a method established in a 1985 court settlement were “unjust and unreasonable” and directed the pipeline’s carriers to use actual costs to determine interstate shipping rates for the years 2005-08.
On Jan. 28, 2009, the pipeline’s owners — BP Pipelines (Alaska) Inc., ConocoPhillips Alaska, Unocal Pipeline Co., Koch Pipelines (Alaska) LLC and ExxonMobil — filed a new interstate rate of $3.45 per barrel for calendar year 2008 in compliance with Opinion No. 502.
But the State of Alaska and shipper Anadarko Petroleum Corp. protested the tariff, claiming for various reasons that the rate was discriminatory or unjust and unreasonable.
On April 16, the commission issued an order in which it accepted the 2008 rate on an interim basis, subject to refund, and directed a FERC administrative law judge to hold a public hearing on most of the issues raised and to correctly calculate a 2008 interstate tariff for the pipeline.
The commission’s rulings will result in an estimated $640 million in additional oil production tax and royalty payments flowing to Alaska coffers, according to state officials.
The carriers have appealed the commission’s April 16 ruling.
New issues in 2009 rate protests Meanwhile, ExxonMobil in its March 31 filing proposed a rate change for 2009 that it contends complies with the commission’s directions in Opinion 502.
The state and shipper Anadarko protested the change, raising a number of issues, including some of the same concerns that they expressed about the carriers’ 2008 rates. The issues include whether the carriers used the appropriate depreciation period to reflect the remaining useful life of the pipeline; the costs of the carriers’ Strategic Reconfiguration Program, including its impact on rate of return which includes proxy group and capital structure issues; costs for dismantling and removal of the pipeline along with restoration of the pipeline right of way; operating expenses; throughput; and the uniform rate.
Anadarko also asked the commission to consolidate ExxonMobil’s filing with the pending 2008 compliance rate filing hearing. The state requested consolidation of the issues regarding the Strategic Reconfiguration Program and DR&R claims with Alaska’s protests of the 2007 and 2008 tariffs on those same grounds and held in abeyance.
In response, ExxonMobil said complete consolidation of the two hearings is not appropriate because the 2008 compliance filing was based on actual costs for calendar year 2008, “the locked in period,” whereas its proposed 2009 rate is based on a 2008 base period, adjusted for known and measurable changes in the nine-month period ending Sept. 30.
Though Anadarko and the State of Alaska’s protests raised many of the same issues cited in the 2008 compliance rate proceeding, the commission concluded that there were different issues also to be determined in the 2009 tariff.
“We adhere to the (earlier) ruling on the life of the line, and set the other issues in this proceeding for hearing,” FERC said. “With respect to issues that overlap between the 2008 rate proceeding and this proceeding, we find that the hearing on the 2009 rate should await the determinations in the 2008 compliance rate proceeding, and the (administrative law judge’s) rulings in the aforementioned 2008 compliance rate proceeding shall apply here as well.”
Outcome hinges on 2008 rates In the April 29 order, FERC accepted and suspended ExxonMobil’s proposed 2009 rate to become effective May 1, subject to refund, and ordered a public hearing to resolve the aspects of the protests that did not overlap concerns about the 2008 rates and to determine correct interstate shipping rates for 2009.
Because of new issues raised regarding the 2009 rate, the commission did not formally consolidate the proceeding with the 2008 rate proceeding. Instead, it directed that the administrative law judge who hears the case determine the best procedures for addressing the non-overlapping issues and how those issues should be resolved in light of findings with respect to the overlapping issues.
The commission also said it may be advisable for the presiding judge in the 2008 rate proceeding to be designated the presiding judge in the 2009 proceeding as well.
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