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RCA OKs temporary Badami tariff New rate 72% decrease, from $26.09 to $7.26 per barrel; change based on reduced operating expenses, higher throughput Kristen Nelson Petroleum News
The Regulatory Commission of Alaska has approved — on a temporary basis — a decrease from $26.09 per barrel to $7.26 per barrel the rate BP Transportation (Alaska) will charge to move oil on the pipeline from Badami to Endicott.
The commission said in an Oct. 8 order that it is suspending the tariff rate filed by BP Transportation (Alaska) for the Badami oil pipeline, allowing the filed rate to be collected on a temporary and refundable basis and allowing the filed rate to take effect on less than 30 days notice.
The order follows an Oct. 5 letter to the commission from BPTA requesting a rate decrease from $26.09 per barrel to $7.26 per barrel and asked for an Oct. 10 effective date.
“Good cause exists because the production of petroleum at the Badami Unit, which has been suspended since 2007, is expected to resume by October 10, 2010,” BPTA said in its letter.
BP Exploration (Alaska) brought the Badami field online in 1998; the field produced 1.15 million barrels in 1999, declining thereafter. The Alaska Department of Natural Resources’ Division of Oil and Gas shows no production at Badami in 2004. Production was begun again in 2005 and continued through 2007; there is no production recorded for 2008 and 2009.
In an annual report the Alaska Oil and Gas Conservation Commission said regular production at Badami began in August 1998 and peaked in September at an average daily rate of 7,450 barrels per day. Beginning in January 1999, production rapidly declined to 3,300 bpd and the first shut-in for the field was from February through April of that year. Facilities were upgraded and remediated and production was restarted in May 1999, jumping to an average 5,300 bpd in July 1999, but declined to fewer than 3,000 bpd by year end 1999.
By July 2003 production was averaging less than 1,300 bpd from six wells and in August 2003 RCA approved BP’s request to temporarily shut down Badami oil pipeline for some two years.
Settlement agreement with state Although BPTA had filed notice of temporary suspension in 2003, RCA said it accepted a settlement agreement between the State of Alaska and BP Transportation (Alaska) which created the Badami settlement methodology, requiring BPTA to calculate maximum tariff rates to be effective Jan. 1 of each year.
In the summer of 2005, when Badami production was resumed, the Badami settlement agreement was amended.
RCA said that amendment “was intended to address the uncertainties of the Badami Unit which may cease and then restart production again, requiring BPTA to suspend and resume transportation of petroleum on the pipeline.”
RCA accepted the amendment, “subject to protest from an economically impacted party.”
RCA said the 72 percent decrease in tariff, from $26.09 per barrel to $7.26 per barrel, “appears to be primarily attributed to significantly diminished anticipated operating expenses, combined with higher anticipated throughput expected for 2010 relative to that of 2007.”
While the proposed rate is relatively high, it is much lower than in previous years, RCA said, “and does not appear to be out of the ordinary, given the past experience and operational uncertainties of the Badami Oil Pipeline.”
RCA said because the new rate is a decrease, it allows the new rate to go into effect on a temporary and refundable basis on shortened notice, and said BPTA may begin collecting the new rate Oct. 10.
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