The trans-Alaska oil pipeline owners have petitioned the Federal Energy Regulatory Commission, alleging that rates set by the Regulatory Commission of Alaska for 2005 transportation within the state on the 800-mile trans-Alaska pipeline system are unlawful because they discriminate in favor of in-state shippers.
But at least two shippers have filed objections to the move, claiming TAPS’ owners have jumped the gun by failing to exhaust in-state remedies before seeking help at the federal level.
The pipeline owners, BP Pipelines (Alaska) Inc., ConocoPhillips Transportation Alaska Inc., ExxonMobil Pipeline Co., Koch Alaska Pipeline Co. and Unocal Pipeline Co., told FERC in a July 20 filing that the in-state rates create an undue preference in favor of in-state shippers and an undue burden on interstate commerce.
The owners asked the federal panel to investigate the new in-state rates and set new “reasonable” in-state rates equal to or comparable to their interstate tariffs. They also asked FERC to consolidate this request with an existing case in which the State of Alaska and Anadarko Petroleum Corp. protested 2005 interstate rates set by TAPS’ owners late last year.
In-state rates about half
The (in-state) rates set by the RCA for deliveries to the Valdez Marine Terminal are about half the level of the TAPS owners’ 2005 interstate rates for identical service, the carriers said. (In-state) rates ordered by the RCA for shorter (in-state) movements, which are lower than the Valdez (in-state) rate, are disproportionately low when compared to the 2005 interstate rates, the owners argued in a 25-page petition.
The (in-state) rates for shorter movements are lower than for longer movements because most costs are allocated on a per-barrel-mile basis.
Even considering a shorter length haul, there are no justifications for the rate differences, the carriers told FERC.
“The TAPS carriers provide exactly the same service on a length of haul basis to both interstate and (in-state) shippers,” the owners said. “The (in-state) shippers should be required to cover their fair share of the TAPS carriers’ total revenue requirement, which they are not doing by paying only half as much for the same service that the interstate shippers receive.”
Tesoro, Anadarko counter file
In motions filed Aug. 5, Tesoro Alaska Co., an in-state and interstate TAPS shipper and owner of an oil refinery in Nikiski, and interstate shipper Anadarko Petroleum Corp., urged FERC to reject the TAPS owners’ petition.
Tesoro said it invested time and considerable resources in helping the RCA gather information in a $20 million, five-year investigation that resulted in the setting of in-state shipping rates for TAPS. Any increase in those rates would negatively affect Tesoro’s oil refining and distribution operations, the company said. Tesoro purchases North Slope crude from the State of Alaska, which acquires the oil as in-kind royalties.
Tesoro criticized TAPS’ owners for asking FERC to use its “limited” powers to increase in-state TAPS rates, which were set in 2002 and have continued in effect because the owners “refused to file tariff revisions for increased rates that comply with 3 AAC 48.275(a) of the RCA’s regulations.”
“The TAPS carriers make no attempt to explain or justify why the commission should exercise its limited power under (federal law) to increase an in-state rate when the TAPS owners, themselves, are making no attempt to comply with the RCA’s regulations to revise the permanent (in-state) rate,” Tesoro argued.
All the TAPS owners have to do to capture the alleged benefit from any disparity in shipping rates is modify their sales contracts to sell F.O.B. destination, Tesoro argued.
“This is hardly the type of extreme situation that would create a significant burden on interstate commerce and justify intervention into a state’s regulatory sovereignty” as permitted by federal law, the company added.
Petition called ‘premature’
Tesoro, along with oil and gas independent Anadarko, called the TAPS owners’ petition “premature,” noting that an inherent precondition of FERC’s exercise of its power is that the owners first attempt to revise the in-state rate through compliance with the RCA’s regulations and regulatory framework.
The TAPS owners have taken the position that their appeal of an earlier RCA ruling, which sets in-state rates for 2000, will somehow impact the in-state rate for 2005, Tesoro said.
“If that is the case, then they should be required to wait until a final decision is issued,” the company argued.
Otherwise, FERC is being used to bypass the appellate jurisdiction of the Alaska State Courts, according to both shippers.
In short, the use of FERC’s power should be the last resort, and not the first resort, they said. The TAPS owners also asked FERC to consolidate its petition with the case currently pending to achieve “efficiency and consistency” in investigating both interstate and in-state shipping rates on the pipeline.
TAPS’ owners had asked shippers to pay up to 28 percent higher interstate transportation rates in 2005, but Anadarko and the State of Alaska protested the increase.
Unlike most oil pipelines, which base their interstate tariffs on the producer price index, TAPS charges shipping rates calculated using a cost-based model approved by the owners, the State of Alaska and FERC in a 1985 settlement.
Spokeswoman Tamara Young-Allen said FERC tries to act on requests such as the filings by the TAPS carriers and shippers in a timely manner, though no time limit is set for such deliberations. The commission’s next meeting is scheduled for Sept. 15 and its agenda will be posted on FERC’s Web site Sept. 8.
—Rose Ragsdale
