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Vol. 12, No. 24 Week of June 17, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Donít leave it to FERC

Palin on right track, Murkowski gas line contract left important details up to feds

Kristen Nelson

Petroleum News

Donít leave anything to FERC. Fund the stateís efforts on the gas pipeline. Get gas for Alaskans. Get access to the line right. Get the tariff rates right. And have a very good reason if you decide to give control of the gas pipeline to a few major producers, because that will have an impact on access, an impact on rates and an impact on the State of Alaskaís power to manage and tax its own resources.

Those are the lessons attorney Robin Brena sees for the gas line after more than 20 years of being in the trenches on pipeline rate litigation, which he shared with a House Resources Committee hearing on June 7 in Anchorage.

A partner in the law firm of Brena, Bell & Clarkson, Brena said he is 100 percent in favor of a gas pipeline, but said Alaskaís oil and gas resources are transported through pipelines with no competition. These are monopoly-controlled lines, he said, and economic regulation of these noncompetitive pipelines must meet two basic goals: fair access and just and reasonable rates.

Getting access and rates right, he told the committee, will maximize the stateís income from its hydrocarbon resources by bringing in more E&P companies to develop more oil and gas, which in turn will deliver more royalty and severance taxes into state coffers. Fair access and rates will also yield more value-added manufacturing and jobs in Alaska.

Murkowski contract left a lot to FERC

The gas line contract negotiated by the Murkowski administration with the three big North Slope producers under the Stranded Gas Development Act left a lot to the Federal Energy Regulatory Commission, Brena said. The details were not addressed, and thatís where the money is, he said.

Brena said FERC isnít viewed as an active regulator because in the Lower 48 pipelines generally have competition and FERC has evolved in response to that competitive situation and is not well suited to Alaska where there is no pipeline competition.

He also said that FERC hesitates to get involved in massive cases between well-funded parties.

ďThese are your resources,Ē he told legislators and urged them not to try to solve a local problem in D.C.

And he urged them to fund the work. Past administrations, he said, have been out- resourced in pipeline matters ó out-litigated, out negotiated and out staffed. Brena said this is not a comment on the Palin administration, which he said has some very bright people and is aimed in the right direction. But he warned that the state faces the best of the best ó oil company representatives who do this work for a living.

Tariff cases in process

Brena is the attorney for Anadarko Petroleum and Tesoro in the current trans-Alaska oil pipeline tariff case before FERC. He reviewed the status of that case for the committee, as well as the earlier case before the Regulatory Commission of Alaska that resulted in a lowering of tariffs for intrastate transportation of oil.

The 2002 RCA decision on the 1997 case, which set a $1.96 rate for intra-state shipment, was affirmed in Superior Court in 2006, Brena said. The carriers appealed the decision to the Alaska Supreme Court. The case has been argued before that court; the court has not yet issued a decision.

An initial decision favorable to Brenaís clients was issued in May on the Federal Energy Regulatory Commission case by an FERC administrative law judge. The full commission has not yet heard the case, which Brena said would certainly be appealed to the D.C. Circuit Court. An appeal to the U.S. Supreme Court is probable, but Brena said he didnít think the Supreme Court would hear the case.

The FERC case began in 2005 when Anadarko and Tesoro claimed the tariff rates ranging from $3.78 to $4.41 proposed for 2006 were unjust and unreasonable and requested FERC to establish a $2.04 per-barrel rate for 2006 based on FERC Opinion 154-B.

The initial decision established a $2.04 rate, agreeing with Anadarko and Tesoro to the penny, Brena said.

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