State and federal regulators have agreed to a schedule for a series of joint hearings next year that will dissect the rates charged for shipping oil on the trans-Alaska oil pipeline.
The two months of hearings, set to run from October 2011 to January 2012, will be divided equally between Anchorage and Washington, D.C., a compromise between the Regulatory Commission of Alaska and the Federal Energy Regulatory Commission.
At issue is whether and how to include the cost of a major pipeline upgrade project in the shipping rates paid by companies moving oil down the 800-mile pipeline.
That project, called Strategic Reconfiguration, is over budget and past deadline. For that reason, the State of Alaska and Anadarko Petroleum, both of which stand to benefit in different ways by lower shipping rates, believe some of the costs of Strategic Reconfiguration are the result of imprudence and should not be paid by shippers. The companies that own the pipeline, though, see Strategic Reconfiguration as a series of projects to reduce costs and increase efficiency, including several successful ventures.
The issue is complex and is complicated further by the number of players involved.
Although the pipeline is a single system, it is divided in several ways. First, five companies own undivided shares of the pipeline. Next, oil bound for out of state markets is overseen by FERC while oil bound for Alaska markets is overseen by the RCA.
Since late 2008, four of the five pipeline owners have each requested two increases for in-state rates before the RCA. The RCA consolidated those eight cases this past August.
Since that consolidation, though, the RCA also approved two more increases, for ConocoPhillips and Koch Alaska. Those 10 outstanding temporary and refundable increases more than double the last permanent in-state shipping rates set in 2002.
At the same time, the pipeline owners also requested rate increases from FERC, which decided to split its cases in two “phases,” one covering everything not related to Strategic Reconfiguration and the other focused entirely on Strategic Reconfiguration.
As is common in rate cases, the State of Alaska, Anadarko Petroleum and the refiner Tesoro Alaska challenged various pieces of the rate increases. Each of those third parties stands to gain by lower rates: the state by getting higher royalties, Anadarko by paying less to ship its oil and Tesoro by paying less for oil it takes off the pipeline for refining.
Because of the similarity of the various rate cases, parties on both sides of the issue asked the RCA and FERC to consider some form of joint hearings. The two regulatory bodies previously set up a system for handling such hearings in a 2003 memorandum.
FERC scheduled hearings and in August the RCA agreed to the dates, but only as long as the hearings were held entirely in Anchorage, where the RCA is headquartered.
In October, the two bodies agreed to split the hearings equally between Washington, D.C., and Anchorage, and arrange for videoconference of the Washington, D.C., hearings. They also set up a system for administrative law judges from both bodies to work together.
The hearings will begin with three weeks in Anchorage from Oct. 31 to Nov. 18, 2011, move to Washington, D.C., for a month — from Nov. 30 to Dec. 21, 2011, and from Jan. 9 to Jan. 13, 2012, and conclude with a week in Anchorage from Jan. 23 to Jan. 27, 2012.