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Point Thomson Pipeline settlement reached Pipeline owners ExxonMobil and BP reach tariff agreement with state, ConocoPhillips; if regulators make changes, agreement void KRISTEN NELSON Petroleum News
PTE Pipeline LLC, the state of Alaska and ConocoPhillips Alaska Inc. reached a settlement agreement Sept. 16 on initial tariff rates for intrastate and interstate transportation of condensate on the line from Point Thomson to Badami.
PTE Pipeline LLC, owned 68 percent by ExxonMobil Pipeline Co. and 32 percent by BP Transportation (Alaska) Inc., submitted proposed initial rates of $20.39 per barrel in September of 2015 to the Regulatory Commission of Alaska and the Federal Energy Regulatory Commission. The state of Alaska filed a protest and petition to intervene and ConocoPhillips filed a petition to intervene.
The parties said the settlement agreement filed with RCA and FERC resolves all issues in both RCA and FERC dockets and provides stipulated rates for two periods, an initial period of April 1, 2016, through March 31, 2017, and a second period beginning April 1, 2017. The agreement says PTE LLC has agreed to file rates by June 1, 2019, for a rate change effective no later than July 1, 2019, subject to refund and investigation.
The parties said the agreement “does not raise any policy implications and is tailored to address only the issues that have been raised in the instant proceedings.”
Integrated package The parties described the settlement as “an integrated package” and said it incorporates compromises by both PTE LLC and the other parties, with no element of the agreement “severable from the whole.”
If either RCA or FERC rejects or modifies any provision of the agreement or conditions its approval, the agreement “will immediately terminate and be deemed withdrawn as an offer of settlement with that agency.”
If one agency approves the settlement without modifications or conditions and the other does not, the agreement “will be implemented at the approving agency and deemed withdrawn at the other agency.”
The parties said the agreement is “intended to resolve uncertainty and avoid the expense of litigation in these proceedings,” as well as providing assurance for the parties on tariff rates for the settlement period.
Rates lowered The initial tariff rate is lowered in the settlement from $20.39 per barrel to $17.56 per barrel for the period April 1, 2016, through March 31, 2017, and to $12.09 per barrel for the period beginning April 1, 2017, and ending “on the date when PTE LLC places superseding rates in effect, but not later than July 1, 2019.”
Within 30 days of approval of the agreement by FERC and/or RCA, PTE LLC is to refund to shippers, with interest, the difference between the tariff rate previously paid and the initial settlement rate.
22-mile line The Point Thomson Export Pipeline is a 22-mile, 12-inch liquids pipeline originating at the Point Thomson central production facility and connecting to the Badami Pipeline to the west.
Tariff filings by PTE Pipeline put the cost of the line at some $165.8 million. Projected first-year throughput on the line was some 5,800 barrels per day, some 2.1 million barrels in the first year of operation.
When the state protested the initial rates it called them “unjust, unreasonable and unlawful” and said the underlying assumptions and inputs of the tariff were unsupported. The state said the rates were so high because they were based on throughput for the line’s first year of operation, estimated at some 5,000 bpd, while second-year throughput is estimated at some 8,000 bpd. The state objected to the tariff model which it said makes no adjustment based on a projection of a 60 percent increase in throughput in the second year.
The line has a capacity of 70,000 bpd and Point Thomson initial production is projected to peak at 10,000 bpd.
When ConocoPhillips intervened it noted it would be a future shipper - it is a part owner at Point Thomson - and had a direct financial interest in the proceeding outcomes.
In November the parties told the RCA they were in settlement discussions, said they were making progress in the settlement negotiations and asked for time to complete the negotiations.
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