Hilcorp applies to change Swanson tariff

Hilcorp Alaska doing business as the Swanson River Oil Pipeline has petitioned the Regulatory Commission of Alaska that the Swanson River oil pipeline be designated a pipeline facility eligible to operate under a simplified pipeline tariff.

In May Hilcorp and Swanson River Oil Pipeline applied to the commission to transfer ownership of the pipeline from Hilcorp to Swanson River, which is wholly owned by Harvest Alaska. Harvest Alaska is wholly owned by Hilcorp Alaska, currently the sole owner of the pipeline. That application is still pending.

The commission said in an Oct. 7 notice that the proposed simplified tariff rate is 68 cents per barrel for transportation of crude oil from Swanson River field to a tie-in point with the Kenai Pipe Line Co. facilities, an increase from the current rate of 8.9 cents per barrel.

Rates under simplified pipeline tariff regulations are developed using a defined process and receive streamlined regulatory review, the commission said.

The Swanson River Oil Pipeline is an 8-inch diameter, 18.83-mile pipeline transporting crude oil from Swanson River to Kenai Pipe Line Co. facilities in Nikiski.

The pipeline was built prior to enactment of the Alaska Pipeline Act in 1972, and prior to that date was not regulated by the state. For most of its operating history the pipeline was part of the larger Kenai Pipe Line system, which has operated under a certificate of public convenience and necessity since 1972.

The Swanson River line was separated from the Kenai Pipe Line system in 2013 and transferred to Hilcorp, and Hilcorp has since operated the line under its own certificate of public convenience and necessity.

The Swanson River line rate was one of several rates contained in the Kenai Pipe Line system tariff and after transfer of the Swanson River line to Hilcorp the currently effective rate of 8.9 cents per barrel was carried over.

That 8.9 cents rate was established in 1992 by RCA’s predecessor, the Alaska Public Utilities Commission, using a 1991 test year, and the rate has not changed since then.

Hilcorp said existing annual intrastate revenue for the line is $86,296; proposed annual intrastate revenue under the proposed tariff would be $659,338. Actual annual operating costs for the line in 2014 were $131,335, Hilcorp told the commission, and the annual ad valorem tax expense for the line was some $299,000, which combined with return on rate base of $251,000 brought total cost of service to $668,000 for throughput of 970,000 barrels for a cost of service rate of 68 cents per barrel.

The commission is accepting comments through 5 p.m. Nov. 6.

- KRISTEN NELSON