Transfer of Koch pipeline stake OK’d

BP, Conoco, Exxon assume Koch’s piece, will now own slightly larger shares of trans-Alaska oil pipeline; Unocal transfer pending

Wesley Loy

For Petroleum News

The Regulatory Commission of Alaska has approved the transfer of Koch’s small interest in the trans-Alaska pipeline system to BP, ConocoPhillips and ExxonMobil.

The commission’s Dec. 14 order caps a process that began in June, after Koch Alaska Pipeline Company LLC informed the other TAPS owners that for “strategic reasons” it wished to exit the Alaska transportation market.

Koch Alaska is a unit of Koch Industries Inc. of Wichita, Kan.

The transfer of Koch’s interest means the TAPS ownership group shrinks from five companies to four.

The shrinkage is expected to continue as another minor owner, Unocal Pipeline Co., also is looking to deal away its stake in TAPS.

The trans-Alaska pipeline carries North Slope crude oil south 800 miles to the tanker terminal at Valdez.

Koch’s sole crude shipper on the pipeline was Flint Hills Resources, a Koch subsidiary that operates a refinery at North Pole near Fairbanks.

Ownership of a pipeline carrier can’t change without regulatory commission approval.

In considering the transfer, the commission considered whether BP, ConocoPhillips and ExxonMobil were “able and willing” to operate Koch’s share of TAPS, whether the continued operation of the pipeline was required for “public convenience and necessity,” and whether the transfer was in the public’s best interest.

On all counts, the commissioner determined in favor of the transfer.

“The Parties maintain that conveying (Koch’s) TAPS interest to existing TAPS Owners will not change the TAPS rate base or impact the methodology for calculating maximum tariffs for TAPS and that there will be no change in the day-to-day operations or management of the pipeline as a result of the conveyance,” the RCA order said.

The order did not specify a sale price.

Koch held a 3.0845 percent interest in the TAPS pipeline assets and Valdez Marine Terminal oil storage tank assets.

The company acquired its interest from The Williams Cos. in 2003.

With the transfer, the commission amended company certificates of public convenience and necessity to reflect the following:

• BP Pipelines (Alaska) Inc. will own 48.441 percent of TAPS pipeline assets and 47.5881 percent of terminal tankage. Previously, BP held a 46.9263 percent interest in TAPS pipeline assets and a 46.0955 percent interest in tankage.

• ConocoPhillips Transportation Alaska Inc. will own 29.2086 percent of TAPS pipeline assets and 28.1267 percent of tankage. Previously, ConocoPhillips held a 28.2953 percent interest in TAPS pipeline assets and a 27.2445 percent interest in tankage.

• ExxonMobil Pipeline Co. will own 20.9943 percent of TAPS pipeline assets and 22.6252 percent of tankage. Previously, ExxonMobil held a 20.3378 percent interest in TAPS pipeline assets and a 21.9155 percent interest in tankage.

The commission, with its order, revoked Koch Alaska’s certificate.

Unocal owns a 1.3561 percent interest in the pipeline and a 1.66 percent interest in terminal tankage.

“There will be no change to Unocal’s ownership interests as a result of the transfer addressed in this order,” the commission said.

Unocal, part of Chevron, in July received permission from the RCA to temporarily suspend service on its share the pipeline.

Unocal has said it intends to sell or transfer its ownership interest to a third party, another TAPS owner, or all of the remaining TAPS owners.

“Negotiations regarding the transfer of Unocal’s ownership interest in TAPS are ongoing, but an agreement regarding the terms of a transfer has not yet been reached,” Unocal told the commission Oct. 25.

On Dec. 18, the commission ordered Unocal to file an application by Jan. 25 to transfer its operating authority in TAPS, or “make a filing explaining why the transfer application has not been filed.”