|
FERC judge: Pick up the pace of hearing Oral testimony in joint federal-state review of trans-Alaska pipeline shipping rates dispute gets off to slow start in Anchorage Rose Ragsdale For Petroleum News
Proceedings advanced so slowly during the first weeks of a joint federal and state hearing that one of the two presiding judges spoke out to urge attorneys in the complex case to speed up the pace of witness interrogation.
The hearing, held by the Federal Energy Regulatory Commission and the Regulatory Commission of Alaska, began Oct. 31 in Anchorage. It concerns a proposal by the trans-Alaska oil pipeline carriers to recover hundreds of millions of dollars of costs associated with ongoing “strategic reconfiguration” of the 800-mile conduit.
“We’re starting the fifth day of the hearing, and we’re on the second witness. So I am going to ask the parties, have you considered the possibility of waiving cross-examination of some witnesses?” FERC Administrative Law Judge Carmen A. Cintron asked the attorneys Nov. 4.
The Commission and the RCA had agreed for the hearing to continue for about three weeks. The hearing will then recess until after Thanksgiving and reconvene in Washington, D.C., in late November for another three weeks or so. Thereafter, the hearing was scheduled to reconvene in Washington after New Years for one week before returning to Anchorage for a final week at the end of January.
In response to the judge’s question, David Lewis of Sidley Austin, representing ExxonMobil Pipeline, said: “We do not plan to waive cross-examination of any witnesses.”
To which, Cintron responded: “Maybe you can surprise me later on.”
Said Lewis: “I’m sure there will be some surprises as we go along, but I doubt that that will be one of them.”
“You’ve just blown my day,” replied Cintron, who presided jointly in the hearing with RCA Administrative Law Judge Debra J. Brandwein.
Timeliness an issue At the start of proceedings Nov. 7, Cintron again raised the issue of timeliness. “The commissions, both of them, and the parties are spending a lot of money in this proceeding,” she said. “As of today, the second week of hearings, we’ve only gone through one witness, and we are on cross-examination of the second witness. By my count, we are at least a week behind in the schedule.”
Cintron then asked the “TAPS carriers” to develop a plan to get the hearing “back on track.”
Strategic reconfiguration, or SR, refers to a costly multiyear renovation and modernization program initiated by the pipeline’s operator, Alyeska Pipeline Service Co., on behalf of the conduit’s five owners, BP Pipelines (Alaska) Inc., ConocoPhillips Transportation Alaska Inc., ExxonMobil Pipeline Co., Koch Alaska Pipeline Company LLC, and Unocal Pipeline Co., in 2002.
The pipeline’s shippers and the State of Alaska dispute how the SR costs should be allocated and that the carriers’ proposed tariff increases aimed at recovering these costs have not been shown to be “just and reasonable,” and they raised numerous issues in their protests similar to concerns expressed about the pipeline carriers’ tariff increase requests filed in 2009 and 2010.
SR issues consolidated The FERC has consolidated various SR issues in the tariff dispute with the SR phase of the consolidated 2009 rate proceeding in Docket No. IS09-348-004, et al.
The SR costs would have a very substantial impact on the pipeline’s shipping rates, related exploration and development activities on the Alaska North Slope, and revenues the State of Alaska receives from resulting crude oil production.
“It is critical that an accurate and complete record be developed for the presiding judges, this Commission, and the RCA on the important issues presented in this case,” the FERC’s trial staff wrote in early October.
In opening statements Oct. 31, all sides weighed in with arguments on the SR issues.
On behalf of the State of Alaska, Bradley Lui of Morrison & Foerster said the case revolves around whether the TAPS carriers prudently managed the conception, planning, design and execution of the strategic reconfiguration program.
Costing more, taking longer “The SR program was originally slated to cost approximately $252 million and was supposed to have taken two years to perform with completion by the end of 2005,” said Lui. “It is now currently estimated that it will cost over three times as much, around $780 million, and is not projected to be completed until 2014 at the earliest.”
Lui said the carriers made a “horrible mistake” by choosing an electrification program from among several options. If they had pursued a “hybrid” approach, the SR program would be essentially finished now at a cost of $181 million.”
In his opening statement, Steven Brose, counsel for ConocoPhillips Transportation Alaska Inc. represented the pipeline carriers. He said SR was extensively studied, tested and vetted, dating back to 1997, before the carriers approved the option they chose.
Brose said the option was the one most consistent with the obligation and the state right-of-way lease that required the carriers to use “the best available technology for TAPS.”
“SR made TAPS better day to day. It made it better for the long term. And it made it better in emergency circumstances, as we saw with the incident at pump station 1 earlier this year,” he concluded.
| 