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Hilcorp picks up Swanson River pipeline Nineteen-mile line moves crude to Nikiski; Tesoro will retain ownership of other Kenai Pipe Line Co. facilities related to refinery By KRISTEN NELSON Petroleum News
Hilcorp Alaska, which acquired Union Oil Company of California’s assets in Alaska’s Cook Inlet in 2011, and cut a deal with Marathon in 2012 for that company’s Cook Inlet assets, is adding to its Cook Inlet facilities with the acquisition of the pipeline which carries crude oil from the company’s Swanson River field to the Tesoro refinery at Nikiski.
Hilcorp Alaska and Kenai Pipe Line Co. have applied to the Regulatory Commission of Alaska for approval to transfer the 19-mile 8-inch crude oil pipeline to Hilcorp Alaska.
The Swanson River Oil Pipeline, part of the Kenai Pipe Line, or KPL, facilities, runs from the Soldotna Creek pumping station in the Swanson River field to a connection with facilities at KPL’s Nikiski Marine Terminal near the Tesoro refinery.
KPL is owned by Tesoro.
RCA said the historic use of the Swanson River Oil Pipeline has been to move Swanson River crude oil to Nikiski, a purpose for which the pipeline has been used for more than 50 years, and the anticipated use of the pipeline for the foreseeable future.
Hilcorp Alaska is the only producer at Swanson River and owns 100 percent of Swanson River production; its production accounts for all throughput on the pipeline, RCA said.
Throughput declining Production from the Swanson River field has declined as the field has aged and throughput in the pipeline has also declined, the commission said. In the late 1980s throughput was some 15,000 barrels per day, but in 2012 it ranged from 400 to 1,000 bpd.
RCA said it is the only pipeline transportation from the Swanson River field, so its service remains important to Hilcorp, but as throughput declines, KPL has become less important to its owner, Tesoro, as Swanson River crude oil “now accounts for only a small portion of Tesoro’s refinery feedstock.”
As the pipeline has aged and throughput has declined, “KPL has found it to be no longer economic to operate and maintain the Pipeline or to meet the anticipated future financial requirements to maintain continued compliance with pipeline safety requirements,” the commission said, and no longer wishes to meet regulatory and financial obligations of operating and maintaining the line as a common carrier pipeline.
RCA said that KPL and Hilcorp believe Hilcorp, because of its ownership and operation of the Swanson River field, “is likely the only entity that would be both able and willing to own and operate the Pipeline today.”
KPL retaining other assets KPL is not seeking to transfer its certificate of public convenience and necessity, because it intends to retain other regulated assets and continue to operate them, including 3.6 miles of 12-inch pipeline from Middle Ground Shoals to Nikiski and terminal facilities in the vicinity of the Nikiski refinery, including crude oil storage tanks and related piping, valves, pumps and facilities.
KPL is seeking to transfer ownership and operating authority for just the Swanson River Oil Pipeline.
The commission said it has already found Hilcorp Alaska “able and willing to operate both oil and gas pipelines under the Pipeline Act,” finds that continued operation of the Swanson River Oil Pipeline to transport crude oil from the Swanson River oil field “is required by the public interest” and has determined that approving the transfer of ownership from KPL to Hilcorp is in the public interest.
In a related filing, Hilcorp Alaska has applied for a certificate of public convenience and necessity “to acquire, own, and operate the pipeline transportation facility described herein and referred to herein as the ‘Swanson River Oil Pipeline.’”
The filings, dockets P-12-021 and P-12-022, are available on the commission’s website at http://rca.alaska.gov. Comments on the filings are due Jan. 22.
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