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CIE wants CIPL reconsideration Independent believes state regulators misinterpreted terms of a 2010 settlement governing rates on west side oil pipeline
By ERIC LIDJI For Petroleum News
Cook Inlet Energy LLC is asking state regulators to reconsider their decision to approve a 61 cent increase in the shipping rate on the Cook Inlet Pipe Line, a west side oil pipeline.
The small independent exploration and production company believes the decision from the Regulatory Commission of Alaska “misinterprets” a 2010 settlement on the pipeline.
The commission approved the increase in December, effective at the beginning of 2015.
Cook Inlet Energy had challenged the increase on four counts: anticipated revenue levels under the increase, an exemption from certain reporting requirements, a 60 cent surcharge to fund end-of-life activities and the potential inclusion of certain capital costs.
The proposed rate increase appears to be consistent with a ratemaking methodology that the state and the pipeline company created in 2001, according to an analysis by Regulatory Commission of Alaska staff. Given that a 2010 settlement over shipping rates prohibited Cook Inlet Energy from challenging rates made using the 2001 settlement, commission staff decided to approve the proposed rate increase.
“This conclusion is unreasonable, erroneous, unlawful and otherwise defective because it fails to take into account that the Settlement Agreement had a limited five year term,” Cook Inlet Energy Chief Executive Officer David Hall wrote to regulators on Jan. 7.
The 2010 settlement grew out of a previous effort to increase shipping rates.
In late 2009, Cook Inlet Pipe Line Co. proposed a 259 percent increase in its shipping rates to compensate for damage caused by a series of volcanic eruptions at the nearby Mount Redoubt earlier in the year. Cook Inlet Energy challenged the increase, leading to nearly a year of regulatory wrangling and a 2010 settlement for determining future rates.
The settlement expired at the end of 2014.
According to Hall, clauses such as the one prohibiting his company from challenging rates made under the terms of 2001 only applied during the term of the 2010 settlement.
Wants a hearing Cook Inlet Energy had requested was a “suspension” of the rate increase, a regulatory process by which new rates go into effect on a temporary basis while regulators study whether the rates are justified. Regulators can later approve the rates or require refunds.
The 42-mile Cook Inlet Pipe Line follows the western coast of the Cook Inlet, moving oil from the Granite Point, McArthur River, Redoubt Shoal and Trading Bay fields to the Drift River Marine Terminal. The Hilcorp Alaska LLC subsidiary Cook Inlet Pipe Line Co. owns the pipeline and the terminal. Hilcorp is a primary customer of both facilities.
Under the new rates, the cost to use the pipeline increased to $3.76 per barrel, up from $3.15 per barrel. The rate includes the 60 cent per barrel end-of-life surcharge.
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