Badami pipeline shutdown approved

The Regulatory Commission of Alaska has approved BP Transportation (Alaska)'s request for a temporary shutdown of the Badami oil pipeline and the Badami gas and products pipeline.

The commission said it requires BP “to resume pipeline service upon receipt of tenders of crude oil, gas or products for shipment on its pipeline and related filings.” And, it said, “approval of a temporary suspension does not mean that the pipeline carrier can recovery extraordinary costs.”

The commission said BP requested approval for a temporary suspension of service after it was notified by BP Exploration (Alaska) that Badami oil production would be temporarily suspended because of low production. The Badami shutdown is expected to last for two years while BP evaluates “options for restart or reuse” of the Badami unit facilities, the commission said Aug. 1.

The shutdown could be extended if restart or reuse of the facilities is not possible within two years.

The commission said that while it has approved suspension of pipeline operations, under its authority to approve an “extraordinary suspension of service,” such extraordinary suspensions may involve additional costs, such as discontinuation and restart costs, and may also “involve cost-savings in certain areas” in addition to the “issue of recovery of capital costs during the period of suspension.”

Approval of the suspension does not mean that BP can recovery extraordinary costs, although “it is unlikely that we would allow recovery of those costs if a suspension was not authorized,” the commission said. It is considering settlement of Badami oil pipeline rates between BP and the state of Alaska, and said it would add consideration of the rate implications of the temporary suspension in that same docket.

Editor’s note: See article titled “BP to mothball Badami” in June 22 edition of Petroleum News.