Exxon seeks new TAPS increase

The increase is the fifth requested by the company since early 2009, but follows a decrease requested earlier this year

Eric Lidji

For Petroleum News

For the fifth time since 2009, ExxonMobil Pipeline Corp. is seeking to increase the rate it charges to ship crude oil on the trans-Alaska oil pipeline to destinations in the state.

Exxon is proposing to charge $4.09 to ship a barrel of oil from the North Slope to North Pole and as much as $6.47 to ship to Valdez, depending on the destination. (There are two off-take points in Valdez: the PetroStar refinery and the Valdez Marine Terminal.)

The change represents a roughly 8.5 percent increase over Exxon’s existing rates of $3.78 per barrel to ship to North Pole, and as much as $5.95 per barrel to points in Valdez.

As with its previous cases, Exxon said it needed the rate increase to offset declining throughput and rising operating costs. The proposed increase would only generate around $1.6 million in additional annual revenue for the transportation subsidiary of Exxon.

Exxon currently ships intrastate oil exclusively to the Valdez Marine Terminal.

Exxon asked for the increase in late April and wants it to go into effect on June 1.

The Regulatory Commission of Alaska must approve the increase for it to take effect.

The 800-mile pipeline from the North Slope to Valdez was long owned by transportation subsidiaries of BP, ConocoPhillips, ExxonMobil, Koch and Union Oil Co. of California, but Koch and Unocal have recently been transferring their small stakes to the other three.

Exxon owns the third-largest undivided stake in the pipeline.

BP is the only pipeline owner that hasn’t asked for an increase to in-state shipping rates.

Follows recent decrease

After years of attempting to use an old ratemaking methodology, four of the five pipeline owners began requesting increases in late 2008 using a new court-approved methodology.

The companies continued filing additional increases year after year and the RCA continued to approve those proposed rates on a temporary and refundable basis while it investigated whether the increases were merited. The RCA eventually consolidated 12 cases — three each from four companies — into a single docket because they all dealt with similar issues, and held a series of concurrent hearings with the Federal Energy Regulatory Commission, the body that handles rate cases on interstate pipelines.

In the years since the consolidation, the four companies have continued to file additional rate increases. The RCA has also accepted those on a temporary and refundable basis, but has generally paused its investigation of those cases until the larger case is resolved.

If the RCA ultimately approves all those increases, the current rates would become permanent, but if it declines the increases in whole or in part the companies could be required to issue refunds. The current “permanent” rates are from 2002, when the companies charged $1.25 to ship to North Pole and $1.96 to ship to points in Valdez.

The overlapping cases have complicated the proceedings in other ways, too.

For instance, earlier this year, Exxon decreased its in-state shipping rates to accommodate a change in the Trans-Alaska Pipeline System depreciation schedule. The change had been negotiated as part of a settlement related to the concurrent hearings. The revision decreased the rate from $3.87 per barrel to North Pole and as much as $6.10 to Valdez.

And within the past year, the ownership of the pipeline became consolidated. Late last year, Koch transferred its small, undivided stake in the pipeline to BP, ConocoPhillips and ExxonMobil. Union Oil Co. of California also intends to sell its stake in the pipeline, but is currently arbitrating a dispute with the other carriers, according to the company.