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Murkowski, Renkes say state will join pipeline owners in court appeal of RCA tariff ruling
Kay Cashman PNA Publisher & Managing Editor
The state of Alaska has decided to appeal in state Superior Court a November ruling by the Regulatory Commission of Alaska that would lower the trans-Alaska pipeline system’s intrastate tariff by approximately $1.50 per barrel. The TAPS owners, which include BP, ExxonMobil and ConocoPhillips, have already filed an appeal against the ruling.
The rates for intrastate and interstate shipment of North Slope crude were set in a 1985 settlement agreement between the state and TAPS owners.
In 1997, Williams Alaska Petroleum Co. and Tesoro Alaska Co. filed a complaint alleging TAPS owners were charging them too much.
The commission agreed with the refiners. On Nov. 27, RCA said it found the intrastate rates charged by TAPS for 1997 through 2000 to be excessive — about 57 percent too high, totaling $9.9 billion. The agency set new rates and ordered the carriers to refund the difference.
RCA also ordered filings so that it could set rates for 2001 and subsequent years.
The commission noted that this was the first time in 20 years that a regulatory agency has reviewed rates charged for consistency with statutory standards. TAPS rates before 1996 were determined according to the 1985 settlement methodology and based on confidential reports.
State wants to be a participant Gov. Frank Murkowski and Attorney General Gregg Renkes said the Murkowski administration’s appeal of the state agency’s decision is “narrowly focused to target important policy issues of concern to the state,” including “the need for the state to be a full participant in cases that have a significant effect on the future of the state; protection of the state’s ability to negotiate settlements with industry to increase fiscal certainty for all parties; assurance that the intrastate tariff structure is consistent with antitrust laws and can be reconciled with federal tariff requirements; and protection of the state from the adverse financial consequences that may result from the decision.”
During the RCA proceedings, the Knowles’ administration also supported the carriers’ position, asserting “that public policy concerns also support preserving the settlement.” RCA said the state described its position as “ensuring that this case does not affect the validity or enforceability of the settlement,” while protecting the state’s ability to make oil pipeline settlements within the jurisdiction of RCA and protecting the state’s economic interests.
Far-reaching effects Anchorage attorney Robin Brena, who represents Tesoro in regulatory matters, told Petroleum News Alaska in late January that if the courts and the Federal Energy Regulatory Commission ultimately agree with RCA’s methodology for establishing rates and it is applied to both interstate and intrastate TAPS tariffs, it could impact all TAPS tariffs from 1977 through the life of pipeline.
The issue has not been brought before FERC, but if the refiners prevail in court, they are expected to take it to the federal agency and ask for a similar reduction in interstate rates, which FERC has jurisdiction over.
Brena said the intrastate shipping rates have not been adjusted in years, and that they are not in sync with more competitive interstate rates set by FERC.
Meyers said RCA decision “disappointing” ConocoPhillips Alaska President Kevin Meyers called RCA’s decision “disappointing.”
“The industry and the state had an agreement on how we would do TAPS tariffs,” Meyers told PNA Jan. 27.
“All parties were equally satisfied or dissatisfied when the deal was put in place,” he noted. Brena said it may take three years of appeals to state Superior Court before the case in all likelihood reaches the Alaska Supreme Court for a decision.
The current agreement between the state and TAPS owners continues through 2011. Talks on a renegotiated tariff must be started by the state in 2007 and concluded by 2009, according to the 1985 settlement.
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