Another twist in the TAPS rate case

In another twist in a massively complicated trans-Alaska pipeline rate case that began in 2008, pipeline shippers Tesoro and Anadarko have questioned litigation related costs that the pipeline owners want to include in the rates charged for transporting oil through the pipeline.

The case has hinged on the recovery through the pipeline rates of the costs associated with a major pipeline upgrade called “strategic reconfiguration.” The upgrade involved installing new electrically powered pumps at the pipeline's pump stations and the implementation of a more automated pipeline control system. In November the Federal Energy Regulatory Commission issued an order, ruling that the strategic reconfiguration project had been imprudent and that the pipeline owners could only recover from the pipeline rates a portion of the project costs. However, the commission did allow the owners to recover from rates reasonable litigation expenses incurred as a result of the rate case. In February the Regulatory Commission of Alaska concurred with the FERC decision, including the ruling over litigation expenses - FERC regulates the interstate transportation of oil on the pipeline, while RCA regulates the shipment of oil to oil purchasers in Alaska.

In compliance with the FERC and RCA orders, the pipeline owners have filed revised rates for the years 2008 to 2010, the years to which the rate case applies. But on May 16 Tesoro and Anadarko filed a comment with RCA, questioning the manner in which the owners have included their litigation costs in their new intrastate rates. The shippers say that allowing the pipeline owners to recover litigation costs associated with an imprudent action contravenes state statutes. The shippers also claim that the revised pipeline intrastate rates filed by ConocoPhillips and ExxonMobil, two of the pipeline owners, incorporate the recovery of litigation costs from both FERC and RCA, based on the rules that the agencies set in their separate orders, with this double collection resulting in a recovery of 188 percent of the costs.

The shippers have asked the RCA to disallow the recovery of all litigation costs. Alternatively, the commission should at least direct the owners to remove from their intrastate rates any litigation costs that have already been included in FERC rate filings, the shippers said.

The state of Alaska has also filed a comment, saying that recovery of litigation costs from pipeline rates in this case is illegal under state law and should be disallowed.

- ALAN BAILEY