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The state, Anadarko contest TAPS rates Say that the revised rates filed by pipeline owners in compliance with FERC rate case order include inadmissible cost elements ALAN BAILEY Petroleum News
Challenges continue to the revised oil shipping rates for the trans-Alaska pipeline, following a November finding by the Federal Energy Regulatory Commission that the strategic reconfiguration project, a major upgrade project for the pipeline, had been imprudent. The latest challenges have been filed with FERC by the state of Alaska and Anadarko Petroleum.
Late last year, in the culmination of a massively complicated rate case, FERC, the federal agency that regulates the interstate transportation of oil, barred the pipeline owners from recovering much of the cost of the strategic reconfiguration project from the pipeline rates and ordered the owners to develop revised rates for the years during which project costs had been recovered.
The pipeline owners have filed new rates in compliance with the FERC order, but the state of Alaska and some other shippers of oil on the pipeline have questioned the validity of the rate revisions. The state, Tesoro and Anadarko had previously complained to the Regulatory Commission of Alaska about the recovery from rates of litigation costs associated with the strategic reconfiguration project - in early June the commission turned down that complaint.
Five issues raised The state, in its complaint to FERC, has questioned five features of the pipeline owners’ compliance tariff filings. The state says that two of the owners, by calculating pipeline operating costs for a time period when pump station 1 was being upgraded, have inadmissibly included some strategic reconfiguration costs in their rate calculations. The state has also complained that some costs to be recovered from rates consist of pipeline dismantlement expenses that are already accounted for separately as part of the pipeline dismantlement, removal and restoration components of the rates. Supplemental property tax payments relating to a tax correction have been improperly included; excessive litigation costs have been claimed; and pipeline operating costs have not been calculated accurately, the state claims.
Anadarko’s complaint to FERC also claims that some compliance filings including strategic reconfiguration costs at pump station 1 and that the rates include the inadmissible recovery of supplemental property tax payments. Anadarko also says that the filings do not provide sufficient information about cost calculations to determine whether some litigation costs have been double counted.
The rates charged for shipping oil on TAPS form a critically important component of the overall cost of North Slope crude oil. Moreover, by impacting the wellhead value and the delivery cost of the oil, the rates impact the state’s royalties and production taxes levied on the oil.
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