Oliktok Pipeline explains rate hike

The Oliktok Pipeline Co. has explained its large rate hike planned for next year.

The ConocoPhillips Co. transportation subsidiary told regulators that the increase was “due primarily to the fact that throughput in 2016 was significantly below the throughput levels forecasted in 2015 to develop the 2016 rates.” Additional, the company forecast throughput for next year based on 2016 throughput levels, and “2016 throughput was significantly below forecasted throughput levels used develop the 2015 rates.” The company calculates rates based on forecasts of its throughput, using previous years as a guide. The methodology used to set rates allows the company to correct a discrepancy between forecasted and actual throughput by adjusting rates the following year.

For 2017, Oliktok Pipeline Co. wants to charge $17.15 per thousand cubic feet to ship natural gas from the BP Exploration (Alaska)-operated Prudhoe Bay unit to the ConocoPhillips Alaska-operated Kuparuk River unit (up from a current rate of $3.12 per mcf) and $12.99 per thousand cubic feet to ship natural gas from the Prudhoe Bay unit to the Milne Point Pipeline Connection (up from a current rate of $2.37 per mcf).

What is now known as the Oliktok Pipeline was built in 1980 to transport crude oil from the new Kuparuk River unit to the Prudhoe Bay unit, where it would continue on to market along the trans-Alaska oil pipeline. When the larger-diameter Kuparuk Pipeline was brought online in 1985, the Oliktok Pipeline was converted to natural gas deliveries.

Those shipments ended in 1988, but the pipeline was revived in 1995 to send natural gas and natural gas liquids in the opposite direction, for enhanced oil recovery at Kuparuk.

Oliktok Pipeline Co. made another change in November 2014, when it began shipping natural gas exclusively to the Kuparuk River unit to use as a fuel supply for field operations across the field. The company proposed a more than six-fold increase to its rates in 2015, leading BP Exploration (Alaska) Inc. to challenge the proposed tariff.

- ERIC LIDJI