|
TAPS parties resolve depreciation Agreement concerns depreciation and life of line issues when it comes to ratemaking, but the case cannot be used as precedent Eric Lidji For Petroleum News
The parties battling over shipping rates on the trans-Alaska oil pipeline have settled a big portion of the case, specifically relating to the projected life of the 800-mile pipeline.
The agreement establishes the depreciation rate for the pipeline through 2044.
The agreement will remain in place for five years, with an automatic one-year extension going into place in 2018, if none of the parties withdraw. The agreement brings together the five historic owners of the pipeline with third parties, including the State of Alaska.
Those players have been involved in long regulatory proceedings held concurrently by the Regulatory Commission of Alaska and the Federal Energy Regulatory Commission.
While the agreement should help the larger rate case move toward a conclusion, it appears unlikely to lock down larger questions about the life of the pipeline, a perennial topic of concern among policymakers considering the future of the North Slope oil industry. The parties agreed that the deal “shall have no precedential effect in any forum, and shall not prejudice any party’s position with respect to current or future FERC and RCA proceedings regarding depreciation expense, life of line, or any other issue.”
The parties said the deal avoids a costly litigation process to resolve the question. And by extending the life of the line by 10 years, the deal also results in a lower depreciation rate than what otherwise would have gone into effect, they added. The agreement lasts for five years to accommodate provisions in the Alaska’s Clear and Equitable Share tax code.
A complex proceeding The larger case is a consolidated docket including rate cases from five companies going back five years on both the state and federal level. At issue is deciding what costs the pipeline owners should be allowed to pass on to their customers through shipping rates.
The five owners of the pipeline are transportation subsidiaries of BP Exploration Alaska, ConocoPhillips Alaska, ExxonMobil, Union Oil Co. of California and Koch Alaska, but Unocal and Koch recently announced the intent to transfer their small shares to the other three companies.
The third parties include the refineries Tesoro Alaska, Flint Hills Resources and Petro Star, the independent producer Anadarko Petroleum and the State of Alaska.
Generally, the five — soon to be three — owners have an interest in seeing shipping rates rise, while the five third-party entities have a stake in seeing shipping rates lowered.
| 