Conoco seeking 16 percent increase

With its fifth request since late 2008, the company would more than triple its most recently approved rates for Alaska markets

Eric Lidji

For Petroleum News

ConocoPhillips is asking state regulators for a roughly 16 percent increase to the rate it charges to ship crude oil on the trans-Alaska oil pipeline to destinations within the state.

ConocoPhillips wants to charge $3.91 per barrel to ship from the North Slope to a Golden Valley Electric Association pipeline in North Pole leading to the Flint Hills Refinery, $6.14 per barrel to ship to the PetroStar refinery in Valdez and $6.17 per barrel to ship to the Valdez Marine Terminal, also in Valdez. Those fees represent a 16 to 16.8 percent increase over ConocoPhillips’ existing rates of $3.37 per barrel to North Pole, $5.26 per barrel to the PetroStar refinery and $5.28 per barrel to the Valdez Marine Terminal.

As has becoming standard in similar rate cases, ConocoPhillips said it needs the increase because pipeline throughput continues to decline while operating costs have increased.

The proposed rate increase would generate an additional $4.8 million per year, or $33.5 million total, for ConocoPhillips. Through its pipeline subsidiary, the company currently ships most of its oil bound for local markets to the PetroStar refinery with a small amount going to North Pole, but does not appear to ship any to the Valdez Marine Terminal.

ConocoPhillips wants the higher rates to go into effect starting Sept. 1, 2012.

The request is the fifth ConocoPhillips has made since late 2008, when the owners of the trans-Alaska oil pipeline began filing rate cases using a newer court-approved methodology, rather than a methodology established in a 1985 settlement with the state.

ConocoPhillips made its most recent request in May 2011.

17 cases now outstanding

The RCA consolidated the first 12 cases into a single docket, currently at the center of concurrent hearings with the Federal Energy Regulatory Commission. ConocoPhillips is asking for the five most recent cases to be consolidated into a separate docket. The other four cases have been held in abeyance pending the outcome of the concurrent hearings.

The RCA approved ConocoPhillips’ four previous rate increases on a temporary and refundable basis while it studies aspects of the increasingly complex case.

ConocoPhillips’ most recent permanent rates, from 2002, charge $1.25 per barrel to North Pole and $1.96 per barrel to the PetroStar refinery or the Valdez Marine Terminal.

If the RCA decides that any or all of the four increases it has temporarily approved since 2008 are not justified, ConocoPhillips would be forced to issue refunds with interest.

The 800-mile pipeline from the North Slope to Valdez is owned by transportation subsidiaries of BP, ConocoPhillips, ExxonMobil, Koch and Union Oil Co. of California.

ConocoPhillips Transportation Co. owns an undivided, 28.2953 percent stake in the pipeline, making it the second largest owner after BP and before ExxonMobil. Unocal and Koch together own less than 5 percent and are currently marketing their shares.

BP is the only pipeline owner that hasn’t asked for an increase to in-state shipping rates.