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State approves Badami rate decrease
State regulators have approved a large decrease in Badami Pipeline shipping rates.
Under the new rates, Nutaaq Pipeline LLC will charge $5.21 to ship a barrel of oil from the Badami unit to an interconnection with the Endicott Pipeline, down from $12.25.
While the documentation supporting rate change is confidential, the 57.5 percent reduction over 2014 rates “appears to be attributable to a decrease in the cost of service as a result of the net carryover mechanism, coupled with an anticipated increase in throughput,” the Regulatory Commission of Alaska wrote in a Dec. 30 ruling.
The rates went into effect Jan. 1. As with many smaller North Slope pipelines, Badami Pipelines rates are calculated using a predetermined methodology. The commission approves those rate changes at the beginning of each year on a provisional basis, and the rates become permanent on a daily basis. Each day, rates for the previous day become permanent unless a customer protests, at which point the commission would investigate.
Rates have varied greatly Shipping rates on the Badami Pipeline have been swinging greatly in recent years. In November 2013, operator BP Exploration (Alaska) Inc. decreased shipping rates to $9.42 per barrel, down from $12.25 per barrel, while claiming it was eligible for a maximum rate of $21.97 per barrel under a rate setting methodology approved by the state. In April 2014, after taking over the pipeline, Nutaaq increased the rate back to $12.25 per barrel.
Nutaaq is a joint venture between unit-operator Savant and Arctic Slope Regional Corp.
The Badami Pipeline is the easternmost operating pipeline on the North Slope, although it will lose that distinction when ExxonMobil Corp. brings the Point Thomson unit into production, in early 2016. At that point, the Badami Pipeline will became a conduit for bringing Point Thomson liquids to market, in addition to bringing Badami unit oil to market.
- Eric Lidji
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