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FERC says it lacks Tesoro jurisdiction Commission says Kenai Pipe Line, spurs not used in interstate commerce, but only by refinery; denies protests from XTO, Chevron Kristen Nelson Petroleum News
Kenai Pipe Line Co., Tesoro Alaska Co. and Tesoro Logistics Operations LLC filed a request Sept. 1 asking that the Federal Energy Regulatory Commission determine that pipeline routes under Kenai Pipe Line Co.’s FERC tariff are not subject to FERC jurisdiction under the Interstate Commerce Act. Tesoro also requested that FERC determine it does not have jurisdiction over a marine dock and storage tanks currently part of Tesoro’s Alaska refinery in Nikiski.
In a Jan. 19 order the commission found that all of the facilities covered in the request are not within its jurisdiction “because they are only being used to support Tesoro’s refining operations.”
When the tariff was filed in January 1995, two unaffiliated companies — Tesoro Alaska and Kenai Pipe Line Co. — owned different portions of the Nikiski facilities. In March 1995, Tesoro purchased Kenai Pipe Line, and all of the facilities have since been owned by Tesoro, but the tariff was not altered because a provision of the sale required Tesoro to maintain the original Kenai Pipe Line tariff until March 3, 2005.
The 1995 tariff was filed May 18, 2011, as a baseline eTariff to comply with the commission’s eTariff filing requirements; the tariff was not changed to reflect current operations because FERC regulations prohibited significant tariff changes in a baseline eTariff filing.
In September, following public notice of Tesoro’s request, protests were filed by ExxonMobil subsidiary XTO Energy, Chevron, then the owner of Union Oil Company of California Cook Inlet assets, and Hilcorp Alaska LLC, which was then in the process of acquiring Chevron’s Cook Inlet assets (see story in Nov. 13 issue). The protesters told the commission that while they currently sell all of their oil to Tesoro they want to retain the option to ship oil through the Nikiski port to other markets.
No common carrier service The commission said Tesoro contends that the eTariff filing was not a signal that it intended to provide common carrier service from the Nikiski tanks to the Nikiski dock, a service it has not provided for 16 years. Tesoro told the commission its original intention was to file the eTariff and immediately cancel it, but “in an abundance of caution” it instead filed a request for determination of jurisdictional status.
Tesoro told the commission that since the Kenai Pipe Line tariff was first published, it acquired Kenai and all of its related assets. Two of the pipelines referred to in the tariff are now entirely intrastate, delivering crude oil from fields to Tesoro’s refinery, with all of the remaining pipeline routes in the tariff short spur lines that for at least the past 10 years have been used only to support operation of the Tesoro refinery, transporting crude oil from Tesoro’s dock to its refinery. Another spur transports oil from the dock to Tesoro tanks, with short pipeline spurs used to move petroleum products between Tesoro’s refinery and its dock.
“In short, Tesoro states that all of the pipeline spurs specified in the Kenai tariff as well as the dock and tanks are now an integral part of the Tesoro refinery,” and that for at least the last 10 years no business interest other than Tesoro has used the dock, tank facilities or any of the crude oil or petroleum product pipeline spurs referred to in the tariff, the commission said.
Tesoro cited a similar case involving its Salt Lake City refinery, where FERC held that pipeline spur lines between terminals, tanks and a refinery are not within its jurisdiction, and “Tesoro states that the facilities at issue in this case are virtually the same as those involved in the Tesoro Salt Lake City refinery proceeding,” the commission said.
Protesters have not shipped In response to the protests by Chevron and XTO, Tesoro said the protesters lack standing because they have not shipped on the Kenai Pipe Line. Tesoro told the commission it has been the only shipper on the Kenai Pipe Line since 1995 and said the protesters are merely considering shipping “but have not made any nominations or otherwise requested access to the Kenai facilities.”
Tesoro also told the commission that even if the protesters had standing, there is no existing route through which they could feasibly transport crude oil on an interstate basis by using the facilities that are the subject of Tesoro’s request.
The commission said it would entertain a hypothetical future shipment scenario for purposes of a jurisdictional analysis, but said that while there is a pipeline route under the current tariff from producing fields to the Nikiski dock, “Tesoro stated the Kenai pipeline spur has not operated in the direction of the docks since 1991, and has only been used by Tesoro to transport crude oil from the docks to the tankage for subsequent delivery to the Tesoro refinery.”
Tesoro told the commission that while it did not publish a new tariff in 2005 removing all of the assets from interstate commerce, nothing prevents it from doing so now.
“Tesoro is correct on this point because the Commission has held that it does not have jurisdiction over oil pipeline abandonments,” FERC said.
And if Tesoro cancelled the route from the tankage to the docks, “there would be no alternative route that would allow protesters to transport crude oil in interstate commerce. Since any potential shipper would lack a route to transport oil in interstate commerce, the spur pipelines and related dock facilities could only serve Tesoro’s refining operations in Alaska,” the commission said.
On the subject of potential future shipments, FERC said it has held in previous decisions “that it cannot compel a pipeline to offer a service it does not provide or require transportation in a direction that the pipeline does not offer.”
The commission said “whether through a tariff cancellation or this jurisdictional determination, it is clear that Tesoro has not provided interstate common carrier services on the Kenai facilities for some time and does not intend to hold itself out as providing interstate common carrier services in the future. Therefore, consistent with the similar determination concerning pipeline spurs connecting to Tesoro’s Salt Lake City refinery, the Commission finds that all the facilities in the subject request are not within the Commission’s jurisdiction because they are only being used to support Tesoro’s refining operations.”
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