|
Settlement talks continue on Swanson rate Hilcorp acquired Swanson River Pipeline from Tesoro subsidiary Kenai Pipeline; current proposed tariff is 40 cents per barrel KRISTEN NELSON Petroleum News
In March the Regulatory Commission of Alaska accepted a stipulation allowing Swanson River Oil Pipeline LLC, a Hilcorp subsidiary, to charge a temporary and refundable rate of 40 cents per barrel for transportation on the Swanson River Oil Pipeline.
In an Aug. 26 order RCA said the parties, Swanson River Oil Pipeline, Tesoro Alaska Co., Kenai Pipeline Co. and the Alaska Attorney General, filed a request Aug. 19 that the docket be held in abeyance until the end of the year so they may continue settlement negotiations. The parties noted in the Aug. 19 request that they had submitted a stipulation to the commission in February, resolving some but not all of the issues in the docket, and allowing SROP to charge a temporary and refundable rate of 40 cents per barrel effective March 1. That rate was to become permanent unless there was a protest from the state or the parties filed an agreement containing a different rate by Aug. 31.
The parties said Aug. 19 that they tried to resolve the matter prior to Aug. 31, but “are still exchanging information in furtherance of a long-term settlement.”
They told the commission they believe they can settle the matter by mid-October, and set Oct. 18 as the date the 40 cents per barrel rate would become permanent and not subject to refund unless one of the parties files a protest by Oct. 17 or the parties file an agreement containing a provision to adjust the 40 cents per barrel rate.
Docket dates from 2015 SROP applied to RCA in 2015 to operate under a simplified pipeline tariff rate of 68 cents per barrel, an increase from the 8.9 cents per barrel established in 1992. Hilcorp acquired the pipeline from Kenai Pipe Line in 2013 and a certificate of public convenience and necessity was transferred from Hilcorp to SROP in 2015.
In its Oct. 26 order the commission also said the parties have requested that the commission hold in abeyance a decision on SROP’s petition to have the pipeline declared a designated pipeline facility eligible to operate under a simplified pipeline tariff until Oct. 18, at which time SROP would notify the commission whether it still requests that designation.
The commission also said the parties request that the docket be held in abeyance until Dec. 30 to allow them time to complete negotiations on a settlement agreement.
The commission said it was extending to Dec. 30 the date at which the tariff would automatically go into effect absent further action by the commission and said it would determine any further action to be taken related to the proposed tariff and related petition no later than Dec. 30.
The 68 cents Following the Oct. 1, 2015, filing, Tesoro and Kenai Pipeline Co. protested the proposed 68 cents per barrel tariff, citing depreciation issues, the rate and a procedure to negotiate long-term resolution of rates.
The parties noted in their Feb. 26 stipulation that the pipeline is one of the oldest oil pipelines in Alaska. In 1995, they said, Kenai Pipeline Co., which then owned SROP and other assets, was sold to Tesoro. Hilcorp acquired the Swanson River Pipeline in 2013 and it was transferred to SROP, an affiliate of Hilcorp Alaska, on Feb. 15, 2016.
The parties said Hilcorp Alaska sought depreciated plant information about the pipeline from Kenai Pipeline Co., “but was unable to obtain the information that it sought,” and then “relied in part on the KPL Annual Operating Reports to the Commission.” That report, however, did not provide separate property balance and depreciation figures for the pipeline which Hilcorp had acquired.
“In reality, as of the date that KPL sold the Pipeline to Hilcorp Alaska, the property balances related to the Pipeline were fully depreciated,” the parties said, adding that since Hilcorp filed the tariff, “KPL has provided Hilcorp Alaska with sufficient explanation regarding its carrier property accounts to demonstrate such full depreciation.”
“Hilcorp Alaska asserts that if it had known that the Pipeline had no undepreciated plant as of its purchase in 2013, it would have pursued a different strategy in connection with its rate filing,” the parties said, adding that Hilcorp is “seeking enough in rates to cover its actual expenses of operating” the SROP.
In their February stipulation the parties said they had reached agreement with respect to settlement of issues raised by Tesoro and Kenai Pipeline, setting an interim and refundable rate and a procedure to negotiate possible long-term resolution of tariff issues.
Zero value The parties said in February that when Kenai Pipeline sold the Swanson River Pipeline to Hilcorp, its net plant value, cost less accumulated depreciation, was zero, “resulting in a starting rate base of zero at the time of acquisition by Hilcorp Alaska.”
The parties said they had agreed to an interim and refundable rate of 40 cents per barrel and said Hilcorp would provide cost support data for that rate to the other parties.
They also said SROP and the Office of the Attorney General, Regulatory Affairs and Public Advocacy Section, “agree to work toward reaching a long-term tariff settlement agreement.”
Kenai Pipeline also agreed to file with RCA before May 31 an explanation of adjustments in its 2008 annual operating report and any amendments or supplements warranted in the light of such explanation, as well as amendments to its 2013 and 2014 operating reports to reflect the transfer of Swanson River Pipeline to Hilcorp.
In its March order accepting the parties’ February stipulation RCA said it was unclear how the 40 cents per barrel rate was calculated, and said supporting information must be filed with a revised rate.
In a May filing Kenai Pipeline said the Swanson River Pipeline was acquired in 1995 as part of the acquisition of KPL from Chevron, and by 2002 the portion of the acquired assets related to the Swanson River Pipeline was fully depreciated. KPL said the sale price when the asset was sold to Hilcorp Alaska was $150,000.
| 