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Pipeline owners file on quality bank Tesoro and Anadarko request dismissal; pipeline owners don’t have position, but ask for consistency between state, federal rules Kristen Nelson Petroleum News
Responses to the Aug. 21 complaint filed by Flint Hills Resources Alaska LLC asking for changes in quality bank determinations for different values of crude oil shipped on the trans-Alaska oil pipeline range from neutral to negative.
The trans-Alaska oil pipeline owners told regulators they have no position on the complaint but are concerned that state and federal quality bank rules remain the same.
Two shippers on the line — Anadarko Petroleum Corp. and Tesoro Petroleum — are jointly asking for dismissal of the complaint.
On the procedural side, the Regulatory Commission of Alaska established a panel for the Flint Hills complaint, but has “not yet determined whether good cause exists to investigate the complaint.” The Sept. 5 order from RCA Chairman T.W. Patch designates Patch, Norm Rokeberg and Janis Wilson as the commission panel.
No position from owners The pipeline owners — BP, ConocoPhillips and ExxonMobil — said in a Sept. 10 filing that they are not taking a position on the Flint Hills’ complaint, but want to ensure that quality bank methodology “adopted for interstate barrels transported in TAPS is identical to the methodology that applies to intrastate barrels.”
The companies said there have been problems in the past when the two commissions — RCA for intrastate shipping and the Federal Energy Regulatory Commission for interstate shipping — came to different decisions on quality bank issues. They requested that any proceedings on the Flint Hills’ complaint be held concurrently by RCA and FERC, “to ensure that both Commissions develop identical records and that the TAPS Quality Bank Methodology continue to apply identically to interstate and intrastate barrels of crude oil transported through TAPS.”
The owners also request that any changes to quality bank methodology “be capable of being administered,” and not require the administrator of the quality bank “to make complex or controversial calculations or independent determinations, which would inevitably lead to further controversy and challenges by shippers.”
They also note that Flint Hills did not claim the owners have failed to administer the quality bank in accordance with their tariffs or claimed the owners “should be liable for refunds or reparations. Therefore, the Commission should make clear in an order that the Indicated TAPS Carriers cannot be liable for refunds or reparations on the basis of Flint Hills’ Complaint.”
Should there be changes? BP Exploration (Alaska) Inc. and Petro Star Inc. both petitioned to intervene.
Tesoro Alaska Co. and Anadarko Petroleum Corp. jointly petitioned to intervened, but also moved to dismiss the Flint Hills’ complaint.
Writing for Tesoro/Anadarko, attorney Robin Brena said the history of quality bank proceedings has been “both protracted and highly contentious” and said RCA has “properly held that a party seeking to challenge an approved Quality Bank methodology is required to demonstrate material circumstantial changes. Changes meeting this standard have, in the past, involved significant, unexpected alterations in the pricing construct under the approved methodology, such as discontinuation of posted proxy prices and/or changes in quality specifications of a particular proxy product.”
He characterized the changes described by Flint Hills as “circumstantial changes” which “merely demonstrate that crude markets constantly change.” Shifts in supply and demand “can directly impact refinery operations, including coker utilization,” he said, but impacts can be positive or negative.
He said Tesoro and Anadarko “have not been able to confirm whether, as Flint Hills claims, significant excess coking capacity currently exists in the United States.” Brena said even if the Flint Hills’ assertions are true, that “would not necessarily demonstrate circumstantial changes sufficient to justify reopening the current Quality Bank methodology.”
If not dismissed If the Flint Hills’ complaint is not dismissed, Brena said Tesoro/Anadarko request that any hearings on the complaint be phased, “with an initial hearing focused exclusively on the changed circumstances inquiry” before the commission considers “broader questions of whether the adjustments urged by Flint Hills are appropriate and whether other distillation cuts must be re-examined.”
In its complaint Flint Hills focused on the relative value of the Resid cut, telling the commission the quality bank formula “fails to calculate accurately the relative difference in the market values of the varying qualities of crude oil transported over TAPS as well as the relative value of the Resid cut.”
In their answer to the complaint the pipeline owners also provided an update on Unocal Pipeline Co., which “continues to own an interest in TAPS” although it provided final notice of withdrawal effective Aug. 1, 2012, “and is in the process, subject to applicable government approvals, of completing the transfer of its TAPS interests to the Indicated TAPS Carriers.” Pipeline ownership is shared by BP Pipelines (Alaska) Inc., ConocoPhillips Transportation Alaska Inc. and ExxonMobil Pipeline Co.
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