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FERC accepts latest TAPS tariffs Regulator reverses 2008 order in favor of original calculations for valuing crude shipped through the trans-Alaska oil pipeline By Rose Ragsdale For Petroleum News
Reversing an earlier order, the Federal Energy Regulatory Commission has accepted the latest tariffs filed by owners of the trans-Alaska oil pipeline in a move aimed at bringing nearly 30 years of disputes over calculating the value of crude shipped through the pipeline closer to resolution.
The conflict arose because crude produced from different fields on the North Slope varies considerably in quality but is shipped to market in the one pipeline. The oil cannot be segregated during shipping, and the blended stream cannot be separated at the end of the pipe.
Regulators created the TAPS Quality Bank in the early 1980s in an effort to compensate shippers of higher quality crude that is commingled with lower quality crude from others shipper by making monetary adjustments to the value of eight different components, or cuts, of the streams of oil entering the pipeline. The filed tariffs set forth the current valuations of these components.
The pipeline’s owners — BP Pipelines (Alaska) Inc., ConocoPhillips Alaska, Unocal Pipeline Co., Koch Pipelines (Alaska) LLC and ExxonMobil Pipeline Co. — filed identical tariffs April 27 to consolidate information regarding the TAPS Quality Bank methodology into one tariff.
Information consolidated Previously, information concerning the very complex methodology used in the TAPS Quality Bank was set forth in the rules and regulations tariff of each carrier, individually, as well as in the Quality Bank Methodology Tariff. The April 27 filing canceled the previously effective provisions and replaces them with a single uniform tariff applicable to each individual carrier. The filing proposed an effective date of June 1.
It also followed an order issued by the commission April 14, in which it granted a rehearing of certain aspects of the case and reversed an earlier order made in response to a remand by the U.S. Court of Appeals for the District of Columbia Circuit of the FERC’s original orders in the case.
The commission initially determined the method for valuing the Quality Bank cuts in Opinion No. 481 in 2005. The opinion subsequently was appealed and the court remanded it to FERC for additional calculations to resolve a perceived inequity in the method used to determine the value of the heavy distillate and resid cuts of the crude stream.
The carriers filed tariffs in 2006 to comply with Opinion No. 481 and the commission accepted those tariffs in its April 14 order, saying that Conoco and Exxon raised sound arguments in support of the original valuations.
“As the rehearing requests point out, it is permissible to treat different Quality Bank cuts differently where there is a valid reason for doing so since the goal is to assure that a Quality Bank cut is not being overvalued in relation to other Quality Bank cuts,” the commission concluded.
Compliance filing rejected The commission also rejected a Sept. 8, 2008, compliance filing by the carriers.
Chevron U.S.A. Inc. and Union Oil Company of California filed a protest of the carriers’ “instant” filings and a motion to intervene out of time. Flint Hills Resources Alaska LLC and Petro Star Inc. also filed motions May 21 and May 22, respectively, in support of Chevron’s protest.
Chevron argued the tariffs submitted by the carriers have not been shown to be just and reasonable, and may be unjust, unreasonable, and unduly preferential or discriminatory, and requested that the proposed tariffs be allowed to take effect, subject to suspension and refund, and that the commission order the tariffs to conform to the outcome of the case. Chevron also indicated that it would appeal the commission’s latest decision. Flint Hills said it has an appeal in the case currently pending.
The commission noted that a pending appeal of an order does not change the status of that order; however, the regulator said it will abide by any future court rulings that may affect the tariffs.
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