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Cook Inlet pipeline dispute continues Oil producer Cook Inlet Energy fights CIPL’s 259 percent rate hike; two sides agree to discovery process leading to 2011 hearing Wesley Loy For Petroleum News
Efforts to settle a dispute over Cook Inlet Pipe Line Co.’s recent rate hike are moving to a new level.
In a joint filing on June 29 with the Regulatory Commission of Alaska, lawyers for CIPL and a small oil and gas producer, Cook Inlet Energy, said they had tried — in accordance with an order from the RCA — to work out a resolution.
“CIE and CIPL have engaged in settlement discussions with the assistance of settlement judge Blythe Marston,” the joint filing said. “These discussions have included two-day settlement conferences on two separate occasions. While CIE and CIPL continue to discuss settlement, as of the date of this motion they have not been able to reach settlement.”
The two sides did agree, however, to a proposed “procedural schedule” for filing testimony and other documents through a process known as discovery. This process would culminate in a two-week hearing scheduled to begin on April 26, 2011, the joint filing says.
259 percent rate hike The RCA, in a March 22 order, appointed Marston and directed the parties to engage in “meaningful settlement discussions.”
The issue is CIPL’s 259 percent tariff increase, which took effect at the beginning of 2010. The RCA is allowing the pipeline operator to collect the rate temporarily and subject to refunds.
The current transportation rate is $14.57 per barrel of oil, up steeply from the previous rate of $4.06.
Texas-based CIPL operates a 20-inch pipeline that runs 42 miles from Granite Point down the western side of Cook Inlet to the Drift River Oil Terminal, which also belongs to CIPL. The pipeline was installed in 1966.
Cook Inlet Energy, in its formal complaint filed in January, argued the rate hike was excessive and “could not have come at a worse time” for the young company, which in late 2009 bought oil and gas assets on the west side of Cook Inlet from Pacific Energy Resources Ltd., a California firm that underwent bankruptcy liquidation. The assets include the West McArthur River oil field.
Cook Inlet Energy is a subsidiary of Tennessee-based Miller Energy Resources.
CIPL has attributed much of its tariff increase to damage the erupting Redoubt volcano caused in 2009, idling west Cook Inlet oil production and the pipeline for months.
In filings with the RCA, the pipeline operator has defended its higher rate as “entirely reasonable,” allowing for recovery of actual costs plus a reasonable return. CIPL added it “has no responsibility to subsidize” Cook Inlet Energy’s investments.
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