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CIE protests Cook Inlet Pipe Line tariff Rate determined by settlement agreement between pipeline, state; Cook Inlet Energy not a party, says it is not bound by the terms KRISTEN NELSON Petroleum News
Cook Inlet Energy is protesting the new tariff for the Cook Inlet Pipe Line the company uses to ship its crude oil on the west side of Cook Inlet to market.
A protest filed with the Regulatory Commission of Alaska in December by Brena, Bell & Clarkson on behalf of CIE said a settlement reached between CIPL and the state in 2001, last amended in 2009, granted a waiver from certain filing requirements “based upon the then-short life expectancy of the CIPL facilities,” and said that as a result, the pipeline has not “filed testimony or submitted certain information typically required in support of a proposed rate change.”
The protest also said that since CIE is not a party to the settlement it is not bound by its terms, or by the rates resulting from the settlement.
“The RCA has long held that nonparties to a settlement are not bound by the terms of the settlement and are free to require a just-and-reasonable rate be established,” the protest said.
2010 settlement In an order establishing a docket, and inviting participation by the state attorney general, RCA noted that a 2010 settlement between CIPL and CIE resolved relevant issues in a 2010 docket, but did not change any of the Cook Inlet settlement methodology provisions established in the 2001 settlement and subsequent amendments.
The commission said the 2010 settlement left the settlement methodology uninterrupted “with the 2010 Settlement Agreement terms being implemented separately from the tariff.” That 2010 settlement agreement expired at the end of 2014, RCA said.
While CIE protested 2015 rates (rates are files annually), RCA said it “ruled that CIE’s comments were in violation of the 2010 Settlement Agreement.”
CIPL filed 2016 rates in December and CIE protested.
“Because of the protest and because the rate contained in (the new tariff filing) has not been shown to be just and reasonable and may be unjust and unreasonable,” the proposed rate is suspended and CIPL is allowed to collect it on a temporary basis, the commission said.
The proposed 2016 rate is $4.47 per barrel, an increase from $3.75 per barrel.
The Regulatory Affairs and Public Advocacy Section of the attorney general’s office filed to participate in the docket in early January.
Settlement methodology Cook Inlet Pipe Line, responding through its attorneys Guess & Rudd, said the tariff was filed in accordance with the Cook Inlet Settlement Methodology as required by the pipeline’s settlement agreement with the state.
Since CIE is protesting the settlement agreement, CIPL expects the state to participate in the docket “in support of the continuing validity and enforceability of the Settlement Agreement and the CISM.”
The response says CIPL denies the CIE allegation “that changed circumstances warrant the termination of the use of the CISM for ratemaking purposes,” as well as denying allegations that the settlement methodology “does not result in just and reasonable rates” including allegations that dismantlement, removal and restoration and the pipeline’s capital expenditures “are not properly included in CIPL’s rates.”
In a January update to the commission Ed Sniffen Jr. of the Department of Law’s Regulatory Affairs and Public Advocacy section, said the parties were engaged in discussions which might resolve the issues presented in filings, and requested a procedural stay for 60 days.
Disagreement on procedure But a subsequent status report, filed by CIE’s attorneys June 14, requested that scheduling of a prehearing conference, and said that settlement discussions between CIE and CIPL since early in the year “have not been successful,” and said it was requesting a prehearing conference because of “the breakdown in settlement attempts.”
A June 15 filing by CIPL’s attorneys requested “institution of alternative dispute resolution ... including appointment of a mediator” and said CIPL and the state “worked long and hard to develop a durable settlement agreement that would be suitable for the remaining life of the pipeline and would result in rates that were fair both to the pipeline and its shippers.”
In a June 27 response to the motion for alternative dispute resolution procedures, CIE reiterated that it was not a party to the settlement agreement between CIPL and the state and said informal settlement discussions between January and May were unsuccessful.
A settlement process may be useful in the future, CIE said in its response, but that would be only after CIPL makes a filing with the commission and CIE has an opportunity to conduct discovery.
“In the experience of CIE and its counsel, the most productive settlement discussion, whether through mediation or otherwise, occurs after the parties have a full understanding of the matters at issue,” which cannot happen, CIE said, until CIPL “lays out its rate case in the form of a 275(a) filing, and CIE has had an opportunity to review that filing and to conduct discovery thereon.”
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