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RCA has many questions; hearing a possibility, as is intervention
Kristen Nelson Petroleum News
The Regulatory Commission of Alaska has resolved initial issues in Harvest Alaska’s acquisition of BP Pipelines (Alaska)’s interest in the trans-Alaska oil pipeline, and its share in the Milne Point and Point Thomson pipelines, and is now turning its attention to whether the acquisitions meet its statutory standards and whether they are in the best interest of the public.
In March the commission ruled financial information in its dockets on the acquisition must be considered confidential (see story in March 22 issue of Petroleum News). It had previously ruled that copies of the sales agreement were confidential.
And the commission set a date of Sept. 28 to issue final orders on the dockets.
Now it is tackling the main issues and on April 2 it ordered the companies to provide answers to a dozen pages of what it called “initial questions.”
RCA said it is “mindful” of the Sept. 28 deadline for a final order in the proceeding but is allowing 30 days for the companies to respond, “given current circumstances.”
Then it cautioned the companies:
“We advise BP and Harvest Alaska that the completeness, clarity, and candor of answers to the preceding questions will shape the course of future proceedings in these dockets, including whether there is a need for a hearing, whether participation by intervenors may aid our resolution of the issues raised by the applications, and what (if any) conditions on the approvals sought by applications may be necessary to protect the public interest.”
Range of questions The scope of questions RCA asked and the level of detail it requested, are broad, beginning with “all operational risk assessments performed for TAPS, MPPLLC, or PTEP in the last ten years.” It requested details on the process for establishing work plans and budgets for the pipelines; a list of scheduled pipeline repairs, replacements or improvements and what known work is not currently scheduled; a list and description of each incident resulting in a reportable spill or damage “or any other major pipeline operational upset since inception.”
It wants to know how the pipelines are insured against unanticipated incidents, what insurance mechanisms BP has used and how Harvest Alaska intends to insure against unplanned incidents affecting operation of the pipelines and asked if BP has agreed to provide any backstop for Harvest Alaska’s operational liability.
Since the Milne Point and Point Thomson pipelines are limited liability companies, with liability exposure limited to LLC assets, are the members of those LLCs obligated to cover unanticipated expenses not reflected in their tariff rates, the commission asked.
For the trans-Alaska oil pipeline, the commission asked for a detailed description of how Alyeska Pipeline Service Co. is funded, and how Harvest would fund any large or unusual amounts requested by Alyeska.
“Explain whether recent changes in the financial markets have impacted Harvest Alaska/Hilcorp Alaska/Harvest Midstream’s access to the capital necessary to fund this transaction,” the commission said, and also asked what financial reserves have been set aside to fund Alaska operations.
The commission asked for copies of the financial assurance agreements Harvest has with the Alaska Department of Natural Resources.
RCA also asked what insurance bonding or security DNR has required for right-of-way leases for the pipelines.
And it wants specifics on the BP corporate guaranty which will remain in place after the transfer of BP’s Alaska assets.
DR&R The commission asked for a lot of dismantlement, removal and restoration information: all studies BP or Alyeska have done to estimate DR&R costs “since the inception of TAPS”; whether any DR&R funds have been expended to date; responsibility of other TAPS carriers if an individual carrier is unable to cover its cost of DR&R; and how much money BP has collected in its rates for DR&R “by destination, by shipper, and by month since the inception of TAPS through interstate and intrastate rates” to cover its share of DR&R.
“Please confirm that BP’s liability for DR&R extends to a lawfully-ordered refund of DR&R overcollections,” RCA said. It also asked for a schedule of the extent to which BP has assumed responsibilities for DR&R associated with former TAPS carriers such as Unocal Pipeline Co.
“Is there a BP backstop for Harvest Alaska’s DR&R liability should Harvest Alaska fail, for whatever reason, to adequately perform or fund its share of DR&R costs?” the commission asked.
And it wanted to know how DR&R collections and anticipated expenditures are recorded in BP’s financial filings, including a copy of the most recent such recording.
The commission noted that once BP’s Alaska assets are owned by Harvest, “BP will no longer be subject to clear RCA jurisdiction as it will have no intrastate pipeline assets in Alaska,” and asked if it is the company’s position that RCA would have “jurisdictional reach” in DR&R matters.
It asked for an explanation of the arrangements for planning BP’s DR&R obligations at the end of the useful life of TAPS, and what the arrangements are “between Harvest Alaska and BP to ensure Harvest Alaska has the capabilities to assume BP’s DR&R responsibilities, both financially and operationally?”
And if a new component of TAPS is put in service, how will that asset be distinguished for DR&R purposes?
The commission also wants to know about DR&R responsibilities for the Milne Point and Point Thomson pipelines.
- KRISTEN NELSON
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