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Vol. 27, No. 26 Week of June 26, 2022
Providing coverage of Alaska and northern Canada's oil and gas industry

Pikka nudges forward

Regulatory Commission of Alaska says yes to Santos-owned firms requests

Kay Cashman

Petroleum News

An order granting requests by Oil Search (USA) and its parent Papuan Oil Search Ltd. was issued June 16 by the Regulatory Commission of Alaska, moving Oil Search’s North Slope Pikka project that much closer to first oil in 2025. Both companies are owned by Santos Ltd.

“In the matter of the (April 21) application filed by Oil Search (USA), or OSU, for a certificate of public convenience and necessity to construct and operate a common carrier oil pipeline (Pikka Sales Oil Pipeline), for approval of connection, and for approval of connection agreement,” RCA’s June 16 order approved a petition for confidential treatment of financial statements, addressed the decision timeline and re-designated the commission panel.

Another Santos subsidiary, Oil Search (Alaska), is on the ground working on Phase 1 of the Pikka project, which is expected to bring 80,000 barrels of oil online shortly after startup in 2025.

Eighty thousand barrels of oil per day represents a 25% increase in flow through the 800-mile trans-Alaska pipeline system.

Pikka Phase 1 involves a single drill site; subsequent phases are expected to add two more drill sites and increase output to a maximum of 160,000 bpd.

Oil Search estimates the minimum engineering design life of the Pikka Sales Oil Pipeline will be 30 years.

The sales line will be approximately 22.2 miles long and consist of a 16-inch diameter pipe from Pikka’s Nanushuk processing facility, or NPF, to the tie-in pad, or TIP, and a 12-inch pipeline from the TIP to the Kuparuk Pipeline.

The sales line will be located on the Pikka and Seawater Treatment Plant pipeline support racks when present and connect the NPF, via the TIP, and terminate at the Kuparuk Pipeline Extension, or KPE, Tie-in Point.

Financial statement waiver

For an existing business, RCA regulations require submission of the two most recent years of independently audited financial statements with a pipeline carrier application for new construction.

With its application, OSU filed a motion for waiver of this requirement.

Plus, OSU and POSL filed a petition for confidential treatment of financial statements submitted with the application.

RCA issued a public notice of the application, motion for waiver, and petition for confidential treatment on April 28, with comments due by May 19, and notice of intent to file a competing application due by May 30.

The agency received no comments or competing applications. OSU supplemented the application on June 9.

In lieu of audited financial statements, OSU filed three years of unaudited financial statements, asserting that the financial statements filed were comparable to the financial statements required by RCA regulations “as they substantially set forth OSU’s financial status and detail its assets and liabilities.”

OSU further asserted that the submitted financial statements had been verified and certified for accuracy. In support of this assertion, OSU referred to the verified written statement of Troy Herrera who certified that the unaudited OSU financial statements were accurate.

In further support of its application and motion for waiver, OSU provided copies of the audited financial statements for POSL, noting that OSU was a wholly owned subsidiary of POSL and that POSL was willing to provide a parent company guaranty of its common carrier obligations under AS 42.06.

The four audited POSL financial statements filed in the supplemental filing, dated June 9, were for years ending Dec.31, 2018; Dec. 31, 2019; Dec. 31, 2020; and Dec. 31, 2021.

Based on these facts, RCA found that OSU satisfied the requirements for waiver of the audit requirement contained in 3 AAC 48.625(a)(7)(B) and granted the motion for waiver.

Petition for confidential treatment

Under the Pipeline Act, records filed with RCA are presumed to be open to public inspection. However, this presumption is subject to limited exception, per AS 42.06.445.

“We have previously held that AS 42.06.445(c) was enacted to protect pipeline carriers that are jointly regulated by a federal agency and by this commission from having to make public disclosure of any information about themselves that they would not have had to make if they were regulated only by the federal agency,” RCA wrote in its June 16 order.

The statute’s part c provided a three-part test to determine confidential treatment. Under the three-part test the information or document must be related to the finances or operations of a pipeline, the pipeline must be subject to federal jurisdiction, and the information or document must not be required to be filed with the appropriate federal agency, RCA said.

Good cause

“Our regulations further allow classification of records as privileged or confidential under 3 AAC 48.045. In order to obtain privileged or confidential treatment under that section, we require a petition identifying the record to be protected and setting out good cause.

“The good cause standard requires a showing that (1) disclosure of the record to the public might result in competitive or financial disadvantage or harm or reveal a trade secret, and (2) the need for privilege or confidential treatment outweighs the public interest in disclosure,” RCA said.

“Bald assertions” that some harm might occur did not satisfy the good cause standard, the commission noted.

In their June 9 filings OSU and POSL said the oil transported on the Pikka Sales Oil Pipeline “is expected to be entirely comprised of interstate shipments subject to concurrent regulation by the Federal Energy Regulatory Commission,” or FERC.

Financial statements are not required to be filed with FERC.

The companies OSU and POSL said that they derived economic value from the unavailability of their financial information “because disclosure of such information would allow contractors and vendors, and potentially competitors, to use the information to develop pricing and bidding strategies that would damage business, give competitors undue advantage, and unfairly benefit potential contractors.”

OSU and POSL said that financial information of private companies was routinely kept confidential in the oil and gas industry. And while the companies conceded that the public had an interest in access to records filed with public agencies, they also said the public benefitted in attracting financial investment from outside companies willing to do business in Alaska.

In reviewing the companies’ petition for confidential treatment, RCA found that such treatment was “not currently warranted under AS 42.06.445(c) because the Pikka Sales Oil Pipeline did not yet exist. Additionally, the pipeline would be subject to the jurisdiction of FERC but OSU and POSL had “not provided any indication that it is presently” subject to the jurisdiction of FERC.

Based on these facts, the commission found that OSU and POSL have not satisfied the three-part test for confidential treatment under AS 42.06.445(c).

However, RCA found that OSU and POSL “sustained the burden for confidential treatment” under the agency’s good cause standard; that OSU and POSL’s interest in confidentiality outweighs the public’s interest in disclosure and therefore granted their petition for confidential treatment.

Decision timeline, panel

There was no timeline required by statute for this proceeding, which was something OSU and POSL wanted RCA to correct.

Therefore, under 3 AAC 48.661(a) the commission said it would “rule on an application for a new certificate within six months after the filing of a complete application.”

“If a motion for waiver or petition for confidential treatment is filed, we cannot determine whether an application is complete until after we reach a decision to grant or deny the motion for waiver or petition for confidential treatment,” RCA said.

In the commission’s June 16 order, it granted the petition for confidential treatment and motion for waiver, noting all other filing requirements had been met. Therefore, RCA ruled that OSU and POSL’s application was complete as filed on April 21 and said it would issue a ruling in the proceeding by Oct. 21.

In the June 16 order, the chairman also addressed another OSU and POSL request, designating Commissioners Keith Kurber II, Daniel A. Sullivan and Janis W. Wilson as the commission panel.

The chairman said Commissioner Wilson would remain the commission docket manager.

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ConocoPhillips KTC filing

As previously reported in the June 12 issue of Petroleum News, Kuparuk Transportation Co. applied to the Regulatory Commission of Alaska on May 24 for approval of a connection permit allowing Oil Search (USA) to connect the east end of its proposed Pikka Sales Oil Pipeline to KTC’s Kuparuk Pipeline and for approval of a connection agreement between KTC and OSU.

In its application, ConocoPhillips Alaska-owned KTC said the proposed Pikka Sales Oil Pipeline would be a 16-inch diameter line some 22.2 miles long, from the Nanushuk Processing Facility tie-in to the proposed Kuparuk Oil Pipeline tie-in on the southeast end of the Pikka line with a 1,000-foot 12-inch transmission pipeline from the tie-in pad to the Kuparuk Oil Pipeline.

KTC said the connection agreement between KTC and OSU would become effective upon RCA granting a connection permit and approving the connection agreement.

According to KTC, the commission’s longstanding precedent holds that a connection permit would be granted without formal proceedings when the connecting party and the pipeline carrier agreed on terms and conditions, there were no protests and the terms and conditions were reasonable.

The Pikka line “is expected to support throughput in both the Kuparuk Oil Pipeline and TAPS, slowing or offsetting throughout declines and keeping transportation rates lower on both of those pipelines than they would otherwise be without the Pikka unit production throughput.”

Connection equipment cost, estimated at $1,756,000, will be paid by OSU, the connecting party, KTC said, and would not be included in KTC’s intrastate crude oil transportation rates.

RCA’s notice, dated June 1, said any comments on the filings were due by 5 p.m. June 22.

—Petroleum News