SitNews - Stories in the News - Ketchikan, Alaska


TAPS owners may be trembling
By Sen. Kim Elton



July 02, 2007

If it takes you five minutes to scan this letter, just think of it as another couple thousand of your dollars down the tube.

Down the tube and straight into the pockets of BP, ConocoPhillips and ExxonMobil, and some other minor owners of the Trans-Alaska Pipeline (TAPS). That's because a series of findings by pipeline regulators indicate TAPS owners may be plundering us to the tune of about $400 a minute for transporting Alaska's royalty oil from the North Slope to Valdez.

The Regulatory Commission of Alaska (RCA), the Federal Energy Regulatory Commission (FERC) staff, and a FERC administrative law judge have all found that TAPS owners are overcharging Alaska about $2 for each barrel shipped through the pipeline. Richard Feinberg, an Alaska oil industry watchdog, worked the tariff numbers back to get to overcharges of $404 a minute. If the regulators are right, Alaska isn't the only victim. The overcharges also ding independents like Anadarko and Tesoro who ship their North Slope oil through TAPS.

The RCA finding and the two FERC findings were grounded in facts and couched in precise legalese. But strip away the patina of legal language and you get to something more basic-non-lawyers might accurately characterize the three rulings as findings of potential piracy. That's because the excessive transportation tariffs diverted Alaska's doubloons to their treasure chest.

If the three regulatory reviews are right, the excessive transportation charges hurt the state and independent producers in two ways:

1. we got fleeced to the tune of hundreds and hundreds and hundreds of millions of dollars over the last few years; and 2. the state is deprived of a competitive North Slope oil regime because rip-off high tariffs discourage exploration and production by independents.

Point two is less obvious but still important. One state economist said the difference between what the independent oil companies are charged for TAPS access and what they should be charged "is the equivalent of raising a company's stress price for making investment decisions." ExxonMobile, BP, and ConocoPhillips, of course, don't care about that particular stress price because the extra $2 in tariffs they pay on their oil simply disappears from their production pocket and magically reappears in their TAPS pocket.

It comes as no surprise, of course, that the TAPS multi-nationals disagree with the RCA and the FERC staff and judge rulings. But, if the FERC commissioners agree later this year with the RCA and their FERC staff and judge, the multi-national owners owe huge refunds and their TAPS tariff gusher will quit gushing. So far, the TAPS owners are dismissive of the three preliminary regulatory findings. BP's spokesman says the opinion issued in May by the FERC administrative law judge is nonbinding and reflects her opinion only. I guess he could be right and all the regulators so far are wrong. But I suspect the BP reaction was artful spinning in the wake of a potentially disastrous decision.

BP is right that "the three initial findings aren't binding on transportation tariffs" applied to North Slope oil destined for Valdez and beyond, but that doesn't mean the regulatory reviewers are wrong. Unfortunately for BP and the other TAPS owners, another possible way to spin the FERC judge's May ruling is that her 116-page opinion just might become the basis for a new script in the 'Pirates' movie franchise.

Pirates IV could break from the proto-typical, big-budget Hollywood adventure/fiction film cliché and morph into the fact-based documentary movie genre. Just title this documentary foray: Pirates of the Consortium: At World's End.

World's end this time is the upper end of the globe-the North Slope of Alaska. And, in this documentary movie, the pirates, so far, are losing. Big time.

Received July 02, 2007 - Published July 02, 2007

About: Sen. Kim Elton (D) is a member of the Alaska Legislature representing Juneau.


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Stories In The News
Ketchikan, Alaska