Pipeline owners contest tariff decision

Exxon Mobil Corp., BP and Conoco Phillips are among companies petitioning the U.S. Circuit Court of Appeals for the District of Columbia to review the December 2008 decision by the Federal Energy Regulatory Commission.

The action by pipeline owners could hold up the millions the carriers owe the state under the FERC decision.

Jon Iversen, with the state Department of Revenue, said Alaska is due $441 million in unpaid royalties and production taxes for 2007 and 2008.

The federal commission said tariffs charged by the pipeline owners to transport oil were too high in 2007 and 2008.

Pipeline owners appealed, but the commission affirmed its decision in April and ordered the companies to issue refunds.

Disputes about the pipeline's rates -- or tariffs -- and back-payments to the state have plagued the state and oil producers since the first drops of oil entered the pipeline.

Antony Scott, commercial analyst with the state Department of Natural Resources, said tariffs on oil destined for customers inside and outside Alaska were governed by a settlement between carriers and the state from 1977 until about 1996. If carriers kept tariffs below a set level, the state wouldn't object.

But Tesoro, which owns a Kenai refinery, successfully challenged rates on in-state oil before the Regulatory Commission of Alaska. The RCA ruled that carriers could assess only tariffs that recoup the cost of providing service at a given time. The pipeline owners already had earned enough profit to recover the bulk of their initial investment, the RCA said.

Then Anadarko Petroleum Corp., a smaller North Slope leaseholder without an ownership stake in the trans-Alaska pipeline, looked to the FEC for adjustments of out-of-state tariffs.

The federal commission said rates assessed in 2005 and 2006 were too high and that the state was due $175 million in adjustments. Some of that has been paid. Iversen said specific details are pending an audit.

In its December decision, the FEC said the tariffs in the subsequent two years also were too high.

When tariffs are high, pipeline owners make money, but the state's income from royalty oil and production taxes lessens. The value of the state's oil royalties and the taxable value of the companies' shares are calculated by subtracting transportation costs from the oil's sale price. The lower the tariff, the higher the state's royalty.

Refineries such as Tesoro welcome low tariffs, which keep costs down. Companies without a stake in pipeline ownership also want low tariffs to help keep any product at competitive market prices.

The state has said that high tariffs hamper new exploration by new companies.