Exxon asks for increase in pay rate to move oil in pipeline

Eric Lidji | Petroleum News

Exxon Mobil has asked state regulators to increase the rate it charges to ship oil on the trans-Alaska oil pipeline to in-state destinations by about 22 percent.

The request makes Exxon the third of the five owners of the 800-mile pipeline to ask in 2010 for an increase to intrastate shipping rates. The Regulatory Commission of Alaska previously approved increases for Conoco Phillips and Koch on a temporary basis.

Exxon is proposing to charge $3.07 to ship a barrel of oil from the North Slope to North Pole and about $4.83 to ship to Valdez, depending on the final destination. Valdez has two off-take points: the PetroStar refinery and the Valdez tanker port.

That represents a roughly 22 percent increase over Exxon's existing rates of $2.53 per barrel to ship to North Pole, and about $3.94 per barrel to ship to Valdez.

Exxon said the increase is needed because the pipeline's oil flow is declining while operating costs and property taxes are increasing. The proposed rates would bring Exxon some $3.3 million per year, or $600,000 more than the $2.7 million the company currently earns on in-state markets. Exxon presumably ships most of its North Slope oil to the West Coast under shipping fees set by federal regulators.

The rate increases would make Exxon the most expensive carrier for in-state markets.

By comparison, Conoco and Koch requested 12 percent increases in 2010, bringing their rates to roughly $2.87 per barrel to North Pole and $4.50 to Valdez.

Exxon wants the new rates to go into effect by Jan. 20.

The request is the third time since November 2008 that Exxon has asked the RCA to increase in-state shipping rates. If approved, it would represent a 146 percent jump in shipping rates over the past two years. In late 2008, four of the five owners, including Exxon, asked for a 57 percent increase to in-state shipping rates in place since 2002.

Those 2002 rates, calculated under a new method charge $1.25 to ship a barrel of oil from the North Slope to North Pole and $1.96 to ship to various points in Valdez.

If the RCA ultimately decides that any or all of the rate increases it has temporarily approved since 2008 aren't justified, the carriers would be forced to issue refunds.

BP is the only pipeline owner that hasn't asked for an increase to in-state shipping rates. Unocal did not request an in-state rate increase in 2010, but did in 2008 and 2009.

Exxon owns a 20.34 percent stake in the pipeline, making it the third largest owner after BP and Conoco. Unocal and Koch together own less than 5 percent.

Petroleum News