A complex regulatory battle over how much money the owners of the trans-Alaska pipeline charge to ship crude is one step closer to being settled. Pending signoff from the Federal Energy Regulatory Commission, the pipeline owners have agreed to set the depreciation rate for the pipeline at 2044.
Over the years the owners, which include BP, ConocoPhillips and Exxon Mobil Corp., have argued that the economic life was shorter, and therefore they should be allowed to charge higher fees for moving oil down the pipeline to cover depreciation. The higher that fee, the less money the state earns in production and royalty taxes.
In the latest tariff battle with the state, the companies argued the pipeline's operational life should be pegged at 2034. The Alaska Attorney General's legal team countered in FERC filings the line could last until 2075 or longer.
Agreeing to the year 2044 "was a compromise,” said Alaska Attorney General Michael Geraghty. “We’re pleased that this part is settled, but there is much more work left to do” in the tariff dispute.
Yet, the settlement seems to conflict with arguments by Gov. Sean Parnell, who has said the trans-Alaska pipeline -- the 800-mile umbilical cord that symbolizes the state's lifeblood industry -- is running low on oil and could shut down in as soon as eight years under certain conditions
Parnell’s state website to support his tax proposal, “Stem the Decline -- Grow Alaska,” cites a U.S. Energy Department report that says the pipeline could stop moving oil sometime between 2020 and 2035, it was a report that was widely debunked by energy experts.
Parnell has advocated for the Alaska Legislature to cut taxes by up to $2 billion a year for the companies that produce crude from state lands Parnell and others claim that will result in the companies searching for more oil and pumping it into the pipeline, thus extending the operational life of the line.
The compromise of 2044 is a small step in the state's latest protest over tariff rates. The state, as well as independents Tesoro Alaska and Anadarko Petroleum Corp. argue that the pipeline owners are shortchanging Alaska and those independent companies by increasing the fees they charge for moving oil down the pipeline.
"The increased tariff rates result in a direct and substantial loss to Alaska. Excessively high tariff rates may also have adverse consequences on North Slope bidding, exploration and development," the state's attorneys have argued in filings with FERC.
Contact Amanda Coyne at amanda(at)alaskadispatch.com