Anchorage Daily News

Declining throughput on the pipeline has led one owner to seek to offer discounts to shippers willing to commit to move 5,000 barrels per day.

Unocal, the company that owns the smallest share of the trans-Alaska oil pipeline, is looking to discount its shipping rate as a way to compete with the other owners of the pipeline.

Unocal wants regulators to let it cut shipping rates by 38 percent to any company that commits to ship at least 5,000 barrels of oil per day.

The move is Unocal's attempt to compete for customers at a time when less oil is flowing through the 800-mile pipeline running from the North Slope to the Valdez tanker port.

The pipeline can move about 2.1 million barrels of oil per day at maximum capacity, but it hasn't hit that peak since 1988. Current throughput is less than 700,000 barrels per day.

That spare capacity, combined with recent rate increases by four of the five pipeline owners, has put Unocal at a competitive disadvantage, the company said in filings.

Late last year and early this year, the Regulatory Commission of Alaska let four of the five pipeline owners temporarily increase rates by 57 percent for oil shipped to Alaska refineries.

BP, which owns the largest share of the pipeline, did not request a rate increase.

The move created a rare disparity in shipping rates among the owners of the pipeline.

BP now charges the least among the five companies for oil shipped to Alaska refineries. And it has capacity to spare: BP owns nearly 47 percent of the pipeline, or about 985,000 barrels per day of capacity, more than the entire daily North Slope production.

BP, Conoco Phillips and Exxon Mobil are the largest North Slope producers and also own the largest shares of the pipeline. But two other North Slope producers, Anadarko and Pioneer Natural Resources, don't own any stake in the pipeline and must rent space.

Unocal Pipeline Co. owns 1.36 percent of the pipeline.

Since the rate increases took effect, Unocal's "portion" of the pipeline is carrying less oil, which the company attributes to the "availability of the significantly lower" rates from BP.

The discount, called a "volume incentive rate," is meant to make Unocal competitive.

For example, a company taking advantage of the discount would pay $1.90 to ship a barrel of oil from Prudhoe Bay to Valdez, rather than $3.05, the temporary rate approved earlier this year for Unocal and the three other owners. That would beat BP's $1.96 per barrel.

In regulatory filings, Unocal insisted the discounted rate isn't high enough for the company to recover its costs, but "given the current competitive environment, (Unocal) is willing to offer service at these non-compensatory rates in an effort to recover some portion of its costs from incremental shippers."

Unocal made similar requests to both RCA and the Federal Energy Regulatory Commission, which regulates shipping rates on oil headed to refineries outside Alaska.

The state protested the request before FERC, saying the incentive that Unocal proposed offered to discount a flawed rate. The state is among a group arguing that the pipeline shipping rates have been and continue to be unfairly high.

FERC approved Unocal's request for the discounted rate, but acknowledged the company could be required to pay refunds depending on the results of other ongoing rate cases.

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