ANCHORAGE, Alaska (AP) — A federal agency has barred the oil company owners of the trans-Alaska pipeline from charging higher fees for moving oil after they mismanaged a project that lasted years longer and cost millions more than anticipated.
The Federal Energy Regulatory Commission issued its decision last week. The ruling states that the project to update four pump stations and control systems along the 800-mile line, known as Strategic Reconfigurations, was “imprudently” managed.
The commission’s decision means the pipeline’s oil company owners, including BP, ConocoPhillips and ExxonMobile, will collect at least $1.5 billion less in rates, said Robin Brena, lead counsel for Anadarko Petroleum and Tesoro Alaska, two companies that do not own a portion of the Trans-Alaska Pipeline System.
The lower rates, estimated at about 20 percent, will serve as a benefit to refiners and independent producers and shippers, including refiner Tesoro, as well as Anadarko, a minority partner in ConocoPhillips’ Alpine field.
The state will also bring in about $500 million in additional revenue because lower rates mean lower transportation costs that the oil companies can deduct from taxes paid to the state, Brena said.
“It increases the value of the resource and opens up the basin for independents,” said Brena.
The commissioners who heard the case upheld the finding of imprudent management in a decision by a FERC administrative law judge in 2014. The case is expected to move forward to the U.S. District Court of Appeals.
Representatives of BP and ConocoPhillips said the ruling is under review and did not provide further comment. ExxonMobil had no comment.
The Strategic Reconfiguration project began in 2003 with a two-year completion date, but it will not be finished until 2016. The initial cost estimate of $242 million has more than tripled.
The commissioners rejected several arguments from the oil company owners, including that they “prudently” estimated the project’s benefits, such as reducing personnel and major maintenance expenses.