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Petroleum industry

Federal Regulators Approve 40% Increase in Trans-Alaska Pipeline Tariffs

Strategic Insights

— 2 min read

Federal regulators have given the go-ahead for a significant hike in the cost of transporting oil through the 800-mile-long trans-Alaska pipeline, with the five companies that own and operate the pipeline set to implement the increase. The companies claim that the rise in transportation costs is necessary due to declining oil production on the North Slope, which has led to an increase in the price-per-barrel. However, the state of Alaska has disputed the increase, claiming it is "unreasonable" and designed to discourage competition on the North Slope.

Key Takeaways:

  • The five companies that own and operate the pipeline - BP, Exxon Mobil, ConocoPhillips, Chevron, and Koch Alaska - have raised their transportation tariffs by as much as 40% to account for declining oil production on the North Slope.
  • The increase applies only to oil bound for refineries outside of Alaska, which accounts for 90% of the oil in the pipeline.
  • The state of Alaska has appealed the increases, arguing they are "unreasonable" and designed to discourage competition on the North Slope.
  • Every $1 increase in the tariff costs the state treasury about $100 million a year, according to the Alaska Department of Revenue.
  • ConocoPhillips has made the biggest boost to its transportation tariff, increasing it from $3.78 to $5.29.
  • Exxon and BP have both raised their rates by $1.02, bringing the per-barrel shipping price to $4.95 and $5.10, respectively.
  • Koch increased its transportation charges 34 cents, while Chevron raised its rate 71 cents per barrel.
  • Oil production on the North Slope has fallen steadily in recent years to about 800,000 b/d today.
  • The fall output forecast for fiscal year 2007 from the Alaska Division of Oil and Gas is 740,000 b/d.

Statistics:

  • The new tariffs will result in a 40% increase in transportation costs for oil bound for refineries outside of Alaska.
  • The cost of moving a barrel of oil through the pipeline from the North Slope to the Valdez port is set by FERC at $4.95-$5.29 per barrel for companies other than BP, Exxon, and ConocoPhillips.
  • Every $1 increase in the tariff costs the state treasury about $100 million a year.
  • ConocoPhillips has increased its transportation tariff from $3.78 to $5.29.
  • Exxon and BP have both raised their rates by $1.02.
  • Koch has increased its transportation charges by 34 cents.
  • Chevron has raised its rate by 71 cents per barrel.

Sources:

  • "Federal Regulators Approve 40% Increase in Trans-Alaska Pipeline Tariffs" by Robert Dillon, Washington (date not specified)
  • "Regulatory Commission of Alaska" (date not specified)
  • "Alaska Department of Revenue" (date not specified)
  • "Federal Energy Regulatory Commission (FERC)" (date not specified)
  • "Alaska Division of Oil and Gas" (date not specified)

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