Press Release

State Agrees to Settle TAPS Tariff Rate Litigation

December 14, 2017

(Anchorage, AK) – The State of Alaska has agreed to settle dozens of cases involving Trans Alaska Pipeline System (TAPS) tariff rates for the years 2009-2015. In these cases, the State asserted that TAPS tariff rates were too high, resulting in reduced royalty and tax obligations by the shippers who utilize TAPS.

For the last two years, the State engaged in negotiations with the carriers, federal regulatory agencies, and independent shippers to resolve the issues raised in the 2009-2015 rate cases. Under the proposed settlement, the State will retain the $224 million already collected, and will collect at least $165 million of additional revenue. In addition, the carriers will agree that approximately $625 million of costs associated with strategic reconfiguration, a project which automated and electrified equipment along the TAPS pipeline, will never be placed in TAPS tariff rates, keeping rates low into the future. This will increase the value of Alaska North Slope (ANS) crude for tax and royalty purposes.

“This settlement is a great result for the State,” said Attorney General Jahna Lindemuth. “It creates certainty going forward, avoids future litigation, and will provide additional taxes and royalties—bringing needed money to the state treasury.”

To help keep future disputes about TAPS tariff rates to a minimum, the State and the carriers also agreed to use a settlement methodology to calculate interstate TAPS tariff rates through 2021.

The 2009-2015 TAPS tariff cases primarily focused on two questions: (1) whether the TAPS owners improperly capitalized (and placed into TAPS tariff rates) over $600 million of costs related to "strategic reconfiguration"; and (2) whether the carriers could recover prior year TAPS property taxes (ad valorem taxes) in later years. As a result of litigating these questions, the State already collected approximately $224 million of additional revenue. However, these matters were under review by two appellate courts. This settlement would bring those matters to a close. The settlement is subject to regulatory approval before it is final.

The State of Alaska received substantial assistance in this matter from other parties, including independent shippers and Federal Energy Regulatory Commission trial staff.
The parties will file the necessary settlement agreement documents with the Federal Energy Regulatory Commission and the Regulatory Commission of Alaska tomorrow, December 15, 2017.

Here are copies of the relevant documents:

CONTACT: Chief Assistant Attorney General John M. Ptacin at 269-5100 or john.ptacin@alaska.gov.

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Department Media Contacts: Communications Director Patty Sullivan at patty.sullivan@alaska.gov or (907) 269-6368. Information Officer Sam Curtis at sam.curtis@alaska.gov or (907) 269-6269.