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H.R. 245 AND TRANS-ALASKAN PIPELINE SYSTEM

TARIFFS

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SUBCOMMITTEE ON GENERAL OVERSIGHT

AND THE ECONOMY

OF THE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES

NINETY-NINTH CONGRESS

FIRST SESSION

WASHINGTON, DC, JUNE 18, 1985

Printed for the use of the Committee on Small Business

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U.S. GOVERNMENT PRINTING OFFICE

53-702 0

WASHINGTON : 1985

COMMITTEE ON SMALL BUSINESS

PARREN J. MITCHELL, Maryland, Chairman NEAL SMITH, Iowa

JOSEPH M. McDADE, Pennsylvania JOSEPH P. ADDABBO, New York

SILVIO O. CONTE, Massachusetts HENRY B. GONZALEZ, Texas

WILLIAM S. BROOMFIELD, Michigan JOHN J. LAFALCE, New York

ANDY IRELAND, Florida BERKLEY BEDELL, Iowa

JOHN HILER, Indiana HENRY J. NOWAK, New York

VIN WEBER, Minnesota THOMAS A. LUKEN, Ohio

DAVID DREIER, California IKE SKELTON, Missouri

D. FRENCH SLAUGHTER, JR., Virginia CHARLES W. STENHOLM, Texas

JIM KOLBE, Arizona ROMANO L. MAZZOLI, Kentucky

WILLIAM W. COBEY, JR., North Carolina NICHOLAS MAVROULES, Massachusetts ROBERT C. SMITH, New Hampshire CHARLES HATCHER, Georgia

HOWARD COBLE, North Carolina RON WYDEN, Oregon

JOSEPH J. DIOGUARDI, New York DENNIS E. ECKART, Ohio

JAN MEYERS, Kansas GUS SAVAGE, Illinois

DEAN A. GALLO, New Jersey BUDDY ROEMER, Louisiana

J. ALEX MCMILLAN, North Carolina NORMAN SISISKY, Virginia

JOHN E. GROTBERG, Illinois
ESTEBAN EDWARD TORRES, California
JIM COOPER, Tennessee
JIM OLIN, Virginia
RICHARD RAY, Georgia
CHARLES A. HAYES, Illinois
CATHY (Mrs. Gillis) LONG, Louisiana
TOMMY F. ROBINSON, Arkansas

MAJOR L. CLARK III, Staff Director
THOMAS G. POWERS, General Counsel

Lois LIBERTY, Publications Specialist
CHRISTINE A. RUSSELL, Minority Staff Director

SUBCOMMITTEE ON GENERAL OVERSIGHT AND THE ECONOMY

NICHOLAS MAVROULES, Massachusetts, Chairman BERKLEY BEDELL, Iowa

SILVIO O. CONTE, Massachusetts NORMAN SISISKY, Virginia

DAVID DREIER, California JIM COOPER, Tennessee

JOSEPH J. DIOGUARDI, New York JIM OLIN, Virginia

JIM KOLBE, Arizona JOSEPH P. ADDABBO, New York

CATHLEEN GARMAN, Subcommittee Staff Director

CONTENTS

Hearing held on June 18, 1985...........
Opening statements of:

Bedell, Hon. Berkley, a Representative in Congress from the State of

Iowa.

Mavroules, Hon. Nicholas, chairman, Subcommittee on General Over-

sight and the Economy.

Testimony of:

Battese, Andrew W., Director, Division of Special Pipeline Rates, Office of

Pipeline and Producer Regulation, Federal Energy Regulatory Commis-

sion...................................

Blum, Jack A., attorney at law, Blum, Nash & Railsback, on behalf of the

Independent Gasoline Marketers Council ..

Chisholm, Phillip R., executive vice president, Petroleum Marketers Asso

ciation of America .....

Damon, E. Kent, Jr., vice president, planning and control, ARCO Trans-

portation Co...............
Love, James P., research associate, Center for Study of Responsive Law.....
McGimpsey, Ronald A., senior vice president, crude trading and transpor-

tation, Sohio Oil Co..............
Maynard, Robert M., assistant attorney general, State of Alaska, Depart-

ment of Law; accompanied by Mark Wittow, associate director for

Alaska Governor Sheffield's Washington, DC, office....................

O'Connell, Quinn, Connole & O'Connell, on behalf of British Petroleum

Pipelines, Inc............................

Sisk, Marcus W., Jr., attorney at law, Bowman, Conner, Touhey & Pe

trillo, on behalf of Tosco Corp.........

Additional material supplied for the hearing record:

Battese, Andrew W. Director, Division of Special Pipeline Rates, Office of

Pipeline and Producer Regulation, Federal Energy Regulatory Commis-
sion: Attachments to testimony........

...........
Blum, Jack A., attorney at law, Blum, Nash & Railsback, on behalf of the

Independent Gasoline Marketers Council: Prepared statement ............
Chisholm, Phillip R., executive vice president, Petroleum Marketers Asso

ciation of America: List of Petroleum Marketers Association members...
Damon, E. Kent, Jr., vice president, planning and control, ARCO Trans-
portation Co.: Prepared statement.....

.............

Love, James P., research associate, Center for Study of Responsive Law:

Attachments to testimony:

Evidence memorandum titled: Background Regarding Effects of Oil

Company Ownership of Pipelines on Pipeline Capacity .....................

Paper titled: Oil Pipeline Regulation ...............

Prepared statement with attachments ..........

Mavroules, Hon. Nicholas, chairman, Subcommittee on General Over-

sight and the Economy: Letter sent to and response of the Department

of Justice .............

Maynard, Robert M., assistant attorney general, State of Alaska, Depart-

ment of Law: Prepared statement with attachments.........
Sisk, Marcus W., Jr., attorney at law, Bowman, Conner, Touhey & Pe

trillo, on behalf of Tosco Corp.: Tosco's motion to intervene

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APPENDIXES

.

...

.

Page 185 194 198

203

A. H.R. 245—Bill to determine methodology for TAPS tariff rates.........
B. Additional correspondence with Department of Justice .....
C. Prepared statement submitted by EXXON Pipeline Co., Houston, TX......
D. Additional material submitted by Tosco Corp ...........
E. Comments submitted by Arctic Slope Regional Corp., re TAPS proceeding

before FERC.........
F. ARCO opinion on Williams Pipeline case re settlement .................
G. State of Alaska opinion on Williams Pipeline case re settlement...
H. Additional information submitted by James P. Love, research associate,

Center for Study of Responsive Law ...

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H.R. 245 AND TRANS-ALASKAN PIPELINE

SYSTEM TARIFFS

TUESDAY, JUNE 18, 1985

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON GENERAL OVERSIGHT

AND THE ECONOMY,
COMMITTEE ON SMALL BUSINESS,

Washington, DC. The subcommittee met, pursuant to notice, at 9:40 a.m., in room 2359-A, Rayburn House Office Building, Hon. Nicholas Mavroules (chairman of the subcommittee) presiding.

OPENING STATEMENT OF CHAIRMAN MAVROULES Mr. MAVROULES. The hearing will now come to order.

This morning the Small Business Subcommittee on General Oversight and the Economy meets to explore the questions surrounding the correct methodology for determining the tariffs for the Trans-Alaskan Pipeline System.

Since 1977, the tariffs established by the pipeline owners have been under dispute. Although several recommendations for just and reasonable tariff rates have been made by a FERC administrative law judge, a U.S. appellate court, and even the State of Alaska, there has been no resolution of this issue.

We are concerned that the high tariffs now being charged have reduced competition and diminished incentives among producers to explore, develop, and produce petroleum on Alaska's North Slope and effectively kept out the small and independent shippers and oil companies.

We have before us one proposal for a TAPS methodology put forth by my colleague, Berkley Bedell, which calls for the use of an original cost methodology. Furthermore, the State of Alaska recently reached an agreement with ARCO and British Petroleum which is intended to be the basis for calculating any refunds owed and determining maximum tariff rates for the life of the pipeline.

Just and reasonable tariffs are our ultimate goal. And coming as I do from a region of the country which is heavily dependent on oil, I am concerned that we promote competition and domestic exploration in order to alleviate our own unhealthy reliance on foreign oil.

Also, in these times of fiscal austerity, we need to review the impact any of these methodologies will have on the U.S. Treasury and ultimately on all consumers of oil.

It is my hope that today's hearing will give all parties directly and indirectly affected by the tariffs an opportunity to express

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