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Tesoro-owned company files amended application for pipeline

Posted: November 4, 2013 - 10:12pm

Nearly a year ago, Cook Inlet Energy submitted an application for a pipeline right-of-way lease in Cook Inlet to the State Pipeline Coordinator’s Office.

Since then, changes have been made to the paperwork including a change in applicant, making an amended application necessary, Graham Smith, spokesperson for the coordinator’s office said.

The new applicant is the newly formed Trans-Foreland Pipeline Co., LLC, a company wholly owned by Tesoro.

There was also a slight route change for the project; the total length proposed to cross state lands decreased from 26 to 22 miles. The office generally asks applicants to start the process over again for route changes, Smith said.

According the application, filed on Oct. 23, the company plans to begin construction in February, which Smith said is an optimistic goal, but it is possible.

The coordinator’s office has started the 60-day notice of application, during which agencies with direct financial interest may raise objections. The 30-day notice of the Commissioner’s Analysis and Proposed Decision is the next step, which can run concurrent with the application notice period. If it is determined that a public hearing should be held, there will be another notice period followed the hearing. After all those periods expire, the Department of Natural Resources can issues the final decision and award the lease contract, Smith said.

The proposed 29-mile pipeline would run from the west side of Cook Inlet at the existing Kustatan Production Facility dipping south in a U-shape and running to the east side Kenai Pipeline Company Tank Farm.

CIE owns the land where the Kustatan Porduction Facility is located, and according to a Cook Inlet Regional Citizens Advisory Council October report, CIE has committed to shipping its oil via the pipeline. Hilcorp Alaska, another west side operator, is waiting for additional information before committing to using the proposed pipeline.

CIRCAC supports the project, and sees it as a safer method of oil transportation than by tanker across the Inlet, Jerry Rombach, CIRCAC director of administration said.

He noted collisions with docks or ice as safety concerns along with ice or current involved incidents could force a tank off a dock during load or unloading. Rombach also mentioned onboard fires and ruptures that could cause a tanker to sink as additional concerns.

“Anything we can do to eliminate or reduce that risk, we want to see happen,” Rombach said.

Following a Hilcorp June 2012 presentation to return up to two Drift River Oil Terminal storage tanks to normal service at the Christy Lee platform, CIRCAC responded with a July 2012 paper. The council stated it would prefer the company replace its terminal and tankers with a pipeline. CIRCAC supported the request to reopen the terminal with conditions that the requested pipeline is constructed within five years.

“We fully support the negotiations that would bring Hilcorp into some kind of partnership or some user relationship when the pipeline is built so that we don’t have that trans-foreland navigation issue any longer,” Rombach said.

Lori Nelson, external affairs manager for Hilcorp Alaska said there are too many commercial and regulatory uncertainties for the company to join the project.

Nelson said some of the questions Hilcorp has about the project are:

— Will it reduce transportation costs for the shippers?

— Does it reduce the risk of business interruption?

— Will it affect Hilcorp’s ability to sell its product to a competitive market?

Hilcorp’s door is open for conversation with Tesoro, Nelson said, but the company is not making any decisions at this time.

Nelson said the company also has yet to see any “hard-line studies” that proves a pipeline would be a safer transportation method than a tanker. She noted that Hilcorp has a safe track record with transporting oil in the inlet.

“We’re being very cautious in involving ourselves in this process because we do want it to be based on sound science and research rather than a knee-jerk reaction to what may be a better option for the company,” Nelson said.

The 8-inch pipeline is designed with a transport capacity of 62,600 barrels per day. It is estimated last 30 years, in coordination with the proposed lease, after which it would be evaluated for useful life, according to the project description.

In its application, Trans-Foreland estimates about 130 construction jobs would be filled and 12 positions would be created to run the pipeline.

Materials for the pipeline are estimated to cost $15 million and construction and installation is estimated at $35 million. Operation and maintenance is estimated at $5.2 million annually.

Kaylee Osowski can be reached at kaylee.osowski@peninsulaclarion.com.

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