Voices Of Alaska

Posted: Monday, October 11, 2004

One day, the North Slope oilfields will run dry and it will be time to remove the pipeline and terminal facilities built to transport crude oil south, and time to clean up the 800-mile corridor to Valdez.

The question is, will the money be there to pay for the work?

It's supposed to be. A comprehensive 1985 tariff agreement between the state and the oil industry allowed the owners of the trans-Alaska pipeline and the Valdez tanker terminal to collect a special fee on every barrel of oil moving through the system. This fee was intended to offset the future cost of what's called "DR&R," meaning dismantlement and removal of the facilities and restoration of the land they stood on.

The problem is, these fees have not been accumulated in a dedicated fund, nor clearly and publicly accounted for. While it's known how much has been collected, it's not known where the money is now, or how certain we can be that it will be available when needed.

To make sure it is, the Prince William Sound Regional Citizens' Advisory Council has urged the Regulatory Commission of Alaska to require the system's oil-company owners to establish a dedicated DR&R fund with transparent accounting of its management. Government agencies, public-interest organization such as ours, and individual Alaskans must be able to satisfy themselves the money is being handled properly.

Alyeska Pipeline Service Co. operates the system for several owner companies, most of whom are subsidiaries of major North Slope oil producers. According to Alyeska, the owners are BP Pipelines (Alaska) Inc; ConocoPhillips Transportation Alaska Inc.; ExxonMobil Pipeline Co.; Unocal Pipeline Co.; and Koch Alaska Pipeline Co.

For the most part, the North Slope producers are their own customers, shipping their own oil through their own pipeline and paying themselves the tariffs, including DR&R fees. However, some nonowners of the pipeline also produce North Slope oil and pay tariffs and DR&R fees to the owner companies.

Our recommendations came in response to a call for comments earlier this year by the state regulatory commission, which oversees the tariffs pubic utilities charge their customers. The commissioner's interest in DR&R arises from its authority over pipeline tariffs, including the DR&R fee collected since 1985.

Our comments were based on a report on DR&R issues by Fairbanks economist Richard Fineberg. According to Fineberg, pipeline owners have already collected more than $1.5 billion in DR&R funds.

Besides advocating a dedicated fund with transparent accounting, we also urged the agency to ensure the regulations do not give pipeline owners an incentive to delay DR&R projects so they can continue earning investment income off the DR&R funds.

If the pipeline stays in operation until 2034, Fineberg estimated, the value of DR&R collections plus income on the collected funds could exceed actual DR&R expenses by more than $50 billion.

We believe all Alaskans would agree the pipeline corridor should be restored to natural conditions when oil production ends on the North Slope. State oversight of DR&R funds is an important step in making sure that happens.

the council's 18 member organizations are communities in the region affected by the 1989 Exxon Valdez oil spill, as well as aquaculture, commercial fishing, environmental, Native, recreation, and tourism groups.

John Devens is executive director of the Prince William Sound Regional Citizens' Advisory Council, an independent nonprofit corporation whose mission is to promote environmentally safe operation of the Valdez Marine Terminal and the oil tankers that use it. The council's work is guided by the Oil Pollution Act of 1990, and its contract with Alyeska Pipeline Service Company.

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