Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co.
| Decision Date | 04 December 1987 |
| Docket Number | Nos. S-1769,S-1798 and S-1799,s. S-1769 |
| Citation | 746 P.2d 896 |
| Parties | TESORO ALASKA PETROLEUM COMPANY, Appellant, v. KENAI PIPE LINE COMPANY and State of Alaska, Alaska Public Utilities Commission, Appellees. KENAI PIPE LINE COMPANY, Appellant, v. STATE of Alaska, ALASKA PUBLIC UTILITIES COMMISSION, and Tesoro Alaska Petroleum Company, Appellees. STATE of Alaska, ALASKA PUBLIC UTILITIES COMMISSION, Appellant, v. KENAI PIPE LINE COMPANY and Tesoro Alaska Petroleum Company, Appellees. |
| Court | Alaska Supreme Court |
Andrew E. Hoge, David S. Johnson, Hoge and Lekisch, Anchorage, for Kenai Pipe Line Co.
Robin O. Brena, Atkinson, Conway & Gagnon, Anchorage, for Tesoro Alaska Petroleum Co.
Virginia A. Rusch, Asst. Atty. Gen., Anchorage, Grace Berg Schaible, Atty. Gen., Juneau, for Alaska Public Utilities Commission.
Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.
This case concerns the regulatory authority of the Alaska Public Utilities Commission (APUC) under the Pipeline Act, AS 42.06.140-.640. In short, we must determine whether the APUC has jurisdiction to regulate the transportation of crude and refined oil through Kenai Pipe Line Company's (KPL) marine terminal facilities. The APUC concluded that it had jurisdiction over all movements of oil, crude and refined. The superior court affirmed the APUC's decision as to the movement of crude oil, but reversed as to the movement of refined oil, holding that "refined oil" was not "oil" within the meaning of the Pipeline Act. Both the APUC and Tesoro Alaska Petroleum Company (Tesoro) appeal from that portion of the superior court's order which held that the APUC did not have regulatory authority over KPL's refined oil transport operations. 1 KPL cross-appeals, challenging the portion of the superior court's order holding that the APUC had regulatory authority over crude oil transport at KPL's marine terminal facility. KPL also contests the superior court's award of costs and attorney's fees to Tesoro. We conclude that the APUC has jurisdiction to regulate all aspects of KPL's operations. Accordingly, we reinstate the APUC's determination.
The relevant facts are largely undisputed. 2 For purposes of convenience, the operative facts for all three appeals will be set forth together.
KPL is involved in the transportation of crude and refined oil on the Kenai Peninsula. It performs this function through two divisions: a crude oil pipeline division and a marine terminal division. The headquarters of both divisions is Nikiski, Alaska. At the heart of the present dispute is the movement of oil through KPL's Nikiski facilities. Thus, a detailed description of these facilities and the movement of oil through them is necessary.
KPL's pipeline division consists of two main trunk lines and a receiving tank (T-401). The trunk lines carry crude oil to Nikiski from two Cook Inlet production areas, the Middle Ground Shoals production unit, and the Swanson River and Soldotna Creek production units (East Side Production Units). At Nikiski, the crude oil is (or has been) supplied to two separate refineries (Refineries): one owned and operated by Tesoro, and the other by Chevron USA, Inc. (Chevron). The crude oil is transported from the East Side Production Units to the Refineries through the interconnection of KPL's pipeline and storage tank with "feeder" pipelines owned by the Refineries. There is no dispute concerning APUC's jurisdiction over these facilities.
KPL also owns and operates a marine terminal. This facility consists of a wharf, four storage tanks (T-402, T-405, T-407 and T-408), several hundred lineal feet of crude oil lines, a ballast system, a pump station, meters and an office/shop building. These tanks and facilities are also interconnected with the feeder pipelines that run to the Refineries. The APUC's regulation of this marine terminal facility is at issue in these appeals.
Tank T-401 of KPL's pipeline division is interconnected with the tanks and lines of KPL's marine terminal. Thus, KPL has the physical facilities and ability to transfer East Side Production Unit oil from tank T-401 to its marine terminal. KPL can also transfer this oil directly from its main trunk lines to the marine terminal facilities without passing through tank T-401. Presently, however, these interconnections are not used and have not been since 1975.
The movement of oil at KPL's marine terminal can be broken down into three categories: (1) the outward movement of crude oil, (2) the inward movement of crude oil, and (3) the outward movement of refined oil. Each of these movements is more particularly described below.
The first movement of oil at issue here involves the outward movement of crude oil originating from the East Side Production Units. In the past, East Side crude oil was transported through KPL's main trunk lines and marine terminal facilities to oil tankers at KPL's wharf. The tankers would then carry the crude oil to other locations for refining. 3 KPL's entire pipeline system was originally constructed to operate in this manner. 4 In recent years, however, production from the East Side Production Units has decreased while the operations of the Refineries has increased. Consequently, less and less East Side crude oil has been shipped through KPL's marine terminal. In fact, since 1975, the Refineries have processed all the East Side crude oil; none of it has passed through KPL's marine terminal facilities. At the present time, all crude oil from the East Side Production Units is transported to the Tesoro refinery.
KPL's marine terminal facility is also used to receive crude oil from tankers for transportation to the Refineries. The bulk of this oil is Alaska North Slope (ANS) crude oil from the Valdez terminal of the Trans-Alaska Pipeline System. However, Tesoro also receives some crude oil from production fields on the west side of Cook Inlet, and occasionally from foreign sources.
The ANS crude oil is off-loaded from tankers at KPL's marine terminal, transported via the facility's pump station to the storage tanks (tanks T-402, T-405, T-407, and T-408), and withdrawn as needed by the Refineries. The crude oil from other sources is transferred to the Tesoro refinery via a line owned by Chevron which runs over KPL's marine terminal and connects with a line owned by Tesoro.
The third movement of oil involves the outward transportation of "clean" and "residual" refined oil 5 from the Refineries through KPL's marine terminal facilities to tankers or barges. None of these movements involves any pipeline owned by KPL.
Clean refined oil is transported from the Refineries through KPL's marine terminal via two 14-inch "clean product lines" which are owned by Chevron and connected to Tesoro's refinery. 6 Residual refined oil can be transported over KPL's property and onto its dock by way of a "resid/crude line." Currently, Chevron ships residual refined oil through KPL's marine terminal via the 20-inch resid/crude line connected to its refinery. Prior to 1982, Tesoro also transported residual refined oil over KPL's facilities via the same line owned jointly by Chevron and Tesoro. However, Tesoro has not shipped residual refined oil over KPL's facilities since November 1982, and currently moves its "resid" across the nearby unregulated Phillips Petroleum Company (Phillips) dock.
KPL charges shippers a service fee for loading refined products at its marine terminal. This untariffed fee 7 covers the attendant, direct, and administrative services performed in loading tankers and barges.
Prior to 1972, pipelines and pipeline facilities such as KPL's were not regulated by the state. In 1972, however, the Alaska Legislature passed the Alaska Pipeline Commission Act, ch. 139, § 1, SLA 1972, codified at AS 42.06. This act created the Alaska Pipeline Commission 8 and granted it broad authority to regulate pipelines and pipeline carriers in Alaska to the extent not preempted by federal law. AS 42.06.140-.150.
Among other things, this Act requires that the services offered by pipeline carriers be governed by tariffs, which must be just, reasonable, and nondiscriminatory. AS 42.06.360-.380.
To comply with these statutory mandates, KPL filed tariffs establishing rates and rules for the intrastate services it offered. At the beginning of this proceeding, KPL had in force two tariffs governing services provided at its marine terminal facility. The tariff referred to as APC No. 5 establishes rates and regulations for the transportation of crude oil from the East Side Production Units to "pipelines of others" or to "ships' rails" at KPL's marine terminal. This tariff sets different rates depending on the origin and destination of the crude oil. APC No. 5 was approved by the Alaska Pipeline Commission on November 27, 1978, effective as of July 1, 1978.
The second tariff in force is APC No. 3. Under this tariff, KPL receives crude petroleum from tankers at its marine terminal, stores it, and delivers it to "pipelines of others" at Nikiski. The charge for this service is provided in the tariff. APC No. 3 has been in effect since August 15, 1975.
It is KPL's attempt to revise these tariffs which underlies the current dispute.
The present controversy began over five years ago when KPL, by letter dated August 11, 1982 and designated "Tariff Advice Letter No. 3," attempted to cancel its existing tariffs concerning the movement of crude oil through its marine terminal facility. KPL premised its tariff revisions on the assertion that the APUC lacked jurisdiction to regulate KPL's marine terminal facility because the facility (1) is not a "pipeline" or "pipeline facility" under the Pipeline Act, ...
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