The surprise decision by the Interstate Commerce Commission Tuesday, rejecting rates proposed by seven of the eight oil companies which own the Alaska pipeline, could generate $30 to $40 million more in revenues for Alaska than the state had been planning on for fiscal 1978.
State revenues from oil royalties and production taxes for the year would be boosted under the ICC action by about $100 million above the state income which tariffs proposed by the oil companies would have provided. State officials expect the oil companies to take the rate issue to court.
Alaska earns royalties and taxes on oil production based on the value of oil at the wellhead. Wellhead value is determined by deducting transportation costs of the oil from its going market price. The higher the tariff for transporting the oil from the pipeline, the lower the state's income.
In its decision Tuesday, the ICC tossed out tariff proposals by the companies which won the pipeline and suggested rates that would be acceptable. The average company-proposed tariff amounted to $6.28 per barrel; the ICC's proposed tariff averaged $4.81 per barrel or about $1.47 lower than the companies' proposals.
Bob Breeze, a member of the Alaska Pipeline Commission, said that once the pipeline is producing to full capacity, the ICC's tariff rate would boost state revenues by $135 million above the revenues which would have resulted from the tariff proposed by the oil companies.
"If what the Interstate Commerce Commission has done is not overturned by a court, it will give us a tremendous boost of millions of dollars in the coming year," Tom Williams, director of the petroleum revenue commission of the state department of revenue, said.
Williams said Alaska has been proposing a tariff rate which would bring in about $40 million more income yearly than the interim rate the ICC has recommended. But, for planning purposes, he said the state had taken a conservative approach and projected oil revenues of $432 million for the coming year.