The Justice Department said yesterday it has agreed in principle to the settlement of part of a long-standing dispute over the rates charged by oil companies for carrying oil along the Alaska pipeline.
The settlement could eventually lead to billions of dollars of future savings for consumers of oil from the pipeline.
The department said it had agreed with Arco Pipeline Inc., one of the pipeline's eight owners, on a settlement of a challenge of the pipeline's rates pending before the Federal Energy Regulatory Commission (FERC) since 1977. The Justice Department and Alaska officials had challenged the rates initially filed by the owners of the Trans-Alaska Pipeline System as exceeding those allowable under the Interstate Commerce Act.
A FERC administrative law judge ruled in favor of the challengers in 1980, but the full commission has not yet ruled on the case, pending further hearings.
The settlement only applies to Arco, which owns 20 percent of the pipeline, but Justice Department officials said they hoped the other seven companies would follow suit. They also conditioned the agreement to the settlement on the willingness of FERC to order other owners who do not join the settlement to comply with its terms.
British Petroleum and its Standard Oil of Ohio subsidiary own 50 percent of the pipeline, Arcon and Exxon Corp. own 20 percent each, Mobil Corp. owns 4 percent, and the remainder is owned by Phillips Petroleum Co., Unocal Inc. and Amerada Hess Corp.
Exact terms of the settlement were not disclosed, but the Justice Department said it would require that pipeline rates be calculated under a modified, cost-based system of regulation, allowing the companies a "real rate of return" based on invested capital and adjusted for inflation and actual depreciation charges. The plan would be in effect until 2011.
J. Paul McGrath, assistant attorney general for antitrust, said in a statement that if other pipeline owners join in the new rate-making system, he expects that the pipeline's rates will begin falling very quickly and remain low well into the next century, as most of the crude oil expected to be found on Alaska's North Slope will make its way through the pipeline. The pipeline carries more than 1.6 million barrels of oil a day, about 20 percent of the oil produced in the United States.
Last year, in testimony before FERC, the Justice Department claimed that the rates originally sought by the pipeline's owners would cost U.S. consumers $1 billion extra a year. The government also claimed that the high rates would discourage some oil production in Alaska, reducing total U.S. production by 1 billion barrels over the next 25 years and cutting federal oil revenue by $15 billion in that period.