CIPL, a subsidiary of Chevron Pipeline, operates a 42-mile pipeline on the west side of Cook Inlet, and is the sole means by which CIE can export its oil production.
The settlement will reduce transportation costs for all CIE production by $6.57 per barrel to a rate of $8 per barrel for the remainder of 2010.
In February 2011, a true-up will occur that will adjust the per barrel rate for 2010, and the company’s management expects the true-up to result in a refund to CIE of approximately $1.5m, which will be paid shortly after the true-up occurs.
The settlement also lays out a methodology for determining CIE’s future pipeline transportation rates.
The rates to be paid by CIE to CIPL during 2011 through 2014 will be determined by dividing the agreed annual CIPL revenue requirement of $17.28m for each year of the term of the settlement agreement by the forecasted total annual CIPL throughput.
CIE will pay for transportation of a minimum of 260,063 barrels of production in 2010 and 346,750 barrels in each of the years 2011 through 2014.
Each February, a true-up adjustment for the previous year will be made by dividing the $17.28m revenue requirement of the pipeline by the actual number of barrels put through the line to determine the actual rate due to CIPL.
Overpayments by CIE up to $250,000 will be credited against future shipments, while any overpayment above $250,000 will be repaid to CIE in cash.
In the event that CIE had underpaid CIPL for the previous year, payment of that shortfall will be made after the annual true-up.
