The Trans-Alaska Pipeline System (TAPS) was constructed through the central portion of Alaska on right-of-way lands granted by federal, state, and private landowners. There is a Dismantling, Removal, and Restoration (DR&R) obligation originating in the pipeline right-of-way grant and lease agreements with the state and federal governments. PWSRCAC had concerns about the TAPS DR&R fund.
DR&R stipulations specify that upon completion of the use of TAPS that the land is restored to a satisfactory condition and that equipment is removed. All facilities at the Valdez Marine Terminal are included in DR&R for the pipeline.
Although various documents specify the DR&R requirements and mandate that the funds will be available for this intended purpose, they are silent on the management of DR&R collections. Instead, government officials rely on the assumption that the legal obligations of the right-of-way grant and lease are sufficient to compel the TAPS owners to perform DR&R when required and that the guaranty requirements of the right-of-way grant and lease would assure availability of sufficient funds from the owners at that time.
Because it is possible for ownership interests to change, PWSRCAC and the public require assurance that funds and other resources set aside for DR&R purposes by one owner will be transferred to any new owner, that sufficient funds and resources are being set aside by the current owners, and that these resources will be available and sufficient for DR&R purposes at the end of the useful life of TAPS. DR&R obligations are often disputed by the various responsible parties because meeting such obligations will require the expenditure of significant financial resources by both the pipeline owners and operators.
The Regulatory Commission of Alaska requested public comment on the need for regulations governing the accounting treatment of DR&R under AS 42.06 for oil and natural gas pipelines subject to their jurisdiction.
PWSRCAC’s recommendations to the Regulatory Commission of Alaska include implementation of the following broad policy recommendations regarding management of the DR&R fund:
- Petroleum pipeline owners should be required to establish external trust accounts for the receipt of all past and future petroleum pipeline DR&R collections necessary to accomplish their intended purposes.
- Regulations should be developed to ensure that DR&R funds collected in the future are sufficient and will be employed in a timely manner for their intended purpose.
- Because uncertainties inherent in the long-range forecasting make it difficult, if not impossible, to forecast the amounts necessary for DR&R in the distant future, all petroleum pipeline DR&R collection schedules should be reviewed and updated periodically to ensure that collection levels are appropriate to their particular task.
- Regulations governing DR&R should be crafted with careful attention to the distinction between independent (stand-alone) and producer-owner pipelines in order to identify the differential results and reduce unanticipated benefits to the latter that may reward them for delay of DR&R outlays, to the detriment of both environmental and broader public policy interests.
- In light of the complexity of the issues, the diversity of agencies involved and the broad and important environmental and public policy interests in the DR&R transaction, maximum transparency and the involvement of the responsible government agencies and public interest organizations are essential to constructive resolution of DR&R issues.