Dismantling, Removal, and Restoration Fund

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
Trans-Alaska Pipeline System Dismantling, Removal and Restoration (DR&R): Background Report and Recommendations | June 24, 2004 | File size: 0.3 MB | Author: Richard A. Fineberg/Research Associates

Reconfiguration of the Valdez Marine Terminal

Declining oil production on the North Slope, along with the need to modernize and automate 30-year-old facilities, are the driving forces behind Alyeska’s plan for system-wide upgrades. Strategic Reconfiguration is what Alyeska calls part of its “overall vision to renew assets and its organization.”

The reconfiguration focuses on two areas: the Trans-Alaska Pipeline System (TAPS) and the Valdez Marine Terminal (VMT). The council has been monitoring the VMT reconfiguration. Although Alyeska is fully engaged in Strategic Reconfiguration for the pipeline and pump stations, it advised the council in September of 2005 that reconfiguration of the VMT as a coordinated effort had ceased. However, improvements to the Ballast Water Treatment Facility (BWTF), one of the original reconfiguration projects, are underway.

Ballast Water Treatment Facility Upgrades

The council is monitoring and advising on Alyeska’s upgrade and redesign of the Ballast Water Treatment Facility to reduce air and water pollution. Also of concern to the council is the issue of non-indigenous species (NIS) in ballast water processed for oil removal at the VMT and discharged into Port Valdez. Currently, the BWTF does not address NIS in its processes.

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Pipeline Right-of-way Renewal

The Trans-Alaska Pipeline System (TAPS) was constructed through Alaska on right-of-way lands granted by federal, state, and private landowners. State and federal grants were renewed in 2002 and 2003, respectively, for the maximum 30 years.

The Bureau of Land Management, which has system-wide oversight of TAPS renewal, had issued a draft environmental impact statement, on which PWSRCAC commented regarding safety at the VMT. The council weighed in on this issue because the Valdez Marine Terminal (VMT) is included in the renewal process as part of TAPS. Comments covered a wide range of issues including air quality, water quality, and concerns regarding adequate maintenance practices for the VMT.

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Final EIS (2002)

What is the Trans-Alaska Pipeline System?
The Trans-Alaska Pipeline System (TAPS) transports crude oil 800 miles across the state of Alaska, from the Prudhoe Bay oil fields on the North Slope to the Valdez Marine Terminal (VMT) in Valdez, the United States’ northernmost ice-free port. TAPS was completed in 1977 after two years of construction. At the terminal the crude oil is loaded onto oil tankers for transport.

During 2002, tankers were loaded at the rate of 38 per month and just less than one million barrels of oil arrived in Valdez each day. In mid-2005, about 825,000 barrels per day flow into the Valdez Marine Terminal and tankers are loaded at the rate of about 30 per month. Nevertheless, more than 10 percent of U.S. oil production still consists of the crude oil shipped through the Valdez Marine Terminal. At its peak in 1988, North Slope production supplied more than two million barrels to be loaded into tankers in Valdez each day.

At the rate of 850,000 barrels per day, it takes a little over 11 days for oil to travel from Prudhoe Bay to Valdez. As much as nine million barrels may be in the pipeline at any one time. The VMT has a nominal storage capacity of about nine million barrels; however, only about seven million barrels of this capacity is currently in use. The terminal is a 1,000-acre facility on the southern shore of Port Valdez, across from the town of Valdez.

For more information, visit the TAPS Public Information (EIS) web site.

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