A spokesperson from BP confirmed that they will retain the decommissioning liability for the Trans Alaska Pipeline System (TAPS) after the sale of its Alaska assets to Hilcorp is complete. Hilcorp will assume obligations on the North Slope. BP Spokesperson Megan Baldino said, “Environmental obligations associated with Prudhoe Bay and upstream operations will transfer to Hilcorp. BP is retaining its decommissioning liability on TAPS.”
According to Alyeska Pipeline, the ownership percentages in TAPS are:
- BP Pipelines (Alaska), Inc. 48.441%
- ConocoPhillips Transportation Alaska, Inc. 29.2086%
- ExxonMobil Pipeline Company 20.9943%
- Unocal Pipeline Company 1.3561%
How about that 1.3561% Unocal ownership!
Leases requires removal of all facilities at the end of the economic life of the pipeline and assets on the North Slope, as well as remediation of the land. TAPS has long been subject to litigation over tariffs and property taxes. This may be a contributing factor to BP retaining the decommissioning liability. There could also be a regulatory hurdle for approval of the sale if Hilcorp would assume the liability. BP, ConocoPhillips, and Exxon show this as a liability on their balance sheets. They have basically said they can cut a check to cover the costs at the time the pipeline needs to be dismantled (Hopefully not for a long time). They are also all publicly traded companies. Hilcorp is a private company and does not have anywhere near the cash reserves of BP, Conoco, or Exxon.
I was not able to find any recent estimates of decommissioning TAPS but I did come across this 2004 report by Richard Fineberg titled, “Trans-Alaska Pipeline System Dismantling, Removal and Restoration (DR&R): Background Report and Recommendations.” According to the report:
The estimated cost of DR&R on TAPS is easily 100 times greater than that of the estimated dismantling costs for two other pipelines for which the RCA has considered DR&R issues – the Cook Inlet and Kenai crude oil pipelines. Because TAPS passes through numerous and diverse regions generally recognized to be of great environmental value, and since DR&R for TAPS includes the Valdez Marine Terminal and associated facilities, the public interest requires assurance that these extraordinary sums of money will in fact be available for their intended environmental purposes. In view of the dollars at issue and the attendant environmental and public policy impacts, it is difficult to imagine establishing policies governing pipeline DR&R without giving serious
consideration to the implications of that policy for TAPS.
The report goes on to say:
The estimated DR&R cost of $872.1 million in 1977 dollars falls between the estimates of the Corps of Engineers ($601 million) and the TAPS owners ($1,012 million).
According to an inflation calculator, $872 million 1977 dollars is equal to approximately $3.6 billion 2019 dollars. However, keep in mind that technology has been drastically improved since 1977, which would likely lower the cost of removal.
This is an extremely complex issue that has been litigated for years. I recommend reading the entire report to get a better understanding of the issue taking into consideration a lot has changed in the last 15 years.