Trans Alaska Pipeline System (TAPS) Carriers' CD containing their Prepared Reply Testimony re BP Pipelines (Alaska) Inc's under IS09-348 et al. (CD 1 of 3). Volume -A.

Exhibit No. ATC-656 SUMMARY OF THE PREPARED REPLY TESTIMONY OF GEORGE R. GANZ Mr. Ganz is the principal cost of service witness for the Trans Alaska Pipeline System (TAPS) Carriers in connection with their 2009 and 2010 rate filings at the Federal Energy Regulatory Commission (FERC). He also filed testimony on behalf of certain of the TAPS Carriers in the Regulatory Commission of Alaska (RCA) proceedings that are being heard concurrently with the FERC dockets for purposes of the Strategic Reconfiguration (SR) issues. Mr. Ganz is an expert in oil pipeline ratemaking. Mr. Ganzs prepared reply testimony addresses the various cost-of-service adjustments proposed by Anadarko/Tesoro and the FERC Trial Staff in their respective answering testimony. Mr. Ganzs testimony primarily responds to the Anadarko/Tesoro and Staff proposals regarding the TAPS Carriers FERC rates; however, his discussion of two issues (Anadarko/Tesoros proposal to remove $350.03 million of SR project costs from the TAPS Carriers rate base and end-of-life issues for depreciation purposes) relate to both the TAPS Carriers FERC and RCA rates. In addition to SR project cost and end-of-life issues, Mr. Ganz addresses (1) Anadarko/Tesoros and Staffs treatment of FERC litigation expenses, (2) Anadarko/Tesoros proposal to normalize certain expenses related to relocation of the TAPS operations control center, (3) Anadarko/Tesoros proposal regarding charitable contributions and lobbying expenses, (4) Andarko/Tesoros rate design treatment of ad valorem property taxes, (5) Staffs test period proposals, (6) Staffs adjustment to severance payments, (7) Anadarko/Tesoros adjustment to 2009 test period compensation expense, (8) Anadarko/Tesoros adjustment to 2009 test period volumes, (9) Exhibit No. ATC-656 TABLE OF CONTENTS I. OVERVIEW OF ANADARKO/TESOROS AND STAFFS PROPOSED COST OF SERVICE ADJUSTMENTS ..................................................................3 A. Adjustments Proposed by Anadarko/Tesoro ...............................................3 B. Adjustments Proposed by FERC Staff .........................................................5 II. PROPOSED RATE BASE DISALLOWANCE FOR SR COSTS .........................7 A. Anadarko/Tesoro Failed to Support Its Claimed $350.03 Million Exclusion...........................................................................9 B. Anadarko/Tesoros Reliance on Other Ratemaking Principles Fails to Support Its Proposed $350.03 Million Disallowance ...................11 1. Used and Useful .............................................................................11 2. Ratepayer Benefit...........................................................................14 3. Intergenerational Equity................................................................16 4. Throughput Conditions ..................................................................17 5. Failed and Abandoned Projects .....................................................20 6. Affiliate Transactions......