Initial Brief of Flint Hills Resources Alaska, LLC under OR14-6.

UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION BP Pipelines (Alaska) Inc. ) ConocoPhillips Transportation Alaska Inc. ) Docket No. OR14-6-000 ExxonMobil Pipeline Company ) INITIAL BRIEF OF FLINT HILLS RESOURCES ALASKA, LLC Travis A. Pearson David DAlessandro FLINT HILLS RESOURCES, LP Dennis Lane 4111 East 37th Street North M. Denyse Zosa Wichita, KS 67220 Stinson Leonard Street LLP Telephone: (316) 828-8594 1775 Pennsylvania Avenue, Suite 800 Travis.Pearson@fhr.com Washington, D.C. 20006 (202) 785-9100 david.dalessandro@stinsonleonard.com dennis.lane@stinsonleonard.com denyse.zosa@stinsonleonard.com March 14, 2014 TABLE OF CONTENTS BACKGROUND ............................................................................................................. 1 ISSUES ............................................................................................................................. 3 I. What Findings Must Be Made By The Commission To Warrant A Change To The Existing Quality Bank Methodology........................................................... 3 II. Whether, Based On The Applicable Legal Standards, The Quality Bank Methodology Has Become Unjust And Unreasonable For The Valuation Of Resid......................................................................................................................... 7 A. Introduction ........................................................................................................... 7 B. A comparison of QB values to market-based benchmarks shows that the QB is not accurately valuing the Resid cut relative to other cuts. ........................ 9 C. The yields in the QB formula for valuing Resid are understated........................ 14 1. New evidence and evidence of changed circumstances demonstrate that existing QB yields are unjust and unreasonable. ..............................................18 2. Mr. Liebermans yields do not require either the construction of new, or the updating of existing, cokers.........................................................................21 3. There is no support for claims that Mr. Liebermans coker is not the typical coker contemplated by the QB formula.............................................23 4. Mr. Liebermans assumed operating parameters are typical for a new coker. .................................................................................................................25 5. The absence of evidence of actual West Coast coker operating conditions and yields does not detract from the reliability of Mr. Liebermans analysis of yields based on a generic coker. .....................................................29 6. The fact that Mr. Liebermans yields did not precisely match the existing QB cut points is consistent with the source of the existing QB yields. ............31 7. The existing yields produce an unjust and unreasonable end result..................32 8. The QB Resid formula adjustment to assure a return on and of capita