Initial Brief of Commission Trial Staff under OR14-6.

UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION BP Pipelines (Alaska) Inc., ConocoPhillips ) Transportation Alaska, Inc., and ExxonMobil Pipeline ) Docket No. OR14-6-000 Company ) INITIAL BRIEF OF THE COMMISSION TRIAL STAFF Kenneth M. Ende Special Counsel John P. Perkins, III Commission Trial Staff Counsel Washington, DC March 14, 2014 Docket No. OR14-6-000 TABLE OF CONTENTS Statement of the Case .......................................................................................................... 2 Substantive Context for the Current Quality Bank Dispute ................................................ 2 JOINT STIPULATION OF ISSUES................................................................................... 6 I. Issue 1 - What Findings Must Be Made by the Commission To Warrant a Change to the Existing Quality Bank Methodology? ................................................................... 6 II. Issue 2 - Whether, Based on the Applicable Legal Standards, the Quality Bank Methodology Has Become Unjust and Unreasonable for the Valuation of Resid? ........ 9 A. Dr. Verlegers Testimony Does Not Demonstrate Material and Significant Changed Circumstances ............................................................................................ 10 1. Current Coker Utilization/Capacity Is Not Below Historic Levels .............. 11 2. Scores of New Coker Projects World-Wide Are Underway or Have Been Completed .............................................................................................................. 13 3. Cokers Are Currently Retaining Their Value and Recovering Capital Costs .. ....................................................................................................................... 14 B. The Current QB Pricing Formula Continues Accurately to Reflect Relative Pricing Between Resid and the Other TAPS Cuts .................................................... 17 C. The Price of Resid Under the Current QB Formula Reflects a Rational Relationship to Resids Actual Value........................................................................ 20 D. Dr. Verlegers Testimony Is Entitled to Little Weight ...................................... 22 E. FHR Failed To Meet its Burden To Justify a Change to the QB Coker Yields .... ........................................................................................................................... 24 1. FHR Failed To Present Any Evidence of Changed Circumstances To Justify a Change in the QB Coker Yields ......................................................................... 26 2. FHR Failed To Establish that the QB Yields Are Unjust and Unreasonable or that its Proposed Yields Are Just and Reasonable ................................................ 28 a. Current QB Coker Yields Were Reasonable When Adopted .................... 29 b. QB Coker Yields Are Still Reasonable and Typical for West Coast Cokers; FHRs Proposed Yields Are Not ............................