California oil producers are challenging a pipeline company’s proposal to increase its rates 60 percent, saying the hikes may be too steep at a time of low petroleum prices.
The trade group California Independent Petroleum Association filed a protest Friday with the state Public Utilities Commission, which is reviewing an application by Denver-based Crimson California Pipeline LP to raise its rates for the first time in six years.
Crimson says the increase is necessary to pay for required maintenance. It declined to comment on CIPA’s challenge.
CIPA’s protest said it appreciates Crimson’s high regard for safety and its need to invest in its pipelines. But given the current price of oil, the group argued, incremental rate increases over a period of years would be “far easier for producers to absorb.”
Rock Zierman, CIPA’s CEO, said by email Tuesday some producers rely on Crimson pipelines for 100 percent of their deliveries. He said the alternative, oil delivery by truck, is pricey and not preferred by refineries.
“We recognize that Crimson must incur costs to keep the pipeline in good working condition and we want to incentive them to continue making vital investments in the pipeline infrastructure,“ he wrote. “We would simply like to see more detailed financial information to ensure that the rate increase is reasonable.”
Crimson has grown quickly since its founding in 2005, and now operates more than 1,000 miles of pipeline in California. Last year the company bought Chevron’s 90,000-barrel-per-day common-carrier pipeline linking Kern County oil fields with refineries in the Bay Area.
Crimson has asked the commission to approve its proposed rate increase by January.