Navajo appeals order accepting Western Refining tariffs

By Felicia Fonseca
Albuquerque, New Mexico (AP) 4-08

The Navajo Nation has appealed the federal government’s acceptance of rates set by Western Refining Pipeline Co. to ship crude oil on the company’s pipeline, saying the rates are discriminatory and would harm producers in the Four Corners area.

The Federal Energy Regulatory Commission accepted the tariffs, which range from $6-$7.50 a barrel. Western’s 424-mile pipeline stretches from West Texas to northern New Mexico and briefly crosses the Navajo Nation.

The commission ruled the Navajo Nation did not show it had an economic interest in the matter and that it lacked standing to protest because the tribe does not ship on Western’s pipeline, did not intend to and had not made a request to do so.

The tribe countered by saying it’s a potential shipper and that since Western’s tariffs are for initial service, “by definition, there can be no existing shippers.”

“The central assumption of the order’s finding regarding standing is that only those who are shippers or intend to be shippers can demonstrate a substantial economic interest that would allow them to protest,” attorneys for the Navajo Nation said.

The tribe said the commission’s March 7 order doesn’t cite any precedent to support that assumption. The tariffs went into effect March 10.

Tribal officials are asking the commission to recognize the Navajo Nation’s right to protest the rates, grant a rehearing, require that Western justify its costs and also remove discriminatory terms in setting the tariffs.

Gary Hanson, a spokesman for Western in El Paso, Texas, said the company had not seen the appeal and declined to comment.

“I think it’s best to wait and see how the agency rules on its appeal,” he said.

Resolute Natural Resource Co., its affiliate, Resolute Aneth LLC, and the Navajo Nation hold oil and gas leases on tribal trust lands and on U.S. Bureau of Land Management land in southeastern Utah. Resolute, Navajo Oil and Gas and other parties jointly produce about 10,200 barrels per day from the properties.

The Navajo Nation and Resolute sell the joint production to a Western subsidiary, which ships it 90 miles via the tribe’s Running Horse pipeline. The oil is refined at one of two Western refineries in the Four Corners region.

Western acquired its pipeline from Giant Industries Inc. last May and maintained a south-north directional flow. The tribe contends that prevents it from reaching markets in southeast New Mexico and West Texas because Western has refused to offer an exchange service on the pipeline.

“NNOG will become captive to Western’s pipeline and will have no choice but to accept the severely reduced price offered by Western,” the tribe said.

Selling crude oil at the price Western offers for its production will reduce revenues to Navajo Nation Oil and Gas Co. by $4.2 million a year, the tribe said. In addition, the tribe would lose about $6 million in royalty and tax revenues per year – a decrease Navajo President Joe Shirley Jr. has said “would exacerbate the hardships of the Navajo people and put enormous strain on the Navajo Nation government.”

The tribe said Western’s tariffs violate the Interstate Commerce Act in that the company does not provide an exchange service, favors its refinery affiliates and discriminates against producers in the Four Corners region.

“The commission has a duty under ... the ICA to prevent a common carrier from subjecting any region or territory to any undue or unreasonable prejudice or disadvantage in any respect whatsoever,” the tribe said.

A spokeswoman for the FERC, Tamara Young-Allen, did not immediately return a message left by The Associated Press. She has said the commission will address any arguments in the appeal and can reject them, reaffirm the decision or make changes to the order.