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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Amerada Hess Pipeline Corp. v. Regulatory Commission of Alaska (02/15/2008) sp-6231

Amerada Hess Pipeline Corp. v. Regulatory Commission of Alaska (02/15/2008) sp-6231, 176 P3d 667

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

AMERADA HESS PIPELINE )
CORPORATION, BP PIPELINES ) Supreme Court No. S- 12230
(ALASKA) INC., CONOCOPHILLIPS )
TRANSPORTATION ALASKA, INC.,) Superior Court No. 3AN-02- 13511 CI
EXXONMOBIL PIPELINE COMPANY,)
KOCH ALASKA PIPELINE COMPANY,)
LLC, MOBIL ALASKA PIPELINE ) O P I N I O N
COMPANY, and UNOCAL PIPELINE)
COMPANY, ) No. 6231 February 15, 2008
)
Appellants,)
)
v. )
)
REGULATORY COMMISSION)
OF ALASKA, TESORO ALASKA)
COMPANY, and WILLIAMS ALASKA)
PETROLEUM, INC., )
)
Appellees.)
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, John Suddock, Judge.

          Appearances:   Louis  R. Veerman,  Pamela  D.
          Weiss,  Molly C. Brown, Guess &  Rudd,  P.C.,
          Anchorage;  Steven  H.  Brose,  Steven  Reed,
          Steptoe  &  Johnson  LLP,  Washington,  D.C.;
          Albert S. Tabor, Jr., John E. Kennedy, Vinson
          &   Elkins,   L.L.P.,  Houston,  Texas,   for
          Appellants Amerada Hess Pipeline Corporation,
          BP  Pipeline  (Alaska)  Inc.,  ConocoPhillips
          Transportation   Alaska,   Inc.,   ExxonMobil
          Pipeline   Company,  Mobil  Alaska   Pipeline
          Company,  and Unocal Pipeline Company.   Tina
          M.  Grovier, Birch, Horton, Bittner & Cherot,
          Anchorage;  John  B. Rudolph,  Hall,  Estill,
          Hardwick,  Gable,  Golden  &  Nelson,   P.C.,
          Washington,  D.C., for Appellant Koch  Alaska
          Pipeline Company, LLC.  Charles E. Cole,  Law
          Offices   of   Charles  E.  Cole,  Fairbanks;
          Stephan  H. Williams, Anchorage, for Appellee
          Regulatory  Commission of Alaska.   Robin  O.
          Brena,   David  W.  Wensel,  Brena,  Bell   &
          Clarkson,   P.C.,  Anchorage,  for   Appellee
          Tesoro  Alaska Company.  Douglas  S.  Parker,
          Preston,   Gates  &  Ellis  LLP,   Anchorage;
          Randolph  L.  Jones, Jr., Conner  &  Winters,
          Tulsa, Oklahoma, for Appellee Williams Alaska
          Petroleum, Inc.

          Before:    Fabe,  Chief  Justice,   Matthews,
          Eastaugh, and Carpeneti, Justices.   [Bryner,
          Justice, not participating.]

          PER CURIAM


          The  Regulatory  Commission of Alaska (RCA)  determined
that the shipping rates charged by the owners of the Trans-Alaska
Pipeline were unjust and unreasonable from 1997 through 2000  and
ordered  refunds  for that period.  The owners  appealed  to  the
superior  court, which affirmed, and now appeal  to  this  court.
They make the following four arguments:
     1.   The RCA inappropriately based its rate calculations  on
          depreciation data from a contract between the pipelines
          owners and the State.
          
     2.   The RCAs decision violated the rule against retroactive
          ratemaking  by  making its order enforceable  from  the
          time  when  the rates were first challenged (1997)  and
          not from the time of the order (2002).
          
     3.   The  RCA  provided an unreasonably low rate  of  return
          considering the risks involved with investment  in  the
          pipeline.
          
     4.   The  RCA  violated due process by retaining an economic
          advisor  who four years earlier wrote a masters  thesis
          arguing that the pipelines rates were too high.
          
          The  owners arguments on appeal are generally the  same
as  those they presented to the superior court.  We conclude that
the   superior  court  correctly  resolved  these  arguments  and
therefore adopt the opinion of the superior court as set forth in
the appendix.
          The opinion of the superior court is AFFIRMED.
         IN THE SUPERIOR COURT FOR THE STATE OF ALASKA

              THIRD JUDICIAL DISTRICT AT ANCHORAGE

AMERADA HESS PIPELINE CORPORATION, )
BP PIPELINE (ALASKA) INC.,                   )
EXXONMOBIL PIPELINE COMPANY,       )
MOBIL ALASKA PIPELINE COMPANY,          )
PHILLIPS TRANSPORTATION ALASKA          )
INC., UNOCAL PIPELINE COMPANY,          )
WILLIAMS ALASKA PIPELINE COMPANY   )
LLC,  and  the STATE OF ALASKA,           ) Case No. 3AN-02-13511
CI
                                        )
                    Appellants,              )
                                        )
     vs.                                )
                                        ) RCA Docket Nos. P-97-4, P-
97-7
REGULATORY COMMISSION OF ALASKA,   )
                                        )
                    Appellee.           )
                                        )

                      DECISION AND ORDER*

                   I.  FACTS AND PROCEEDINGS

     Appellees Tesoro Alaska Company (Tesoro) and Williams Alaska
Petroleum Inc. (Williams, or collectively the shippers), refiners
of  North  Slope oil, protested to appellee Regulatory Commission
of  Alaska  (RCA)  1997  intrastate rates for  the  Trans  Alaska
Pipeline  System (TAPS).  The appellants (the TAPS Carriers)  are
subsidiaries of major oil producing companies;1 they  hold  title
to undivided joint interests in the pipeline, and certificates of
convenience  to  operate  the pipeline.  They  delegate  physical
operations  and  maintenance to their  wholly  owned  agent,  the
Alyeska Pipeline Service Corporation (Alyeska).
     RCA decreed the challenged rates provisional and subject  to
refund.   Following  extensive  administrative  proceedings,  RCA
promulgated  Order  No.  151 in Docket P-97-4.2   Order  No.  151
exceeds  two  hundred pages.  Twenty-six years into  TAPSs  life,
Order No. 151 for the first time set fully litigated, rather than
settlement-generated, intrastate rates.  RCA concluded  that  the
1997-2000  intrastate  TAPS rates were not  just  and  reasonable
under  Alaskas  Pipeline  Act.3   RCA  rejected  the  settlement-
generated ratemaking methodology, and prospectively substituted a
depreciated  original  cost  (DOC) methodology.   RCA  determined
values  for constituent components of the DOC formula, calculated
rates  substantially lower than those filed by the Carriers,  and
ordered refunds to the shippers.  The TAPS Carriers and the State
of  Alaska appeal this decision to the Superior Court pursuant to
Alaska Rule of Appellate Procedure 602(a)(2).4
     Planning for TAPS began in 1967.  Oil first flowed in  1977.
     The Federal Energy Regulatory Commission (FERC) regulates most of
the  oil  throughput as interstate commerce.  Somewhat less  than
ten  percent is delivered to refineries near Fairbanks and Valdez
or  shipped  to  Nikiski.   RCA regulates  only  this  intrastate
component.
     Precursor  rate  litigation commenced  post-construction  of
TAPS  in  1977.   After eight years of expensive  and  burdensome
parallel proceedings before FERC and RCAs predecessor agency  the
Alaska  Public Utilities Commission (APUC), the State  of  Alaska
and  the TAPS Carriers settled both the interstate and intrastate
dockets  in  1985.  Thereafter the TAPS Carriers have  calculated
intrastate  rates pursuant to their dickered deal, known  as  the
TAPS  Settlement  Methodology (TSM).  TSM is a highly  customized
ratemaking   methodology   which  deviates   significantly   from
traditional  ratemaking  methodologies  used  by  RCA   and   its
predecessors, APUC and the Alaska Pipeline Commission.
     The TAPS Carriers submitted their settlement for approval by
APUC  on  May  30,  1986.  Petro Star Inc., a Fairbanks  refiner,
protested  and  thereby prolonged proceedings until  it  in  turn
settled  with the Carriers in 1993.  APUC granted final  approval
to the TAPS settlement with the following relief-tinged words:
          [e]ntities impacted by oil pipeline rates are
          sophisticated  and  capable  financially  and
          practically   of   protecting    their    own
          interests.   Not  one  has  come  forward  to
          contest  the  TAPS Settlement.   Under  these
          circumstances, the public interest  does  not
          require that this proceeding be continued.[5]
          
Thus APUC entered no findings on the merits regarding the initial
rate  litigation commenced in 1977 and ultimately  terminated  in
1993.   But  APUC  left  open  the  door  for  the  instant  rate
litigation:
          Each  new  rate  filed by the  TAPS  Carriers
          under the Intrastate Settlement Agreement  is
          considered  to  be  a revised  tariff  filing
          .  .  .  subject  to the same  standards  and
          procedures  to  which  it  would  have   been
          subject    if   the   Intrastate   Settlement
          Agreement had not been accepted.[6]
          
     The  procedural history of the TAPS rate litigations is  set
forth  at  Endnote  2  of Order No. 151.  On December  23,  1996,
Tesoro  protested  the  1997 filed rates; Mapco,  predecessor  of
Williams  Alaska  Petroleum Inc., subsequently  intervened.   The
APUC opened Docket 97-4 to determine if post-1996 rates were just
and reasonable under AS 42.06.370.  The Carriers filed their case-
in-chief  on  October  8, 1998, focusing on  whether  TSM  should
continue  to govern intrastate rates.  On March 15, 1999,  Tesoro
filed  a motion for summary judgment alleging a failure of  proof
that 1997-98 TSM-based intrastate rates were just and reasonable.
RCA  granted  the  motion on April 10, 2000, reasoning  that  the
Carriers focus on the validity of TSM over the TAPS lifetime must
yield  to  a  focus  on  the specific  years  in  question.   RCA
     calendared additional proceedings for the Carriers to prove their
1997-2000  rates  just and reasonable, in light of  RCAs  summary
judgment findings.
     The  Carriers  filed their second-round direct testimony  on
July  12,  2000.  Their central point, elaborated in a  benchmark
economic model, was that if a standard DOC methodology, employing
standard  straight-line depreciation rather than TSM  accelerated
depreciation,   had   been  employed  ab   initio,   consistently
calculated  1997-2000 rates would be higher than  those  actually
filed  by  the  Carriers under TSM.  A five-week  hearing  ensued
beginning April 2001.
     RCA   promulgated  Order  No.  151  on  November  27,  2002,
decreeing inter alia that the Carriers intrastate rates for 1997-
2000  were  excessive and that historically recovered accelerated
depreciation,  rather  than a deemed straight-line  depreciation,
governed  calculation of the Carriers year-end  1996  unrecovered
investment (rate base).  RCA calculated the rate base to be  $669
million  rather than the $3.2 billion computed by  the  Carriers.
RCA  also ruled upon various disputes as to component factors  of
the  traditional  ratemaking  formula  such  as  the  appropriate
treatment  of  risk factors, rates of return, and the  amount  of
presumed  equity  and  debt which financed  construction  of  the
pipeline.  RCA parenthetically found that under the TSM regime up
to  1998,  the  Carriers  potentially  garnered  a  $9.9  billion
windfall  through  excessive  rates.   RCA  made  no  attempt  to
recapture  any such windfall because the regulatory  proscription
against  retroactive ratemaking prevents redress  for  past  year
under-   or   over-collections.   Using   its   traditional   DOC
methodology  and  data  inputs  derived  from  the  record,   RCA
established rates for the disputed period.
     The  Carriers  appealed from Order No. 151  on  December  6,
2002.  Later, RCA issued Order No. 159, rejecting applications by
several   Carriers  for  individualized  rates   for   1997-2000.
Finally,  RCA issued Order No. 162 establishing a 10.5%  interest
rate  on refunds.  The Carriers appealed from that order on  June
3,  2003.   The instant proceeding consolidates appeals of  those
three orders.  The State of Alaska joins the appeal on two issues
only,  RCAs computation of pre-1997 depreciation and its  refusal
to  set  individual Carrier rates.  RCA intervened to defend  its
orders.
     The  TAPS  Carriers, but not the State of Alaska,  challenge
Order  No. 151 on procedural due process grounds over RCAs denial
of  a  motion  to recuse staff economist Antony  Scott.   RCA  is
authorized    by   statute   to   hire   engineers,    examiners,
administrative  law  judges,  arbitrators,  mediators,   experts,
clerks, accountants, and other agents and assistants.7  In  1999,
the  Alaska Legislature appropriated funds for a staff economist.
RCA  commissioner  Nanette Thompson hired Mr. Scott,  a  doctoral
candidate  in  economics at the University of Wisconsin  Madison.
He  began his work at RCA in July 2000, several months after RCAs
grant  of  summary  judgment to Tesoro to  the  effect  that  the
Carriers had failed to prove that their filed rates were just and
reasonable, and prior to the Carriers second case-in-chief.
     Upon learning of Mr. Scotts appointment, the Carriers timely
     moved on March 12, 2001 for his recusal.  At the University of
Wisconsin  in  1996,  Mr. Scott had submitted  a  masters  thesis
entitled  The Trans Alaska Pipeline System: The Consequences  and
Causes  of Regulatory Failure.  Mr. Scott argued that aspects  of
the  TSM  engendered a windfall for the Carriers because TSM  was
inadequately   tied   to   costs.   Protracted   adversary   rate
proceedings, caused in part by the FERCs reluctance  to  regulate
decisively, gave the Carriers a bargaining advantage.  The  State
of Alaska probably ceded too much at the bargaining table.
     Mr.  Scott  was  acquainted with Mr.  Richard  Fineberg,  an
economist who also criticized the TAPS settlement.  At  the  time
Mr. Scott was hired by RCA, Mr. Fineberg was hired by RCAs Public
Advocacy   Section,   which   operated   separately   from    the
commissioners and their advisory staff pursuant to AS  42.04.150.
Fineberg subsequently testified in the proceedings below.
     Mr.  Scott  avers that he read several articles authored  by
Mr.  Fineberg as he researched his masters thesis.    Pre-hiring,
Scott engaged in telephone and e-mail contacts with Fineberg, who
paid  Scott $150 for brief research.  In April 2000, Fineberg  e-
mailed  Scott  that he had been retained by the  Public  Advocacy
Section  to work on the case and that he had tried but failed  to
bring  [Mr. Scott] in on the case.  Mr. Scott responded  that  he
had  been  hired  to  work  as advisory staff;  Fineberg  sent  a
congratulatory  note.  At RCA Scott briefly met Fineberg.   Scott
denied  that  they discussed any aspect of his thesis,  Finebergs
articles or the case at hand.
     RCA   denied   the  recusal  motion,  citing  AS  42.04.050s
authority   to   hire   staff  with  technical   expertise.    It
distinguished cases cited by the Carriers regarding bias  on  the
part  of administrative decisionmakers because Mr. Scott was  not
one.   It  analogized Mr. Scott to a specialized law  clerk,  and
stated:
          [W]e   must  determine  whether  the   highly
          complex  TAPS  Settlement  Methodology  (TSM)
          results  in  just and reasonable rates.   The
          assignment  we  have given Scott  is  not  to
          investigate  independently,  or  to   be   an
          advocate or a witness.  Scott is one among  a
          team     of    advisors,    including     our
          administrative   law   judges,   and   expert
          professional financial and engineering staff,
          who assist us in carrying out our duties.  We
          rely  upon  our team of advisors to  help  us
          understand  and  evaluate the  extensive  and
          highly  technical testimony  offered  by  all
          parties.
          
          Because  of  his expertise as  an  economist,
          Antony  Scott  is  very valuable  to  us.  We
          cannot  readily  substitute another  advisor,
          both because of funding limits and because we
          believe,   based   on  the  lengthy   process
          required   to   hire  him,   that   similarly
          qualified economists are not easily found.
          
          . . . .
          
          In this case we have taken some extraordinary
          measures  to  assure that our decision-making
          process  is  not  unduly  influenced  by  any
          assertions  outside  the  record  or  by  any
          theories that Scott may have developed in the
          past on issues relevant to these proceedings.
          Upon  notice of the TAPS Carriers  objections
          to Scotts work as our advisor, we inquired in
          detail  about Scotts contacts with  Fineberg.
          We explored with Scott the extent to which he
          is  able to segregate and identify for us any
          philosophical  leanings or  opinions  he  may
          have  about the subject matter of this  case.
          Our  discussions included his ability to  act
          in  a  fair and impartial manner to  help  us
          understand   the  technical   testimony   and
          opinions of all witnesses in this case.
          
                     II. STANDARD OF REVIEW
     In  this  consolidated appeal from administrative decisions,
the  superior  court  directly scrutinizes the  merits  of  those
decisions.   The  court  reviews RCAs factual  findings  under  a
substantial evidence standard; they should be upheld if supported
by  relevant  evidence that a reasonable person might  accept  as
adequate to support them.8
     As   to  questions  of  law  not  implicating  RCAs  special
expertise,  this  court substitutes its  own  judgment.   If  RCA
employs specialized expertise in a legal determination, the court
applies  a rational basis standard; RCAs interpretation  prevails
over the courts, so long as RCA is reasonable.9
     The  deferential reasonable basis standard also  applies  to
fundamental  policy  decisions.10 But a failure  to  consider  an
important  factor can undermine the reasonableness  of  a  policy
decision.11  Also,  an  unexplained  failure  to  follow   agency
precedent can erode the deference due a policy decision.12
                        III.  DISCUSSION
     a.  Failure To Recuse
     The TAPS Carriers complain that RCAs refusal to recuse staff
economist  Scott  denied them a fair and  impartial  hearing,  in
violation  of  the due process clauses of both the United  States
and Alaska Constitutions.13  Their briefing intertwines citations
to  federal  and  Alaska  cases.  It is useful  to  first  survey
federal law.
     Professor Richard Pierce, Jr., successor author of the  oft-
cited Kenneth Culp Davis Administrative Law Treatise, provides an
apt  introductory summary to the federal law of neutral  decision
makers:
          The   concept  of  bias  has  at  least  five
          meanings.   Although the five kinds  of  bias
          shade  into each other, the main ideas  about
          bias in an adjudication may be stated in five
          sentences, each of which deals with one  kind
          of  bias:  (1) A prejudgment or point of view
          about a question of law or policy, even if so
          tenaciously held as to suggest a closed mind,
          is  not,  without  more, a  disqualification.
          (2)    Similarly,    a   prejudgment    about
          legislative facts that help answer a question
          of  law  or  policy is not, without  more,  a
          disqualification.  (3) Advance  knowledge  of
          adjudicative facts that are in issue  is  not
          alone  a  disqualification for finding  those
          facts, but a prior commitment may be.  (4)  A
          personal bias or personal prejudice, that  is
          an attitude toward a person, as distinguished
          from  an  attitude  about  an  issue,  is   a
          disqualification when it is strong enough and
          when  the bias has an unofficial source; such
          partiality   may  be  either   animosity   or
          favoritism.  (5) One who stands  to  gain  or
          lose by a decision either way has an interest
          that  may disqualify if the gain or  loss  to
          the  decisionmaker flows fairly directly from
          her decision.
          
          The heart of each of the five propositions is
          supported  by clear and noncontroversial  law
          and  by  prevailing opinion, except that  the
          first    two   propositions   are    commonly
          misunderstood,  especially the  effect  of  a
          closed  mind  on issues of law or  policy  or
          issues  of legislative fact.  With  that  one
          exception, the problems about the law of bias
          do  not  relate to the soundness of the  five
          propositions but relate to their  application
          and to the clear demarcation of each from the
          others.[14]
          
     The  TAPS  Carriers allege that prejudgment of  adjudicative
facts by a staff member creates an appearance of bias on the part
of  the three decisionmaker commissioners.  They argue that  RCAs
decision  should  be  vacated pursuant  to  Cinderella  Career  &
Finishing  School, Inc. v. FTC15 if a disinterested observer  may
conclude that [the agency] has in some measure adjudged the facts
as well as the law of a particular case in advance of hearing it.
The  Carriers  concede that if Mr. Scotts masters  thesis  merely
amounts to a prejudgment or point of view regarding questions  of
law  or  policy (legislative facts), due process is not offended.
They  contend  that the thesis instead involves case-specific  or
adjudicative facts. The Carriers recognize that Mr. Scott was not
a decision maker, but argue that staff bias suffices to taint the
entire process.
     Appellees Tesoro and RCA argue inter alia that the  standard
for  disqualification is not the prejudgment in some measure test
applicable  to  adjudicative facts,  but  rather  an  irrevocably
closed  mind  test  which  applies  to  agency  prejudgments   of
     legislative facts.16  They believe Mr. Scotts thesis is best
characterized  as  policy-oriented  analysis  rather  than  as  a
finding of contested facts.  They emphasize that Mr. Scott was  a
mere  staffer, and not a decision maker, so his biases could  not
disqualify the three RCA commissioners.
     The   test  proposed  by  the  TAPS  Carriers  derives  from
Cinderella  Career & Finishing Schools.  During  a  speech  to  a
press  association the chairman of the Federal  Trade  Commission
briefly   criticized  a  charm  school  for  implying  that   its
curriculum  opened  doors  to airline hostess  jobs.   The  charm
schools  administrative  appeal  was  then  pending  before   the
chairman.  The Cinderella court concluded that his public remarks
created an appearance that he had prejudged the case such that it
would  proceed in predestined grooves.17  In the light  of  prior
warnings to him in other cases, the court scarcely concealed  its
disgust for his ethical laxity.  Cinderella most squarely  stands
for the proposition that intemperate public remarks by a decision
maker  create  a  constitutionally  impermissible  appearance  of
outcome-determinative prejudgment.
     As  framed by the parties, the issue for decision is whether
prejudgment  of  issues  by a staffer in an  unpublished  masters
thesis   at  a  Midwestern  university  in  1996,  triggers   the
Cinderella  standard of prejudgment in some measure  or  the  far
more   deferential   irrevocably  closed  decision   maker   mind
standard.18  Unlike Cinderella, the case at bar is not a  public-
foot-in-mouth case.  Even if fact-finding intrudes into the  more
predominant  analytical drift of Scotts  thesis,  the  aspect  of
public intemperance so central to Cinderella is lacking.
     In  Withrow  v.  Larkin,19  a state  agency  investigated  a
doctors  practices,  issued a disciplinary  complaint,  and  then
adjudicated  the  matter.   The physician  complained  that  this
commingling of investigatory and adjudicative functions  violated
procedural due process.  The U.S. Supreme Court squarely rebuffed
the  argument that agency investigations into adjudicatory  facts
taint subsequent proceedings.  The Court noted initially:
          [V]arious situations have been identified  in
          which experience teaches that the probability
          of  actual bias on the part of the  judge  or
          decision   maker   is   too   high   to    be
          constitutionally  tolerable.    Among   these
          cases are those in which the adjudicator  has
          a  pecuniary interest in the outcome  and  in
          which  he  has  been the target  of  personal
          abuse or criticism from the party before him.
          
          The   contention  that  the  combination   of
          investigative   and  adjudicative   functions
          necessarily creates an unconstitutional  risk
          of bias in administrative adjudication has  a
          much  more difficult burden of persuasion  to
          carry.   It  must  overcome a presumption  of
          honesty  and  integrity in those  serving  as
          adjudicators;  and  it  must  convince  that,
          under  a realistic appraisal of psychological
          tendencies  and human weaknesses,  conferring
          investigative and adjudicative powers on  the
          same  individuals poses such a risk of actual
          bias or prejudgment that the practice must be
          forbidden if the guarantee of due process  is
          to be adequately implemented.[20]
          
The  Withrow  Court did not mention the D.C. Circuits  Cinderella
prejudgment  in  some  measure  standard,  announced  five  years
earlier.  Rather,  the Withrow Court revisited  the  Courts  1948
decision  in FTC v. Cement Institute.21  In Cement Institute  the
Federal Trade Commission had investigated and reported in writing
to   Congress  on  the  legality  of  an  industry-wide   pricing
mechanism.  The Cement Institute Court assumed arguendo that  the
FTC  had  formed a prejudgment opinion of illegality,  but  found
that   this   did  not  suggest  the  commissioners  minds   were
irrevocably closed to testimony, cross-examination, and argument.
The Withrow Court concluded:
          The  mere  exposure to evidence presented  in
          nonadversary   investigative  procedures   is
          insufficient in itself to impugn the fairness
          of  the  board  members at a later  adversary
          hearing.   Without a showing to the contrary,
          state administrators are assumed to be men of
          conscience   and   intellectual   discipline,
          capable  of  judging a particular controversy
          fairly    on   the   basis   of    its    own
          circumstances.[22]
          
Under Withrow, RCA could have retained an economist to conduct an
ex parte investigation of the TAPS rate structure.  His findings,
indistinguishable  from Mr. Scotts thesis, would  not  disqualify
the  commissioners.  It is therefore difficult to  conclude  that
Scotts employment per se offends federal due process.
     In  NEC  Corp.  v.  United  States,23  the  Federal  Circuit
explicitly  rejected  the prejudgment in  some  measure  test  as
unduly  abstract and impractical, adopting the irrevocably closed
mind formulation.  In Starr v. Federal Aviation Administration,24
the Seventh Circuit addressed an issue of staff prejudgment.  The
FAAs Federal Air Surgeon wrote a position paper opposing case-by-
case exemptions to the FAAs mandatory retirement rule for airline
captains.   Captain Starr sought an exemption, moving  to  recuse
the  non-decisionmaker Air Surgeon pursuant to  Cinderella.   The
Court  applied a presumption of good faith and affirmed the  FAAs
refusal to recuse.
     The TAPS Carriers assert that the Cinderella test applies to
all prejudgment-of-adjudicative-fact cases and that the much less
stringent   irrevocably  closed  mind  test   only   applies   to
legislative  facts or policy matters.  But the Ninth Circuit  has
rejected any
          rigid,  artificial distinction between  rule-
          making  and  adjudication. .  .  .   This  is
          particularly true when the functions  of  the
          agency  are  varied  and comprehensive.   Due
          process   should   not   depend   upon   this
          distinction  but rather upon a  specific  and
          practical  inquiry into the  decision  making
          tasks of the Board and a factual analysis  of
          how  the challenged feature could render  its
          decision making process unfair.[25]
          
     In  general,  most federal decisions reviewing  agency  bias
allegations apply a presumption of regulatory propriety  at  odds
with  the vague prejudgment in some measure test.  Federal  cases
like  Cinderella  can  best be viewed as responses  to  egregious
official  obnoxiousness  which  gratuitously  undermines   public
trust,  rather than as across-the-board standards for all  agency
prejudgments of arguably adjudicative facts.
     Although the RCA commissioners sought the assistance  of  an
economist to manage voluminous technical testimony, they were not
novices  in  the  regulatory field.  They heard extensive  expert
testimony on all issues.  The court has not been cited  to  facts
suggesting a practical likelihood that the commissioners were  in
any  sense  dominated by the opinions of their  staff  economist.
There  is no evidence that any commissioner prejudged any  aspect
of   this  case.   There  was  no  public  impropriety   by   any
commissioner or staffer.
     RCA  was  aware of Scotts thesis and the Carriers  concerns.
RCA  obtained assurances from him that he would not overstep  the
bounds  of  a loyal staffer in an explanatory and advisory  role.
There   is   scant   likelihood  that  the   commissioners   were
psychologically or intellectually dominated by their staff member
such  that the presumption of honest judgment is rebutted.   This
situation  does  not  approach that zone of  egregiousness  where
federal  courts discern a procedural due process violation  based
on   prejudgment  bias  relegating  adjudication  to  predestined
grooves.26
     Alaska  administrative due process decisions tend to  survey
both  federal  and foreign state law.  The Court in Amerada  Hess
Pipeline Corp. v. Alaska Public Utilities Commission27 did so  in
its  discussion  of  the due process implications  of  commingled
investigative  and adjudicative agency action.   Citing  Withrow,
the court adopted the federal rule allowing adjudicating agencies
to  first  conduct ex parte investigations:  We see no reason  to
provide   broader  due  process  protection  under   the   Alaska
Constitution in this instance.28
     The  TAPS Carriers urge that the unusual fact of Scotts  on-
point graduate thesis creates an appearance of agency prejudgment
that  should  offend Alaska due process.  They  characterize  the
thesis  as  instinct  with fact-finding.   But  graduate  student
Scott  did not decide whether the butler killed the cook  with  a
candlestick  in the library.  Rather, he took publicly  available
data   regarding   pipeline  costs,  revenues,   taxes,   capital
structures,  and  rates of return, plugged them into  a  standard
ratemaking methodology, and concluded that TSM-generated revenues
exceeded  the  standard  regulatory  paradigm.   His  thesis  was
primarily  an  exercise  in analysis, not  fact-finding.   It  is
likely  that many economists familiar with traditional ratemaking
     principles would opine that TSM was idiosyncratic and yielded
higher-than-normal initial rates.  Others might  disagree.   That
Mr.  Scott was not a tabula rasa should not per se disqualify him
from service. Nothing in the record suggests that this exhaustive
ratemaking adjudication was in any sense intellectually dishonest
because of Scotts involvement.
     The  TAPS Carriers cite two Alaska cases for the proposition
that  Mr.  Scotts  participation  offended  Alaskas  due  process
clause.   In  re  Robson  involves the  Alaska  Bar  Associations
disciplinary  action against lawyer Robson.29   The  Court  found
that  the  Bar Associations executive director was  part  of  the
prosecution  team.  She was present while the Disciplinary  Board
deliberated upon and decided Robsons fate.  The court  held  that
her presence violated due process because both the appearance and
the  fact  of impartiality required that neither prosecution  nor
defense counsel intrude into the functional equivalent of a  jury
deliberation.
     The  TAPS  Carriers argue that Robson stands for  the  broad
proposition  that participation by manifestly biased  persons  in
advisory positions violates due process.  But Robson stands  more
narrowly for the self-evident proposition that all advocates, the
prosecution and defense alike, are per se excluded from the  jury
room  or its functional equivalent.  The case adds little to  the
analysis  of the readily distinguishable facts of this case;  Mr.
Scott never intruded into anything akin to a jury deliberation.
     The TAPS Carriers also rely upon Vaska v. State.30  There, a
judges  law clerk provided the district attorneys office  with  a
confidential  bench  memorandum accompanied by  a  yellow  sticky
notation  indicating that she was advocating  for  the  D.A.  sub
rosa.   She  was an active partisan who was willing to break  the
rules  to  benefit the state . . . with a bias above  and  beyond
philosophical  or  political bias in favor of the  government  in
criminal  cases.31   The  Court  of  Appeals  held  that  if  she
participated to a significant degree in judicial rulings  in  the
case, those rulings should be re-examined by another judge.
     When  she  purloined the bench memo and composed the  yellow
sticky,  the Vaska law clerk forfeited her presumption of honesty
and fair dealing.  She became a volunteer prosecution mole.  Like
the  Robson prosecutor, she was a fox-in-the-chicken coop.   Both
Robson  and  Vaska involve staffers overstepping well recognized,
bright-line boundaries.
     In  contrast,  Mr. Scott did nothing wrong.  He  authored  a
scholarly thesis in graduate school.  Some years later he  landed
a job advising a recondite state agency.  Whether the job and the
thesis  are  incompatible is a fair question.  But resolution  of
the   matter   turns   on  the  mainstream   constitutional   and
administrative law analyses in the federal cases cited above, and
not  on  any punctilio of Alaska law analogized from a jury  room
trespass or a rogue law clerk.
     As  in  Amerada Hess, the Alaska Supreme Court  will  likely
look  to  federal  law  to decide the TAPS Carriers  due  process
challenge  and will not perceive it appropriate to adopt  a  more
expansive  interpretation of Alaskas due process  clause.   Under
either  law,  the unrebutted presumption of honesty coupled  with
     the absence of practical indicia that the wills of three fair-
minded  men  and  women were overborne by their  specialized  law
clerk defeats the claim that Mr. Scotts authorship of an on-point
masters thesis disqualifies him from staff service as a matter of
constitutional law.
     b.  Alleged Departure from Rate-Base Precedent
     Order  No.  151  holds  that a [depreciated  original  cost]
methodology  applied  from the beginning of  pipeline  operations
should  be  used in this case to determine rates.   The  Carriers
explain  the  DOC  methodology in an appendix  to  their  opening
brief.  DOC is expressed by the formula R=Br+T+D+O.  R stands for
revenue  requirement, the annually recomputed dollar  amount  the
Carriers  are  permitted  to  collect  through  their  per-barrel
tariff.   B stands for rate base, which is the historical capital
investment   to   construct,  upgrade  or  augment   the   asset.
Ratemaking permits the owner companies to recover this investment
over  the  life  of  the pipeline; thus the  rate  base  declines
annually.  The portion of investment to be recovered in any given
year is termed depreciation.  It is to be distinguished from  the
more  theoretical  allowance for diminishment by  aging  used  in
financial accounting and tax law.
     Rate  of  return (r) is the percentage that the  owners  are
permitted to earn on the constantly diminishing rate base.  It is
derived from a weighted average of the cost of equity dollars and
borrowed dollars invested in the pipeline.  The percentage mix of
debt  and  equity dollars is termed the capital  structure.   The
cost  of debt is the applicable interest rate; the cost of equity
is  the  rate  of  return  to  the Carriers  allowed  by  RCA  to
compensate them for their investment of capital.  Both costs  may
be  adjusted to compensate for higher than normal risk factors in
the  construction  or operation of the pipeline.   The  ratio  of
equity  and  debt  used in ratemaking may be  derived  from  book
values,  or  may,  as  here,  be  a  hypothetical  ratio   deemed
appropriate  by the ratemaking authority.  Since  the  return  on
equity  is  higher  than the return on debt,  carriers  typically
advocate more equity, and shippers more debt, in a deemed capital
structure.
     The  Income Tax Allowance (T) is added to permit the  owners
their  full  after-tax  earnings on the  equity  portion  of  the
capital  structure.  Operating Expense (O) allows annual recovery
of  the gamut of operating expenses including salaries and wages,
maintenance costs, and insurance.
     The  DOC  method uses straight-line depreciation, permitting
Carriers  to recover equal amounts of their investments over  the
years  of the pipelines life.  Alternatively, recovery of capital
can  be  front-loaded in the early years of a pipelines  life  by
applying  an  accelerated  depreciation  schedule.   Tesoro   and
Williams  argued, and RCA found in Order No. 151,  that  the  TSM
rates  for  all  years prior to 1997 were based  on  accelerated,
rather  than straight-line, depreciation, and that pre-TSM  rates
effectively  included accelerated depreciation.   Order  No.  151
calculated   the  1996  year-end  rate  base  by  applying   this
accelerated  depreciation to the initial  post-construction  1977
rate  base and to each succeeding annual rate base through  1996.
RCA  determined the 1996 year-end rate base to be  $669  million.
From  1997  forward  this rate base would  be  depreciated  on  a
straight-line basis.
     The  Carriers  deny  that  pre-1997  rates  were  based   on
accelerated  depreciation.   They  argue  that  TSM   should   be
disregarded,  and  that  RCA  should simply  apply  straight-line
depreciation  from  the beginning of the  life  of  the  pipeline
through  1996, regardless of the depreciation actually collected.
Their  calculation yields a $3.2 billion rate base  for  year-end
1996.   Order No. 151 implicitly finds that all but $669  million
of  the Carriers claimed $3.2 billion rate base had already  been
recovered;  adopting the Carriers numbers would entail  a  double
recovery  of  $2.53 billion.  This divergence  over  the  correct
depreciation   and   ensuing   rate   base   dwarfs   all   other
methodological disputes in this appeal.
     The  Carriers  and the State allege that RCA  departed  from
agency  precedent by employing accelerated rather than  straight-
line depreciation to establish the year-end 1996 rate base.   Two
rate cases adjudicated by RCA predecessors have calculated a  new
rate  base  midstream in the life of a pipeline.  In  Cook  Inlet
Pipe  Line an initial intrastate rate case was commenced thirteen
years  into  the  life  of  the affected  pipeline.32   The  APUC
rejected  a  valuation  methodology employed  by  the  Interstate
Commerce  Commission for interstate rates, and instead  chose  to
impose   its   standard   DOC  methodology   with   straight-line
depreciation.   APUC  similarly applied DOC in  Kenai  Pipe  Line
Co.33   APUC could not discern from the existing record the basis
for  the  prior  intrastate  rate, and so  adopted  straight-line
depreciation.
     The Carriers argue that both cases stand for the proposition
that,  in  midstream rate cases, DOCs straight-line  depreciation
must  be  applied  from a pipelines inception  to  establish  the
midstream  rate  base, without consideration of  any  accelerated
depreciation  actually collected.  Since  the  only  two  decided
cases  proceeded  in  this  fashion,  the  Carriers  perceive  an
irrational rejection of precedent in RCAs present recognition  of
historical accelerated depreciation for the TAPS midstream  rate-
base calculation.
     It  is useful to cite at some length relevant discussion  in
Order No. 151:
          When the APUC established a DOC rate base  in
          the  middle  of  the life of the  Cook  Inlet
          line,  it  used actual straight-line  charges
          included  under the ICC valuation methodology
          to   calculate   the  new  DOC   rate   base.
          Therefore,  rather  than providing  precedent
          for  use  of straight-line depreciation  when
          establishing a rate base in the middle of the
          life  of  the line, Cook Inlet more precisely
          stands  for  the proposition that the  actual
          depreciation  charges  should  be  used   for
          calculating future rates.
          
          In  Kenai, the APUC could not determine which
          methodology the Kenai Pipe Line Company (KPL)
          had used to calculate prior intrastate rates.
          The  APUC presumed the prior intrastate rates
          were   calculated  under  the  ICC  valuation
          methodology and under those facts,  the  APUC
          concluded   that   the   same   straight-line
          depreciation   that  was  included   or   was
          includable  in rates computed under  the  ICC
          valuation  methodology  should  be  used   in
          calculating the new rates.
          
          The  APUC  ordered  the use of  straight-line
          depreciation in Kenai and Cook Inlet  because
          straight-line    depreciation     was     the
          depreciation actually used to calculate prior
          rates.   Kenai  and  Cook  Inlet,  therefore,
          stand   for   the   proposition   that   when
          establishing a DOC rate base for an  existing
          pipeline in the middle of the operating  life
          we  should  apply  the depreciation  actually
          used to establish prior rates rather than the
          depreciation that would or should  have  been
          used.   Therefore, the Carriers citations  to
          Cook  Inlet and Kenai as precedent for  using
          straight-line depreciation in  this  case  to
          calculate a DOC rate base are not persuasive.
          Instead,  Cook Inlet and Kenai support  using
          [accelerated]  TSM  depreciation  charges  to
          calculate a mid-stream rate base because that
          depreciation  schedule was used to  establish
          the past rates charged to shippers.
          
     The  Carriers  argue that RCA misinterprets Cook  Inlet  and
Kenai. But as to Kenai, the agency cited a cold and indeterminate
record,   found  it  reasonable  to  assume  the  ICCs  valuation
methodology  had  in  fact been used in the past,  and  thereupon
plugged ICC straight-line depreciation into its DOC formula.   If
depreciation   had  been  determined  by  throwing   darts,   the
regulators  would  have recognized past use  of  randomized  dart
depreciation, as RCA reads the decision.  This court has no basis
to  disagree  with  RCAs seemingly reasonable  interpretation  of
Kenai; RCA is entitled to deference based on agency expertise  in
interpreting the rate-making decisions of predecessor  regulatory
entities.
     Even  if RCA could be shown to have misread these cases,  it
is  free to fashion an improved procedure for midstream rate-base
determinations   as  long  as  such  is  not   unreasonable   and
arbitrary.34  RCA reasonably finds that it would be  poor  public
policy  to  allow the Carriers to double collect $2.5 billion  of
their  investment.  An avoidance of any double  recovery  accords
with  lay notions of fairness and common sense; this court  would
support  RCA in overruling Cook Inlet and Kenai if in  fact  they
mandated  a  double  recovery.  RCA has  not  been  shown  to  be
unreasonable or arbitrary in rejecting an outcome that reasonable
     regulators could find indefensible.
     c.  Depreciation Component of Prior Rates
     The  Carriers  argue that RCAs conclusion, that  accelerated
TSM  depreciation  rather  than  straight-line  depreciation  was
actually collected in the pre-1997 rates, has no reasonable basis
in  the  record.   The Carriers note that their  initially  filed
rates  took effect in July 1977, well before the advent  of  TSM.
The  Carriers  argue  that  the record clearly  and  indisputably
establishes that straight-line depreciation was used prior to the
1985 TAPS settlement because, in 1982, the parties to the initial
rate  litigation stipulated to prospective interlocutory  use  of
straight-line depreciation.
     The  Carriers contend that the 1982 stipulation remained  in
force  post-settlement.  Further, TSM should  not  be  viewed  as
establishing any individual component of past rates,  because  it
merely  set  agreed-upon ceilings above which the  TAPS  Carriers
could not file tariffs, and at or below which the State could not
protest   the  TAPS  Carriers  rates.   The  Carriers  view   TSM
depreciation as a component of an indivisible settlement.   While
the  State  and  the  Carriers compromised on  sundry  ratemaking
components  to  arrive at a mutually satisfactory  package  deal,
they  argue,  neither  would  necessarily  have  agreed  to   TSM
depreciation  in  isolation  from  other  dickered  items   which
rendered the whole acceptable.  Thus the Carriers suggest  it  is
unfair to select TSM depreciation as the sole enduring feature of
TSM by deeming it actually-collected depreciation.
          1.  Pre-settlement Depreciation
     RCA  found  the  depreciation stipulation  to  be,  for  all
practical purposes, irrelevant, because it was superseded by  the
TAPS settlement.  Order No. 151 reads:
          The   Carriers  have  urged  that  using  TSM
          depreciation  charges to set  rate  base  for
          1997-2000   is  inappropriate,  because   TSM
          itself contained no depreciation charges  for
          1977-1983.  Instead, the Settlement Agreement
          set  a  starting rate base for 1983  year-end
          and  determined depreciation charges for 1984
          through   the   present.   The   depreciation
          charges   upon   which  Tesoro   relies   are
          contained  in  an  illustrative  exhibit  [in
          support  of  APUC approval of the  1985  TAPS
          settlement] known as TSM-6.
          
          We  acknowledge  that the TSM-6  depreciation
          charges  were  not  directly  used   to   set
          tariffed rates for 1977-1983.  Rather,  until
          the Settlement was brokered, rates were still
          being  charged  according to  the  originally
          filed  and suspended rates from 1977. .  .  .
          [T]he record shows that the Carriers and  the
          APUC relied on the TSM-6 depreciation charges
          to  arrive  at  and  accept  the  Settlements
          starting  rate base . . . .  [A]s  a  witness
          for    Williams   noted,   the   depreciation
          contained in TSM-6 was analogous to setting a
          rate  based on a suspension rate.   In  other
          words,  the  Carriers had  made  a  tentative
          filing  under one rate methodology,  and  the
          actual depreciation rates to be used were not
          established until later.
          
Thus  RCA  found  that  TSM was retroactively  applied  from  the
pipelines  inception.  Tesoro argues that the initial provisional
tariffs   were   excessive  and  would  have  engendered   refund
obligations in the billions if TSM had not retroactively reckoned
them to include accelerated depreciation.
     RCAs  finding that pre-settlement depreciation charges  were
consistent  with  accelerated depreciation is  most  specifically
supported in the record by the testimony of States witness Jerome
Haas.   Mr. Haas was a member of the States settlement  team  who
participated  in  the creation of TSM; he testified  as  both  an
expert  and  an  occurrence witness.  Haas  stated  that  a  core
settlement goal of the State was to set rates that would  decline
over  time to match declining throughput.  Asked how TSM achieved
these declining rates, he explained:
          Primarily, the steeply declining rate profile
          was  achieved  by  rapidly  depreciating  the
          original, pre-operating TAPS investment  over
          the years 1977-84, i.e. the operational years
          preceding  the  settlement. .  .  .   Applied
          retrospectively [at the time  of  settlement]
          in   1985,   the   front-loaded  depreciation
          resulted  in  presettlement rates  that  were
          roughly   equal  to  the  rates  the   owners
          actually collected under their filed tariffs.
          The  State  believed those  past  rates  were
          excessive  when  judged against  a  benchmark
          based     on     traditional    straight-line
          depreciation schedules, but it was willing to
          accept  them as part of a settlement  package
          that produced reasonable and low tariff rates
          for  1990  and beyond. . . .  The  resulting,
          accelerated depreciation schedule was one  of
          the most attractive benefits to the State  of
          the  TAPS Settlement Methodology. . . .   All
          parties clearly understood that the effect of
          using the rapid depreciation I have described
          would  be  the relatively quick  recovery  of
          invested capital. . . .  At the time  of  the
          settlements, it was expected that four-fifths
          of   the   original  (pre-operational)   TAPS
          investment  would be recovered by 1990,  even
          though the system would have operated by then
          for  only  about two-fifths of  its  expected
          economic life.
          
This   quoted  passage  substantially  supports  RCAs  conclusion
regarding  presettlement depreciation.  This court may not  weigh
or balance conflicting testimony of adverse experts; it is merely
to ascertain whether RCA had a reasonable basis in the record for
determining  that the rates filed before settlement included,  de
facto, accelerated depreciation.  The court so finds.
          2.  Significance of TSM Depreciation
     The  parties  do  not  seriously dispute  that  TSM  employs
accelerated depreciation.  For example, Carrier expert Adam Jaffe
testified  that TSM specified a rate base recovery schedule  that
is  much more rapid than the normal ratemaking schedule.  Carrier
expert  Billy  Folmar testified that TSM depreciation  is  unique
because it is front-end loaded.
     Tesoro  argued,  and  RCA  found, that  the  computation  of
accumulated depreciation from 1977 through 1996 should  be  based
on  the  actual  depreciation  recovered  in  prior  rates.   The
Carriers argue that TSM did not establish this datum, but  merely
set  a rate ceiling; an individual Carrier was free to charge any
rate  it chose, concocted under any methodology, so long  as  the
rate  fell  at  or below the ceiling.  But the Carriers  cite  no
evidence  to  this  court of discounted rates.   The  theoretical
possibility  of  below-ceiling  rates  does  not  establish   the
counterintuitive  scenario that Carriers, authorized  to  recover
accelerated  depreciation, failed to do  so.   In  fact,  Carrier
witness  Billy  Folmar testified that no Carrier had  voluntarily
reduced a tariff below the TSM ceiling:
          Q:    Now if BP Pipeline had ever voluntarily
          reduced  a tariff below the maximum  rate  it
          would   be   shown  on  line  135   [of   its
          calculation  of  TSM  for  the  year   2000],
          wouldnt it?
          
          A:   That is correct.
          
          Q:    Are  you aware of any carrier prior  to
          1996 who had a voluntary revenue reduction?
          
          A:   Im not aware of one.
          
          Q:     You   went  through  every  individual
          carriers form . . . and you dont remember any
          voluntary reductions prior to 1996?
          
          A:   I dont recall that there were any.
          
Absent proof of discounted tariffs, to characterize TSM as a mere
ceiling  rate is to quibble.  Since the Carriers cite  no  record
evidence  of  voluntary reductions, their mere  ceiling  argument
fails  to undercut RCAs conclusion that TSM depreciation  equates
with depreciation actually recovered.
     When the TAPS settlement was presented to the Federal Energy
Regulatory  Commission for approval, the State in an  Explanatory
Statement   represented  that  accelerated   depreciation   would
actually be included in charged rates:
          The   TSM   employs  a  unit  of   throughput
          depreciation    schedule    which,    through
          negotiations,  was accelerated  in  order  to
          meet  the  [States] objective of  ensuring  a
          declining tariff profile. . . . The  [States]
          objective  .  .  .  required  that  a   large
          fraction   of  the  original  investment   be
          depreciated in the early years of  the  TAPS.
          Consequently, the rate base  the amount  upon
          which  the  owners earn their rate of  return
          shrinks  rapidly.  For example, by  1990  the
          depreciated cost arising from pre-operational
          investments  in  TAPS would be  approximately
          one-fifth of its initial 1977 historic  cost,
          even  though about two-thirds of the  systems
          economic life still remains.
          
The  Explanatory Statement further noted that, by 1990, the heavy
hand  of  accelerated depreciation would so dramatically diminish
the  rate base that the Carriers might lack incentive to continue
pipeline  service. Therefore TSM would discard the  insignificant
remaining  rate  base in 1990 in favor of a more  lucrative  per-
barrel allowance to keep the Carriers in active play.
     RCA  simply had no hard evidence on which it could  conclude
that the TAPS Carriers acted inconsistently with the provisos  of
the   States   Explanatory   Statement,   forgoing   front-loaded
depreciation.  The evidence rather consistently tends  to  refute
such a counterintuitive outcome.  Tesoro quotes a telling 1989 BP
Pipeline memorandum explaining away allegations of excess profits
from 1983-1987:
          [The]  ratemaking agreement . . . front loads
          the recovery of investment. . . .  [T]hus the
          TSM depreciation allowance . . . embedded  in
          the  revenues  for the period  is  materially
          greater  than that reflected on the financial
          records of the carriers. . . .  [W]hile there
          is   certainly  substantial  cash  generation
          during the period, it reflects primarily  the
          accelerated   recovery  of  investment,   not
          profit.
          
The  author,  writing to rebut an inference of windfall  profits,
supports  RCAs  conclusion  that TSM  depreciation  was  actually
embedded in the rates collected by the Carriers.
     The  Carriers contend that the 1982 interlocutory  straight-
line   depreciation  stipulation  remained  in  force   post-TAPS
settlement. The State argues more narrowly that in the absence of
a  settlement agreement, this stipulation would have governed the
depreciation  schedule.  The shippers position accords  with  the
testimony  of  Williams expert Kenneth Johnston: I view  the  TSM
undertaking as one that supersedes this stipulation with  respect
to  rate and tariff matters. This court finds that RCA had before
it  sufficient evidence to justify a reasoned conclusion that TSM
superseded the 1982 depreciation stipulation.
     Finally,  the Carriers and the State contend that no  single
aspect  of the settlement should be considered in isolation  from
all other elements.  Doing so might give the shippers the benefit
of  one  provision  of  the settlement,  without  recognition  of
balancing  tradeoffs  regarding  other  features.   Neither   the
Carriers nor the State complain about a full historical review of
economic  statistics to derive actual annual inputs for the  rate
formula;  but  both  contend that TSMs  status  as  a  negotiated
settlement component ipso facto insulates it from inclusion in  a
historical rate-base computation.
     The   Carriers  offered  no  concrete  evidence   that   TSM
depreciation  charges should have been equitably  reallocated  to
other  components  of  TSM.  The court  has  not  been  cited  to
evidence   that  the  interests  of  the  carriers  were   either
advantaged or disserved by accelerated depreciation, or  that  it
in fact represented a tradeoff.  Absent actual proof establishing
why  TSM depreciation could or should not survive apart from  its
settlement  context,  RCA  was not required  to  discount  record
evidence that such depreciation was embedded in prior rates.
     This court holds that RCA had a reasonable basis to conclude
that the rates from 1977 through 1982, filed by the Carriers  but
never  approved  on their merits by the Alaska  Public  Utilities
Commission,  were sufficiently robust to be deemed  inclusive  of
accelerated depreciation; that the initial rate base and the 1983-
85  rates were retroactively established under TSM in accord with
its  accelerated precept; that the 1982 depreciation  stipulation
was  superseded by the TAPS settlement and had no effect  on  the
initial   rate  base  and  subsequent  rates;   that  accelerated
depreciation was embedded in all post-settlement rates,  and  was
properly used to derive the year-end 1996 rate base; and that  an
artificial  reversion to a deemed straight-line  depreciation  ab
initio  would unreasonably subject the shippers to the burden  of
twice compensating the Carriers for a portion of their investment
and contravene RCAs mandate to set just and equitable rates.
          3.  Evidence Rule
     The  Carriers and the State argue that RCAs factual  finding
that  the  Carriers  actually collected TSM depreciation  over  a
twenty-year  period  violates  a public  policy  against  use  of
settlement  negotiations  in  subsequent  proceedings   involving
settling  parties.   They cite Alaska Rule of  Evidence  408  and
associated  case  law.   Appellees  counter  that  the  rule   is
irrelevant because it only proscribes use of settlement to  prove
a  disputed claim but does not preclude the shippers from proving
such factual matters as the quantum of accumulated depreciation.Rule 408 reads in
relevant part as follows:
          Evidence  of  (1) furnishing or  offering  or
          promising  to  furnish  .  .  .  a   valuable
          consideration  in compromising or  attempting
          to  compromise a claim which was disputed  as
          to   either  validity  or  amount,   is   not
          admissible   to   prove  liability   for   or
          invalidity of the claim or its amount.
          
The court agrees with appellees that the rule is inapposite.   By
way  of  analogy, if two competitors settle a dispute by agreeing
to  fix  prices,  a  victimized consumer is  not  precluded  from
proving the bargain to establish damages.  Here the State and the
Carriers  agreed,  inter alia, on amounts to be charged  shippers
for depreciation. The shippers sought an accounting.  Without the
settlement as Exhibit No. 1, RCAs findings would be divorced from
reality.
     The  TAPS  settlement  can have no more gravitational  force
than  APUC accorded it.  APUC never found it just and reasonable.
Instead, the State and the Carriers requested a finding that  the
public  interest was served by the cessation of near-decade  long
rate  litigation.   The States 1986 supporting  brief  emphasized
that  APUC  retained unfettered discretion in future  third-party
rate cases:
          [T]he  Commission  retains full  jurisdiction
          over   intrastate  TAPS  tariffs;  any   non-
          signatory to the agreement . . . may seek  to
          challenge  a  tariff filed  pursuant  to  the
          settlement  regardless of whether the  tariff
          complies    with    the    terms    of    the
          settlement.  .  .  .  [T]his  commission   is
          absolutely   free   as  it  should   be    to
          establish whatever TAPS tariff rates it finds
          are    consistent    with    the    statutory
          requirement.
          
Subsequently Petro Star, an affected intrastate shipper not bound
by the agreement, filed a rate protest which was settled in 1993.
The  APUC  decreed that any future rate challenges would  proceed
without deference to the TAPS settlement.35
     The  State  fails to explain why, if RCA remained absolutely
free to establish any tariff consistent with the Pipeline Act, it
could  not  look  to  the TAPS settlement to measure  accumulated
depreciation  for  purposes  of a rate-base  calculation.   Under
appellants  analysis, the TAPS settlement commits  third  parties
and   RCA   to   a  particular  approach  in  the  instant   rate
adjudication.   Perhaps  several  billion  dollars   of   already
recovered  depreciation must be included in  the  midstream  rate
base.
     The  court  believes such an outcome far exceeds  the  quite
limited  imprimatur  of  approval  the  APUC  accorded  the  TAPS
settlement.   The  settling  parties  understood  and  the   APUC
announced  that the TAPS settlement carried with  it  no  binding
effect  in  subsequent third-party rate protests.  To now  accord
the  profound effect urged by the Carriers and the State pursuant
to  Alaska Rule of Evidence 408 would vest the settlement with  a
force contrary to the representations of the settling parties and
to the APUCs caveat when it accepted the settlement.
     d.  Capital Structure
     The  Carriers, but not the State, appeal on the ground  that
the  hypothetical capital structure adopted by RCA for the  years
1997-2000  included  too much debt and too little  equity.   They
allege that no reasonable basis supports this, charging RCA  with
arbitrarily departing from its own precedents.  They urge  review
with heightened scrutiny.
     The  capital  structure of a regulated  entity  affects  its
rates.   Investors pay income tax on revenues derived from equity
capital   but  not  on  debt-attributable  revenues  matched   by
     deductible interest payments.  A component of the rate formula
holds  investors harmless from taxes.  Consequently higher levels
of  equity versus debt financing generally lead to higher  rates.
Rate  makers  determine  the appropriate capital  structure.   No
party  contended  that  the  actual  capital  structures  of  the
Carriers should be used, in part because the Carriers are limited-
purpose  subsidiaries which likely could not  stand  alone.   The
Carriers   instead  argued  that  a  composite  of  the   capital
structures of the parent oil- producing companies should be used,
resulting in a presumed Carrier equity in the pipeline of  75-77%
from  1997-2000, or on average 68% from 1968-2000.  Tesoro  urged
that  the  parent companies were an inappropriate paradigm.   RCA
accepted Tesoros model based on a proxy group of stand-alone  oil
and  gas  pipeline  companies operating in  other  states,  which
averaged 50.5% equity.
     Tesoro  expert  Frank  Hanley  testified  that  the  capital
structure  should  be  consistent  with  prospective  levels   of
business  risk  of  an  enterprise as  revealed  by  the  capital
structures  of  similarly situated companies.   He  analyzed  the
capital  structures  of the Carriers parent companies,  comparing
that data to a proxy group of five oil pipeline holding companies
and  four  gas  pipelines companies, plus twelve  subsidiary  gas
pipeline  companies.   Hanley  noted  that  the  Carriers  parent
companies   included  several  of  the  largest  integrated   oil
companies  in  the  world, with high-risk  operations  of  global
scope.   He  contrasted them to the Carriers, regulated operating
oil-pipeline  companies in an American state, and concluded  that
the  Carriers  were  more aptly likened to  stand-alone  pipeline
companies than to the major producer-refiner-petrochemical parent
companies.
     The  five  proxy oil pipeline companies averaged 49%  equity
during  1995-99.  For 1999 alone, their average equity was 50.5%.
The four gas holding companies averaged 43.7% equity during 1995-
99,  but  only  because they were bloated with debt  from  recent
mergers  and acquisitions; Mr. Hanley therefore discounted  them,
and  instead  relied  on  the capital structures  of  the  twelve
subsidiary  gas  pipeline  companies.   Their  five-year  average
equity  was  51.6%.   Their 1999 equity was  50.7%.   Mr.  Hanley
concluded that in the real world, stand-alone operating  pipeline
companies subsist with a capital structure of approximately 50.5%
equity and 49.5% debt.
     Carrier  expert William Tye addressed the issue  of  capital
structure  in his pre-filed testimony.  He concluded the  average
composite  capital  structure for the Carriers  parent  companies
should  control, but provided no particular reason why  this  was
preferable  to  a  capital  structure  derived  from  stand-alone
pipeline  companies.   He testified that  the  composite  capital
structure of the parent companies was 22.7% debt to 77.3%  equity
at year-end 1997.
     The  issue  of  the  deemed capital structure  for  TAPS  is
technical  and  peculiarly within RCAs expertise.  With  contrary
expert  testimony before it, RCA made a plausible  decision  that
the  paradigm should be operating pipeline companies rather  than
oil-producing  and refining companies.  This court  is  precluded
from  second-guessing that conclusion because it is supported  by
reasonable evidence in the record viewed as a whole.
     e.  Risk Premium
     The  Carriers  contend that RCA imputed an  inadequate  risk
premium   to   compensate  lenders  and  equity   investors   for
purportedly  extraordinary risks inherent to the  project.   They
urge  that expert witnesses Dr. Tye and Dr. Gaske aptly estimated
the  low  end of a reasonable risk premium to be 2% on  debt  and
equity, and that RCA erred by assessing a parsimonious .75%  risk
premium on equity alone.
     Dr.  Tyes  pre-filed testimony about risk discusses,  in  an
abstract  and  conclusory  fashion, such  considerations  as  the
propriety  of  putting $10 billion investor eggs in  one  basket;
risks   of  non-completion  or  non-viability;  legal  obstacles;
escalating  construction  costs;  decreasing  world  oil  prices;
possible  regulatory  setbacks; and Alaskas extreme  climate  and
geography.  He concluded that a risk premium should range from 2-
5%.
     RCAs  Order  No.  151 adopted the Carriers  methodology  for
computing  a risk premium including a prospective view  of  risks
that,  in hindsight, proved evanescent. It rejected rote reliance
on  the  data inputs proposed by any one testifying expert.   RCA
concluded  that  cited academic studies regarding  the  risks  of
unrelated  high-cap or high-tech projects like tunnels,  subways,
airports, toll roads, and power plants were quite possibly apples
to  oranges  comparisons.  It decided that,  to  the  extent  the
pipeline was ever an all-or-nothing gamble, such risk spanned the
planning  stage only.  RCA therefore awarded a risk  premium  for
non-completion due to regulatory and legal uncertainties  limited
to   that  stage.   It  augmented  this  risk  premium  for   the
contingency  of  cost  overruns during  construction.   In  other
respects  RCA  found  TAPS less risky than an  average  pipeline.
There  was a low risk of inadequate supply of oil; a low risk  of
competition   from  alternative  carriers;  no  extra   risk   of
throughput  interruption; and no risk of  a  volatile  regulatory
climate.
     The Carriers argue that a risk premium should be applied  to
the  entire  capital  structure,  both  debt  and  equity.   RCAs
analysis  focuses on the risks to equity investors and  does  not
specifically  discuss  the  risk  to  lenders  in  this  context.
Presumably,  the  risk to lenders is reflected  in  the  interest
rates they charge, for which the Carriers are directly reimbursed
in  the rate formula.  In a related context, RCA noted that  TAPS
could  be expected to generate funds to cover debt service  under
almost  any  scenario.   It appears that Dr.  Tye  was  the  sole
witness to unequivocally endorse a risk premium on debt.  RCA was
not  required to accept his seemingly idiosyncratic  approach  to
risk.
     RCAs  risk  analysis  was  extraordinarily  thoughtful   and
complete.   It  addressed the contentions  and  evidence  of  all
parties.  It supported its analysis with a thirteen-page  single-
spaced  endnote with eighty-eight citations to the record  or  to
prior  cases.   It  merits the deference courts must  apply  when
reviewing  complex decisions implicating agency expertise.   This
court sustains RCAs findings as supported by the record.
     f.  Return on Equity
     The  Carriers argue that RCA departed from precedent without
adequate   explanation  when  it  expanded  its  purview   beyond
principle  reliance on a discounted cash flow  (DCF)  methodology
for  determining  the  appropriate  rate  of  return  on  equity.
Instead,   RCA   averaged   the   results   of   four   different
methodologies.
     Order No. 151 states in relevant part:
          The  parties  largely failed to  successfully
          rebut  each  others  various  approaches   to
          determining return on equity.  For  the  most
          part,   the   record  fails  to   provide   a
          theoretical  or empirical basis for  deciding
          whether   any  particular  method   is   more
          appropriate  than another.  The  record  also
          fails  to  suggest  that any  of  the  expert
          witnesses  have applied their chosen  methods
          inappropriately, or have chosen inappropriate
          data or parameters.
          
          We find Tesoros expert witness to be the most
          credible.    We  base  our  rate  of   return
          findings   primarily  upon  Tesoros  witnesss
          recommendation.   Tesoro  sponsors   multiple
          methods because it believes investors rely on
          the  widest  possible information  available.
          We agree with Tesoro that investors are aware
          of all the various traditional cost of common
          equity    models   discussed   in   financial
          literature.  Absent good reason for believing
          that  investors  weight the  results  of  one
          method  more  heavily than another  in  their
          assessment of an appropriate rate of  return,
          it  is  reasonable  to  hold  that  investors
          ascribe weight to them all.  We note that the
          APUC  has relied on a variety of methods when
          those   methods  were  reliable   given   the
          specific facts at hand.
          
          In addition, we find Tesoros DCF analysis the
          most  reliable . . . we primarily  rely  upon
          Tesoros recommendation . . . .
          
     This passage supports the Carriers argument that RCA stepped
beyond a primary reliance on a DCF methodology to a more catholic
acceptance  of  other  methods.  But  RCA  more  than  adequately
explained  its reasoning.  It found Tesoros Mr. Hanley  to  be  a
compelling  expert witness.  He, unlike others,  testified  about
how  investors  actually tick.  RCA preferred subtleties  of  Mr.
Hanleys DCF methodology, as compared to other DCF presenters.
     The quoted excerpt from RCAs rate of return analysis reveals
that the area is technical; that competing theoretical models are
well  developed; that RCA understood what it was doing; and  that
it  was  thoughtful, conscientious, and discursive.   RCA  had  a
reasonable  rather  than  an arbitrary basis,  supported  by  the
record,  for its approach.  A reviewing court is not entitled  to
probe  further.  RCA has adequately explained any departure  from
agency  precedent and is supported by the record in  arriving  at
its rate of return conclusions.
     g.  Retroactive Ratemaking
     Retroactive ratemaking is a regulatory taboo in Alaska and a
majority   of  jurisdictions.36   Rates  may  only   be   altered
prospectively,  without  any attempt  to  recapture  past  excess
profits,  or  to redress deficient past revenues.  This  protects
the  reliance  interest of a utility and  its  customers  in  the
stability of rates filed by a utility and approved by regulators.
In  Order No. 151 RCA found that pursuant to TSM the Carriers had
the  opportunity to collect an undeserved $9.9 billion.   Yet RCA
properly  considered any such excess profit as moot, and  nothing
in  Order No. 151 purports to reduce or adjust the 1997-2000 rate
structure to account for prior revenue anomalies.
     Nonetheless  the  Carriers  argue  that  RCAs  use  of   TSM
accelerated depreciation to calculate the year-end 1996 rate base
squarely  transgressed  the retroactive  ratemaking  prohibition.
The  argument is predicated on the notion that the 1982 straight-
line  depreciation  stipulation was not superseded  by  the  TAPS
settlement agreement, a contention RCA rejected.  RCA permissibly
found that TSM accelerated depreciation was actually used by  the
Carriers  to  compute  their  rates prior  to  the  instant  rate
challenge.   This  finding  renders  the  retroactivity  argument
untenable.   RCA  did  not meddle with prior  rates.   It  simply
parsed  a highly customized private settlement to determine  what
portion   of   past  revenues  should  fairly  be  allocated   to
depreciation.
     The  Carriers  argue that rates pursuant to  Order  No.  151
should  be  prospective from its date of issuance, and  that  the
Carriers  need  not  refund excess revenues collected  under  TSM
during  1997-2000  while  the rate challenge  was  pending.   The
Carriers characterize TSM as sufficiently long-lived by 1997 that
it  had  been  de facto ratified by RCA. As such TSM  had  become
impervious to any but the prospective modification allowed in RCA-
initiated  challenges  of  previously  approved  rates  under  AS
42.06.410(a).
     RCA found to the contrary in Order No. 151.  It held that it
had  properly suspended the 1997-2000 tariff filings, i.e. it had
allowed  the rates provisionally subject to post-hearing  refunds
pursuant  to  AS  42.06.400. That statute governs  revised  rates
filed  by  Carriers  and judged anew by RCA under  its  just  and
reasonable standard.
     Prior to Order No. 151, TAPS tariffs were never approved  by
RCA as just and reasonable.  The initial rates filed in 1977 were
challenged.   The  parties  engaged in protracted  and  expensive
litigation  until they arrived at a mutually acceptable  but  sui
generis  ratemaking  methodology in  1985.   The  State  and  the
Carriers  alike  essentially  urged  APUC  to  forgo  substantive
evaluation  of  TSM.  The State affirmatively  argued  that  APUC
could  rekindle  its  inquiry upon any  future  third-party  rate
challenge.   APUC expressly reserved the right to evaluate  rates
     anew without prejudice from its acquiescence in TSM.  The power
to  suspend  rates is a significant adjunct to a rate  challenge.
Since  a  rate challenge may demonstrably take years to  resolve,
RCA cannot do complete justice to a protestant absent a power  to
affect rates from the time of challenge.
     When rate litigation recommenced in 1997, its character as a
review  of  unapproved  rates  was intact.   Neither  Tesoro  nor
Williams  was a party to the TAPS settlement and so  neither  was
bound  thereby.  They properly sought the review of TSM that  was
interrupted  in  1985.   These facts fall  within  AS  42.06.400s
procedure  for  evaluation  of a carrier-generated  rate  filing.
In contrast, AS 42.06.410, which does not permit suspended rates,
would more aptly apply if RCA had sua sponte initiated review  of
rates in which parties enjoyed decisively vested reliance rights,
because  the rates had previously been found just and reasonable.
RCA appropriately distinguished cases cited by the Carriers for a
contrary conclusion.
     h.  Unitary TAPS Rate
     The  Carriers are wholly owned subsidiaries of oil-producing
companies.  Each Carrier owns an undivided joint interest in  the
pipeline.  The Carriers have jointly formed the Alyeska  Pipeline
Service  Company  (Alyeska) to manage, maintain and  operate  the
pipeline.   Each Carrier holds its own certificate of convenience
to  operate an oil pipeline.  In-state consumers such  as  Tesoro
and  Williams contract with individual Carriers and are  invoiced
directly.
     In  1983,  the  Superior Court invalidated individual  rates
approved  by  APUC,  finding TAPS to be a  unity  and  not  eight
virtual  pipelines.37   At the request of the  parties  post-TAPS
settlement, that decision was vacated.  Thereafter, the  Carriers
filed  rates  not exceeding the TSM ceiling; per the  settlement,
those  rates  were immune from State challenge.   The  matter  of
individual rates became a regulatory non-issue.
     During  the  instant  rate litigation, Carrier  and  shipper
experts  agreed  RCA  should  impute to  all  Carriers  identical
capital  structures  with a deemed debt to equity  ratio,  common
interest  rates  for borrowed capital, and a collective  rate  of
return.    The   Carriers   opted  to  defend   TSM,   not   with
individualized  cost  data,  but  instead  with  an   overarching
benchmark  economic  model.  RCA rejected the model,  disagreeing
with its inputs and assumptions.  RCA set a date for the Carriers
to  file  individual  rates based on proof of prudent  individual
costs,  but  only  so  long  as  the  total  revenues  from   all
individually and jointly-filed rates did not exceed RCAs  revenue
entitlement set forth in Order No. 151.
     On  January 27, 2003, three Carriers filed individual  rates
for  1997-2000.  The ensuing revenue total exceeded RCAs  figure.
The  Carriers  again  declined  to  support  their  filings  with
individualized cost data.  RCA rejected the individual rates, and
made  final the rates established in Order No. 151.  The Carriers
and the State appeal.
     The parties engage in statutory construction of the Pipeline
Act  to  support  their  positions.  For  example,  the  Carriers
discern a clarion legislative mandate that each may file its  own
     rates to be scrutinized in isolation by RCA.38  Tesoro discerns a
clear  discretionary authority to set a common rate.39  The State
finds  it  inescapable that the Pipeline Act requires  individual
rates.
     In  Order  No.  151,  RCA  concluded that  AS  42.06.630(17)
defines  tariff  to  mean  a rate for  a  pipeline  facility  for
services  furnished  by the facility and  not  a  rate  for  each
individual  owner  of the pipeline facility.   Further,  from  AS
42.06.370(a),  All  rates  demanded or  received  by  a  pipeline
carrier  or by any two or more pipeline carriers jointly  .  .  .
shall be just and reasonable, RCA inferred authority for a single
rate imposed on joint owners.  Finally, RCA found that nothing in
the  Pipeline  Act precluded it from setting a single  rate  upon
rejection of filed individual rates as unjust and unreasonable.
     The  parties  cite  no legislative history.  The  referenced
statutes  do  not explicitly address the issue.  The statutes  to
which  the parties and RCA attribute controlling significance  do
not definitively reveal a plain meaning.
     RCA twice afforded the Carriers an opportunity to file rates
supported by actual cost data.  The Carriers persisted  in  their
more  theoretical rate defense.  RCA rejected this approach.  The
Carriers have not shown that RCAs requirements were arbitrary  or
capricious.  Irrespective of the validity of its decision to  cap
aggregate  revenues from individual and joint rates, RCA  had  an
adequate and independent basis to reject individual rate  filings
by  three  Carriers,  for failure of proof.  Absent  a  compliant
defense  of  the  filed rates, RCA can in a sense  be  viewed  as
setting  individual rates for all Carriers; the individual  rates
are  identical, because no carrier distinguished itself from  the
pack.
     The  State  argues  that the Carriers have filed  individual
rates  for  years,  and RCA has departed from  precedent  without
adequate  explanation.  The State does not provide  record  cites
proving  prior price competition.  Tesoro contends that  no  TAPS
Carrier  has  ever charged anything but the TSM  ceiling,  citing
testimony  to that effect.40  RCA concluded that the  record  was
insufficient to determine whether the TAPS Carriers ever  engaged
in price competition amongst themselves.
     Tesoro  represents that the five Carriers have no employees.
The  pipeline  itself  is  operated by Alyeska  Pipeline  Service
Company,  which  presumably bills the  Carriers  based  on  their
respective percentages of ownership.  Significant items  such  as
debt to equity ratio, cost of borrowed capital, risk factors, and
rate  of  return  are  imputed to the  Carriers  in  common;  the
Carriers   fault  the  numbers  but  not  the  joint  imputation.
Individually incurred Carrier expenses may well be a  microscopic
factor  in  the  rate  equation, given that the  parties  jointly
operate the pipeline through Alyeska on a shared-cost basis,  and
are  otherwise  imputed  invariant capital  structures,  interest
rates,  risk  factors, and rates of return.  The parties  do  not
discuss the extent of the administrative burden imposed on RCA by
any statutory mandate to set individual rates.
     RCAs total revenue cap means that Carriers seeking leave  to
exceed  the  unitary rate initiate a zero-sum  game;  some  other
     Carrier must elect to charge less, so that total revenue remains
constant.   The  scenario is unrealistic.  In  practical  effect,
Order  No.  151  establishes a unitary rate; its individual  rate
provision  is  illusory as to Carriers seeking  a  rate  premium,
given the cap.
     The  court  concludes that interpretation of  RCAs  enabling
statutes    to   arrive   at   practical   parameters    requires
administrative expertise.  RCAs decision to set a unitary rate or
highly  conditioned individual rates for this jointly  owned  and
operated  pipeline  applies  agency expertise  to  a  fundamental
policy  question.   RCAs interpretation of the  Pipeline  Act  is
entitled  to deference.  RCAs conclusion regarding the  statutory
scope  of  its  discretion is reasonable and  must  therefore  be
sustained  by  this court.41  Its exercise of this discretion  is
supported by the record.
     i.  Interest Rate
     RCA  ordered  refunds to affected shippers.  Alaska  Statute
42.06.400(b)  states that the difference between a temporary  and
permanent  tariff,  in favor of either a carrier  or  a  shipper,
shall bear interest at the rate set forth in AS 45.45.010(a),  or
10.5%.  RCA so ordered.
     The  Carriers  argue  that  AS  42.06.400(b)  was  at  least
impliedly  repealed by the 1997 amendment to the  Code  of  Civil
Procedure  at AS 09.30.070(a) which established the interest  due
on civil judgments [n]otwithstanding AS 45.45.010.    The statute
applies  a  floating interest rate based on the  Federal  Reserve
discount  rate  to  judgments in civil litigation  filed  in  the
superior  or district court.  The annual rate may be  greater  or
lesser  than the 10.5% legal rate of interest established  in  AS
45.45.010  for other purposes.  For 2006, the floating  rate  for
civil judgments is 8.25%.
     The  amendment  of  AS  09.30.070  was  a  component  of   a
comprehensive  tort  reform  act.   The  legislatures  intent  to
relieve society of perceived excesses or irrationalities in civil
litigation was discussed in Evans ex rel. Kutch v. State:
          The  legislative goals underlying the damages
          caps, as well as the rest of chapter 26,  SLA
          1997,  are  explicitly stated in chapter  26,
          section 1, SLA 1997. Specifically, section  1
          states  that the legislation was intended  to
          (1)   discourage  frivolous  litigation   and
          decrease  the costs of litigation;  (2)  stop
          excessive punitive damages awards in order to
          foster  a positive business environment;  (3)
          control  the increase of liability  insurance
          rates;   (4)   encourage  self-reliance   and
          independence  by underscoring  the  need  for
          personal  responsibility; and (5) reduce  the
          cost    of    malpractice    insurance    for
          professionals.[42]
          
Nothing in the Tort Reform Acts stated rationale suggests a  more
general  purpose  to  repeal the legal interest  rate  applicable
outside  the  context  of  tort  and  contract  cases.   Had  the
legislature  wished  to  repeal the  interest  provision  of  the
Pipeline  Act when it passed tort reform legislation in 1997,  it
would logically have done so expressly, and indicated why it  was
ranging so far a field from its statement of intent.  Nothing  in
the  Tort Reform Act evinces an intention to affect anything  but
tort  and  contract litigation.  Alaska Statute  09.30.070(b)  is
specifically  tailored to tort and contract claims,  linking  the
initial  interest accrual date to written notice of a claim;  the
provision  makes little sense in RCAs sphere.  RCA  appropriately
followed the mandate of the Pipeline Act to order interest at the
legal rate set forth in AS 45.45.010.
                        IV.  CONCLUSION
     This  court  affirms the decision of RCA  in  all  respects.
Points on appeal not specifically addressed in this decision  are
denied as without merit.
     Dated this  18th day of January, 2006 at Anchorage, Alaska.

                                    /s/  John Suddock
                                          Superior Court Judge
_______________________________
     *     The superior courts Decision and Order has been edited
to  conform  to  our style and formatting requirements  and  most
internal citations have been omitted.

     1     The eight original owners were subsidiaries of Amerada
Hess, ARCO, BP, Exxon, Mobil, Sohio, Phillips and Union.  Mergers
and  transfers have reduced their number to five.   They  are  BP
Pipelines (Alaska), Inc.;  ExxonMobil Pipeline Company;  Phillips
Transportation  Alaska,  Inc.;  Unocal  Pipeline   Company;   and
Williams Alaska Pipeline Company, L.L.C.

     2     The same order is also styled Order No. 110 in related
Docket P-97-7 (collectively, Order No. 151).

     3    AS 42.06.140 and .410(a).

     4     The  statutory basis for jurisdiction is found  in  AS
22.10.020(d), AS 42.06.480(a), and AS 44.62.560-.570.

5      Re   Amerada  Hess  Pipeline  Corp.,  13  APUC  448,   456
(1993).

     6    Id.

7    AS 42.04.050.

8     Alyeska  Pipeline  Serv.  Co. v.  Deshong,  77  P.3d  1227,
1231 (Alaska 2003).

     9    Id.

     10   Id.

     11    Ninilchik Traditional Council v. Noah, 928 P.2d  1206,
1217 (Alaska 1996).

     12   Totemoff v. State, 905 P.2d 954, 967-68 (Alaska 1995).

     13   U.S. Const. amends. V, XIV; Alaska Const. art. I,  7.

14     2   Richard  Pierce,  Jr.,  Administrative  Law   Treatise
9.8, at 648-49  (4th ed. 2002).

     15   425 F.2d 583, 591 (D.C. Cir. 1970).

16    FTC  v.  Cement Inst., 333 U.S. 683, 68 S. Ct. 793,  92  L.
Ed. 1010 (1948).

     17   Cinderella Career & Finishing Sch., 425 F.2d at 590.

     18   FTC v. Cement Inst., 333 U.S. 683, 68 S. Ct. 793, 92 L.
Ed.  1010  (1948).  The phrase irrevocably closed decision  maker
mind is this courts, not the Cement Institute Courts.

     19   421 U.S. 35, 95 S. Ct 1456, 43 L. Ed. 2d 712 (1975).

20   Id. at 47, 95 S. Ct. 1464 (emphasis supplied).

     21   333 U.S. 683, 68 S. Ct. 793, 92 L. Ed. 1010 (1948).

     22   Withrow, 421 U.S. at 55, 95 S. Ct. at 1468.

     23   151 F.3d 1361 (Fed. Cir. 1998).

     24   589 F.2d 307 (7th Cir. 1979).

25    United  Farm  Workers  of Am., AFL-CIO  v.  Arizona  Agric.
Employment Relations Bd., 727 F.2d 1475 (9th Cir. 1984) (citation
omitted).

     26   Cinderella, 425 F.2d at 590.

     27   711 P.2d 1170 (Alaska 1986).

     28   Id. at 1180.

29   575 P.2d 771 (Alaska 1978).

     30   955 P.2d 943, 946-47 (Alaska App. 1998).

     31   Id.

32   6 APUC 527 (1985).

     33   12 APUC 425 (1992).

34    Alyeska  Pipeline  Serv.  Co. v.  Deshong,  77  P.3d  1227,
1231 (Alaska 2003).

35     Re   Amerada  Hess  Pipeline  Corp.,  13  APUC  448,   456
(1993).

36    Matanuska  Elec. Assn v. Chugach Elec. Assn,  53  P.3d  578
(Alaska 2002).

37     State   v.  Alaska  Pub.  Util.  Commn,  3AN  80-7163   CI
(Alaska Super. 1983).

38    TC  Init.  Br.  123-24, citing  variously AS  42.06.630(15)
(defining  pipeline carrier as the owner, including  corporations
organized under the laws of the United States or of any state  of
any  pipeline  .  .  . any interest in it); AS  42.06.245  ([T]he
requirements  of  this chapter for permits  and  certificates  of
public  convenience and necessity . . . apply to . . . a pipeline
or  pipeline  carrier.); AS 42.06.350(a) (every   intrastate  oil
pipeline  carrier shall file . . . all rates . . . pertaining  to
service  provided  under the certificate); AS 42.06.140(3)   (RCA
shall require just, fair, and reasonable rates . . . for pipeline
carriers);   and  AS  42.06.370(a)  (requiring  that  all   rates
demanded   or  received  by  a  pipeline  carrier  be  just   and
reasonable).

     39    Tesoro Br. 119-20, citing AS 42.06.140 (broad  general
regulatory powers); AS 42.06.370(a) (rates charged by a  pipeline
carrier,  or by any two more pipeline carriers jointly  shall  be
just and reasonable); AS 42.06.630(a) (tariff means a rate . .  .
of  a  . . . pipeline facility relating to services furnished  by
the  facility);  AS  42.06.630(15) (pipeline  carrier  means  the
owner,  including  corporations .  .  .  of  any  pipeline);   AS
42.06.630(14)  (pipeline or pipeline facility  includes  all  the
facilities of a total system of pipe).

     40   See discussion supra at  III(c)(2).

41   Denuptiis v. Unocal Corp., 63 P.3d 272 (Alaska 2003).

     42   56 P.3d 1046, 1053 (Alaska 2002) (footnotes omitted).

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