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April 21, 2010
Economic Analysis Provided by Brattle Principals Matthew O’Loughlin and Daniel Arthur Contributes to $205 Million Settlement in Pipeline Rate Challenges

Matthew O’Loughlin and Daniel Arthur, principals in The Brattle Group’s Cambridge, MA office, provided key economic analysis and testimony on behalf of shippers in the proceedings surrounding the $205 million settlement to resolve pipeline rate challenges against a unit of Kinder Morgan Energy Partners LP. The various rate challenges filed with the U.S. Federal Energy Regulatory Commission (FERC) date back as early as 1992, and involve 12 shippers that took issue with Kinder Morgan subsidiary SFPP LP’s collected rates for shipping gasoline, jet fuel, and diesel on its California, Oregon, and southwest pipeline systems. The $205 million settlement resolves the challenges from 11 of the 12 shippers involved in the cases: Exxon Mobil Corp., US Airways Inc., Valero Marketing and Supply Co., ConocoPhillips, BP West Coast Products LLC, Western Refining Co., Holly Corp.'s Navajo Refining Co., Tesoro Refining and Marketing Co., Southwest Airlines Co., Continental Airlines Inc., and Northwest Airlines Corp. ] Mr. O’Loughlin and Dr. Arthur worked on behalf of Dorsey & Whitney, who represented ConocoPhillips; Venable LLP, who represented Valero Marketing and Supply Co., US Airways, Southwest Airlines, Continental Airlines, and Northwest Airlines; and Weber & Associates, who represented Chevron Products Co., the one remaining shipper challenging the collected rates who is not a party to the settlement. Their work consisted of expert economic testimony in several of the resolved proceedings on cost of service matters including the calculation of rate base and associated return, the appropriate income tax allowance for a Master Limited Partnership (MLP), analysis of recurring operating expense levels, allocation of parent company overhead expenses, and the appropriate volume level for determining rates. Their testimony also addressed issues of rate design and the application of the FERC’s “substantially changed circumstances” standard. The proposed settlement was submitted to the FERC on April 16, 2010, and a ruling on the agreement is expected by the third quarter of 2010.