Assignment of Proceeding

John A. Bohn is the assigned Commissioner and Karl J. Bemesderfer is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. The origin market for the Pipeline consists of the Pipeline, ExxonMobil's proprietary pipeline and the San Joaquin Refinery.

2. The HHI for the origin market is 4,125.

3. Undiluted San Joaquin Valley Heavy crude has an API gravity of 14.

4. The Pipeline is the only pipeline capable of transporting undiluted SJVH from the San Joaquin Valley to the San Francisco Bay area.

5. Trucks, unit trains and water-borne transport are not economically competitive means of transporting undiluted SJVH from the Joaquin Valley to the San Francisco Bay area.

6. The Tesoro and Valero refineries in the San Francisco Bay Area rely on undiluted SJVH to maximize the financial performance of their refinery assets.

7. The Kern Oil refinery is configured to process crude oil with an API gravity of 29 and cannot process SJVH without making major capital investments.

8. The Big West refinery is shut down and its owners have announced that it will not process crude oil in the future.

9. The San Joaquin Refinery is currently a net seller of crude oil and has no need to purchase additional crude oil.

10. The proprietary ExxonMobil pipeline from the San Joaquin Valley to the Los Angeles area is physically capable of transporting undiluted SJVH.

11. Independent shippers have no right to nominate shipments on the ExxonMobil pipeline.

12. SJVH may be blended with lighter crude oils to produce a mixture (SJV Blend) that is capable of being transported in unheated pipelines.

13. Even if the SJVH currently transported on the Pipeline could be delivered as part of SJV Blend, the Tesoro and Valero Bay Area refineries could not process SJV Blend without making major capital investments.

14. Alternative modes of transporting undiluted SJVH to the San Francisco Bay Area (such as trucking, rail and water-borne deliveries) create a higher relative risk to both transportation and public safety than transportation of such crude oil on the Pipeline.

15. The Pipeline's affiliate STUSCO is able to purchase SJVH at a discount at Coalinga.

16. The Pipeline is the only heated pipeline available to shippers at Coalinga.

17. The heavy crude oil delivered by the Pipeline to the Bay Area refineries includes a small amount of Outer Continental Shelf (OCS) crude oil that has been blended with SJVH.

18. OCS commands a lower market price than SJVH.

19. When OCS is blended with SJVH it is "re-graded" and sold to independent shippers at the higher price of SJVH.

20. The Pipeline charges STUSCO a lower transportation loss allowance than it charges independent shippers.

21. The Pipeline has raised the price of transporting undiluted SJVH from the San Joaquin Valley to the San Francisco Bay area from $1.09 per barrel to $1.90 per barrel without losing any significant business from independent shippers.

22. The Pipeline exercises significant market power over independent shippers of undiluted SJVH from the San Joaquin Valley to the San Francisco Bay area.

Conclusion of Law

SPBPC's application to charge market-based rates for transporting crude oil from the San Joaquin Valley to the Bay Area refineries should be denied.

INTERIM ORDER

IT IS ORDERED that the application of San Pablo Bay Pipeline Corporation to charge market-based rates for the transportation of crude oil on its heated pipeline between the San Joaquin Valley and the San Francisco Bay area is denied.

This order is effective today.

Dated November 19, 2010, at San Francisco, California.

Commissioners

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