3. Request

Pursuant to Section 851 and Rule 35 of the Commission's Rules of Practice and Procedure, Shell of California seeks authority to remove its Pipeline #369 and Line Segment #370, and related facilities from public utility service. Pipeline # 369 consists of a 14" Bakersfield pipeline, running between the Bakersfield Pump Station (BPS) and the Caliola Station and Line Segment #370 consists of an 18" Caliola pipeline, running between the Caliola Station and the Coalinga Station.

The pipeline, approximately 120 miles long, is used to move crude oil from the Kern River production area to the Bakersfield Tank Farm, a proprietary facility owned by Shell Oil Products US (SOP US) where it is heated and pumped to BPS, the origination of the Pipeline. Intermediate pump stations along the pipeline are used to increase the temperature and pressure of the crude oil being transported and delivered to the Caliola Station. From the Caliola Station the crude oil is delivered through an 18" Caliola crude line to the Coalinga Tank Farm, another proprietary facility owned by SOP US. The crude oil is then stored at the Coalinga Tank Farm for eventual shipment north on the SOP US proprietary 20" Coalinga pipeline to the Avon pipeline.

The pipeline was constructed and placed into service in 1936. The costs of this facility, excluding SOP US proprietary assets, was $10,414,357, and the total remaining undepreciated cost of the pipeline assets is $8,931,845.

Shell of California seeks to abandon from public utility service the pipeline and related facilities on the basis that it is not economical to continue to operate the pipeline. It explained that the pipeline is expensive to maintain because the pipeline runs through wet rural and agricultural lands, which leads to increasing corrosion rates. To maintain the pipeline, Shell of California must make internal inspections every 12 to 18 months, compared to every five years for a typical pipeline. In addition, four of the pump stations along the pipeline use heaters fueled by natural gas to maintain the viscosity of heavy crude being shipped, and contribute to poor air quality in the San Joaquin Valley, a designated Severe Non-Attainment Area. By removing the pipeline and related facilities from service, the emissions associated with the heaters will be eliminated and Shell of California will not be required to upgrade its pipeline to meet new emission standards that will take effect in June of 2005.

There is only one shipper using the pipeline, Shell Trading US Company (STUSCO). STUSCO, an affiliate of Shell of California, ships approximately 50,000 barrels per day through the pipeline. STUSCO has made arrangements to transport its crude oil through alternate pipelines, such as the Cross Valley Pipeline. STUSCO also supports removing Pipeline #369 and Line Segment #370 from public utility use, as detailed in its May 12, 2005 letter attached to the application as Exhibit 7. With STUSCO's arrangements to transport its crude oil through alternative pipelines, there is no current or projected use of Pipeline #369 and Line Segment #370. Accordingly, Shell of California seeks to remove the pipeline, line segment, and related facilities from service and to modify its tariff to show this change in status.

Consistent with good oil field practice, Shell of California has requested approval of the California State Fire Marshall (CSFM) to abandon the line. While the pipeline is being abandoned from public utility service, Shell of California currently expects to continue to own the pipeline and it will be designated as "Out of Service", as defined in, and for purposes of, the CSFM regulations.

Shell of California will decommission the pipeline system pursuant to CSFM standards and corresponding federal regulations (49 CFR 195.402(c) (10)), and Shell of California's internal standards, all of which are accepted good oil-field practice. As detailed in the application, the entire length of the pipeline will be drained of all crude oil using a nitrogen purging and pigging process. Each end of the pipeline will be "air-gapped". Then the piping, pumps and valves will be drained, the heaters decommissioned, the surge tanks cleaned and decommissioned, the electricity source disconnected, and the pump station isolated from the pipeline.

After the pipeline and related facilities are removed from public utility service, they will be maintained in accordance with the CSFM standard for Out of Service pipelines, the corresponding federal regulations, and Shell of California's internal standards. The maintenance plan includes a one-call monitoring system for the pipeline, maintenance of markers and records, right-of-way inspections and maintenance, continuing cathodic protection, continuing community awareness and damage prevention activities, and maintenance of life of facilities records.