Wolverine Pipe Line Company (WPLCo)

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Transmix Pricing Analysis
Wolverine Pipe Line Company (WPLCo) September 29,
2005
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Description of Transmix Process

• WPLCo transports more than 300k barrels per day
  (bpd) of refined products. In some cases,
  tickets are cut at midpoint of the interface and
  any transmix is handled within the terminal
  owner's facilities. In other cases, WPLCo
  controls the deliveries to transmix tankage owned
  by WPLCo or a 3rd party. The Wolverine
  controlled transmix volumes amount to
  approximately 500 bpd for all Shippers or less
  than .2 of total shipments on Wolverine.
• More than 75 of this transmix is comprised of
  Low Sulfur Diesel (LSD). WPLCo settles by paying
  Shippers for the lost LSD and charging Shippers
  for transmix that is generated in the course of
  protecting the Shippers LSD. WPLCos previous
  transmix pricing procedure (average of Unleaded
  Regular and Jet Fuel prices) was originally
  developed to value transmix at premium over
  Diesel to help cover WPLCos costs associated
  with handling transmix. During the past year LSD
  prices have generally exceeded Unleaded Regular
  prices diminishing the historical transmix
  pricing premium that was intentionally arranged
  to offset associated costs.
• WPLCo has developed a method that prices
  transmix based on the actual losses/downgrades on
  WPLCo each month, plus a price adjustment of
  0.56 per barrel to restore the historical price
  premium and to help offset a portion of WPLCo's
  estimated cost of 1.74 per barrel which is
  associated with transmix handling.
• This procedure is consistent with WPLCo's intent
  to settle gains and losses with Shippers in an
  equitable manner to ensure WPLCo does not absorb
  an new and unreasonable cost burden with
  maintaining the integrity of the Shippers'
  product and Shippers are not unreasonably charged
  for keeping their products clean
  (transmix/downgrades).
• This method will be based on the net clean
  product losses in the system for the given month,
  which will more accurately price transmix based
  on the commodities that created it. Therefore,
  the Shippers' and WPLCo's exposure to market
  price fluctuations will be reduced.

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Recent Transmix Price Calculation
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Historical Transmix Price Calculation
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