9448 Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations 

1 Five-Year Review of the Oil Pipeline Index, 171 

FERC ¶ 61,239, at P 1 (2020) (NOI). 

2 Designated Carriers include Buckeye Partners, 

L.P., Colonial Pipeline Company, Energy Transfer 

LP, Enterprise Products Partners L.P., and Plains 

All American Pipeline, L.P. 

3Public Law 102–486 1801(a), 106 Stat. 3010 

(Oct. 24, 1992). This mandate to establish a 

simplified and generally applicable ratemaking 

methodology specifically excluded the TransAlaska Pipeline System (TAPS), or any pipeline 

delivering oil, directly or indirectly, into TAPS. Id. 

1804(2)(B). 

4 49 U.S.C. app. 1 et seq. 

5Revisions to Oil Pipeline Regulations Pursuant 

to Energy Policy Act of 1992, Order No. 561, 58 FR 

58753 (Nov. 4, 1993) FERC Stats. & Regs. ¶ 30,985 

(1993) (cross-referenced at 65 FERC ¶ 61,109), order 

on reh’g, Order No. 561–A, FERC Stats. & Regs. 

¶ 31,000 (1994) (cross-referenced at 68 FERC 

¶ 61,138), aff’d sub nom. Ass’n of Oil Pipe Lines v. 

FERC, 83 F.3d 1424 (D.C. Cir. 1996) (AOPL I). 

6Pursuant to the Commission’s indexing 

methodology, oil pipelines change their rate ceiling 

levels effective every July 1 by ‘‘multiplying the 

previous index year’s ceiling level by the most 

recent index published by the Commission.’’ 18 

CFR 342.3(d)(1). Oil pipelines may adjust their rates 

to the ceiling levels pursuant to Commission’s 

regulations so long as no protest or complaint 

demonstrates that the index rate change 

substantially diverges from the pipeline’s cost 

changes. Id. 343.2(c)(1). 

7Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 

30,941. 

8 Five-Year Review of Oil Pipeline Pricing Index, 

93 FERC ¶ 61,266 (2000), aff’d in part and 

remanded in part sub nom. Ass’n of Oil Pipe Lines 

v. FERC, 281 F.3d 239 (D.C. Cir. 2002) (AOPL II), 

order on remand, 102 FERC ¶ 61,195 (2003), aff’d 

sub nom. Flying J Inc. v. FERC, 363 F.3d 495 (D.C. 

Cir. 2004). 

9 Five-Year Review of Oil Pipeline Pricing Index, 

114 FERC ¶ 61,293 (2006) (2005 Index Review). 

10 Five-Year Review of Oil Pipeline Pricing Index, 

133 FERC ¶ 61,228 (2010) (2010 Index Review), 

reh’g denied, 135 FERC ¶ 61,172 (2011). 

11 Five-Year Review of the Oil Pipeline Index, 153 

FERC ¶ 61,312 (2015) (2015 Index Review), aff’d 

sub nom. Ass’n of Oil Pipe Lines v. FERC, 876 F.3d 

336 (D.C. Cir. 2017) (AOPL III). 

12 2015 Index Review, 153 FERC ¶ 61,312 at P 9. 

13The United States Court of Appeals for the 

District of Columbia Circuit has affirmed the 

Commission’s use of the Kahn Methodology. AOPL 

I, 83 F.3d at 1433–37; Flying J Inc. v. FERC, 363 

F.3d at 497–500. 

14The weighted mean assigns a different weight 

to each pipeline’s cost change based upon the 

pipeline’s total barrel-miles. 

security-based swap dealers or major 

security-based swap participants 

pursuant to section 15F(b) of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78o–10(b)) shall become effective 

sooner than the normal 60 day waiting 

period provided in Rule 15Fb3–2(b) 

(§ 240.15Fb3–2(b) of this chapter). 

* * * * * 

By the Commission. 

Dated: December 22, 2020. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–28819 Filed 2–12–21; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 342 

[Docket No. RM20–14–000] 

Five-Year Review of the Oil Pipeline 

Index 

AGENCY: Federal Energy Regulatory 

Commission, Department of Energy. 

ACTION: Order establishing index level. 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) 

issues this Final Order concluding its 

five-year review of the index level used 

to determine annual changes to oil 

pipeline rate ceilings. The Commission 

establishes an index level of Producer 

Price Index for Finished Goods plus 

0.78% (PPI–FG+0.78%) for the five-year 

period commencing July 1, 2021. 

DATES: This order is effective February 

16, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Evan Steiner (Legal Information), Office 

of the General Counsel, 888 First 

Street NE, Washington, DC 20426, 

(202) 502–8792 

Monil Patel (Technical Information), 

Office of Energy Market Regulation, 

888 First Street NE, Washington, DC 

20426, (202) 502–8296 

SUPPLEMENTARY INFORMATION: 

1. On June 18, 2020, the Commission 

issued a Notice of Inquiry initiating its 

five-year review to establish the oil 

pipeline index level for the July 1, 2021 

to June 30, 2026 time period.1 The NOI 

requested comment regarding: (a) The 

proposed index level of Producer Price 

Index for Finished Goods plus 0.09% 

(PPI–FG+0.09%); and (b) any alternative 

methodologies for calculating the index 

level. 

2. For the reasons discussed below, 

we adopt an index level of PPI– 

FG+0.78%. The departure from the NOI 

results from: (a) Trimming the data set 

to the middle 80% of cost changes; (b) 

adopting Designated Carriers’ 2 proposal 

to adjust the data set to remove the 

effects of the Commission’s 2018 

income tax policy change for Master 

Limited Partnership (MLP)-owned 

pipelines; and (c) updated Form No. 6 

filings and other corrections to the data 

set. The Commission’s indexing 

calculations and other data analysis are 

contained in Attachment A to this order. 

As discussed below, we decline to adopt 

other changes to the index calculation 

proposed by commenters. 

I. Background 

A. Establishment of the Indexing 

Methodology 

3. The Energy Policy Act of 1992 

(EPAct 1992) required the Commission 

to establish a ‘‘simplified and generally 

applicable’’ ratemaking methodology 3

that was consistent with the just and 

reasonable standard of the Interstate 

Commerce Act (ICA).4 To implement 

this mandate, the Commission issued 

Order No. 561 5 establishing an indexing 

methodology that allows oil pipelines to 

change their rates subject to certain 

ceiling levels as opposed to making 

cost-of-service filings.6

4. In Order No. 561, the Commission 

committed to review the index level 

every five years to ensure that it 

adequately reflects changes to industry 

costs.7 The Commission conducted fiveyear index reviews in 2000,8 2005,9

2010,10 and 2015.11 In the 2015 review, 

the Commission established the index 

level of PPI–FG+1.23%, to be effective 

for the five-year period beginning July 1, 

2016.12 The index level established 

herein results from the Commission’s 

fifth five-year review of the index level. 

B. The Kahn Methodology 

5. In Order No. 561 and each 

successive five-year review, the 

Commission has calculated the index 

level based upon a methodology 

developed by Dr. Alfred E. Kahn.13 The 

Kahn Methodology uses pipeline data 

from Form No. 6, page 700 from the 

prior five-year period to determine an 

appropriate adjustment to be applied to 

PPI–FG. The calculation is as follows. 

Each pipeline’s cost change on a perbarrel mile basis over the prior five-year 

period (e.g., the years 2014–2019 in this 

proceeding) is calculated. In order to 

remove statistical outliers and spurious 

data, under the Kahn Methodology, the 

resulting data set is trimmed to those oil 

pipelines in the middle 50% of cost 

changes (middle 50%). The Kahn 

Methodology then calculates three 

measures of the middle 50%’s central 

tendency: The median, the mean, and a 

weighted mean.14 The Kahn 

Methodology calculates a composite by 

averaging these measures of central 

tendency and measures the difference 

between the composite and the PPI–FG 

over the prior five-year period. The 

Commission then sets the index level at 

PPI–FG plus (or minus) this differential. 

C. The 2020 Five-Year Review 

6. On June 18, 2020, the Commission 

issued the NOI initiating its five-year 


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15NOI, 171 FERC ¶ 61,239 at PP 7–8. 

16 Id. P 8. 

17 Joint Commenters include: The Airlines for 

America; Chevron Products Company; the National 

Propane Gas Association; and Valero Marketing and 

Supply Company. 

18For purposes of this proceeding, Liquids 

Shippers include: Apache Corporation; Cenovus 

Energy Marketing Services Ltd.; ConocoPhillips 

Company; Devon Gas Services, L.P.; Equinor 

Marketing & Trading US Inc.; Fieldwood Energy 

LLC; Marathon Oil Company; Murphy Exploration 

and Production Company—USA; Ovintiv Marketing 

Inc.; and Pioneer Natural Resources USA, Inc. 

19 Inquiry Regarding the Commission’s Policy for 

Recovery of Income Tax Costs, 162 FERC ¶ 61,227, 

at P 8 (2018 Income Tax Policy Statement), reh’g 

denied, 164 FERC ¶ 61,030, at P 13 (2018). 

20Commenters either agree or do not dispute that 

the effects of the Tax Cuts and Jobs Act of 2017 

(TCJA) are appropriately reflected in the data set; 

and no adjustment is necessary to reflect the 

Commission’s May 21, 2020 policy statement 

revising its ROE policy for natural gas and oil 

pipelines because that policy change occurred after 

the conclusion of the 2014–2019 period. Inquiry 

Regarding the Commission’s Policy for Determining 

Return on Equity, 171 FERC ¶ 61,155 (2020) (ROE 

Policy Statement). 

21 2016 is the only year for which pipelines filed 

page 700 data reflecting both the 2018 Income Tax 

Policy Change and the Commission’s prior income 

tax allowance policy. Oil pipelines filed page 700 

data for 2016 on two occasions: As current-year 

data in the Form No. 6 filings due for submission 

on April 18, 2017, before the Income Tax Policy 

Change; and as prior-year data in Form No. 6 filings 

due for submission on April 18, 2018, after the 

Income Tax Policy Change. See 2018 Income Tax 

Policy Statement, 162 FERC ¶ 61,227 at P 46 & n.83 

(directing MLP pipelines to eliminate the income 

tax allowance in the 2016 and 2017 data reported 

in their April 18, 2018 Form No. 6, page 700 

filings). 

22AOPL Initial Comments at 28–29 (citing 

Shehadeh Initial Decl. at 14–15). 

23 Id.; Shehadeh Initial Decl. at 16. 

review to establish the index level for 

the July 1, 2021 to June 30, 2026 period. 

The NOI proposed an index level of 

PPI–FG+0.09% and requested comment 

on this proposal and any alternative 

methodologies for calculating the index 

level.15 The Commission explained that 

commenters could address issues 

including, but not limited to, different 

data trimming methodologies and 

whether, and if so how, the Commission 

should reflect the effects of cost-ofservice policy changes in the index 

calculation.16

II. Comments 

7. Initial comments filed in response 

to the NOI were due on August 17, 

2020, and reply comments were due on 

September 11, 2020. Comments were 

filed by the Association of Oil Pipe 

Lines (AOPL) (together with Designated 

Carriers, Pipelines), Designated Carriers, 

Kinder Morgan, Inc., Colonial Pipeline 

Company, Joint Commenters,17 the 

Liquids Shippers Group (Liquids 

Shippers),18 the Canadian Association 

of Petroleum Producers (CAPP) 

(together with Joint Commenters and 

Liquids Shippers, Shippers), the Energy 

Infrastructure Council (EIC), the 

Pipeline Safety Trust, and the Pipeline 

and Hazardous Materials Safety 

Administration (PHMSA). 

8. The commenters discuss numerous 

issues related to the proposed index 

level, including statistical data trimming 

and whether the index should 

incorporate the effects of the 

Commission’s 2018 policy change 

requiring MLP-owned pipelines to 

eliminate the income tax allowance and 

previously accrued Accumulated 

Deferred Income Taxes (ADIT) balances 

from their page 700 summary costs of 

service (Income Tax Policy Change).19

In addition, Liquids Shippers propose to 

replace the weighted mean in the Kahn 

Methodology’s calculation of central 

tendency with the weighted median and 

to replace the returns on equity (ROE) 

reported on page 700 for 2014 and 2019 

with standardized, industry-wide ROEs 

for both years. The commenters propose 

varying index levels, including AOPL’s 

proposal to adopt an index level of at 

least PPI–FG+0.79%, Designated 

Carriers’ proposals of PPI–FG+1.27% 

(using the middle 80% of cost changes) 

or PPI–FG+0.82% (using the middle 

50%), Joint Commenters’ proposal of 

PPI–FG–0.19%, and Liquids Shippers’ 

proposal of PPI–FG–1.58%. 

III. Discussion 

9. We adopt an index level of PPI– 

FG+0.78% for the five-year period 

beginning July 1, 2021. We adopt 

Designated Carriers’ proposed 

adjustment to remove the effects of the 

Income Tax Policy Change from the 

page 700 data used to derive the index 

and we adopt Pipelines’ proposal to 

calculate the index level using the 

middle 80% of cost changes. We also 

reject Liquids Shippers’ proposals to: (a) 

Calculate the composite measure of the 

data set’s central tendency using the 

median of the barrel-mile weighted unit 

cost change; and (b) replace the reported 

page 700 ROEs for 2014 and 2019 with 

standardized ROEs. We also address 

arguments regarding negotiated rate 

contracts as raised by CAPP, pipeline 

costs resulting from integrity 

management regulations, and the 

treatment of mergers and acquisitions in 

the data set. 

A. 2018 MLP Income Tax Policy Change 

1. Comments 

10. Commenters disagree about 

whether the Commission should 

incorporate the effects of the Income 

Tax Policy Change in the index 

calculation.20 Pipelines argue that the 

Income Tax Policy Change should not 

be incorporated and present proposals 

for adjusting the page 700 data to 

remove its effects from the calculation. 

Shippers oppose Pipelines’ adjustments 

and contend that the policy change’s 

effects are appropriately reflected in the 

index. 

11. AOPL argues that its proposed 

adjustment to eliminate the effects of 

the Income Tax Policy Change is 

necessary to calculate an index that 

accurately measures cost changes 

incurred during the 2014–2019 period 

and predicts the likely rate of future cost 

changes. According to AOPL, 

eliminating the income tax allowance 

from page 700 did not affect costs 

because MLP pipelines’ income tax 

costs were the same before and after the 

policy change. Thus, AOPL asserts that 

the Commission should remove the 

policy change’s effects to ensure that the 

page 700 data reflects consistent 

policies. 

12. To remove the policy change’s 

effects from the data set, AOPL’s 

witness Dr. Shehadeh proposes to adjust 

the reported page 700 data for pipelines 

that were MLPs throughout the 2014– 

2019 period based upon the following 

steps. First, Dr. Shehadeh eliminates the 

2014 income tax allowance for all 

pipelines that reduced their page 700 

income tax allowance for 2016 from a 

positive number to zero following the 

Income Tax Policy Change.21 Second, 

Dr. Shehadeh adjusts these pipelines’ 

2014 page 700 return on rate base to 

reflect the elimination of their 

previously accumulated ADIT 

balances.22 This adjustment involves, 

for each pipeline: (a) Taking the 

difference between the 2016 rate base 

reported in the pipeline’s April 18, 2017 

page 700 filing (with ADIT balances 

included) and the higher 2016 rate base 

reported in its April 18, 2018 filing 

(with ADIT balances removed); (b) 

adding this amount to the 2014 rate 

base; and (c) calculating the return on 

the higher 2014 rate base by multiplying 

the higher rate base by the 2014 

weighted average cost of capital.23

13. Designated Carriers support 

AOPL’s position and propose to extend 

AOPL’s proposed adjustments to all 

pipelines that were owned by MLPs in 

2014 and later converted to CCorporations, not just those pipelines 

that were MLPs throughout the 2014– 

2019 data period. Designated Carriers 

contend that this approach is necessary 

to avoid treating one class of MLPs 

(those that were MLPs in 2014 and 

remained MLPs in 2019) differently 

from another class (those that were 

MLPs in 2014 and converted to CVerDate Sep<11>2014 15:57 Feb 12, 2021 Jkt 253001 PO 00000 Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\16FER1.SGM 16FER1

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24 Designated Carriers Initial Comments at 21 

(citing Webb Initial Affidavit at P 24). 

25 Joint Commenters Reply Comments at 13–14 

(quoting 2015 Index Review, 153 FERC ¶ 61,312 at 

P 13) (citing AOPL III, 876 F.3d at 345–46); Liquids 

Shippers Reply Comments at 6 (quoting AOPL III, 

876 F.3d at 345; 2015 Index Review, 153 FERC 

¶ 61,312 at P 13). 

26 Joint Commenters Initial Comments at 12–15; 

Joint Commenters Reply Comments at 13–15; 

Liquids Shippers Initial Comments at 33–42; 

Liquids Shippers Reply Comments at 6–7. 

27 Joint Commenters Reply Comments at 16–17 

(quoting 2018 Income Tax Policy Statement, 162 

FERC ¶ 61,227 at P 46); Liquids Shippers Initial 

Comments at 34–35 (same). 

28Liquids Shippers Initial Comments at 34–35, 

40; see also Joint Commenters Reply Comments at 

16–17 (citing 2018 Income Tax Policy Statement, 

162 FERC ¶ 61,227 at P 46). 

29This issue did not arise prior to the 2015 Index 

Review because the Commission measured 

industry-wide cost changes in the Order No. 561 

Rulemaking and the 2000, 2005, and 2010 index 

reviews using Form No. 6 accounting data, rather 

than the summary cost-of-service data reported on 

page 700. Because the Commission did not adopt 

any significant cost-of-service policy changes 

during the 2009–2014 review period, the 

Commission likewise did not have occasion to 

address this issue in the 2015 Index Review. 

30Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 

30,948, 30,950. Capital costs such as income taxes 

are among the industry-wide costs that the index is 

designed to measure. E.g., 2015 Index Review, 153 

FERC ¶ 61,312 at P 17. 

31 In 2015, the Commission adopted page 700 

because it included actual total cost-of-service data 

reflecting the costs recoverable under the Opinion 

No. 154–B methodology. 2015 Index Review, 153 

FERC ¶ 61,312 at P 13. We reaffirm that using page 

700 data remains a superior means of measuring 

those recoverable costs as compared to the prior 

methodology from which the Commission departed 

in the 2015 Index Review. Id. PP 12–16. For 

example, the Opinion No. 154–B methodology 

reflected on page 700 more appropriately addresses 

capital costs. Id. PP 14–15 & nn.29–30. However, 

the purpose of the index is to address changes to 

those recoverable costs, not changes to what the 

Commission deems recoverable, such as the 

complete elimination of a particular cost category 

such as the MLP income tax allowance. 

32 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 46. 

33 2015 Index Review, 153 FERC ¶ 61,312 at P 14 

(citing Order No. 561–A, FERC Stats & Regs. 

¶ 31,000 at 31,096, 31,098). 

34Net carrier property measures changes to the 

book value of the pipeline’s asset base but does not 

incorporate changes to the costs of financing the 

asset base, such as ROE. As the Commission 

explained in the 2015 Index Review, the 

relationship between net carrier property and 

income tax costs is attenuated because income taxes 

are dependent upon the pipeline’s ROE, not merely 

the size of the pipeline’s asset base. 2015 Index 

Review, 153 FERC ¶ 61,312 at P 14. 

35Under the Commission’s Lakehead policy from 

1995 to 2005, partnership entities like MLP 

pipelines could recover an income tax allowance 

for income attributable to corporate partners, but 

not for income attributable to individuals or other 

non-corporate partners. See Lakehead Pipe Line Co., 

L.P., Opinion No. 397, 71 FERC ¶ 61,338 (1995), 

reh’g denied, Opinion No. 397–A, 75 FERC 

¶ 61,181, at 61,594–99 (1996). 

36 In 2005, the Commission departed from the 

Lakehead policy and issued a policy statement 

announcing that it would permit partnership 

entities to recover an income tax allowance for 

income attributable to all partners regardless of the 

partner’s corporate form, to the extent that the 

partner had an actual or potential income tax 

liability on that income. Inquiry Regarding Income 

Tax Allowances, 111 FERC ¶ 61,139, at P 32 (2005). 

Corporations during the review 

period).24

14. Shippers oppose Pipelines’ 

proposed adjustments and argue that the 

Commission should incorporate the 

effects of the Income Tax Policy Change 

in the index calculation. Shippers 

contend that the index is meant to 

reflect changes to recoverable pipeline 

costs as determined under the 

Commission’s Opinion No. 154–B costof-service methodology.25 Because the 

Income Tax Policy Change prohibits 

MLP pipelines from recovering an 

income tax allowance under that 

methodology, Shippers assert that the 

index should reflect this reduction in 

recoverable costs.26

15. Furthermore, Shippers claim that 

adopting Pipelines’ proposals would 

contravene the Commission’s 

commitment in the 2018 Income Tax 

Policy Statement to ‘‘incorporate the 

effects of [the policy change] on 

industry-wide oil pipeline costs’’ and 

‘‘ensure that the industry-wide reduced 

costs are incorporated on an industrywide basis as part of’’ the 2020 five-year 

review.27 Shippers argue that the 

Commission opted to incorporate these 

effects in the index in lieu of directing 

pipelines to submit rate filings or 

initiating rate investigations to eliminate 

the income tax double recovery from 

MLP oil pipeline rates, as the 

Commission did for MLP natural gas 

pipelines. Thus, Shippers contend that 

the Commission must reflect the 

elimination of the income tax allowance 

and associated ADIT balances from MLP 

oil pipelines’ page 700 costs of service 

in order to bring those pipelines’ rates 

in line with their recoverable costs.28

2. Commission Determination 

16. Whether the index should reflect 

the effects of cost-of-service policy 

changes is an issue of first impression.29

For the reasons discussed below, we 

adopt Designated Carriers’ proposal to 

adjust the page 700 data set to remove 

the effects of the Income Tax Policy 

Change from the index calculation. As 

a result, for all pipelines that were MLPs 

in 2014, we reduce the 2014 income tax 

allowance to zero and revise the 2014 

return on rate base to reflect the removal 

of ADIT. We find that this adjustment is 

necessary to accurately calculate the 

index. 

17. First, the purpose of indexing is to 

allow the indexed rate to keep pace with 

industry-wide cost changes,30 not to 

reflect alterations to the Commission’s 

Opinion No. 154–B cost-of-service 

methodology.31 Although the 

Commission uses the Opinion No. 154– 

B methodology cost data on page 700 for 

purposes of the five-year review, 

changes to the Opinion No. 154–B 

methodology itself are distinct from the 

annual changes to the pipeline costs 

that are input into the Opinion No. 154– 

B methodology. Where the Commission 

modifies an Opinion No. 154–B cost-ofservice policy used to measure 

recoverable costs midway through the 

five-year review period, the Opinion No. 

154–B cost of service reported on page 

700 for the first and last years of the 

period will reflect different sets of 

policies. Just as a business must account 

for changes to its accounting policies 

when comparing its costs over two 

different periods, we must make a 

similar adjustment to the reported page 

700 data here to derive an ‘‘apples-toapples’’ comparison of pipeline cost 

changes. By contrast, comparing data 

reported under different sets of policies 

will produce a less accurate measure of 

normal industry-wide cost changes. 

18. Second, although we recognize 

that in the 2018 Income Tax Policy 

Statement the Commission stated that it 

would ‘‘incorporate the effects of the 

post-United Airlines’ policy changes on 

industry-wide oil pipeline costs in the 

2020 five-year review of the oil pipeline 

index level,’’ 32 we conclude that the 

index is not an appropriate mechanism 

for incorporating the post-United 

Airlines’ policy changes. The index 

allows for incremental rate adjustments 

to enable pipelines to recover normal 

cost changes in future years. It is not a 

true-up designed to remedy prior overor under-recoveries in pre-existing rates 

resulting from cost-of-service policy 

changes during the prior five-year 

period. Accordingly, we find that it 

would be improper to address any 

double recovery via the index. 

19. Third, it is not clear that the 

double recovery of MLP pipelines’ 

income tax costs was ever incorporated 

into the index. Before the Commission 

updated its calculation of the index in 

the 2015 Index Review to use page 700 

data, the Kahn Methodology used net 

carrier property as a proxy for capital 

costs and income taxes.33 This proxy 

did not reflect changes in the 

Commission’s Opinion No. 154–B 

methodology, including changes to the 

Commission’s income tax policy.34 As a 

result, the Commission’s prior policies 

permitting MLP pipelines to recover a 

partial 35 or full 36 income tax allowance 

were never directly incorporated into 


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37MLP pipelines therefore would not have 

benefitted from these policies unless they 

established an initial cost-based rate under 18 CFR 

342.2(a) of the Commission’s regulations or changed 

an existing rate pursuant to the cost-of-service 

methodology under 18 CFR 342.4(a) while these 

policies were in effect. 18 CFR 342.2(a), 342.4(a). 38See 2018 Income Tax Policy Statement, 162 

FERC ¶ 61,227 at PP 45–46. 39As the Commission has explained, investors in 

MLP pipelines and C-Corporation pipelines incur 

an investor-level income tax cost that is reflected in 

the pipeline’s rate of return. SFPP, L.P., Opinion 

No. 511–C, 162 FERC ¶ 61,228, at PP 22–24 (2018), 

order on reh’g and compliance, Opinion No. 511– 

D, 166 FERC ¶ 61,142, at PP 10–11 (2019), aff’d, 

SFPP, L.P. v. FERC, 967 F.3d 788, 795–97 (D.C. Cir. 

2020). However, unlike MLPs, corporations incur 

an additional corporate income tax liability prior to 

the distributions to investors. See Opinion No. 511– 

C, 162 FERC ¶ 61,228 at PP 22 n.44, 25 n.53. 

40AOPL Initial Comments at 17–24; AOPL Reply 

Comments at 7–9. 

41AOPL Initial Comments at 18 (quoting 

Shehadeh Initial Decl. at 23); AOPL Reply 

Comments at 9. 

42AOPL Initial Comments at 19. Trimming the 

data set to the middle 50% would exclude 80 of the 

160 pipelines in the data set, whereas trimming to 

the middle 80% would exclude 32 pipelines. 

43AOPL Initial Comments at 21–22 (citing AOPL 

I, 83 F.3d at 1433). 

44 Id. at 23 (citing AOPL II, 281 F.3d at 245–46). 

45 Designated Carriers Initial Comments at 7; 

Kinder Morgan Initial Comments at 3; EIC 

Comments at 7–8, 17. 

46 Joint Commenters Initial Comments at 15–16; 

Joint Commenters Reply Comments at 5–7; Liquids 

Shippers Reply Comments at 17; CAPP Reply 

Comments at 15–16. 

47 Joint Commenters Reply Comments at 10 

(citing Brattle Group Report at 13–20); Brattle 

Group Report at 22; Liquids Shippers Reply 

Comments at 19–21 (citing Crowe Reply Aff. at 4– 

5). 

48 Joint Commenters Reply Comments, Brattle 

Group Report at 17–20. 

49 Joint Commenters Reply Comments at 7–8; 

Liquids Shippers Reply Comments at 26. 

50 Joint Commenters Reply Comments at 9–11 

(quoting 2015 Index Review, 153 FERC ¶ 61,312 at 

P 42 n.80) (citing 2015 Index Review, 153 FERC 

¶ 61,312 at P 43); Liquids Shippers Reply 

Comments at 23–25 (citing 2015 Index Review, 153 

FERC ¶ 61,312 at PP 40, 43). 

51 Joint Commenters Reply Comments, Brattle 

Report at PP 46–48 (citing 2015 Index Review, 153 

FERC ¶ 61,312 at P 43; Order No. 561–A, FERC 

Stats. & Regs. ¶ 31,000 at 31,098). 

52Liquids Shippers Reply Comments at 22–23 

(citing Order No. 561–A, FERC Stats. & Regs. 

¶ 31,000 at 31,097). 

53 2015 Index Review, 153 FERC ¶ 61,312 at PP 

42–44; 2010 Index Review, 133 FERC ¶ 61,228 at PP 

60–63. 

54E.g., Encino Motorcars, LLC v. Navarro, 136 S. 

Ct. 2117, 2125–26 (2016) (‘‘Agencies are free to 

change their existing policies so long as they 

provide a reasoned explanation for the change. . . . 

But the agency must at least display awareness that 

it is changing position and show that there are good 

Continued 

the index.37 Because no prior index 

calculation incorporated the policies 

allowing MLP pipelines to recover an 

index tax allowance, it is not necessary 

to reflect the policy change denying 

those pipelines an income tax allowance 

in the calculation here. 

20. Accordingly, we adopt Designated 

Carriers’ proposal to adjust the 

historical page 700 data for 2014 to 

remove the effects of the Income Tax 

Policy Change for all pipelines that were 

MLPs in 2014, including those that later 

converted to a business form (such as a 

C-Corporation) eligible to recover an 

income tax allowance. This approach is 

broader than AOPL’s more limited 

proposal to adjust the data for only 

those pipelines that were MLPs in 2014 

and that continued to be MLPs for the 

remainder of the 2014–2019 period. 

Because the Commission’s revised 

income tax allowance policy applies 

equally to all MLP pipelines,38 we 

conclude that it is appropriate to make 

these adjustments for all pipelines that 

were MLPs in 2014, regardless of 

subsequent changes in corporate form. 

By applying these adjustments to all 

pipelines subject to the Income Tax 

Policy Change, we will ensure that the 

entirety of the page 700 data reflects the 

same MLP income tax allowance policy 

for both 2014 and 2019. Furthermore, 

those pipelines that converted from the 

MLP form to the corporate form 

incurred increased tax costs as a result 

of the change in business form. This 

cost change, just like any other cost 

change, should be reflected in the 

index.39

B. Statistical Data Trimming 

1. Comments 

21. AOPL argues that the Commission 

should calculate the index level by 

trimming the data set to the middle 

80%.40 AOPL asserts that absent errors 

in the data, it is preferable to use more 

data points because this makes the 

measurement of industry-wide cost 

changes more precise.41 AOPL contends 

that using the middle 50% in this 

proceeding would go beyond excluding 

statistical outliers by removing valuable 

data from the analysis, resulting in a 

less accurate measurement of industry 

cost changes.42

22. In addition, AOPL maintains that 

considerations the Commission has 

previously found to support trimming 

the data set to the middle 50% should 

not control here. It states that whereas 

the Commission found in Order No. 561 

that data reporting errors supported 

restricting the analysis to the middle 

50%, subsequent improvements in 

reporting accuracy obviated these 

concerns.43 Furthermore, AOPL states 

that contrary to the Commission’s 

finding in the 2015 Index Review, the 

fact that pipelines in the middle 80% 

are further removed from the median 

does not support excluding their cost 

data unless that data is anomalous or 

spurious.44 Designated Carriers, Kinder 

Morgan, and EIC support AOPL’s 

proposal to rely solely upon the middle 

80%.45

23. Shippers oppose use of the middle 

80% and argue that the record does not 

provide a sufficient basis for departing 

from the Commission’s practice in the 

2015 and 2010 Index Reviews of relying 

solely upon the middle 50%.46 Shippers 

cite the Commission’s findings in the 

2015 and 2010 Index Reviews that using 

the middle 50% provides a simple and 

effective method of excluding outlying 

data from the sample and minimizes the 

need to analyze individual pipeline 

data. Here, Shippers argue that the 

middle 80% contains outlying data and 

that AOPL did not undertake a 

company-by-company review of the 

incremental data included in the middle 

80% to prove otherwise.47 Joint 

Commenters also contend that the 

middle 80% is more dispersed than the 

middle 50% in this proceeding and the 

middle 80% in prior index reviews, 

indicating that it contains cost changes 

that are not representative of typical 

experience.48 Moreover, Shippers assert 

that it is unnecessary to use the middle 

80% in this proceeding to obtain a 

representative sample of industry cost 

changes because the middle 50% 

contains a greater percentage of barrelmiles subject to the index (82%) than in 

the 2015 Index Review (56%) or the 

2010 Index Review (76%).49

24. Shippers further argue that 

AOPL’s arguments for using the middle 

80% are unavailing and inconsistent 

with the Commission’s findings in the 

2015 Index Review.50 Joint Commenters 

maintain that the Commission has 

previously rejected the argument that 

using the middle 50% will bias the 

index calculation downwards.51 Liquids 

Shippers state that AOPL incorrectly 

argues that the sole purpose of statistical 

data trimming is to remove inaccurate 

data and statistical outliers. According 

to Liquids Shippers, data trimming also 

serves to exclude data that, while 

accurate, fails to represent normal 

industry cost experience.52

2. Commission Determination 

25. Based upon our review of the 

instant record, we calculate the index 

level by trimming the data set to the 

middle 80%. We recognize that this is 

a departure from the Commission’s 

practice in the 2015 and 2010 Index 

Reviews of trimming the data set to the 

middle 50%.53 An agency may change 

its position in light of experience or 

further analysis so long as it articulates 

a satisfactory explanation for its new 

position.54 Thus, notwithstanding the 


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reasons for the new policy.’’) (internal quotation 

mark and citations omitted); New England Power 

Generators Ass’n, Inc. v. FERC, 879 F.3d 1192, 1201 

(D.C. Cir. 2018) (‘‘So long as any change is 

reasonably explained, it is not arbitrary and 

capricious for an agency to change its mind in light 

of experience . . . or further analysis or other 

factors indicating that the agency’s earlier decision 

should be altered or abandoned.’’ (citing FCC v. Fox 

Television Studios, 556 U.S. 502, 514–16 (2009)); 

Defenders of Wildlife v. Zinke, 856 F.2d 1248, 1262 

(9th Cir. 2017). 

55 Davila-Bardales v. INS, 27 F.3d 1, 5 (1st Cir. 

1994) (citing Rust v. Sullivan, 500 U.S. 173, 186– 

87 (1991); Motor Vehicles Mfrs. Ass’n v. State Farm 

Mut. Auto. Ins. Co., 463 U.S. 29, 42 (1983)). 

56 FCC v. Fox Television Studios, Inc., 556 U.S. 

at 515; see also id. (explaining that an agency ‘‘need 

not demonstrate to a court’s satisfaction that the 

reasons for the new policy are better than the 

reasons for the old one; it suffices that the new 

policy is permissible under the statute, that there 

are good reasons for it, and that the agency believes 

it to be better’’) (emphasis in original). 

57NOI, 171 FERC ¶ 61,239 at P 9 (citing 2005 

Index Review, 114 FERC ¶ 61,293). 

58Shehadeh Initial Decl. at 26. 

59The definition of idiosyncratic data can vary 

from review to review. In any given five-year review 

period, an historically high level of cost change 

(due to, e.g., new regulatory requirements) may be 

widely experienced by pipelines across the industry 

and, accordingly, will be reflected in the central 

tendency of the industry-wide data and thus 

identified as a ‘‘normal’’ cost change. On the other 

hand, if during a different five-year review period, 

only a small number of pipelines experience that 

same level of cost change, then the cost change will 

be idiosyncratic and will differ significantly from 

the central tendency of the industry-wide data. 

Generally, the best method of identifying normal 

and idiosyncratic costs is to consider an inclusive 

and broadly representative data set such as the 

middle 80% and to compare those costs to the 

central tendency of that data set. 

60Likewise, if the lower bound of the middle 80% 

includes pipelines with cost changes that are below 

industry norms, the index average will significantly 

exceed this lower bound. 

61For instance, commenters proposing various 

manual data trimming methodologies demonstrated 

that the middle 80% included pipelines whose cost 

changes resulted from idiosyncratic circumstances 

such as major rate base expansions or increases in 

net plant. See 2015 Index Review, 153 FERC 

¶ 61,312 at PP 20–29; 2010 Index Review, 133 FERC 

¶ 61,228 at PP 34–55. 

62When these pipelines are removed from the 

data set, the mean of the middle 80% declines from 

1.46% to 1.29%, while the median and weighted 

mean remain nearly unchanged. This reduces the 

composite central tendency of the middle 80% only 

marginally, from 0.78% to 0.72%. Compare 

Attachment A, Ex. 1, with id., Ex. 6. Furthermore, 

even this limited reduction may be exaggerated 

because it results in part from reducing the overall 

number of pipelines in the sample, which would 

tend to lower the mean of the sample. Additionally, 

because four of the seven removed pipelines are 

located below the median, it is unsurprising that 

excluding them from the middle 80% would reduce 

the mean. 

63 In using the middle 80% in this proceeding, we 

observe that the index level established herein is 

nonetheless the lowest index since the 2000 Index 

Review. This mitigates concerns that using the 

middle 80% leads to an anomalous index level. 

64See 2015 Index Review, 153 FERC ¶ 61,312 at 

P 33 n.60 (noting that 26 of the 41 pipelines that 

commenters proposed to exclude for reporting 

‘‘non-comparable’’ data were included in the 

middle 50%); 2010 Index Review, 133 FERC 

¶ 61,228 at P 48 n.25 (noting that 7 of the 25 

pipelines that a commenter proposed to exclude for 

experiencing rate base expansions were included in 

the middle 50%). Just as the presence of those 

pipelines did not preclude use of the middle 50% 

in earlier reviews, we find that the pipelines Joint 

Commenters identified do not preclude use of the 

middle 80% in this proceeding. 

65AOPL also argues that the Commission should 

use the middle 80% because it conforms more 

closely to a lognormal distribution than the middle 

50%. AOPL Initial Comments at 20–21, 24 (citing 

Shehadeh Initial Decl. at 24); AOPL Reply 

Comments at 8–9. Shippers contend that this 

argument is mathematically flawed and unsound. 

Joint Commenters Reply Comments, Brattle Report 

at PP 50–54; Liquids Shippers Reply Comments at 

24–25 (quoting Crowe Reply Aff. at 5). Given these 

objections, we do not rely upon this argument in 

reaching our decision to use the middle 80% here. 

See also 2015 Index Review, 153 FERC ¶ 61,312 at 

P 43 (rejecting this same argument). 

Commission’s determinations in the 

2015 and 2010 Index Reviews, the 

Commission ‘‘retain[s] a substantial 

measure of freedom to refine, 

reformulate, and even reverse [its] 

precedents in the light of new 

insights’’ 55 if it describes good reasons 

for the new policy.56 In the NOI, the 

Commission requested comments that 

address whether the Commission 

should continue to trim the data set to 

the middle 50% or adopt an alternative 

approach to data trimming, including 

using the middle 80%.57 Based upon 

our review of the resulting record, we 

conclude that using the middle 80% is 

appropriate for this index review. 

26. Three primary considerations 

support using the middle 80% instead 

of the middle 50% in this proceeding. 

First, we find it is appropriate to 

consider more data in measuring 

industry-wide cost changes rather than 

less. The Kahn Methodology derives the 

index level by computing the central 

tendency of a statistically trimmed data 

sample. As a general matter, considering 

a broader sample of data should 

enhance the Commission’s calculation 

of the central tendency of industry cost 

experience. In this proceeding, using the 

middle 50% would exclude 48 

pipelines 58 from the Commission’s 

review of industry-wide cost changes 

over the 2014–2019 period. We are 

reluctant to discard this additional data. 

27. Second, we find in this 

proceeding that ‘‘normal’’ cost changes 

are best defined by using the inclusive 

data sample embodied in the middle 

80%. Prematurely discarding data prior 

to determining the central tendency 

could skew the index such that it does 

not actually reflect industry-wide 

trends. By using this inclusive data 

sample, the Commission is able to 

accurately identify the central tendency 

of industry-wide cost changes that 

reflects the ‘‘normal’’ cost changes 

recoverable by the index.59 Moreover, 

even if the middle 80% (or, for that 

matter, the middle 50%) includes 

relatively high cost changes at its upper 

bound, the index average will be 

significantly below that upper bound 

and will not allow pipelines to recover 

such extraordinary costs.60 Rather, the 

index will reflect the central tendency 

of the industry-wide data, which, by 

definition, represents normal industrywide costs. Absent a compelling 

showing that including data from the 

middle 80% distorts our measurement 

of the industry-wide central tendency, 

we are inclined to consider this more 

comprehensive data set. 

28. Third, along similar lines, we 

emphasize that mere generalized 

concerns about outlying or 

unrepresentative data do not justify 

excluding the experiences of pipelines 

in the incremental 30% (i.e., those 

pipelines that are included in the 

middle 80% but not the middle 50%) 

from our review of industry cost 

changes. Unlike in prior index reviews, 

the record in this proceeding does not 

contain sufficient evidence that 

pipelines in the incremental 30% 

experienced anomalous cost changes 

that would skew the index. In the 2015 

and 2010 Index Reviews, commenters 

presented detailed analyses 

demonstrating that the incremental 30% 

contained anomalous cost changes 

resulting from factors not broadly 

shared across the industry that would 

materially distort the index 

calculation.61 The record here does not 

contain a comparably detailed analysis 

of the incremental 30%. Although Joint 

Commenters identify 7 pipelines (out of 

48) with anomalous cost changes in the 

incremental 30%, removing those 

pipelines from the sample would only 

marginally affect the central tendency of 

the middle 80%.62 Furthermore, the 

record contains no evidence that the 

cost experiences of the remaining 41 

pipelines similarly diverged from 

industry norms.63 Finally, the mere 

presence of pipelines with anomalous 

cost experiences in a data sample is not 

sufficient reason to use an alternative 

sample. The Commission recognized in 

the 2015 and 2010 Index Reviews that 

the middle 50% likely includes 

pipelines with idiosyncratic cost 

experiences, such as rate base 

expansions.64 Accordingly, this record 

does not justify discarding the 

additional data in the incremental 30% 

via statistical data trimming to the 

middle 50%.65

29. Shippers’ arguments for a contrary 

result are unavailing. Notwithstanding 

that the middle 80% is more dispersed 

than in prior reviews, the record 

contains no evidence addressing 


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66See Order No. 561–A, FERC Stats. & Regs. 

¶ 31,000 at 31,097 (rejecting request to adopt index 

‘‘sufficiently high and generous to encompass even 

the most extraordinary costs’’ because such an 

index ‘‘would provide windfalls to many oil 

pipelines by allowing rate changes substantially 

above cost changes’’). 

67Liquids Shippers Initial Comments at 13–15. 

For instance, Liquids Shippers state that Colonial 

and Enbridge comprise 40% of the total barrel-miles 

for all of the 160 pipelines in the data set. Id. In 

addition, Liquids Shippers claim that Colonial 

reported a higher unit cost change over the 2014– 

2019 period than 69 of the 80 pipelines included 

in the middle 50% and Enbridge reported a higher 

cost change than 47 of those pipelines. Id. at 15. 

68Specifically, Liquids Shippers claim that 

Colonial reported an inaccurate capital structure in 

both 2014 and 2019 and that Enbridge’s reported 

ROEs are inconsistent with Commission policy. Id. 

at 17–19. 

69 Id. at 16–19. 

70The standard median identifies the cost change 

for which the same number of pipelines have a 

smaller cost change and a larger cost change. By 

contrast, the weighted median identifies the cost 

change for which the same share of barrel-miles 

(rather than the number of pipelines) is accounted 

for by the pipelines below and above the selected 

median. 

71Liquids Shippers Initial Comments at 19–20 

(quoting Order No. 561–A, FERC Stats. & Regs. 

¶ 31,000 at 31,097). 

72 Id. at 20. 

73 Id. at 20 n.45; Crowe Initial Affidavit at 8–9. 

74AOPL Reply Comments at 22–27; Designated 

Carriers Reply Comments at 6–13. 

75Colonial Reply Comments at 3–11. 

whether the more dispersed cost 

changes in the incremental 30% 

resulted from pipeline-specific factors 

rather than from broadly shared 

circumstances representative of 

ordinary pipeline operations. 

Furthermore, Shippers’ own evidence 

demonstrates the dispersion is primarily 

just a few pipelines at the top of the 

middle 80%. Although it may be 

possible that analyses of the middle 

80% in this proceeding similar to those 

provided in prior index reviews would 

have raised similar concerns about 

considering the middle 80%, no 

commenter presented such a 

comprehensive analysis. In the absence 

of a more detailed showing, we prefer to 

use a larger sample, representing a 

broader array of cost experience, in 

determining the data set’s central 

tendency. 

30. We are likewise unpersuaded by 

Shippers’ reliance upon the 

Commission’s findings in the 2015 and 

2010 Index Reviews that the middle 

80% includes pipelines further removed 

from the median and that using the 

middle 50% provides a more effective 

method of excluding outlying data. As 

discussed above, we have reconsidered 

our prior findings and now conclude 

that based upon the record in this 

proceeding, the benefits of considering 

the additional data in the middle 80% 

outweigh concerns about introducing 

anomalous data that could bias the 

index calculation. 

31. We also find unpersuasive 

Shippers’ argument that it is 

unnecessary to use the middle 80% to 

obtain a representative sample of 

industry cost data. We acknowledge that 

the middle 50% represents a greater 

percentage of barrel-miles subject to the 

index than in 2015 or 2010. However, 

we find that on this record, it is 

preferable to consider additional data 

that more fully reflects the diversity of 

industry cost experience than the 

middle 50%. 

32. Similarly, we disagree with 

Shippers’ assertion that using the 

middle 80% here would result in an 

index that encompasses extraordinary 

cost changes.66 As discussed above, the 

Kahn Methodology determines the 

index level using the central tendency 

of the trimmed data sample, and does 

not set the index at the sample’s upper 

or lower bounds. Thus, using the 

middle 80% will not allow pipelines at 

the top or bottom of the sample to 

recover their particular cost changes, 

which by definition would diverge from 

the experience of pipelines closer to the 

central tendency. Instead, this approach 

only ensures that those pipelines’ cost 

experiences are reflected in calculating 

the data set’s central tendency. As 

discussed above, we find that 

considering a wide spectrum of industry 

experience will aid the Commission in 

calculating a central tendency that 

better represents normal industry-wide 

cost changes. 

C. Liquids Shippers’ Proposal To 

Calculate the Composite Measure of 

Central Tendency Using the Weighted 

Median 

1. Comments 

33. As discussed above, the Kahn 

Methodology calculates the median, 

mean, and weighted mean of the data 

set and averages the results to calculate 

a composite measure of central 

tendency. Liquids Shippers argue that 

the weighted mean of the data set in this 

proceeding accords undue weight to two 

pipelines, Colonial and Enbridge 

Energy, L.P. Liquids Shippers allege that 

these pipelines are substantial outliers 

in terms of barrel-miles and cost 

changes 67 and that both reported 

inaccurate page 700 data for 2014 and 

2019.68 Because the weighted mean 

accords significant weight to these 

pipelines, Liquids Shippers state that 

using it to calculate the composite 

measure of central tendency will skew 

the index level upwards and fail to track 

normal industry-wide cost changes.69

34. To remedy this issue, Liquids 

Shippers propose to replace the 

weighted mean in the index calculation 

with the median of the barrel-mile 

weighted cost changes in the middle 

50% (weighted median),70 as calculated 

by their witness Elizabeth H. Crowe. 

Liquids Shippers contend that the 

Commission has recognized that the 

median is the preferred statistical 

measure of central tendency where the 

data distribution is highly skewed.71

Thus, Liquids Shippers argue that using 

the weighted median is a statistically 

appropriate method of ameliorating the 

undue influence that Colonial and 

Enbridge exert upon the index 

calculation.72 Alternatively, if the 

Commission decides not to replace the 

weighted mean with the weighted 

median, Liquids Shippers propose 

reducing the weighting afforded to the 

weighted mean in the Kahn 

Methodology from 33.3% to 20% or 

10%.73

35. Pipelines oppose this proposal 

and argue that Liquids Shippers have 

not justified modifying the Kahn 

Methodology to exclude the weighted 

mean. Pipelines disagree with Liquids 

Shippers’ claim that the weighted mean 

affords excessive weight to Colonial or 

Enbridge. Rather, Pipelines assert that 

averaging the weighted mean with the 

median and unweighted mean ensures 

that larger pipelines receive appropriate 

weighting in the index calculation, 

consistent with indexing’s aim to 

measure cost changes on an industrywide basis. Pipelines also assert that 

neither Colonial nor Enbridge is an 

outlier because both pipelines are 

included in the middle 50% of the data 

set. In addition, Pipelines maintain that 

Liquids Shippers’ allegations regarding 

Colonial’s and Enbridge’s page 700 

inputs are both irrelevant and outside 

the scope of the five-year review. 

Finally, Pipelines contend that Liquids 

Shippers’ calculation of the weighted 

median is methodologically flawed and 

would distort the index by affording 

undue weight to smaller pipelines in the 

data set.74 Colonial filed separate reply 

comments echoing these arguments and 

urging the Commission to disregard 

Liquids Shippers’ claims regarding its 

page 700.75

2. Commission Determination 

36. We decline to adopt Liquids 

Shippers’ proposal to replace the 

weighted mean with the weighted 

median. First, removing the weighted 

mean from the index calculation would 

contravene longstanding Commission 

practice and Dr. Kahn’s testimony in the 

rulemaking proceeding that established 


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76Testimony of Dr. Alfred E. Kahn, Docket No. 

RM93–11–000, at 9 (filed Aug. 12, 1993). 

77The Commission has previously recognized 

that large pipelines like Colonial can exert 

significant influence upon the weighted mean. 2015 

Index Review, 153 FERC ¶ 61,312 at P 24 n.49 

(explaining that ‘‘[b]ecause Colonial is a large 

pipeline, it heavily influences the weighted average 

in the Kahn Methodology’’). 

78AOPL II, 281 F.3d at 241. Although Order No. 

561–A recognized that the median is often the 

preferred statistical measure of central tendency 

where the distribution is highly skewed, the 

Commission made this observation in affirming the 

use of statistical data trimming to derive a median 

sample of the overall data set rather than in the 

context of using the median to determine the data 

set’s central tendency. See Order No. 561–A, FERC 

Stats. & Regs. ¶ 31,000 at 31,096–97. In that 

proceeding and in each subsequent index review, 

the Commission has consistently calculated the 

composite measure of central tendency by averaging 

the median, mean, and weighted mean. 

79Shehadeh Reply Decl. at 11. 

80For example, consider a set of numbers 3, 4, 6, 

10, where each number is weighted 1, 2, 3, and 5, 

respectively. In this scenario, the weighted median 

of the data set would equal 6, because including 6 

in the set increases the cumulative weighting to 

50%. (1+2+3)/(1+2+3+5) = 6/11 = 54.55%. By 

contrast, the standard median would be 5, which 

equals the average of the second and third numbers 

of the set. 

81 Dr. Shehadeh correctly performs this 

calculation using Liquids Shippers’ data set and 

derives a weighted median cost change of 0.68%, 

as reported by Enbridge. Shehadeh Reply Decl., 

App. B, Ex. 1. 

82Shehadeh Reply Decl. at 13; see also Crowe 

Initial Aff., App. 6 at Cost Changes Tab. Although 

Ms. Crowe’s testimony on this issue was unclear, 

our understanding of her calculation is as follows. 

First, she identified the pipelines with percentage 

cost changes in the middle 50%. Second, she 

multiplied each pipeline’s percentage cost change 

by its barrel-miles. Third, she arranged the 

pipelines based upon these results from smallest to 

largest. Fourth, she determined the median of this 

data sample. Because Ms. Crowe’s sample consists 

of an even number of pipelines, the median lies at 

the midpoint between two pipelines, Hilcorp 

Pipeline Company, LLC, and BOE Pipeline, LLC. 

Finally, she divided the median percentage cost 

change by those pipelines’ 2014 barrel-miles, which 

produces a final result of ¥0.57%. See Crowe 

Initial Aff., App. 3, at Cost Changes Tab; Shehadeh 

Reply Decl. at 10, Figure 1 and App. B, at Figure 

1—Chart Backup Tab. 

83 In essence, Ms. Crowe attempts to calculate the 

weighted median by using a modified version of the 

formula the Commission uses to compute the 

weighted mean. 

84See Crowe Initial Aff., App. 3 at Cost Changes 

Tab. Under this approach, it is unclear whether the 

median pipeline of a given sample reported (a) 

relatively high cost changes and low barrel-miles or 

(b) relatively low cost changes and high barrelmiles. 

the indexing regime. In proposing to 

average the weighted mean with the 

median and unweighted mean to derive 

the composite central tendency, Dr. 

Kahn explained that each of these 

measures ‘‘captured a significant aspect 

of the composite results from an 

industry perspective.’’ 76 The 

Commission credited Dr. Kahn’s 

testimony and adopted this approach to 

calculating the composite central 

tendency in that proceeding and in all 

subsequent five-year reviews. As 

discussed below, we find that Liquids 

Shippers’ arguments do not provide an 

adequate basis for departing from this 

consistent practice. 

37. Second, we reject as unpersuasive 

Liquids Shippers’ claim that the 

Commission should replace the 

weighted mean merely because it 

provides greater weight to larger 

pipelines like Colonial and Enbridge.77

The index strives to track cost changes 

on an industry-wide basis among 

pipelines of all sizes. To this end, the 

Kahn Methodology strikes a balance 

between large and small pipelines by 

determining the central tendency of the 

cost data using two measures that do not 

take pipeline size into account (the 

median and the mean) together with the 

weighted mean, which weights each 

pipeline’s cost change by its transported 

volumes. Including the weighted mean 

in this analysis ensures that the costchange calculation takes sufficient 

account of pipeline size so that ‘‘minor 

pipelines do not skew’’ the result.78

Thus, the fact that the weighted mean 

may accord additional weight to larger 

pipelines in this data set is fully 

consistent with its role in the index 

calculation. Removing it from the 

analysis as Liquids Shippers propose 

would upset the balance between large 

and small pipelines that the Kahn 

Methodology achieves. For this reason, 

we likewise reject Liquids Shippers’ 

alternative proposal to reduce the 

weighting of the weighted mean in the 

calculation from 33.3% to 20% or 10%. 

38. Third, Ms. Crowe’s calculation of 

the weighted median is 

methodologically flawed. AOPL’s 

witness Dr. Shehadeh testifies that the 

established statistically appropriate 

method for calculating the weighted 

median, as applied to pipeline cost 

changes, is to identify the cost change 

in the data set for which the same share 

of barrel-miles (rather than the same 

number of pipelines) is accounted for by 

the pipelines below and above the 

selected median.79 Shehadeh Reply 

Decl. at 11 n.17 (citing Thomas H. 

Cormen, Introduction to Algorithms 194 

(2009); 6 F.Y. Edgeworth, On 

Observations Relating to Several 

Quantities 279–85 (1887) (The weighted 

median may be defined as follows: 

This value is appropriately derived by 

ordering the pipelines by cost-change 

percentage, computing each pipeline’s 

share of total barrel-miles, and 

measuring the cumulative share of total 

barrel-miles represented as each 

pipeline is included in the sample.80

The pipeline whose share of total barrelmiles causes the cumulative share to 

reach 50% represents the data set’s 

weighted median.81

39. Ms. Crowe, however, performed a 

different calculation by identifying the 

median weighted barrel-mile costchange percentage and dividing that 

figure by the average of those pipelines’ 

2014 barrel-miles.82 This calculation 

departs from the proper method of 

calculating the weighted median 

discussed above. Rather than identify 

the pipeline that causes the cumulative 

share of total-barrel miles represented in 

the sample to reach 50%, Ms. Crowe 

derives the median value of the 

weighted cost-change percentages for 

2019 without regard to the barrel-miles 

represented below and above that cost 

change.83 Unlike the Commission’s 

calculation of the standard median and 

Dr. Shehadeh’s calculation of the 

weighted median, Ms. Crowe does not 

order pipelines by cost changes, and 

instead orders them by cost changes 

times barrel-miles.84 Thus, the median 

of Ms. Crowe’s data sample does not 

capture the central tendency of 

industry-wide cost changes, as 

evidenced by the significant and 

multidirectional fluctuations above and 


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85A small shift in the data sample’s median 

would produce significant and multidirectional 

changes in the calculation’s result. For instance, a 

median reflecting the pipeline with the next lowest 

weighted percentage change (Wildcat Liquids 

Caddo LLC) would reduce Ms. Crowe’s result from 

0.57 to ¥1.74% (a decrease of over 200%), whereas 

a median reflecting the next highest change 

(reported by Wesco Pipeline, LLC) would reduce 

the result by an even greater amount, from ¥0.57% 

to ¥2.28% (a decrease of 400%). These haphazard 

results do not reflect a convergence towards a 

central tendency of industry-wide cost changes. 

86 In addition to failing to reflect the central 

tendency of industry-wide cost changes, Ms. 

Crowe’s calculation also improperly reduces the 

weighting attributed to larger pipelines in the data 

set. Because Ms. Crowe orders the pipelines by 

barrel-mile cost change times barrel-miles, a 

pipeline with high barrel-miles would likely only 

lie near the median of the data sample if it reported 

extremely low cost changes. Thus, Ms. Crowe’s 

methodology would nullify the influence of larger 

pipelines upon the index calculation and thereby 

defeat the purpose of relying upon a weighted 

measure of central tendency. See AOPL II, 281 F.3d 

at 241 (explaining that the weighted mean serves to 

ensure that ‘‘minor firms do not skew the result’’). 

87See AOPL I, 83 F.3d at 1437 (holding that the 

Commission did not err in Order No. 561 by 

declining to periodically review individual pipeline 

costs and instead requiring shippers to challenge 

individual pipeline rates via protests or 

complaints); see also Calnev Pipe Line L.L.C., 127 

FERC ¶ 61,304, at P 5 (2009) (‘‘[T]he Commission 

has made quite clear that it will not review 

allegations regarding the appropriateness of a 

pipeline’s cost of service or the accuracy of its 

accounting in an index proceeding. Such 

allegations must be included in a complaint once 

the index-based filing becomes effective.’’ (citing 

SFPP, L.P., 123 FERC ¶ 61,317 (2008); BP W. Coast 

Prods. LLC v. SFPP, L.P., 121 FERC ¶ 61,243 (2007)). 

88 2015 Index Review, 153 FERC ¶ 61,312 at PP 

22–30, 33–39 (declining to adopt manual data 

trimming proposals that would have required 

analyzing individual pipeline data); 2010 Index 

Review, 133 FERC ¶ 61,228 at PP 48–55 (same). 89Shehadeh Reply Decl. at 14; see also supra 

n.81. 

90Liquids Shippers Initial Comments at 21–22. 

91 Id. at 21, 25 (citing 2015 Index Review, 153 

FERC ¶ 61,312 at PP 13, 15). 

92 Id. at 21 (citing FPC v. Hope Nat. Gas Co., 320 

U.S. 591, 603 (1944); Bluefield Water Works & 

Improvement Co. v. Pub. Serv. Comm’n of W. Va., 

262 U.S. 679, 692–93 (1923); Farmers Union Cent. 

Exch., Inc. v. FERC, 734 F.2d 1486, 1502 (D.C. Cir. 

1984)). 

93 Id. at 22–23. Liquids Shippers assert that 

regulated pipelines typically face comparable risks 

and that the Commission typically sets oil pipeline 

ROEs at the median of the proxy group results. Id. 

94 Id. at 23. For instance, Liquids Shippers state 

that among the 160 pipelines included in the 

untrimmed data set, reported page 700 ROEs for 

2019 ranged from 0.9% to 22.3%. Id. at 24 (citing 

Crowe Initial Aff. at 9). 

95 Id. at 25–26 (citing Inquiry Regarding the 

Commission’s Policy for Determining Return on 

Equity, 166 FERC ¶ 61,207 (2019)). As discussed 

above, the Commission issued a policy statement 

revising its ROE methodology for natural gas and 

oil pipelines on May 21, 2020. ROE Policy 

Statement, 171 FERC ¶ 61,155. 

96 Id. at 27–28 (citing Crowe Initial Aff., App. 4 

at 1–2) (referring to updated Form No. 6 filings of 

Plains Pipeline, LP and Rocky Mountain Pipeline 

System LLC). 

97Ms. Crowe states that 45 pipelines reported a 

10.29% ROE on their page 700s for 2014. Crowe 

Initial Aff. at 11–12. However, as shown in 

Attachment A, Exhibit 7 to this order, the 

Commission’s review of Form No. 6 filings 

submitted in 2016 indicates that 54 pipelines 

reported this ROE for 2014 in the column on page 

700 for prior-year data. 

98Liquids Shippers Initial Comments at 30–31; 

Crowe Initial Aff. at 12 (citing Trial Staff, Direct and 

Answering Cost-Based Rate Testimony of 

Commission Trial Staff Witness Robert J. Keyton, 

Docket Nos. OR18–7–002 et al. (filed Jan. 14, 2020)). 

99AOPL Reply Comments at 30. 

100 Id. at 28 (quoting 2015 Index Review, 153 

FERC ¶ 61,312 at P 17); Designated Carriers Reply 

Comments at 13–14 (same). 

101AOPL Reply Comments at 32. 

below the purported median that follow 

no discernible pattern.85 Accordingly, 

we conclude that Ms. Crowe’s 

calculation does not provide a useful 

measure of central tendency for 

purposes of calculating the index.86

40. Fourth, Liquids Shippers’ 

challenges to Colonial’s and Enbridge’s 

page 700 data are both misplaced and 

unavailing on the merits. Indexing 

proceedings are not an appropriate 

forum for challenging specific pipelines’ 

page 700 inputs 87 and the Commission 

has declined to scrutinize individual 

pipeline data in prior index reviews.88

In any event, the record does not 

support Liquids Shippers’ claim that 

Colonial and Enbridge reported outlying 

cost changes. Both pipelines are 

included in the middle 50% of all 

pipelines in the data set, which 

indicates that their cost experiences did 

not diverge significantly from industry 

norms. In fact, as Dr. Shehadeh 

demonstrates, Enbridge’s reported cost 

change represents the correctly 

calculated weighted median of the data 

sample,89 refuting Liquids Shippers’ 

contention that it is an outlier in terms 

of cost changes. 

D. Liquids Shippers’ Proposal To Adopt 

Standardized ROEs for 2014 and 2019 

1. Comments 

41. Liquids Shippers state that the 

Commission should replace the ROEs 

that pipelines reported on page 700 for 

2014 and 2019 with single, standardized 

figures for both years.90 Liquids 

Shippers contend that the data used to 

calculate the index level should 

conform to the Commission’s cost-ofservice methodology 91 and that the 

reported ROEs for 2014 and 2019 are 

inconsistent with this methodology in 

two respects. First, Liquids Shippers 

claim that pipelines’ reported ROEs are 

self-selected and do not reflect what 

investors would demand in the 

market.92 Second, Liquids Shippers 

state that if all oil pipeline rates were 

litigated at the same time, absent 

unusual circumstances, the Commission 

would adopt the same ROE for every 

pipeline because regulated pipelines 

typically fall within a broad range of 

average risk.93 Liquids Shippers assert 

that the reported ROEs conflict with this 

principle because they vary 

substantially.94

42. Liquids Shippers also claim that 

uncertainty surrounding the 

Commission’s oil pipeline ROE policy 

undermines the reliability of the 

reported ROEs for 2019. They state that 

the Commission initiated a review of its 

ROE policy in Docket No. PL19–4–000 

on March 21, 2019 but did not clarify 

its ROE methodology for oil pipelines 

until it issued the ROE Policy Statement 

on May 21, 2020.95 Because oil 

pipelines were required to submit page 

700 cost-of-service data for 2019 in 

April 2020, Liquids Shippers allege that 

pipelines were not certain of the 

Commission’s prevailing policy when 

they reported their 2019 ROEs. In 

support of this claim, Liquids Shippers 

observe that two pipelines submitted 

updated Form No. 6 filings in July 2020 

indicating that the page 700 ROEs they 

filed in April 2020 did not comply with 

the Commission’s then-applicable 

policy relying solely upon the DCF 

model.96

43. In light of these concerns, Liquids 

Shippers urge the Commission to 

replace each pipeline’s reported page 

700 ROE for 2014 and 2019 with 

standardized ROEs for purposes of 

calculating the index level. For 2014, 

Liquids Shippers propose a 

standardized ROE of 10.29%, which 54 

pipelines reported in their 2014 page 

700 filings.97 For 2019, Liquids 

Shippers propose to use the 10.02% 

ROE that Trial Staff has proposed in 

testimony in an ongoing oil pipeline 

rate proceeding based upon data for the 

six-month period ending in November 

2019.98

44. Pipelines oppose Liquids 

Shippers’ proposal and disagree with 

their assertions. AOPL disputes Liquids 

Shippers’ claim that variation in the 

reported page 700 ROEs indicates that 

this data is unreliable or inconsistent 

with Commission policy.99 Pipelines 

contend, moreover, that the Commission 

found in the 2015 Index Review that 

statistical data trimming is sufficient to 

remove pipelines with outlying equity 

cost changes from the data set and that 

Liquids Shippers’ arguments do not 

undermine this conclusion.100 In 

addition, AOPL argues that Liquids 

Shippers failed to support their 

proposed standardized ROEs and that 

adopting their proposal would 

complicate the five-year review by 

introducing complex cost-of-service 

ratemaking issues.101


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102 2015 Index Review, 153 FERC ¶ 61,312 at P 

15. 

103See BP W. Coast Prods. LLC v. SFPP, L.P., 121 

FERC ¶ 61,243, at P 9 (observing that ‘‘pipelines 

submit their FERC Form No. 6 under oath and 

exposes the pipeline and its employees to civil and 

criminal sanctions if there are purposeful errors in’’ 

applying the Commission’s existing cost-of-service 

methodology to develop the underlying cost 

inputs). Furthermore, the Commission calculates 

the index level based upon changes in cost over the 

applicable review period, rather than total costs in 

a given year. Because the last year of any particular 

review period (e.g., 2014–2019) is the first year of 

the next review period (e.g., 2019–2024), any 

attempt by pipelines to distort the index calculation 

by reporting inflated cost data in the last year of one 

period would harm their interests by establishing a 

higher cost baseline in the first year of the next 

period. 

104 If a shipper determines that a pipeline has 

reported inaccurate data on its page 700, the 

shipper may file a complaint alleging that the 

pipeline did not properly apply the Opinion No. 

154–B methodology in developing its page 700 cost 

inputs. See BP W. Coast Prods. LLC v. SFPP, L.P., 

121 FERC ¶ 61,243 at P 9 (explaining that shippers 

may file ‘‘a complaint that provides reasonable 

grounds to conclude that the pipeline did not 

properly apply its existing cost-of-service 

methodology to develop the underlying cost inputs 

used to develop the Page 700 in its annual FERC 

Form No. 6, or the inputs were improperly entered 

into its accounts or the calculation.’’). 105See Liquids Shippers Initial Comments at 22– 

23 (quoting El Paso Nat. Gas Co., Opinion No. 528, 

145 FERC ¶ 61,040, at P 592 (2013)). 106E.g., BP Pipelines (Alaska) Inc., Opinion No. 

502, 123 FERC ¶ 61,287, at P 195 (2008) (citing 

Transcon. Gas Pipe Line Corp., Opinion No. 414– 

A, 84 FERC ¶ 61,084, at 61,423–24 (1998)), order on 

reh’g and compliance, 125 FERC ¶ 61,215 (2008), 

reh’g denied, 127 FERC ¶ 61,317 (2009), aff’d sub 

nom. Flint Hills Res. Alaska, LLC v. FERC, 726 F.3d 

881 (D.C. Cir. 2010). 107 2015 Index Review, 153 FERC ¶ 61,312 at P 

17. 108Whereas Liquids Shippers state that 45 of 158 

pipelines filing page 700 for 2014 reported an ROE 

of 10.29%, the Commission’s review of Form No. 

6 data indicates that 54 of 184 filing pipelines 

reported that particular ROE for 2014. Compare 

Liquids Shippers Initial Comments at 31 with 

Attachment A, Ex. 7. 

109According to the most recent procedural 

schedule adopted in Docket Nos. OR18–7–002 et 

al., the initial decision in that proceeding is 

currently scheduled for issuance on May 28, 2021. 

Epsilon Trading, LLC v. Colonial Pipeline Co., 

Docket No. OR18–7–002, at Attachment A (June 23, 

2020). 

110NOI, 171 FERC ¶ 61,239 at P 11. 

111CAPP Initial Comments at 2–5. 

112 Id. at 4 (quoting 2015 Index Review, 153 FERC 

¶ 61,312 at P 28). 

2. Commission Determination 

45. We decline to adopt Liquids 

Shippers’ proposal to replace the 

reported page 700 ROE data for 2014 

and 2019 with standardized ROEs. We 

conclude that Liquids Shippers have not 

adequately demonstrated that the 

reported page 700 ROEs are unreliable 

or inconsistent with Commission policy. 

46. Contrary to Liquids Shippers’ 

contention, the fact that page 700 ROEs 

are self-reported does not demonstrate 

that this data is unreliable or fails to 

capture the returns that investors would 

demand in the market. Rather, one of 

the primary reasons the Commission 

updated the index calculation to use 

page 700 data is that this data is based 

upon ‘‘established ratemaking 

techniques.’’ 102 During the 2014–2019 

period, these techniques included 

determining ROE using the DCF model, 

which is designed to reflect investors’ 

required returns. The instructions on 

page 700 required pipelines to 

determine their ROE (as well as other 

page 700 inputs) consistent with this 

methodology and pipelines submitted 

page 700 under oath and subject to 

sanction if there were purposeful errors 

in their reported data.103 In addition, if 

a pipeline makes any major changes to 

its application of the Opinion No. 154– 

B methodology in preparing page 700, it 

must describe such changes in a 

footnote on page 700. Given these facts, 

we find that Liquids Shippers have not 

adequately demonstrated that the 

reported page 700 ROE data is 

unreliable merely because pipelines 

self-reported.104

47. Similarly, variation among page 

700 ROEs does not indicate that the 

reported ROE data is unreliable. To the 

contrary, multiple factors can cause the 

DCF model to yield different results for 

different pipelines. For example, even 

when analyzing data from the same time 

period, the appropriate proxy group 

may vary from pipeline to pipeline 

depending upon differences in risk. 

Liquids Shippers themselves 

acknowledge 105 that although the 

Commission typically sets the real ROE 

for oil pipelines at the median of the 

proxy group results, it may set the ROE 

above or below the median where the 

record demonstrates that the pipeline 

faces anomalously high or low risks.106

Accordingly, the fact that pipelines 

reported different ROEs for the same 

years does not demonstrate that this 

data is inaccurate or inconsistent with 

Commission policy. Moreover, the 

Commission explained in the 2015 

Index Review that to the extent a 

particular pipeline’s per barrel-mile 

equity cost changes departed 

substantially from industry norms, that 

pipeline would not be among the 

middle 50% used to calculate the index 

level.107 Similarly, such pipelines 

would not be among the middle 80% 

used to calculate the index level in this 

proceeding. Liquids Shippers provide 

no basis for altering this conclusion. 

49. We conclude, moreover, that 

Liquids Shippers have not supported 

their proposed standardized ROEs. For 

2014, Liquids Shippers seek to replace 

all pipelines’ reported ROEs with an 

ROE figure that only 29% of pipelines 

reported for that year.108 However, 

Liquids Shippers do not demonstrate 

that this figure accurately measures the 

investor-required cost of equity for all 

pipelines in the data set. Similarly, 

Liquids Shippers do not justify why the 

Commission should adopt, as the 2019 

ROE for all pipelines in the data set, a 

figure that a participant has proposed in 

an ongoing hearing on which neither the 

Presiding Judge nor the Commission 

have opined.109 Given that oil pipelines 

have diverse business models and 

different risk levels, we cannot simply 

assume that any single ROE could 

reflect the investor-required return for 

all pipelines in the data set. 

50. Finally, we find that adopting 

Liquids Shippers’ proposal would 

undermine indexing’s purpose as a 

simplified and streamlined ratemaking 

regime. Whereas the Kahn Methodology 

promotes simplification by relying upon 

reported page 700 data, Liquids 

Shippers’ proposal would require the 

Commission, in this proceeding and in 

future five-year reviews, to undertake 

separate analyses to determine just and 

reasonable industry-wide ROEs for the 

first and last years of the five-year 

review period. Determining a just and 

reasonable ROE, particularly on an 

industry-wide basis, would be a 

complex and fact-intensive inquiry that 

could require considerable time and 

resources to resolve. The Commission 

explained in the NOI that addressing 

such complex cost-of-service issues 

would improperly complicate and 

prolong the five-year review process in 

violation of EPAct 1992’s mandate for 

simplified and streamlined 

ratemaking,110 and Liquids Shippers 

have not refuted these concerns. 

E. CAPP’s Argument Regarding 

Negotiated Rate Contracts 

1. Comments 

51. CAPP argues that the Commission 

should quantify the effects of negotiated 

rate contracts upon oil pipelines’ 

reported costs of equity. CAPP states 

that these contracts typically contain 

provisions such as shipper volume 

commitments that serve to transfer risk 

from the pipeline to its shippers and 

that failing to reflect pipelines’ reduced 

risks in the page 700 data could 

improperly inflate the index 

calculation.111 CAPP notes that the 

Commission found in the 2015 Index 

Review that the page 700 total cost-ofservice would reflect any reduction in 

the pipeline’s risk, but argues that the 

page 700 data in this proceeding does 

not indicate whether this occurred over 

the 2014–2019 period.112 To provide 


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113 Id. at 5. 114AOPL Reply Comments at 33–37. 115 2015 Index Review, 153 FERC ¶ 61,312 at P 

28. 116Revisions to Indexing Policies and Page 700 of 

FERC Form No. 6, 170 FERC ¶ 61,134, at P 6 (2020). 

117As discussed above, if a shipper determines 

that a particular pipeline’s page 700 inputs do not 

accord with the Commission’s existing Opinion No. 

154–B methodology, it may file a complaint to that 

effect with the Commission. BP W. Coast Prods. LLC 

v. SFPP, L.P., 121 FERC ¶ 61,243 at P 9. 

118AOPL Initial Comments at 36–39; Declaration 

of William R. Byrd, P.E. at 21. 

119Byrd Declaration at 7–17. 

120 Id. at 17–20. 

121AOPL Initial Comments at 40 (quoting 2005 

Index Review, 114 FERC ¶ 61,293 at P 63). 

122PST Comments at 1–2. 

123EIC Comments at 7, 11–16. 

124PHMSA Reply Comments at 1–4. 

125 Joint Commenters Reply Comments at 19–20 

(quoting 2010 Index Review, 133 FERC ¶ 61,312 at 

P 125); Liquids Shippers Reply Comments at 31– 

32 (same); CAPP Initial Comments at 2. 

126Liquids Shippers Reply Comments at 33. 

127 Joint Commenters Reply Comments at 20; 

Liquids Shippers Reply Comments at 33. 

128 If such obligations result in a substantial 

divergence between a pipeline’s actual costs and 

the rate resulting from application of the index, the 

pipeline may file to change its rate using the 

Commission’s cost-of-service methodology pursuant 

to 18 CFR 342.4(a) of the Commission’s regulations. 

18 CFR 342.4(a); see also Order No. 561, FERC 

Stats. & Regs. ¶ 30,985 at 30,957 (explaining that 

‘‘such circumstances as increased safety or 

environmental regulations may justify the use of a 

cost-of-service methodology’’). 

129 2010 Index Review, 133 FERC ¶ 61,228 at P 

125. 

increased transparency, CAPP urges the 

Commission to consider requiring 

pipelines to provide shippers with the 

workpapers underlying their page 700 

calculations.113 AOPL contends CAPP’s 

claims are unsupported and that the 

Commission has previously rejected this 

precise argument.114

2. Commission Determination 

52. We find CAPP’s arguments 

unpersuasive. First, as the Commission 

explained in the 2015 Index Review, 

‘‘[t]o the extent that volume 

commitments in [negotiated rate] 

agreements have reduced the pipeline’s 

risk, the page 700 total cost of service 

would reflect this reduction in the 

embedded costs of equity and costs of 

debt.’’ 115 These effects would tend to 

reduce pipeline costs and thereby 

produce a lower index level, rendering 

CAPP’s concerns unfounded. Although 

CAPP questions whether the effects of 

reduced pipeline risk are reflected in 

the page 700 data, it provides no basis 

for the Commission to conclude that the 

reported data fails to adequately account 

for pipelines’ risks in measuring 

changes in cost of equity and costs of 

debt. 

53. Second, to the extent that CAPP 

requests that the Commission review 

individual pipeline data to evaluate the 

effects of contract rates upon the 

pipeline’s risks, this request is both 

unsupported and misplaced. CAPP has 

not presented any method for 

quantifying any disparity in the risks 

pipelines face when using contract rates 

versus non-contract rates. Although 

CAPP states that the Commission 

should consider requiring pipelines to 

provide shippers with the workpapers 

underlying their page 700 cost of service 

calculations, it has not explained how 

these workpapers would aid in 

identifying differences in risk between 

contract and non-contract rates. 

Moreover, as CAPP itself acknowledges, 

the Commission recently declined to 

require pipelines to provide 

workpapers 116 and CAPP has not 

provided a sufficient basis for the 

Commission to revisit this decision 

here. More broadly, the Kahn 

Methodology measures changes in 

barrel-mile costs on a generic, industrywide basis. Thus, in calculating the 

index level, the Commission does not 

scrutinize the inputs underlying 

individual pipelines’ page 700 data. 

Accordingly, the review that CAPP 

appears to seek would exceed the scope 

of the five-year index review and 

conflict with streamlined and simplified 

ratemaking.117

F. Pipeline Costs Resulting From 

Integrity Management Regulations and 

Other Developments 

1. Comments 

54. AOPL states that oil pipelines 

have experienced significant cost 

increases due to pipeline safety and 

integrity measures and that these costs 

are likely to increase in the future.118

AOPL submits a declaration from 

William R. Byrd identifying new and 

continuing regulatory obligations 

related to pipeline integrity as well as 

other factors affecting pipeline costs, 

such as expenditures related to security 

and cybersecurity, opposition to 

pipeline infrastructure, and the COVID– 

19 pandemic.119 Mr. Byrd also describes 

anticipated regulatory requirements that 

he states will increase pipelines’ 

obligations and compliance costs in the 

future.120 AOPL maintains that 

pipelines’ ability to undertake future 

expansions and adopt environmental, 

safety, and security measures in 

compliance with applicable regulatory 

requirements depends upon the 

Commission adopting an index level 

that allows pipelines to recover 

expected future cost increases.121

55. Other commenters make similar 

assertions. PST states that pipeline 

safety requirements have increased over 

the last five years and that setting the 

index level too low could reduce 

pipelines’ incentives to invest in safety 

measures.122 EIC echoes AOPL’s 

statements regarding increasing costs 

and explains that pipelines’ ability to 

invest in building and operating 

facilities depends upon ready access to 

capital markets and a predictable 

regulatory environment that reduces 

investment risks. Thus, EIC asserts that 

the Commission should be mindful that 

an insufficiently high index level could 

impair pipelines’ ability to attract 

investment.123

56. PHMSA filed comments 

describing safety rules it has enacted 

since the 2015 Index Review as well as 

several pending rulemakings that, if 

adopted, would impose additional costs 

upon pipeline operators. Although it 

takes no position on the specific index 

level the Commission should adopt, 

PHMSA states that the index should 

reflect the costs that its existing and 

future regulations impose upon pipeline 

operators.124

57. Shippers reject these arguments 

and contend that the Commission has 

previously found that future costs are 

speculative and inappropriate for 

inclusion in the index calculation.125

Liquids Shippers argue that costs 

related to safety or integrity measures 

incurred during the 2014–2019 period 

should be reflected in the page 700 

data.126 In addition, Joint Commenters 

and Liquids Shippers contend that if 

safety or integrity-related costs are not 

captured in this index calculation, they 

will be reflected in future index reviews 

and pipelines may seek to recover those 

costs in the interim through cost-ofservice rate filings, where 

appropriate.127

2. Commission Determination 

58. We decline to alter our calculation 

of the index level based upon the 

arguments concerning safety or 

integrity-related costs. To the extent that 

new or continuing regulatory 

requirements caused pipelines’ barrelmile costs to increase during the 2014– 

2019 period, those cost changes would 

be reflected in the page 700 data.128 We 

also decline to adjust the index 

calculation based upon projections of 

future costs or other developments 

occurring after the conclusion of the 

2014–2019 period. As the Commission 

has previously explained, future cost 

projections related to regulatory changes 

are speculative and inappropriate for 

inclusion in the index.129 Additionally, 

because the Kahn Methodology only 

considers cost changes incurred during 


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130Cost changes incurred during the 2019–2024 

period as a result of integrity management and other 

regulatory obligations will be addressed in the 2025 

index review. 

131 2015 Index Review, 153 FERC ¶ 61,312 at P 

38. The Commission has explained that without 

this step, the absorbed pipeline’s cost data would 

be needlessly discarded. Id. 

132 Joint Commenters Reply Comments, Brattle 

Group Report, Attachment D at 2, 4–7 (Data Merger 

Analysis). 

133Shehadeh Initial Decl., Ex. A1 (Companies 

Consolidated to Adjust for Mergers, Acquisitions, 

and Changes in Corporate Form 2014–2019). 

134 Joint Commenters Reply Comments, Brattle 

Group Report at 48–50. 

135The Commission identified the Excel Pipeline 

LLC-Sunoco Pipeline L.P. merger in the NOI 

proposal but did not combine their data for 2019. 

136 Joint Commenters Reply Comments, Brattle 

Report at 49–50. 

137For example, despite its alleged merger with 

Energy Transfer Partners, Mid-Valley continued 

filing Form No. 6 in its own name for each year of 

the review period through 2019. 

1Energy Policy Act of 1992, Public Law 102–486, 

1801(a) (Oct. 24, 1992) (codified at 42 U.S.C. 7172 

note (2006)). 

the prior five years, regulatory changes 

and other developments occurring after 

the 2014–2019 period concluded on 

December 31, 2019, are beyond the 

scope of this index review.130 To the 

extent that such developments affect 

barrel-mile costs going forward, the 

Commission will incorporate those cost 

changes as reflected in page 700 cost-ofservice data in future index 

calculations. 

G. Treatment of Mergers in the Data Set 

1. Comments 

59. To account for mergers that 

occurred during the study period, the 

Kahn Methodology adds the separate 

costs the pipelines reported on Form 

No. 6 in the first year of the data set 

(e.g., 2014) and compares this sum to 

the newly combined company’s costs in 

the last year of the data set (e.g., 

2019).131 The Commission employs a 

similar process for addressing 

divestitures, adding the separate costs 

that the pipelines reported on Form No. 

6 in the last year of the data set and 

comparing this sum to the previously 

combined company’s costs in the first 

year of the data set. Joint Commenters 

and AOPL each propose to adjust the 

data set to account for merger activity 

that they claim occurred during the 

2014–2019 period but was not reflected 

in the data underlying the Commission’s 

proposal in the NOI. 

60. Joint Commenters propose to 

account for six additional mergers: (1) 

Plains Southcap Inc. and Plains 

Pipeline, LP; (2) Red River Crude 

Pipeline LLC and Enterprise Crude 

Pipeline LLC; (3) Regency Liquids 

Pipeline LLC and Lone Start NGL 

Pipeline LP; (4) Independent Trading & 

Transportation Company I, L.L.C. and 

Hiland Crude, LLC; (5) Phillips 66 

Pipeline LLC and Phillips 66 Carrier 

LLC; and (6) Excel Pipeline LLC and 

Sunoco Pipeline L.P.132 AOPL proposes 

to reflect the Excel-Sunoco merger and 

two additional mergers: (i) Mid-Valley 

Pipeline Company and Energy Transfer 

Crude Oil Company LLC (Energy 

Transfer Crude); and (ii) The Premcor 

Pipeline Co. and Valero Partners Lucas, 

LLC (Valero Lucas).133 Joint 

Commenters disagree with AOPL’s 

proposals to reflect mergers between 

Mid-Valley-Energy Transfer Crude and 

Premcor-Valero Lucas.134

2. Commission Determination 

61. We will adjust the data set to 

reflect mergers between: (1) Plains 

Southcap Inc. and Plains Pipeline, LP; 

(2) Red River Crude Pipeline LLC and 

Enterprise Crude Pipeline LLC; (3) 

Regency Liquids Pipeline LLC and Lone 

Star NGL Pipeline LP; (4) Independent 

Trading & Transportation Company I, 

L.L.C. and Hiland Crude, LLC; (5) 

Phillips 66 Pipeline LLC and Phillips 66 

Carrier LLC; and (6) Excel Pipeline LLC 

and Sunoco Pipeline L.P.135 We have 

verified through a review of Form No. 

6 data that these mergers took place 

during the 2014–2019 period and will 

therefore revise the data set to combine 

these pipelines’ costs in 2019 as 

appropriate. 

62. We decline, however, to adopt 

AOPL’s proposal to reflect mergers 

between Mid-Valley-Energy Transfer 

Crude and Premcor-Valero Lucas. We 

find that the record does not support 

adjusting the Form No. 6 data to reflect 

these mergers. For instance, a review of 

the total miles owned at year end does 

not indicate that any transfer of assets 

took place between these companies 

during the review period.136 The 

Commission’s review of other Form No. 

6 data likewise did not confirm whether 

these mergers in fact took place.137

IV. 2021–2026 Oil Pipeline Index 

63. Based upon the foregoing, we 

calculate the index level used to 

determine annual changes to oil 

pipeline rate ceilings for the five-year 

period beginning July 1, 2021 as 

follows. First, as shown in Attachment 

A (Exhibit 2) we remove those pipelines 

that did not provide Form No. 6, page 

700 data or provided incomplete data. 

Second, as shown in Attachment A 

(Exhibit 5), we consider the data on 

Form No. 6, page 700 to calculate each 

pipeline’s cost change on a per barrelmile basis over the prior five-year 

period (e.g., the years 2014–2019 in this 

proceeding). Third, to remove statistical 

outliers and spurious or 

unrepresentative data, we trim the data 

set to those pipelines in the middle 80% 

of cost changes. Fourth, as shown in 

Attachment A (Exhibit 5), we calculate 

three measures of the middle 80%’s 

central tendency: The median, the 

mean, and a weighted mean. Fifth, we 

calculate a composite by taking a simple 

average of those three measures of 

central tendency, as shown in 

Attachment A (Exhibit 1). Finally, we 

compare this composite to the value of 

the PPI–FG index data over the same 

period (0.52% in this proceeding) and 

set the index level at PPI–FG plus (or 

minus) this differential. Using these 

calculations, we establish an index level 

of PPI–FG+0.78% for the five-year 

period beginning July 1, 2021. 

The Commission Orders 

Consistent with the discussion in this 

order, the Commission determines that 

the appropriate oil pipeline index level 

for the next five years, July 1, 2021 

through June 30, 2026, is PPI– 

FG+0.78%. 

By the Commission. Commissioner Glick is 

dissenting with a separate statement 

attached. Commissioner Clements is not 

participating. 

Issued: December 17, 2020. 

Kimberly D. Bose, 

Secretary. 

Federal Energy Regulatory Commission 

Five-Year Review of Oil Pipeline Index 

Glick, Commissioner, Dissenting 

1. Today’s order is a complete 

abdication of the Commission’s 

responsibility to protect oil pipeline 

customers. It overthrows wellestablished Commission policy and goes 

back on explicit promises we made to 

customers just a few years ago. As a 

result, the Commission is handing oil 

pipelines a multi-billion-dollar windfall 

for which customers are left to pick up 

the tab. I dissent strongly from those 

unreasoned and indefensible 

determinations. 

* * * * * 

2. A little background is necessary to 

appreciate just how seriously the 

Commission has fallen down on the job. 

In the Energy Policy Act of 1992, 

Congress directed the Commission to 

promulgate a rule to simplify its 

ratemaking methodology for oil 

pipelines.1 Shortly thereafter, the 

Commission issued Order No. 561, 

which adopted an indexing 

methodology as part of the 

Commission’s approach for regulating 


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Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations 9459 

2Revisions to Oil Pipeline Reguls. Pursuant to 

Energy Pol’y Act of 1992, Order No. 561, FERC 

Stats. & Regs. ¶ 30,985, at 30,955 (1993) (crossreferenced at 65 FERC ¶ 61,109), order on reh’g, 

Order No. 561–A, FERC Stats. & Regs. ¶ 31,000 

(1994) (cross-referenced at 68 FERC ¶ 61,138), aff’d 

sub nom. Ass’n of Oil Pipe Lines v. FERC, 83 F.3d 

1424 (D.C. Cir. 1996). 3At least absent a protest to the update. See Order 

No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,947. 4 Five-Year Rev. of the Oil Pipeline Index, 173 

FERC ¶ 61,245, at P 5 (2020) (2020 Index Review). 

The resulting index level is expressed as the PPI– 

FG plus or minus a value that corresponds to the 

cost change data adjustment. 5This practice of excluding the top and bottom 

25% was part of Dr. Alfred Kahn’s original proposal 

that the Commission adopted in 1994. Ass’n of Oil 

Pipe Lines v. FERC, 876 F.3d 336, 340 (D.C. Cir. 

2017) (noting that in 1994 Dr. Kahn ‘‘omitted from 

his analysis the pipelines within the upper and 

lower 25 percent of the cost spectrum in order to 

exclude statistical outliers and incomplete or 

questionable data’’). 

6 Five-Year Rev. of the Oil Pipeline Index, 171 

FERC ¶ 61,239, at P 9 (2020). 

7 2020 Index Review, 173 FERC ¶ 61,245 at P 2. 

8 Five-Year Rev. of Oil Pricing Index, 133 FERC 

¶ 61,228, at P 61 (2010) (citing Order No. 561–A, 

FERC Stats. & Regs. ¶ 31,000 at 31,097) (2010 Index 

Review); Five-Year Rev. of Oil Pipeline Index, 153 

FERC ¶ 61,312, at P 24 (2015) (2015 Index Review). 

9 2020 Index Review, 173 FERC ¶ 61,245 at P 25. 

10The middle 50% of this data set contains 82% 

of total barrel-miles subject to the index while, in 

2015 and 2010, the middle 50% contained only 

56% and 76% of total barrel-miles, respectively. Id. 

P 23. 

11 Id. PP 26–29. 

12See 2015 Index Review, 153 FERC ¶ 61,312 at 

P 43 (‘‘[B]y definition, costs at the top (or bottom) 

of the middle 80 percent deviate significantly from 

the cost experience of other pipelines. To the extent 

that the middle 80 percent data conforms to a 

lognormal distribution, outlying cost increases per 

barrel-mile will not be offset by similarly outlying 

cost decreases. Thus, using the middle 80 percent 

would skew the index upward based upon these 

outlying cost increases, which is contrary to the 

objective of the index to reflect normal industrywide cost changes.’’); 2010 Index Review, 133 FERC 

¶ 61,228 at P 63 (‘‘[T]he use of the middle 50 

minimizes the risk of including pipelines that 

experienced either large increases or decreases in 

cost (or errant data) that may be included in an 80 

percent sample, while still capturing changes from 

a broad spectrum of the pipeline industry.’’). 

13See 2015 Index Review, 153 FERC ¶ 61,312 at 

PP 42–44; 2010 Index Review, 133 FERC ¶ 61,228 

at PP 60–63. 

14 2020 Index Review, 173 FERC ¶ 61,245 at P 28. 

15 Id. 

16United Airlines, Inc. v. FERC, 827 F.3d 122 

(D.C. Cir. 2016) (finding that the Commission 

permitted a double recovery of income tax costs by 

allowing an MLP to recover both an income tax 

allowance and a return on equity determined 

pursuant to the discounted cash flow methodology, 

which already reflects income tax costs). 

17 Inquiry Regarding the Commission’s Pol. for 

Recovery of Income Tax Costs, 162 FERC ¶ 61,227 

(2018 Income Tax Policy Statement), reh’g denied, 

164 FERC ¶ 61,030 (2018). 

oil pipeline rates.2 Under that approach, 

if an oil pipeline increases its rates by 

less than the annual ceiling established 

by the index, the pipeline does not need 

to justify those rates through a cost-ofservice filing.3 The majority of oil 

pipelines under the Commission’s 

jurisdiction use this index to 

demonstrate that their rate increases are 

just and reasonable. 

3. Following Order No. 561, the 

Commission updates the index every 

five years to ensure that it represents a 

reasonable measure of the annual 

change in a typical oil pipeline’s cost of 

service. To set the annual index, the 

Commission calculates each 

jurisdictional pipeline’s change in its 

cost-of-service over the previous fiveyear period—we call this oil pipelines’ 

‘‘cost change data.’’ The Commission 

then uses that data to determine an 

appropriate adjustment to the Producer 

Price Index for Finished Goods (PPI–FG) 

established by the U.S. Department of 

Labor.4 To avoid outliers or other 

anomalous, unrepresentative cost data, 

the Commission has historically relied 

on only the cost change data for the 

middle 50% of pipelines when updating 

the index—that is, it excludes data from 

the 25% of pipelines with the lowest 

cost changes and the data from the 25% 

of pipelines with the highest.5

4. In June of this year, the 

Commission issued a notice of inquiry 

that commenced its five-year update to 

the index. In that notice, the 

Commission proposed an index level of 

PPI–FG+0.09, based on our historical 

practice of relying on the middle 50% 

of cost change data.6 Today’s order 

tosses that historical practice aside and 

establishes an index level that is nearly 

ten times higher at PPI–FG+0.78.7 That 

order of magnitude increase is largely 

the result of a pair of unreasoned, 

illogical and unsupported changes that 

lack any meaningful support in the 

record before us. I’ll discuss them in 

turn. 

5. The Commission’s first major 

mistake is to abandon its wellestablished practice of updating the 

index using the cost change data from 

the middle 50% of oil pipelines. As 

noted, in order to weed out potential 

anomalous, unrepresentative cost data 

and ensure that the cost change data 

reflects the experience of a typical 

pipeline, the Commission’s established 

practice is to ‘‘trim’’ the data down to 

the middle 50% of cost changes. The 

Commission has explained that relying 

only on those central values best 

approximates the operations of a typical 

pipeline because it prevents the 

Commission from relying on 

unrepresentative cost changes, such as a 

one-time increase in rate base, plant 

retirement, significant expansions or 

acquisitions, or localized changes in 

supply and demand.8

6. Today’s order abandons that 

approach and instead uses the data from 

the middle 80% of pipelines.9 That 

change dramatically increases the 

likelihood that the updated index will 

reflect anomalous data that does not 

shed light on the cost changes 

experienced by a typical pipeline, 

which, in practice, skews the index 

upwards. Relying upon those relative 

outliers is particularly inappropriate 

here since the middle 50% of pipelines 

corresponds to a much larger percentage 

of the total barrel-miles shipped over 

the last five years than in previous 

index updates.10 In other words, the 

middle 50% already corresponds to a 

significantly larger percentage of total 

oil transportation service provided than 

in previous index updates, which would 

seem to undermine any need to expand 

the data set. 

7. The Commission’s justification for 

abandoning the 50% approach consists 

of nothing more than variations on the 

theme that more data is better.11 But, as 

with most things in life, quality is more 

important than quantity. Including more 

cost change data is not necessarily an 

improvement when there is good reason 

to believe that the incremental data is 

made up of outliers whose experience is 

less representative of a typical oil 

pipeline with a normal cost structure. 

As noted, the purpose of the index is to 

approximate a typical oil pipeline’s 

change in cost—an exercise that does 

not benefit from including cost change 

data from pipelines that are, by 

definition, unrepresentative of the 

average pipeline.12 And that is exactly 

why the Commission has consistently 

rejected replacing the 50% approach 

with the 80% approach adopted in 

today’s order.13 In addition, the 

Commission chastises shippers for not 

arguing that every pipeline whose cost 

change data would have been excluded 

using the middle 50% was an outlier.14

As an initial matter, the shippers did 

provide illustrative data explaining why 

seven of those pipelines’ cost change 

data was not representative, which you 

might think would suffice to support the 

Commission continuing its historical 

practice.15 In any case, the burden to 

show that the index is reasonable is on 

the Commission, and it cannot be 

carried simply by arguing that the 

shippers should have done more. 

8. The Commission’s second major 

mistake is to break its promise to protect 

ratepayers following the U.S. Court of 

Appeals for the District of Columbia 

Circuit’s decision in United Airlines v. 

FERC,16 which struck down the 

Commission’s practice of allowing 

Master Limited Partnerships (MLPs) to 

double recover their income tax cost.17

As a result of that decision, MLPs may 

no longer recover an income tax 


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9460 Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations 

18 Id. P 2. 

19 Interstate & Intrastate Nat. Gas Pipelines; Rate 

Changes Relating to Fed. Income Tax Rate, 162 

FERC ¶ 61,226 (2018). 

20The Commission’s statement is worth reading 

in whole: ‘‘When oil pipelines file Form No. 6, page 

700 on April 18, 2018, they must report an income 

tax allowance consistent with United Airlines and 

the Commission’s subsequent holdings denying an 

MLP an income tax allowance. Based upon page 

700 data, the Commission will incorporate the 

effects of the post-United Airlines’ policy changes 

(as well as the Tax Cuts and Jobs Act of 2017) on 

industry-wide oil pipeline costs in the 2020 fiveyear review of the oil pipeline index level. In this 

way the Commission will ensure that the industrywide reduced costs are incorporated on an industrywide basis as part of the index review.’’ 2018 

Income Tax Policy Statement, 162 FERC ¶ 61,227 at 

P 46. 

21 2020 Index Review, 173 FERC ¶ 61,245 at P 16. 

22 Id. P 20. 

23 Id. P 18. 

24 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 46. 

25Ask anyone who pays their taxes. 

allowance in their cost of service.18

Following United Airlines, in 2018, the 

Commission required natural gas 

pipelines to immediately eliminate that 

double recovery,19 but declined to 

require something similar for oil 

pipelines, promising, quite explicitly, 

that it would address the issue when it 

next updated the index.20

9. So much for that. In today’s order, 

the Commission goes back on its word 

and allows any oil pipeline that was an 

MLP in 2014 to retroactively remove its 

income tax allowance from its 2014 

cost-of-service data.21 That change 

juices the data to make it look like oil 

pipeline costs increased by more than 

they actually did between 2014 and 

2019, thereby leading to a higher index 

value. And, as if that weren’t bad 

enough, today’s order also allows any 

pipeline that transitioned from an MLP 

to a C-Corporation, thereby regaining 

the right to an income tax allowance, to 

remove the income tax allowance from 

their 2014 numbers.22 The result is, you 

guessed it, another increase in the cost 

change data, a higher index level, and 

more expensive rates for customers. 

10. Nothing in today’s order justifies 

that result. The Commission summarily 

concludes that the index update is not 

an appropriate vehicle for incorporating 

the post-United Airlines’ policy 

changes.23 That proposition is hardly 

self-evident, especially given that all 

five then-Commissioners felt differently 

just two years ago.24 In any case, the fact 

of the matter is that tax costs are real 

costs,25 meaning that oil pipelines’ costs 

in the past five years have changed as 

a result of the United Airlines decision. 

Finally, reneging on our promise in the 

2018 Income Tax Policy Statement 

perpetuates the effects of the double 

recovery gravy train that the court 

invalidated in United Airlines. That is 

simply indefensible. 

* * * * * 

11. The Commission’s actions today 

hand oil pipelines what will amount to 

a multi-billion-dollar windfall over the 

next five years. Calling these decisions 

arbitrary and capricious or unreasoned 

would let the Commission off easy. 

They represent a complete abdication of 

our statutory responsibility to protect 

consumers—the companies and 

individuals who will be stuck paying 

those additional billions of dollars to 

the oil pipelines. Although our 

responsibilities under the Interstate 

Commerce Act don’t always get the 

same attention from the public as some 

of our other proceedings, today’s order 

illustrates the tremendous financial 

consequences that they can have for 

everyday customers. I hope that 

proceedings like today’s lead interested 

parties everywhere to more closely 

scrutinize the Commission’s oil orders 

so that these multi-billion-dollar 

handouts do not become a matter of 

course. 

For these reasons, I respectfully 

dissent. 

Richard Glick, 

Commissioner. 

[FR Doc. 2021–03120 Filed 2–12–21; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2021–0057] 

RIN 1625–AA00 

Emergency Safety Zone; Richmond 

Entrance Channel, Richmond, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a temporary safety zone in 

the navigable waters of the Richmond 

Entrance Channel off of Richmond, CA 

in support of the safe navigation of 

vessels and environmental response 

efforts to address the hydrocarbon 

release from the Richmond Long Wharf 

on February 09, 2021. Based on this 

information, this safety zone is 

necessary to protect life, vessels, and the 

maritime environment. Unauthorized 

persons or vessels are prohibited from 

entering into, transiting through, or 

remaining in the safety zone without 

permission from the Captain of the Port 

San Francisco or a Captain of the Port 

San Francisco designated 

representative. 

DATES: This rule is effective without 

actual notice on February 16, 2021. For 

the purposes of enforcement, actual 

notice will be used from 12:01 a.m. 

February 10, 2021 until February 16, 

2021. 

ADDRESSES: To view documents 

mentioned in this preamble as being 

available in the docket, go to https://

www.regulations.gov, type USCG–2021– 

0057 in the ‘‘SEARCH’’ box and click 

‘‘SEARCH.’’ Click on Open Docket 

Folder on the line associated with this 

rule. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Chief Warrant Officer Mickey 

Price, Waterways Management, U.S. 

Coast Guard; telephone (415) 399–7442, 

email SFWaterways@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

COTP Captain of the Port San Francisco 

DHS Department of Homeland Security 

§ Section 

U.S.C. United States Code 

II. Background Information and 

Regulatory History 

The Coast Guard is issuing this 

temporary rule without prior notice and 

opportunity to comment pursuant to 

authority under section 4(a) of the 

Administrative Procedure Act (APA) (5 

U.S.C. 553(b)). This provision 

authorizes an agency to issue a rule 

without prior notice and opportunity to 

comment when the agency for good 

cause finds that those procedures are 

‘‘impracticable, unnecessary, or contrary 

to the public interest.’’ Under 5 U.S.C. 

553(b)(B), the Coast Guard finds that 

good cause exists for not publishing a 

notice of proposed rulemaking with 

respect to this rule because it is 

impracticable. The Coast Guard received 

notice of the hydrocarbon release into 

the waterway and the resulting need for 

this safety zone on February 9, 2021. It 

is impracticable to go through the full 

rulemaking process, including 

providing a reasonable comment period 

and considering those comments, 

because the Coast Guard must establish 

this emergency temporary safety zone 

by February 10, 2021. 

Under 5 U.S.C. 553(d)(3), the Coast 

Guard finds that good cause exists for 

making this rule effective less than 30 

days after publication in the Federal 

Register. Delaying the effective date of 

this rule would be contrary to public 

interest because immediate action is 


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