157 FERC ¶ 61,047

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

[Docket No. RM17-1-000]

Revisions to Indexing Policies and Page 700 of FERC Form No. 6

(October 20, 2016)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Advance Notice of Proposed Rulemaking.

SUMMARY: The Commission seeks comment regarding potential modifications to its 

policies for evaluating oil pipeline indexed rate changes. The Commission also seeks 

comment regarding potential changes to FERC Form No. 6, page 700. The Commission 

invites all interested persons to submit comments in response to the proposals. 

DATES: Initial Comments are due [Insert date 45 days after publication in the 

Federal Register], and Reply Comments are due [Insert date 90 days after publication 

in the Federal Register].

ADDRESSES: Comments, identified by docket number, may be filed in the following 

ways:

• Electronic Filing through http://www.ferc.gov. Documents created electronically 

using word processing software should be filed in native applications or print-toPDF format and not in a scanned format.

• Mail/Hand Delivery: Those unable to file electronically may mail or hand-deliver 

comments to: Federal Energy Regulatory Commission, Secretary of the 

Commission, 888 First Street, NE, Washington, DC 20426.
Docket No. RM17-1-000 - 2 -

Instructions: For detailed instructions on submitting comments and additional 

information on the rulemaking process, see the Comment Procedures section of this

document.

FOR FURTHER INFORMATION CONTACT:

Adrianne Cook (Technical Information)

Office of Energy Market Regulation

888 First Street, NE

Washington, DC 20426

(202) 502-8849

Monil Patel (Technical Information)

Office of Energy Market Regulation

888 First Street, NE

Washington, DC 20426

(202) 502-8296

Andrew Knudsen (Legal Information)

Office of the General Counsel

888 First Street, NE

Washington, DC 20426

(202) 502-6527

SUPPLEMENTARY INFORMATION:
UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Revisions to Indexing Policies and Page 700 of FERC 

Form No. 6

Docket No. RM17-1-000

ADVANCE NOTICE OF PROPOSED RULEMAKING

TABLE OF CONTENTS

Paragraph Numbers

I. Background............................................................................................................. - 4 -

II. Indexing Policies .................................................................................................... - 7 -

III. Modifications to Page 700.................................................................................... - 13 -

A. Background....................................................................................................... - 14 -

B. Supplemental Page 700s................................................................................... - 16 -

C. Additional Reporting Requirements on Page 700............................................ - 22 -

IV. Burden ................................................................................................................. - 31 -

V. Comment Procedures........................................................................................... - 31 -

VI. Document Availability ........................................................................................ - 32 -
157 FERC ¶ 61,047

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Revisions to Indexing Policies and Page 700 of FERC 

Form No. 6

Docket No. RM17-1-000

ADVANCE NOTICE OF PROPOSED RULEMAKING

(October 20, 2016)

1. The Federal Energy Regulatory Commission (Commission) is considering

modifications to its policies for evaluating oil pipeline index rate changes and to the data 

reporting requirements reflected in page 700 of Form No. 6. As discussed below, the 

Commission’s index ratemaking methodology has become the predominant mechanism 

for adjusting oil pipeline rates under the Interstate Commerce Act (ICA). Therefore, 

ensuring that index rate increases do not cause pipeline revenues to unreasonably depart

from oil pipeline costs, and that both the Commission and oil pipeline shippers have 

sufficient information to assess the relationship between oil pipeline rates and costs, is 

essential to the Commission’s implementation of its statutory obligations under the ICA.

In this Advance Notice of Proposed Rulemaking (ANOPR), the Commission is 

considering a series of reforms to improve the Commission’s and shippers’ ability to 

ensure that oil pipeline rates are just and reasonable.

2. This ANOPR is the result of the Commission’s ongoing monitoring and evaluation 

of the relationship between oil pipeline costs and rates. In 2015, the Liquids Shippers
Docket No. RM17-1-000 - 2 -

Group,1 Airlines for America,

2 and the National Propane Gas Association3 (collectively, 

Joint Shippers) filed a petition for rulemaking seeking additional cost information on 

Form No. 6, page 700.

4

 In July 2015, the Commission held a technical conference 

discussing this proposal, including the Joint Shippers’ asserted need for greater insight 

into oil pipelines’ costs and revenues to enable shippers to challenge oil pipeline rates 

that may be unjust and unreasonable. 

3. In addition, the Commission recently completed the 2015 Five-Year Indexing 

Review proceeding, which involved an assessment of the relationship between the oil 

pipeline index and industry costs.5

 Although the five-year review process addressed the 

calculation of the index-level on an industry-wide basis, it did not address how individual 

oil pipelines may adjust their rates based on the approved index. 

 1 Liquids Shippers Group consists of the following crude oil or natural gas liquids 

producers: Anadarko Energy Services Company, Apache Corporation, Cenovus Energy 

Marketing Services Ltd., ConocoPhillips Company, Devon Gas Services LP, Encana 

Marketing (USA) Inc., Marathon Oil Company, Murphy Exploration and Production 

Company USA, Noble Energy Inc., Pioneer Natural Resources USA Inc., and Statoil 

Marketing and Trading (US) Inc. 

2 Airlines for America is a trade association representing cargo and passenger 

airlines, including Alaska Airlines, Inc., American Airlines Group (American Airlines 

and US Airways), Atlas Air, Inc., Delta Air Lines, Inc., Federal Express Corporation, 

Hawaiian Airlines, JetBlue Airways Corp., Southwest Airlines Co., United Continental 

Holdings, Inc., and United Parcel Service Co.

3 The National Propane Gas Association is a national trade association of the 

propane industry with a membership of approximately 3,000 companies, including 38 

affiliated state and regional associations representing members in all 50 states.

4 Petition for Rulemaking, Docket No. RM15-19-000 (filed April 20, 2015) 

(Petition).

5 Five Year Review of the Oil Pipeline Index, 153 FERC ¶ 61,312 (2015).
Docket No. RM17-1-000 - 3 -

4. However, through the Commission’s ongoing monitoring of how the index affects 

pipeline rates, the Commission has observed that some pipelines continue to obtain

additional index rate increases despite reporting on Form No. 6, page 700 revenues that

significantly exceed costs. The Commission’s experience with index proceedings has

also indicated that our standards for evaluating shipper objections to index filings could 

be strengthened and clarified, to both protect against excessive rate increases and, 

consistent with the streamlined and simplified methodology required by Congress,6

minimize costly and time-consuming litigation regarding pipeline rates. 

5. Accordingly, in this ANOPR, the Commission proposes reforms to its review of 

oil pipeline index rate filings and the reporting requirements for Form No. 6, page 700 to 

better fulfill its statutory obligations under the ICA. First, the Commission is considering

a new policy that would deny proposed index increases if (a) a pipeline’s Form No. 6,

page 700 revenues exceed the page 700 total cost-of-service by 15 percent for both of the 

prior two years or (b) the proposed index increases exceed by 5 percent the annual cost 

changes reported on the pipeline’s most recently filed page 700. 

6. Second, in response to the Joint Shippers’ Petition, the Commission is also 

considering applying these new reforms to costs more closely associated with the

proposed indexed rate than the total company-wide costs and revenues presently reported

by oil pipelines on page 700. Accordingly, the Commission is considering requiring 

pipelines to file supplemental page 700s for (a) crude pipelines and product pipelines, 

(b) non-contiguous systems, and (c) major pipeline systems. The Commission also seeks 

 6 See infra P 8.
Docket No. RM17-1-000 - 4 -

comments regarding a proposed requirement that pipelines report (a) information 

regarding the allocations used to prepare the supplemental page 700s, and (b) separate

revenues for cost-based rates (e.g. indexing), non-cost-based rates (e.g. market-based 

rates or settlement rates), and other jurisdictional revenues (such as penalties). 

I. Background

7. The Commission regulates the rates, terms, and conditions that oil pipelines 

charge under the Interstate Commerce Act (ICA).7

 The ICA prohibits oil pipelines from 

charging rates that are “unjust and unreasonable” and permits shippers and the 

Commission to challenge both pre-existing and newly filed rates.8

 

8. In the Energy Policy Act of 1992 (EPAct 1992), Congress mandated that the

Commission establish a simplified and generally applicable ratemaking methodology for 

oil pipelines and streamline procedures in oil pipeline rate proceedings.9

 In response to 

EPAct 1992’s mandate, the Commission issued Order No. 561 creating the indexing

methodology,

10 which allows oil pipelines to change their rates subject to certain ceiling 

levels as opposed to making cost-of-service filings to change those rates. These ceiling 

 7 49 App. U.S.C. 1 et seq. (1988).

8 49 App. U.S.C. 13(1), 15(1), and 15(7).

9 Energy Policy Act of 1992, Pub. L. No. 102-486 Sec. 1803(b), 106 Stat. 3010 

(Oct. 24, 1992).

10 Revisions to Oil Pipeline Regulations pursuant to Energy Policy Act of 1992, 

Order No. 561, FERC Stats. & Regs, ¶ 30,985, at 30,940 (1993), order on reh’g and 

clarification, Order No. 561-A, FERC Stats. & Regs., ¶ 31,000 (1994), aff’d sub nom. 

Ass’n of Oil Pipe Lines v. FERC, 83 F.3d 1424 (D.C. Cir. 1996) (AOPL).
Docket No. RM17-1-000 - 5 -

levels change every July 1 with an index based upon industry-wide cost changes.11

Indexing serves as the Commission’s primary oil pipeline ratemaking methodology. 

However, the Commission also permits oil pipelines to change their rates via (a) a

traditional cost-of-service filing based upon a showing that a substantial divergence exists 

between the pipeline’s indexed rates and the pipeline’s costs, (b) market-based rates if the 

pipeline can demonstrate it lacks market power, and (c) settlement rates.

12

9. At the same time it created the indexing methodology, the Commission added

page 700 to Form No. 6 to serve as a preliminary screening tool to evaluate indexed 

rates.

13 Page 700 provides a simplified presentation of an oil pipeline’s jurisdictional 

cost-of-service and revenues. In its present form, page 700 reflects only total company 

data and does not provide separate costs-of-service for different parts of a pipeline 

system.

10. Page 700 serves as the means for the Commission’s initial evaluation of protests 

and complaints alleging that a pipeline’s indexed rate change is “substantially in excess” 

 11 Pursuant 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) 

(2016). Currently, the index level is based upon the Producer’s Price Index for Finished 

Goods plus 1.23, which was based upon the relationship between PPI-FG and oil pipeline 

cost changes during the 2009-2014 period. The index level is reviewed every five-years. 

See Five-Year Review of the Oil Pipeline Index, 153 FERC ¶ 61,312 (2015). 

12 18 CFR 342.4 (2016). 

13 Cost-of-Service Reporting and Filing Requirements for Oil Pipelines, Order No. 

571, FERC Stats. & Regs., ¶ 31,006 (1994), order on reh’g and clarification, Order No. 

571-A, FERC Stats. & Regs., ¶ 31,012 (1994), aff’d sub nom. All jurisdictional pipelines 

are required to file page 700, including pipelines exempt from filing the full Form 6. 

18 CFR 357.2(a)(2) and (a)(3) (2016).
Docket No. RM17-1-000 - 6 -

of the pipeline’s cost changes.

14 When a shipper files a protest against an oil pipeline’s

indexed rate change, the percentage comparison test has been used by the Commission to

determine whether to investigate the indexed filing. The percentage comparison test

compares (a) the change in the prior two years’ total cost-of-service data reported on page 

700 with (b) the proposed indexed rate change.15 If the percentage comparison test 

differential is greater than 10 percent, the Commission has historically investigated the 

protested index filing via subsequent administrative law judge hearing procedures, and, 

depending upon the outcome of that investigation, may modify or reject the index rate 

change. If the differential is less than 10 percent, the Commission has generally 

exercised its discretion to accept the rate filing without an investigation.

16 

11. The Commission also relies upon page 700 as a preliminary screen to evaluate 

complaints against an indexed rate change. Whereas the percentage comparison test has 

served as the means for evaluating a protest to an index rate change, the Commission 

applies a wider range of factors to evaluate complaints.

17 These factors include the 

substantially exacerbate test that directs further investigation if (a) a pipeline is already 

“substantially over-recovering” and (b) the pipeline has filed an index increase that would

“substantially exacerbate” that over-recovery. If a shipper provides reasonable grounds 

 14 18 CFR 343.2(c) (2016). 

15 Calnev Pipe Line L.L.C., 130 FERC ¶ 61,082, at PP 10-11 (2010) (Calnev).

16 SFPP, L.P., 143 FERC ¶ 61,141, at P 6 (2013).

17 Calnev, 130 FERC ¶ 61,082 at P 11. The Commission has explained that it will 

consider additional factors in a complaint because it has more time to evaluate complaints 

and the complainant must carry the burden of proof. BP West Coast Products LLC v. 

SFPP, L.P., 122 FERC ¶ 61,141, at PP 6-7 (2007).
Docket No. RM17-1-000 - 7 -

that a pipeline’s index increase will substantially exacerbate an existing over-recovery, 

the Commission will set the matter for hearing before an administrative law judge.

18

II. Indexing Policies

12. The Commission is contemplating changes to indexing policies for evaluating 

annual oil pipeline indexed filings. These changes would modify both the existing 

percentage comparison test and the substantially exacerbate test. Through these 

modifications, the Commission seeks to ensure that oil pipeline rates under the ICA are 

just and reasonable by reducing the likelihood that an oil pipeline’s rates substantially

deviate from its costs through the application of indexed rate increases. The Commission

also is exploring whether and how such changes would further streamline and simplify its 

regulations consistent with the objectives of EPAct 1992. 

13. Accordingly, the Commission is considering a two-part evaluation of index 

filings.19 The Commission would use these tests to strengthen and clarify its evaluation 

of all indexed filings upon the filing of a protest or complaint or upon the Commission’s 

own initiative.

20 The first part of the evaluation, the new “exacerbate” test, would deny

 18 BP West Coast Products LLC v. SFPP, L.P., 122 FERC ¶ 61,129 (2008).

19 The Commission does not propose to change its policies for evaluating index 

rate decreases. If the index causes a pipeline’s rate ceiling to decline, then the pipeline 

must adjust its rates so that they remain at or below the reduced rate ceiling. 18 CFR

342.3(e) (2016).

20 Consistent with the policy articulated in Order No. 561, the Commission 

anticipates continued reliance upon affected shippers to bring challenges that apply the 

standards contemplated by this ANOPR to indexed rate changes. Order No. 561, FERC 

Stats. & Regs., ¶ 30,985 at 30,967. However, the Commission retains the authority to 

investigate on its own initiative oil pipeline rates, including indexed rates, under sections 

13 and 15 of the ICA. 
Docket No. RM17-1-000 - 8 -

any ceiling level increase or indexed rate increases for pipelines in which a pipeline’s 

page 700 revenues exceed page 700 total costs by 15 percent for both of the prior two 

years. The second part of the evaluation, the new percentage comparison test, would 

deny a proposed increase to a pipeline’s rate or ceiling level greater than 5 percent of the 

barrel-mile cost changes reported on page 700.

21 These tests would be used by the 

Commission to accept or reject oil pipeline indexed filings without, at least in most cases, 

establishing hearing procedures.

22

14. The Commission anticipates that the new exacerbate test, which considers the 

relationship between an oil pipeline’s revenues and its costs, will have several benefits. 

Under indexing, individual oil pipelines may change their rates based upon industry-wide 

cost changes.23 When an oil pipeline’s revenues significantly exceed costs, the pipeline 

still may seek and receive an additional rate increase that may further increase this gap. 

This is because, currently, the Commission does not typically consider the relationship 

 21 The Commission currently uses costs, not costs per barrel-mile, when applying 

the percentage comparison test to oil pipeline cost changes. However, total cost levels 

can fluctuate due to changing throughput even if the expenses of moving a particular 

barrel remain the same. The Commission has concluded that cost per barrel-mile (Line 

9/Line 12) may provide a more accurate measure of a pipeline’s cost changes. 

22 In other words, if a pipeline’s index filing satisfied both tests, it would generally

be accepted. Likewise, if the index filing failed either the exacerbate test or the 

percentage comparison test, it would generally be rejected. 

23 Using an industry-wide index both simplifies the ratemaking procedures by 

avoiding consideration of a particular pipeline’s costs and rewards efficient companies 

that control costs. “Indexing fosters efficiency by severing the linkage under traditional 

cost-of-service ratemaking between...rate changes and...costs. This provides the 

pipeline with the incentive to cut costs aggressively, since ... it may retain a portion of 

the savings it generates.” See Order No. 561, FERC Stats. & Regs., ¶ 30,985 at 30,948 

n.37.
Docket No. RM17-1-000 - 9 -

between an oil pipeline’s revenues and its costs when evaluating an indexed rate change. 

The exception, the existing substantially exacerbate test, only applies after the proposed 

rate increase becomes effective and a shipper files a complaint. 

15. Through the new exacerbate test, shippers could raise objections to proposed rate 

increases when pipeline revenues already appreciably exceed costs. The contemplated 15 

percent threshold is intended to preserve an indexing regime based upon industry-wide 

cost changes while also ensuring that the index does not cause a particular oil pipeline’s 

rates to unreasonably depart from its costs. For example, an oil pipeline with costs 

corresponding to industry-wide averages and with revenues 115 percent of costs would

earn a real return on equity (ROE)24 that is appreciably higher than the real ROE the 

pipeline itself has identified on page 700.

25 Under these circumstances, it may be 

reasonable to deny additional index rate increases. However, to avoid distortions caused 

by one-year fluctuations in costs and revenue, the Commission only anticipates denying

an index increase if the 15 percent threshold is exceeded for two consecutive years. 

 24 The real ROE is the nominal or total ROE less the inflationary component of 

ROE.

25 When a pipeline reports revenues that are 115 percent of page 700 total cost-ofservice, approximately one-third of these additional revenues represent income tax 

liabilities and the remaining two-thirds are additional equity earnings for the pipeline. 

Accordingly, for a hypothetical pipeline reporting the industry-wide average page 700 

return on equity (page 700, line 7b) of approximately 18.3 percent of its total costs (page 

700, line 9), the additional revenues would translate to an increase in equity return of 

55 percent (i.e. 2/3 * 15 percent /18.3 percent). If the pipeline incorporated the industrywide average ROE of 10.4 percent in its page 700 cost-of-service (page 700, line 6d), 

such a pipeline would actually be recovering a 16.1 percent real ROE (10.4 percent + 

10.4 percent *55 percent). The Commission calculated the industry-wide averages in this 

footnote based upon the publicly available page 700 data filed by oil pipelines. 
Docket No. RM17-1-000 - 10 -

16. Similarly, the Commission also anticipates that the new percentage comparison 

test will help ensure that rates better reflect costs. By reducing the gap between an 

annual rate increase and a pipeline’s cost changes from 10 to 5 percent, the Commission 

constrains the difference that can emerge in a one-year period between a pipeline’s costs

and its revenues.

26 However, as is the case with the existing percentage comparison test, 

if a pipeline’s page 700 reported costs exceed its revenues, the Commission would permit

the pipeline to take the full index increase because the pipeline is not recovering its costs. 

17. The Commission is also considering requiring pipelines, whether or not they 

modify their indexed rates, to make an annual filing showing changes in their ceiling 

levels.27 These ceiling levels would also be subject to challenge using the new 

exacerbate and percentage comparison tests. Applying these processes to the pipeline’s 

rate ceilings, not just the rates, would limit the emergence of pipeline over-recoveries. 

Under the new exacerbate test, a pipeline’s ceiling levels would not increase when its 

revenues exceed 115 percent of costs, ensuring that the pipeline would not be able to

significantly raise its rates (and thus revenues) immediately after page 700 revenues fall 

 26 Using the 10 percent threshold, a pipeline with costs annually declining by 5 

percent and 4.9 percent of annual indexed rate increases could have revenues that exceed 

costs by roughly 20 percent after two years and 30 percent after three years. Applying 

that same hypothetical but using the 5 percent threshold, the revenues would only exceed 

costs by 10 percent after two years and around 15 percent after three years.

27 As explained, supra P 8, indexing allows oil pipelines to change their rates 

subject to certain ceiling levels. These ceiling levels change every July 1 with an index 

based upon industry-wide cost changes. When a pipeline’s ceiling levels change, the 

pipeline is not currently obligated to make a filing with the Commission. Pipelines are 

currently only obligated to make a filing with the Commission if they change their rates 

pursuant to the changing ceiling levels. 
Docket No. RM17-1-000 - 11 -

below 115 percent of page 700 costs.28 Likewise, by applying the new percentage 

comparison test to a pipeline’s ceiling level changes (as well as to its indexed rate 

changes), the Commission also would limit the ability of a pipeline to carry-forward the 

full indexed increase to a future period when that increase significantly exceeds (i.e. more 

than 5 percent) the pipeline’s cost changes.

29

18. The Commission anticipates these tests can be used to simplify and streamline oil 

pipeline ratemaking procedures. While page 700 has been used as a “preliminary 

screen,” under the tests proposed here, the pipeline’s own reported cost data on page 700 

would serve as a sufficient basis for a decision to deny a challenged index rate filing. In 

such circumstances, a full hearing before an administrative law judge would not be 

necessary. By relying more upon the pipeline’s self-reported page 700 data, the 

Commission could simplify and streamline the process for evaluating indexed rate 

changes. To the extent that commenters believe there may be circumstances in which the 

new exacerbate test and the revised percentage comparison tests when applied to page 

700 (or the supplemental page 700s described below) would not provide a reasonable 

 28 In other words, the change in the ceiling increase would be limited to a 5 percent 

difference from the pipeline’s cost change. For example, if the index for 2018 is 3 

percent, and the pipeline’s cost change is -3 percent, the pipeline’s ceiling level could not 

increase by 3 percent because this would fail the percentage comparison test because 6 

[3-(-3)] is more than 5. Rather, in this hypothetical example, the ceiling level could only 

change by 2 percent [2-(-3)=5]. This 2 percent increase to the ceiling level would carry 

forward whether or not the pipeline raised its rates up to the ceiling.

29 Currently, Commission policy allows a pipeline to file a partial index rate 

increase leading to a percentage comparison test of 9.9 percent while the pipeline’s 

ceiling rate still increases by the full index. The pipeline can make a filing with the 

Commission to increase its rates up to the ceiling level in a subsequent year.
Docket No. RM17-1-000 - 12 -

basis for accepting or rejecting an indexed filing, commenters should (a) identify those 

circumstances and (b) specifically discuss how those circumstances could be addressed 

for evaluating indexed rate changes in a simplified and streamlined ratemaking process. 

19. Along similar lines, the Commission anticipates that these modifications would

streamline and simplify Commission policies by establishing clearer standards. For 

example, under the new exacerbate test, the Commission would be identifying the

specific threshold for what constitutes a “substantial over-recovery.” Further, when the 

Commission sets an indexed rate filing for hearing based upon either the percentage 

comparison test or the substantially exacerbate test, there is limited precedent providing 

guidance regarding the parameters and scope of such a hearing subject to a simplified 

ratemaking methodology.30 This lack of clarity creates complexity and uncertainty for 

both shippers and pipelines. By accepting and rejecting indexed filings based upon the 

proposed new exacerbate and percentage comparison tests, the Commission seeks to 

establish a clearer policy consistent with the objective of a simplified and streamlined 

ratemaking process.

20. Whether relying upon the existing page 700 or the supplemental page 700s, the 

Commission expects that these new tests would serve as the primary mechanism for 

evaluating oil pipeline indexed rate changes.

31 The Commission anticipates that these 

 30 Consistent with the intent of indexing to create a simplified ratemaking 

methodology, the investigation into an indexed rate increase should not require the 

parties to fully litigate a cost-of-service rate case. 

31 Because page 700 is critical to the Commission’s ability to monitor oil pipeline 

rates, the Commission emphasizes that pipelines must comply with the current 

requirement to file the Form No. 6, including the page 700, by April 18 of each year. 

(continued ...)
Docket No. RM17-1-000 - 13 -

new policies for evaluating indexed filings would both (a) ensure that index rate increases 

do not cause pipeline revenues to substantially deviate from costs and (b) streamline and 

simplify the Commission’s ratemaking methodologies. 

III. Modifications to Page 700

21. The Commission has preliminarily concluded that additional reporting 

requirements may enhance the ability of shippers and the Commission to monitor oil 

pipeline rates. First, the Commission is considering a requirement that pipelines file 

supplemental page 700s for (a) crude pipelines and product pipeline systems, (b) noncontiguous systems, and (c) certain major pipeline systems. These changes would 

complement the proposed new exacerbate and percentage comparison tests. Using the 

supplemental page 700s, the Commission could evaluate indexed rate changes based 

upon costs and revenues more closely related (and thus more relevant) to the proposed 

indexed rate change.32 

22. Second, the Commission is considering requiring pipelines on page 700 and the 

supplemental page 700s to report additional information regarding (a) cost allocations

 

Although waivers may still be granted in limited circumstances, the Commission must be 

able to evaluate the indexed rates before they become effective on July 1 of each year. 

Failure to timely file the Form No. 6 could delay the effective date of a pipeline’s 

proposed indexed increase or, potentially, lead to the outright rejection of the requested 

increase.

32 Shippers could also use the supplemental page 700 as the basis for initiating a 

cost-of-service complaint against a pipeline’s rates. Consistent with the mandate for a 

simplified ratemaking methodology in EPAct 1992, the Commission created indexing to 

avoid cost-of-service litigation. However, shippers may still pursue cost-of-service 

claims if a pipeline’s indexed rates substantially diverged from a pipeline’s costs. Arco 

v. Calnev Pipe Line, L.L.C., 97 FERC ¶ 61,057, at 61,311 (2001) (citing Order No. 561, 

FERC Stats. & Regs., ¶ 30,985 at 30,955). 
Docket No. RM17-1-000 - 14 -

used on the supplemental page 700s and (b) separate revenues for cost-based rates (e.g. 

indexing), non-cost-based rates (e.g. market-based rates), and other jurisdictional 

revenues (such as penalties). 

A. Background

23. The Commission’s reevaluation of page 700 originated with the Joint Shippers’ 

petition for rulemaking. In the petition, the Joint Shippers requested that the Commission

require pipelines to disaggregate the total company data reported on page 700 and to file 

supplemental page 700s with summary costs-of-service for (a) crude and product systems 

and (b) for each “rate design” segment. The Joint Shippers’ proposal also requested that

all interested parties be given access to the work papers used to prepare page 700. A 

technical conference held July 30, 2015, discussed the Joint Shippers’ petition. The 

Commission provided the opportunity for initial comments due September 25, 2015 and 

reply comments due October 30, 2015.

24. At the technical conference and in subsequent comments, the Association of Oil 

Pipelines (AOPL) opposed the proposal as unduly burdensome and inconsistent with the 

Commission’s indexing ratemaking regime. In addition to the comments from AOPL 

the Commission also received nine separate initial comments from pipeline entities 
Docket No. RM17-1-000 - 15 -

opposing the petition.33 The Joint Commenters,34 Liquids Shippers Group, the Canadian 

Association of Petroleum Producers,35 and Tesoro Refining and Marketing LLC filed 

initial comments supporting the proposal. On October 30, 2015, AOPL and SFPP, L.P., 

filed reply comments expressing continued opposition to the petition and the Joint 

Commenters and the Liquids Shippers Group filed reply comments in further support of 

the petition.

25. In its reply comments, AOPL advanced a limited alternative proposal to the 

petition that would require pipelines to report carrier property data shown on Form No. 6, 

pages 212-213 and accrued depreciation data shown on Form No. 6, page 216 separately 

for crude oil and products.

36 Using this data, AOPL stated shippers could estimate costs 

by crude and products pipeline systems. In the supplemental reply comments filed 

November 23, 2015, Joint Commenters argued AOPL’s counterproposal did not provide 

adequate information for shippers to meaningfully evaluate the reasonableness of rates.

37 

 33 The Commission received comments from Explorer Pipeline Company,

Magellan Midstream Partners, L.P., Marathon Pipe Line LLC, Shell Pipeline Company

LP, Plains Pipeline, L.P., SFPP, L.P., Buckeye Pipe Line Company, L.P., jointly NuStar 

Logistics, L.P. and NuStar Pipeline Operating Partnership, L.P., and, jointly, Enterprise 

Products Partners L.P. and its operating subsidiaries Enterprise TE Products Pipeline 

Company LLC and Mid-America Pipeline Company, LLC.

34 Joint Commenters include Airlines for America, National Propane Gas 

Association, and Valero Marketing and Supply Company.

35 The Canadian Association of Petroleum Producers represents companies that 

develop and produce natural gas and crude oil throughout Canada.

36 AOPL Reply Comments, Docket No. RM15-19-000, at 60.

37 Joint Commenters Supplemental Reply Comments, Docket No. RM15-19-000, 

at 18.
Docket No. RM17-1-000 - 16 -

On December 8, 2015, AOPL filed a response to the Joint Commenters Supplemental 

Reply Comments.

B. Supplemental Page 700s

1. Commission Proposal

26. The Commission’s preliminary assessment indicates that providing supplemental 

page 700s for different parts of a pipeline system may enhance the Commission’s and 

shippers’ ability to evaluate a pipeline’s indexed rates. 

27. For some pipelines, the total company data on page 700 consolidates costs and 

revenues from several different assets, including (a) pipeline systems that move crude oil 

as opposed to petroleum products, (b) non-contiguous systems that use geographically 

separate assets, and (c) major pipeline systems that extend at least 250 miles and serve 

fundamentally different markets. The costs associated with providing service on one of 

these systems may be fundamentally different from the costs associated with providing 

service on other parts of the total company pipeline system. Accordingly, these 

supplemental page 700s would be useful both in the evaluation of index filings (as 

discussed above) and for cost-of-service challenges to oil pipeline rates. When a pipeline 

seeks an indexed increase to a particular rate, shippers and the Commission could use the 

supplemental page 700s to compare the rate change with costs that are more closely 

associated with that particular rate. 

28. Accordingly, as discussed below, the Commission is considering requiring 

pipelines to file supplemental page 700s for crude oil systems (labeled 700c) and 

petroleum product systems (labeled 700p). Within each of these crude and product 

systems, the Commission is considering a further requirement that pipelines provide a 
Docket No. RM17-1-000 - 17 -

supplemental page 700 for (a) non-contiguous (geographically separate) pipeline 

systems38 and (b) major pipeline systems. Major pipeline systems would consist of large 

pipeline systems (at least over 250 miles) that serve markets (either origin or destination) 

different from the remainder of the pipeline’s system.39 Major pipeline systems would 

also include separate pipeline systems (even those below the 250-mile threshold) 

established by a final Commission order in a litigated rate case. The supplemental page 

700s for non-contiguous and major pipeline systems would be labeled 700c1, 700c2, etc.,

for crude systems, and 700p1, 700p2, etc., for product systems.40

29. The Commission anticipates that these supplemental page 700s would allow index 

rate changes to be evaluated using data that is more relevant to a particular shipper’s rates 

than the currently reported company-wide data. These criteria identify pipeline systems 

associated with (a) separate transportation movements and (b) costs due to the use of 

different assets. 

30. The Commission expects that the benefits described above will outweigh the

accounting burden for disaggregating the cost data on these supplemental page 700s. For 

 38 For example, if one pipeline system goes from California to Nevada and another 

pipeline system goes from Texas to Arizona. 

39 A major pipeline system would include one branch of a “V” where different 

parts of the total company system share a similar origin but where one 250-mile system 

serves destinations to the northwest and another part travels to destinations to the 

northeast. Laterals, different divisions of an integrated and interconnected reticulated 

pipeline, different divisions of a straight-line pipeline, and granular rate segments are not 

intended to be a major pipeline system within the Commission’s contemplated definition. 

40 By definition, if a pipeline has one major pipeline system labeled 700c1 which 

extends over 250 miles, it must also file a supplemental page 700c2 for the remainder of 

its crude system.
Docket No. RM17-1-000 - 18 -

crude and product systems, pipelines are already required to disaggregate significant data 

on the Form No. 6. For non-contiguous pipelines, geographically separate systems are 

also more likely to be recorded separately on a company’s books and records.41

Similarly, 250-mile major pipeline systems are likely to be of sufficient significance that 

the pipeline separately tracks the costs and revenues associated with such a large part of 

its business. Nonetheless, to the extent that a pipeline’s existing books and records do 

not allow for the pipeline to directly assign certain costs that would be required to be 

reported on the supplemental page 700s, the Commission, as discussed below, is 

considering allowing for certain reasonable allocations and estimates using the available 

data. 

31. The Commission does not presently intend to pursue additional segmentation of 

page 700, such as the “rate design” segments proposed in the Joint Shippers’ petition. 

Indexing does not require an exact correlation between a pipeline’s costs and rates,

42 and, 

given that regulatory scheme, we believe that the changes proposed above will provide 

sufficient transparency to allow the Commission and shippers to monitor pipelines’ costs 

 41 Pipelines typically record their costs using cost centers and location codes. It 

seems reasonable that in most cases these data should be sufficiently precise to associate 

particular costs with the major pipeline system identified above. 

42 As the United States Court of Appeals for the District of Columbia Circuit has 

explained, requiring an individualized cost-of-service evaluation for each pipeline would 

be inconsistent with the simplification mandated by EPAct 1992. AOPL v. FERC, 281 

F.3d 239, 244 (D.C. Cir. 2002). Indexing achieves simplification by using an industrywide index as opposed to relying upon a detailed examination of each pipeline’s 

particular costs. The Commission only considers a pipeline’s particular cost changes if 

the index rate change is in “substantial excess” of the pipeline’s costs or there is a 

substantial divergence between a pipeline’s rates and the costs associated with those 

rates. 
Docket No. RM17-1-000 - 19 -

and revenues. The Commission has previously relied upon the total company costs 

reported on page 700, and we believe the more specific supplemental page 700s 

identified above will be appropriate to be used in future applications of the index.

32. Moreover, the Commission is concerned about the application of the Joint 

Shippers’ proposal on an industry-wide basis. Most pipelines have never made a filing 

with the Commission identifying their rate design segments, and Commission precedent 

provides limited guidance for identifying rate design segments.43 Rate design 

segmentation of page 700 would likely insert into the Commission’s “simplified” 

indexing methodology complex, fact-specific disputes regarding the appropriate rate 

design segmentation.44 Further, the Joint Shippers’ alternate proposal to define rate 

design segments using definition 32(a) from the Uniform System of Accounts provides 

little clarity because this definition has historically served a separate accounting purpose 

and has never previously been applied to identify rate design segments.

45

 43 A pipeline would only need to identify its rate design segments if it litigated a 

cost-of-service rate case. Because pipelines primarily use indexing to change their rates, 

such cost-of-service cases are rare. The Commission has only required one pipeline, 

SFPP, to use segmented data in a cost-of-service case. SFPP, LP, 86 FERC ¶ 61,022, at 

61,080 (1999). There, the Commission made a series of fact-specific holdings to 

conclude that SFPP’s south system consisted of two rate design segments, one travelling 

from Texas to Phoenix, Arizona, and another from California to Phoenix, Arizona. 

44 How a pipeline defines its segments could fundamentally affect which rates are 

eligible for an indexed increase based upon the supplemental page 700s.

45 Rather, this definition applies to the accounting rules for treatment of the 

purchase and sale of an asset. Specifically, based upon definition 32(a), the sale or 

disposal of a “segment of a business” must be accounted for as part of “discontinued 

operations” and not included among the gains and losses associated with pipeline’s 

continuing operations. See 18 CFR pt. 352, Instruction 1-6(c) and Account No. 676 

(continued ...)
Docket No. RM17-1-000 - 20 -

33. The comments filed in Docket No. RM15-19-000 demonstrate our concerns. As 

an initial matter, different shipper comments supporting the segmentation proposal 

identify conflicting lists of pipelines that “could” have different rate design segments.

46 

Moreover, to identify these segments, the Joint Shippers used potentially inapplicable 

criteria such as “undivided joint interest”47 and separate “tariff listings”48 that, in addition 

to being potentially over-inclusive, failed to identify SFPP, L.P., a non-contiguous 

pipeline that has repeatedly been treated as operating separate segments in Commission 

 

(2016) (“Gain (loss) on disposal of discontinued segments”). The Commission’s 

considerations when applying this accounting definition may differ significantly from 

considerations used to identify separate segments in a rate case.

46 Compare Tesoro Refining and Marketing LLC Initial Comment, Docket No. 

RM15-19-000, Appendix with Joint Shippers Initial Comment, Docket No. RM15-19-

000, at 38-39; Attachment 2, Affidavit of Michael R. Tolleth, Docket No. RM15-19-000, 

at 9 & Liquid Shippers Group Initial Comments, Docket No. RM15-19-000, at 30. 

47 The Joint Shippers state that undivided joint interests pipelines indicate the 

existence of separate rate design segments because these systems “generally have tariffs 

for each of the owners and may be geographically disconnected from other 

segments.” Joint Shippers Initial Comment, Attachment 2, Affidavit of Michael R. 

Tolleth, Docket No. RM15-19-000, at 12. However, because pipelines can structure their 

own tariffs, it is not clear whether merely having a separate tariff justifies a separate rate 

design system. Moreover, it is not clear that undivided joint systems are necessarily 

geographically separate. For example, the “Maumee System” is a crude oil pipeline that 

runs from Lima, OH, and to Samaria, MI. Mid-Valley Pipeline Company (Mid-Valley) 

and Hardin Street Holdings (Hardin) jointly own the “Maumee System.” Including 

Maumee, Mid-Valley’s System extends continuously from northeast Texas to Samaria, 

Michigan, with receipts a several points on the southern portion of its system and 

delivery points all along its system, including four points on the Maumee System. In any 

event, to the extent an undivided joint interest pipeline is geographically separate, it 

would be addressed by the Commission’s definition above. 

48 Oil pipelines have discretion with the structuring of their tariff, and how the 

tariff is structured does not necessarily establish whether or not separate rate design 

segments exist.
Docket No. RM17-1-000 - 21 -

rate cases.49 In addition, the rate design segments identified by shippers include

relatively insignificant assets, such as small laterals.50 The burden associated with 

segmentation is not a one-time burden, as pipeline systems change over time and 

pipelines will need to re-evaluate their rate design segments in future years. Recent 

litigation before the Commission further demonstrates the burdens imposed by a factspecific inquiry into a pipeline’s segmentation.51 Given the Commission’s indexing 

ratemaking regime and our determination that alternative reforms to page 700 will 

 49 See Affidavit of Michael R. Tolleth, Figure 1, Docket No. RM15-19-000, 

page 9. 

50 The shippers’ proposal exempts pipelines that report total company revenues 

less than $10 million for each of the three previous years. However, it does not address 

small segments within larger total systems. For instance, the shippers’ filings identify a 

12-mile lateral on the Seminole pipeline as potentially requiring a separate page 700. 

Compare AOPL Reply Comments, Docket No. RM15-19-000, at 26-27 with Joint 

Shippers Supplemental Reply Comments, Docket No. RM15-19-000, at 8-9. 

51 These disputes have involved issues very specific to the operations of a 

particular pipeline system, such as (a) whether a pipeline, which was effectively a single 

pipe moving from the Gulf of Mexico to the northeastern United States, should be 

divided into two separate rate design systems (Joint Shippers Initial Comment, 

Attachment 1, Affidavit of Daniel S. Arthur, Docket No. RM15-19-000, at 28 and 

Appendix O) (discussing TE Enterprise Products, Docket No. IS12-203-000); (b) whether 

a pipeline’s extension into Long Island, NY, should be treated separately from its much 

larger Eastern System on the basis of the different product moved, different pipeline 

vintages, different operational requirements and other factors (Joint Shippers Initial 

Comment, Attachment 1, Affidavit of Daniel S. Arthur, Docket No. RM15-19-000, 

Appendix E at 2) (discussing Buckeye Pipeline, Docket No. OR12-28-000); and (c) 

although not objecting to the segmentation in that particular case, questioning whether 

one of a pipeline’s three systems should be divided further to account for different lines 

that move different products and serve different shippers (National Propane Group, et al, 

Initial Brief, Docket Nos. IS05-216-000, et al., at 13-14 (filed February 7, 2008) 

(discussing Mid-America Pipeline Company, LLC’s Northern System). The oil pipeline 

cost-of-service cases involving rate design segmentation disputes have generally settled 

before the Commission issues a precedential order. However, they illustrate the burden 

that would be imposed by requiring every pipeline that files a page 700 to assess its 

system in this manner.
Docket No. RM17-1-000 - 22 -

provide sufficient transparency to assist the Commission and shippers, the Commission 

currently does not intend to pursue the Joint Shippers’ proposed reporting requirement.

C. Additional Reporting Requirements on Page 700

34. The Commission is also considering requiring pipelines to report additional data 

on the page 700 and supplemental page 700s. First, in order to facilitate the creation of 

the supplemental page 700s above, the Commission is considering requiring pipelines to 

explain the allocation of costs between the different supplemental page 700s. Second, the 

Commission is considering requiring all pipelines to report separate revenues and 

throughput for cost-based transportation rates (resulting from indexing and cost-ofservice), non-cost-based transportation rates (resulting from settlement rates and marketbased rates), and other jurisdictional revenues (such as penalties). 

1. Cost Allocation Data

35. The Commission is contemplating reporting requirements involving the cost 

allocation methodologies used to derive the system-specific data reported on the 

supplemental page 700s. As discussed below, the Commission recognizes pipeline 

arguments that it may be difficult or costly for pipelines to directly assign certain costs to 

the system-specific supplemental page 700s. Thus, the Commission is considering

whether to permit pipelines to use reasonable methodologies for allocating those costs. 

However, to ensure transparency, the Commission is considering also requiring pipelines 

to provide information regarding these allocations on page 700. This information would 

allow the Commission and other interested parties to observe (a) how these allocations
Docket No. RM17-1-000 - 23 -

are affecting the supplemental page 700s’ costs-of-service and (b) any changes in direct 

assignment or allocation practices between annual page 700 filings.52 

36. Page 700 includes ratemaking information that, unlike typical accounting data,

pipelines may not be able to cost-effectively determine on a segmented basis. For 

example, the Opinion No. 154-B trended original cost rate base53 (page 700, line 5d) 

includes (a) the original cost of the rate base (page 700, line 5a), (b) a Starting Rate Base

Write-Up developed in 1983 to transition from a prior ratemaking methodology to 

trended original cost ratemaking (page 700, line 5b), and (c) Net Deferred Earnings, 

which consists of the accumulations since 1983 of the inflationary component of a 

pipeline’s annual return (page 700, line 5c).

54 Unlike typical accounting data, absent a 

cost-of-service rate case (which most oil pipelines have not experienced since 1983), a 

pipeline may have had no reason to maintain or calculate this data other than on the 

company-wide basis for page 700. Given that an exact accounting of the Starting Rate 

 52 As provided by the current instructions on page 700, a pipeline must explain any 

change in its application of the Opinion No. 154-B cost-of-service methodology from the 

prior year. 

53 The Commission’s cost-of-service methodology was established in Opinion No. 

154-B. Williams Pipe Line Co., Opinion No. 154-B, 31 FERC ¶ 61,377, order on reh’g, 

Opinion No. 154-C, 33 FERC ¶ 61,327 (1985). When the Commission established 

indexing and page 700, the Commission determined that it would continue to use the 

Opinion No. 154-B methodology to measure pipeline costs for evaluating whether a 

pipeline’s indexed rate changes were in substantial excess of the pipeline’s rate changes. 

54 Under the Opinion No. 154-B trended original cost ratemaking, the inflationary 

component of the nominal return is placed in deferred earnings and recovered as a part of 

rate base in future years. See Opinion No. 154-B, 31 FERC ¶ 61,377. See, e.g., BP West 

Coast Prods., LLC v. FERC, 374 F.3d 1263, 1282-83 (D.C. Cir. 2004). 
Docket No. RM17-1-000 - 24 -

Base Write-Up and Deferred Earnings would require data from 1983 to the present,55

obtaining this data may be impracticable. 

37. Accordingly, to the extent the Opinion No. 154-B rate base information is not 

available in company records, the Commission would permit pipelines to perform a onetime allocation of these costs for preparing the supplemental page 700s. Reasonable 

allocations of this data should not significantly reduce the usefulness of the supplemental 

page 700 data. The Deferred Earnings and Starting Rate Base Write-Up are a relatively 

small part of an overall cost-of-service,

56 and thus reasonable allocations should not 

undermine the overall accuracy of the total cost-of-service that is used for evaluating 

 55 To properly allocate Starting Rate Base Write-Up, data may be needed dating 

back to the initial service date of the asset in question. 

56 The Commission evaluated the role of deferred earnings as a percentage of the 

cost of service for each pipeline filing a 2015 page 700. The Commission calculated the 

percentage of deferred earnings of the total cost-of-service as follows: 

Deferred Earnings = Accumulated Net Deferred Earnings, line 5c * Real Cost of 

Stockholders’ Equity, line 6d 

Taxes on Deferred Earnings = Accumulated Net Deferred Earnings, line 5c * 

Adjusted Capital Structure Ratio for Stockholders’ Equity, line 6b * Real Cost of 

Stockholders’ Equity, line 6d * (Composite Tax Rate, line 8a/(1-Composite Tax 

Rate, line 8a))

Deferred Earnings as a Percent of Cost of Service = (Deferred Earnings + Taxes 

on Deferred Earnings)/Total Cost of Service, line 9. 

Using this formula, deferred earnings accounted for 6.71 percent of the median 

pipeline’s cost of service, 3.29 percent for the pipeline at the 25th percentile and 9.44 

percent for the pipeline at the 75th percentile. The industry-wide mean was 6.71 percent. 

Because the starting rate base write-up (line 5b) has been depreciated since 1984, it is 

either fully depreciated or quite small on most pipelines.
Docket No. RM17-1-000 - 25 -

indexed rates. Moreover, once this one-time allocation of these Opinion No. 154-B rate 

base costs establishes a base-line, future allocations should be limited.

57

38. The Commission would also permit other allocations where appropriate. 

Currently, when the pipeline’s business records do not allow direct cost assignment, 

pipelines filing page 700s use Commission-approved cost allocation methodologies for 

(a) allocating parent company overhead to the pipeline filing page 700 and (b) identifying 

the jurisdictional costs reported on page 700 as opposed to the non-jurisdictional costs. 

To the extent necessary, the pipelines may use reasonable methodologies for allocating 

costs58 between the various systems reported on the proposed supplemental page 700s.

The Commission anticipates that these methodologies will generally stay consistent over 

time. However, the Commission recognizes that, in some circumstances, it may be 

appropriate for a pipeline to further refine its allocation methodologies. The Commission

also does not expect pipelines to make major or high cost modifications to accounting 

systems or business processes solely for the purpose of filing the supplemental page 700s. 

39. The Commission, however, also seeks to ensure transparency regarding the costs 

allocated among the supplemental page 700s. The choice and application of cost 

 57 In other words, once a pipeline establishes the base-line net deferred earnings 

for each of its supplemental page 700s, the pipeline can in subsequent years (a) amortize 

the base-line level established for each supplemental page 700 and (b) add future deferred 

earnings to the appropriate supplemental page 700. There may, however, be some further 

adjustments needed if a pipeline subsequently sells or acquires pre-existing assets which 

have accrued deferred earnings. 

58 These allocated costs could include items such as shared assets, shared services, 

and overhead costs where direct assignment may sometimes be very difficult.
Docket No. RM17-1-000 - 26 -

allocation methodologies involves judgment that, to some degree, may be subjective.

59 

The Commission and the public would also benefit from information regarding the 

amount of costs that pipelines are allocating as opposed to directly assigning. In order to 

ensure transparency and to monitor pipeline’s allocation decisions, the Commission is 

considering requiring additional information on page 700 in order to differentiate 

between directly assigned and allocated costs and to briefly describe the allocation 

methodology.

40. Thus, for certain line items on page 700 oil pipelines would be required to report 

(a) directly assigned costs and (b) allocated costs.60 The directly assigned costs would be 

those costs that have been assigned to a specific system based upon cost centers and 

location codes. For the allocated costs, the pipeline would include a footnote explaining 

the methodology used to allocate those costs, including (a) Kansas-Nebraska

methodology, (b) volumetric method, (c) gross plant, or (d) other methodologies.61 

41. Second, in order to facilitate understanding of these allocations, on both page 700 

and the supplemental page 700s, the Commission is considering requiring additional data 

 59 The Commission has established allocation methodologies that are used for 

ratemaking purposes. These include the Massachusetts Formula, the Kansas-Nebraska 

methodology, and volumetric allocations. 

60 The requirement to break-out directly assigned and allocated costs would be 

added to line 1 (Operating and Maintenance Expenses), line 2 (Depreciation Expense), 

line 3 (AFUDC Depreciation), line 4 (Amortization of Deferred Earnings), and proposed

lines 5a1-5a4 (Trended Original Cost Rate Base). This requirement would apply to all 

supplemental page 700s.

61 For example, on page 700c for crude pipeline systems, below line 1 “Operating 

and Maintenance Expenses,” this proposal would add Line 1a “Directly Assigned O&M 

Expenses,” and line 1b “Allocated O&M Expenses.” In a footnote, the pipeline could

explain, “These costs were allocated using the KN Method.”
Docket No. RM17-1-000 - 27 -

involving rate base.

62 Specifically, this approach would add to line 5a, Rate Base—

original cost; line 5a1—Total Carrier Property In Service (Gross Plant); line 5a2—Net 

Carrier Property In Service (Net Plant); line 5a3—ADIT; and line 5a4—Total Working 

Capital. Gross and net plant could be important for understanding how costs are being 

allocated. For example, this data may provide a means for allocating the Opinion No. 

154-B cost data. 

42. By permitting oil pipelines to use estimates and cost allocations for certain costs, 

the Commission would seek to reduce the compliance costs associated with the 

supplemental page 700s. However, the use of allocations would be balanced by the 

additional reporting requirements that would enable the Commission and shippers to 

monitor both the level of allocated costs and, in general terms, how those costs were 

allocated. 

2. Revenue, Barrel and Barrel Mile Data

43. The Commission is also considering requiring pipelines to disaggregate page 700 

revenue, barrel, and barrel-mile data associated with (a) cost-based rates (resulting from 

indexing and cost-of-service), (b) non-cost-based rates (resulting from settlement rates 

and market-based rates), and (c) other jurisdictional revenues (such as penalties).

 62 This information would be used primarily to understand the cost allocations to 

the different systems as reported on the supplemental page 700s. Although the 

Commission does not anticipate that all pipelines would be required to file the 

supplemental page 700s, the Commission is considering requiring all pipelines to report 

this information on page 700. The data would help the Commission understand a 

pipeline’s capital costs, and this company-wide data should already be contained within 

the work papers used to prepare the page 700. 
Docket No. RM17-1-000 - 28 -

44. When page 700 was created following EPAct 1992, most oil pipeline revenues 

resulted from rates subject to cost-based regulation. Therefore, comparing total revenue 

to total costs served as an effective preliminary means to determine whether to challenge 

a pipeline’s cost-based rates. However, in recent years, an increasing percentage of 

pipelines are using settlement rates (including negotiated rates associated with new 

construction). Also, at the same time the Commission created page 700, the Commission 

formalized its market-based rates policy in Order No. 572.

63 The revenue derived from 

these non-cost-based rates may substantially deviate from a pipeline’s cost-of-service, but 

still be just and reasonable.64

45. Separating the cost-based and non-cost-based revenue could help the Commission 

and pipeline shippers to assess, on a preliminary basis, whether a gap between total 

company costs and revenues likely results from cost-based rates (which could be 

challenged on a cost-of-service basis) or from non-cost-based rates (which could not be 

challenged on a cost basis). Also, because a pipeline must know the rate to charge a 

shipper seeking service, this revenue data should be relatively simple for the pipeline to 

identify and to track.

 63 Prior to Order No. 572, the Commission allowed market-based rates on an 

experimental basis. See Buckeye Pipe Line Co., 53 FERC ¶ 61,473 (1990), order on 

reh’g, 55 FERC ¶ 61,084 (1991). 

64 Seaway Crude Pipeline Company LLC, Opinion No. 546, 154 FERC ¶ 61,070,

at P 47 (2016). “(T)here is extensive precedent that supports the Commission’s policy 

that negotiated rates need not be cost –based, and that a pipeline’s entire portfolio of rates 

can produce revenues that exceed its overall cost-of-service.”
Docket No. RM17-1-000 - 29 -

46. Certain limitations apply to this data. Different revenue sources may apply to 

different parts of the pipeline with different costs.65 As a result of this mismatch, the 

Commission does not intend to use the disaggregated cost-based revenues in the indexing 

screens described above. However, this additional information would nonetheless enable 

the Commission and the industry to evaluate the relative effect of the Commission’s 

different ratemaking methodologies. It could also provide an initial assessment for 

shippers contemplating a cost-of-service complaint against a pipeline’s rates.66 

3. Work Papers

47. Based on our consideration of the record in Docket No. RM15-19, and our 

proposed revisions to page 700 included in this ANOPR, we do not propose requiring

pipelines to make the work papers used to prepare page 700 available to all interested 

parties as requested by the Joint Shippers’ petition. 

48. As described earlier in the ANOPR, the Commission is proposing to significantly 

revise pipeline reporting requirements for page 700. Page 700 data filed by the pipelines 

 65 For example, a negotiated rate could apply to the newer part of the pipeline 

system for which the rate base has not depreciated. In contrast, the cost-based rates may 

apply to older, legacy parts of the system in which the rate base has depreciated. 

66 As an example, consider a pipeline that ships 100,000 barrels system-wide, 

where 50,000 barrels are shipped under an indexed rate of $1.00 ($50,000), 25,000 

barrels are shipped under a negotiated discount rate of $0.90 (for revenues of $22,500), 

and 25,000 are shipped at a market-based rate of $2.00 ($50,000). Also assume a total 

cost-of-service of $100,000. Under the existing requirements of page 700, the pipeline 

would list total revenues of $122,500 (50,000 + 22,500 + 50,000), producing a deviation

between cost and revenue of $22,500 or 22.5 percent. If this pipeline instead reported 

segmented revenue, it would report $50,000 in cost-based revenue and $72,500 in noncost-based rate revenue. The pipeline would also report throughput of 50,000 cost-based 

barrels, and 50,000 non-cost-based barrels. Comparing cost-based revenue to cost-based 

throughput, there would be no deviation between cost-based costs ($50,000) and costbased revenues ($50,000).
Docket No. RM17-1-000 - 30 -

is under oath and subject to Commission audit. The current data on page 700 allows a 

shipper to compare (a) a pipeline’s revenues to its total cost-of-service and (b) changes to 

a pipeline’s total cost-of-service. Under both the Commission’s current policy and the 

policy changes proposed above, this is the data directly used to evaluate challenged index 

filings. Page 700 also provides significant context for these total costs, including several 

major cost-of-service subcomponents. By requiring additional information on page 700 

and the supplemental page 700s regarding (a) rate base (proposed lines 5a1-5a4), (b) the 

cost allocations, and (c) revenues, the Commission is providing additional context for the 

data on page 700. 67 We believe that this additional information provides sufficient 

information to allow the Commission and shippers to evaluate index findings and conduct 

a preliminary evaluation of a pipeline’s rates prior to bringing a cost-of-service challenge. 

However, we invite comments on the sufficiency of this additional information in 

evaluating index filings and conducting preliminary evaluations of a pipeline’s rates prior 

to bringing a cost-of-service challenge. 

49. In support of their proposal, the Joint Shippers emphasize that the Commission 

currently has access to pipeline work papers. While true, we believe that, on balance, 

mandating disclosure of work papers is not necessary to provide shippers with sufficient 

information when considering challenges to pipelines’ proposed or existing rates. In 

 67 These additions comport to Dr. Arthur’s statements in his testimony pointing 

out that “two additional significant areas where page 700 work papers provide relevant 

information not reported elsewhere in the Form 6 are the allocation factors used to derive 

the cost-of-service and the treatment of other non-trunkline revenue, both of which can 

have significant influence on a resulting cost-of-service and revenues.” See Joint 

Shippers Initial Comments, Arthur Affidavit, Docket No. RM15-19-000, at PP 6-7. 
Docket No. RM17-1-000 - 31 -

particular, we note that the dissemination of this data to shippers raises potential 

confidentiality concerns that do not exist when the Commission reviews the work papers. 

These issues include (a) shipper information protected by section 15(13) of the ICA, 

which prohibits disclosure of an individual shipper’s movements and (b) the pipeline’s 

competitive business information. On balance, we find that the general disclosure of this 

information, even subject to confidentiality agreements, is not appropriate at this time. 

IV. Burden

50. The Commission invites commenters to also address the potential cost of the 

proposals being considered in this ANOPR. Comments could include an estimate of both 

the one-time implementation costs and the ongoing compliance costs. The Commission 

will provide a burden estimate in any future notice of proposed rulemaking. 

V. Comment Procedures

51. The Commission invites interested persons to submit comments on the matters and 

issues presented in this notice to be adopted. Initial comments are due [INSERT DATE 

45 after publication in the FEDERAL REGISTER]] and reply comments are due 

[INSERT DATE 90 after publication in the FEDERAL REGISTER]]. Comments 

must refer to Docket No. RM17-1-000, and must include the commenter's name, the 

organization they represent, if applicable, and their address in their comments.

52. The Commission encourages comments to be filed electronically via the eFiling 

link on the Commission's web site at http://www.ferc.gov. The Commission accepts 

most standard word processing formats. Documents created electronically using word 

processing software should be filed in native applications or print-to-PDF format and not 
Docket No. RM17-1-000 - 32 -

in a scanned format. Commenters filing electronically do not need to make a paper 

filing.

53. Commenters that are not able to file comments electronically must send an 

original of their comments to: Federal Energy Regulatory Commission, Secretary of the 

Commission, 888 First Street, NE, Washington DC, 20426.

54. All comments will be placed in the Commission's public files and may be viewed, 

printed, or downloaded remotely as described in the Document Availability section 

below. Commenters on this proposal are not required to serve copies of their comments 

on other commenters.

VI. Document Availability

55. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission's Home Page 

(http://www.ferc.gov) and in the Commission's Public Reference Room during normal 

business hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426.

56. From the Commission's Home Page on the Internet, this information is available 

on eLibrary. The full text of this document is available on eLibrary in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

document in eLibrary, type the docket number excluding the last three digits of this 

document in the docket number field.
Docket No. RM17-1-000 - 33 -

57. User assistance is available for eLibrary and the Commission’s website during 

normal business hours from the Commission’s Online Support at (202) 502-6652 (toll 

free at 1-866-208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference 

Room at (202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov.

By direction of the Commission.

Nathaniel J. Davis, Sr.,

Deputy Secretary.