UNITED STATES OF AMERICA 69 FERC   61, 411
                         FEDERAL ENERGY REGULATORY COMMISSION

                                   18 CFR Part 347

                               (Docket No. RM94-2-001)

                            COST-OF-SERVICE REPORTING AND
                        FILING REQUIREMENTS FOR OIL PIPELINES

                         Order on Rehearing and Clarification

                              (Issued December 28, 1994)

          AGENCY:  Federal Energy Regulatory Commission.

          ACTION:  Final rule; Order on rehearing and clarification.

          SUMMARY:  The Federal Energy Regulatory Commission in ruling on a

          request for rehearing is making a minor change to its regulations

          that provide revised filing requirements for oil pipelines

          seeking to establish new or changed depreciation rates, and

          clarifying Order No. 571, issued October 26, 1994.  The change is

          to ensure that the information provided is in a format that will

          protect individual shippers.

          EFFECTIVE DATE:     The amendment to the regulations is effective

          January 1, 1995.

          FOR FURTHER INFORMATION CONTACT:  Harris S. Wood, Office of the

          General Counsel, Federal Energy Regulatory Commission, 825 North

          Capitol Street, NE., Washington, DC 20426, (202) 208-0224.

          SUPPLEMENTARY INFORMATION:  In addition to publishing the full

          text of this document in the Federal Register, the Commission

          also provides all interested persons an opportunity to inspect or

          copy the contents of this document during normal business hours

          in Room 3104, 941 North Capitol Street, NE., Washington, DC

          20426.







          Docket No. RM94-2-001          - 2 -

               The Commission Issuance Posting System (CIPS), an electronic

          bulletin board service, provides access to the texts of formal

          documents issued by the Commission.  CIPS is available at no

          charge to the user and may be accessed using a personal computer

          with a modem by dialing (202) 208-1397.  To access CIPS, set your

          communications software to 19200, 14400, 12000, 9600, 7200, 4800,

          2400, 1200 or 300 bps, full duplex, no parity, 8 data bits, and 1

          stop bit.  The full text of this document will be available on

          CIPS for 60 days from the date of issuance in ASCII and

          WordPerfect 5.1 format.  After 60 days the document will be

          archived, but still accessible.  The complete text on diskette in

          Wordperfect format may also be purchased from the Commission's

          copy contractor, La Dorn Systems Corporation, also located in

          Room 3104, 941 North Capitol Street, NE., Washington, DC 20426.







                               UNITED STATES OF AMERICA
                         FEDERAL ENERGY REGULATORY COMMISSION



          Cost-of-Service Filing and    )    Docket No. RM94-2-001 
          Reporting Requirements for    )
          Oil Pipelines                 )


                                   ORDER NO. 571-A

                         ORDER ON REHEARING AND CLARIFICATION




































          Issued:  December 28, 1994







                               UNITED STATES OF AMERICA
                         FEDERAL ENERGY REGULATORY COMMISSION


          Before Commissioners: Elizabeth Anne Moler, Chair;
                                Vicky A. Bailey, James J. Hoecker,
                                William L. Massey, and Donald F. Santa, Jr.


          Cost-of-Service Filing and    )    Docket No. RM94-2-001 
          Reporting Requirements for    )
          Oil Pipelines                 )


                                   ORDER NO. 571-A

                         ORDER ON REHEARING AND CLARIFICATION

                              (Issued December 28, 1994)

               On October 28, 1994, the Federal Energy Regulatory

          Commission (Commission) issued Order No. 571, in which it

          established filing requirements for cost-of-service rate filings

          for oil pipelines; filing requirements for oil pipelines seeking

          to establish new or changed depreciation rates; and new and

          revised pages of FERC Form No. 6, Annual Report for Oil

          Pipelines. 1/  On November 28, 1994, the Association of Oil

          Pipe Lines (AOPL) filed a request for rehearing and clarification

          of Order No. 571.  As discussed below, the Commission clarifies

          Order No. 571, and grants in part and denies in part AOPL's

          request for rehearing. 

          DISCUSSION

               A.   AOPL argues that the Commission cannot prescribe

          initial filing requirements for cost-of-service rates in excess

          of requirements specified in Section 6 of the Interstate Commerce
                              

          1/   Cost-of-Service Reporting and Filing Requirements for Oil
               Pipelines, Order No. 571, 59 FR 59137 (November 16, 1994),
               III Stats. & Regs.   31,006 (1994).







          Docket No. RM94-2-001          - 2 -

          Act (ICA). 2/  Section 6(3) provides that a carrier must file a

          notice of rate change "which shall plainly state the changes

          proposed to be made in the schedule then in force and the time

          when the changed rates ... will go into effect; and the proposed

          changes shall be shown by printing new schedules ...."  These

          requirements of Section 6(3) are preserved intact in sections

          346.1(a) and (b) of the regulations adopted by the Commission in

          Order No. 571. 3/  Thus, AOPL's dispute is with section

          346.1(c), which requires that an oil pipeline file statements and

          supporting workpapers to make an Opinion No. 154-B cost-of-

          service showing as set forth in section 346.2, on the basis that

          these requirements go beyond the limiting provisions of

          section 6(3).

               As the Commission explained in Order No. 571, the

          requirement that a pipeline file these statements and workpapers

          is justified, not by the filing of information as a part of a

          notice of rate change, but by the requirement of Order

          No. 561 4/ that the oil pipeline meet the threshold test of

          demonstrating a substantial divergence between rates at the

                              

          2/   49 App. U.S.C. 1 (1988).

          3/   See 18 CFR 342.1(a) and (b), to be effective January 1,
               1995.

          4/   Revisions to Oil Pipeline Regulations Pursuant to the Energy
               Policy Act, Order No. 561, 58 FR 58785 November 4, 1993),
               III FERC Stats. & Regs.   30,985 (1993), order on reh'g and
               clarification, Order No. 561-A, 59 FR 40243 August 8, 1994),
               III FERC Stats. & Regs.   31,000 (1994).  These orders are
               jointly referred to as "Order No. 561," unless the text
               clearly specifies otherwise.







          Docket No. RM94-2-001          - 3 -

          indexed ceiling level and the pipeline's cost of service.  Rather

          than a "filing requirement" for a notice of rate change, the

          statements and workpapers must be filed to demonstrate that the

          pipeline is entitled to change rates on a cost-of-service basis

          as an exception to changing rates under the indexing methodology. 

               The Commission relied on section 12 of the ICA as the

          statutory authority for requiring a pipeline to demonstrate that

          it meets the threshold test specified in Order No. 561. 5/ 

          AOPL argues, however, that section 6 establishes initial filing

          requirements for a rate change and thus bars the Commission from

          requiring the threshold filings at issue here.  The Commission

          disagrees.

               Contrary to AOPL's contention, section 6(3) of the ICA is

          not a limitation on the Commission's authority to establish

          initial filing requirements but is rather no more than a

          specification of the form that a notice of a proposed change in

          rates must take.  Thus, the Commission's requirements in section

          346.1(c) are not contrary to the ICA.  Moreover, the Commission

          here affirms its view that section 12(1) confers on the

          Commission broad powers to regulate the transportation of oil by

          pipeline, including those that AOPL claims are precluded by

          section 6(3), and thus authorizes the Commission to establish 


                              

          5/   Section 12 provides, in material part, that "The Commission
               may obtain from such carriers ... such information as the
               Commission deems necessary to carry out the provisions of
               this chapter....  The Commission is authorized and required
               to execute the provisions of this chapter...."







          Docket No. RM94-2-001          - 4 -

          reasonable filing requirements for a cost-of-service rate change

          proposal. 6/

               Rehearing on this first specification error is therefore

          denied.

               B.   AOPL's second specification of error, that the

          Commission imposed unduly burdensome initial filing requirements

          for cost-of-service-based rates, is likewise without merit.  AOPL

          claims that the Commission, by imposing any filing requirements,

          ignored its comments regarding the resulting burden that

          pipelines would have to bear.  AOPL's position, however, is based

          on the premise, already rejected, that section 6(3) bars any

          initial filing requirements.  Thus, the thrust of AOPL's argument

          is that any initial filing requirement other than a mere notice

          of the rate change proposed, regardless of what it might be, is

          too burdensome for pipelines to bear.  The Commission disagrees. 

               The Commission recognizes that there is a filing burden for

          pipelines that seek to opt out of indexing.  However, because

          indexing is the Commission's prescribed, generally applicable

                              

          6/   Section 12(1) of the ICA as it existed on October 1, 1977,
               governs the authority and duties of the Commission.  See
               also 49 U.S.C. 10321(a) which by Public Law 95-473, Oct. 17,
               1978, 92 Stat. 1337, codified and restated in comprehensive
               form, without substantive change, the material part of
               section 12(1).  Section 10321(a) provides:

                    The Interstate Commerce Commission shall
                    carry out this subtitle.  Enumeration of a
                    power of the Commission in this subtitle does
                    not exclude another power the Commission may
                    have in carrying out this subtitle.  The
                    Commission may prescribe regulations in
                    carrying out this subtitle.







          Docket No. RM94-2-001          - 5 -

          ratemaking methodology, the Commission has concluded that a

          pipeline must as a threshold matter justify an exception to that

          methodology when it files for cost-of-service rates.  As

          described earlier, it is well within the Commission's broad

          regulatory powers to determine how an oil pipeline is to secure

          permission to charge rates based on a method that deviates from

          the generally applicable method.  

               Contrary to AOPL's claims, the Commission has required only

          that data necessary for a pipeline to show whether there is a

          substantial divergence between its cost of service and revenues

          at the index ceiling rate and thus whether it warrants an

          exception to indexing.  In fact, the Commission chose not to

          require certain other additional data.  For example, it did not

          require a filing of individual point-to-point cost-of-service

          calculations in the initial filing of notices of rate change,

          recognizing that the burden of such a requirement would not be

          justified, particularly since the initial filing need only show

          that there is a substantial divergence between the costs of the

          pipeline, as reflected in Statement A, and the revenues that

          would be produced by the indexed ceiling rates, as reflected in

          Statement G. 7/  Thus, the Commission was not arbitrary in its

          assessment of minimum filing needs but rather carefully balanced

          the need for threshold information against the burden that filing

          requirements could impose on pipelines.  


                              

          7/   Order No. 571, mimeo at 11.







          Docket No. RM94-2-001          - 6 -

               Rehearing on this second specification of error is therefore

          denied.

               C.   AOPL's third specification of error, that the

          Commission erred in determining that new Page 700 of Form No. 6

          would impose only a minimal burden on oil pipelines, is denied. 

          In Order No. 571, the Commission explained in detail why it

          believed page 700 of Form No. 6 is necessary for carrying out its

          regulatory responsibilities under the ICA and the Energy Policy

          Act of 1992. 8/  It described the benefits to the shippers of

          having this information available as an initial "substantial

          divergence" screen for pipeline rate filings, and as a means of

          testing the performance of the index when compared to individual

          indexed rates. 9/  Nothing in AOPL's request for rehearing

          persuades the Commission to modify its requirements for page 700.

               It is correct that if viewed in isolation, the inclusion of

          Page 700 in the Form No. 6 would increase the reporting burden on

          oil pipelines.  However, viewed as a whole, Order No. 571 will

          reduce the overall individual oil pipeline reporting burden,

          since it reduces or eliminates many of the other reporting

          requirements formerly in the Form No. 6. 10/  Further, with
                              

          8/   42 U.S.C. 7172 note (West Supp. 1993).

          9/   Order No. 571, mimeo at 16-24.

          10/  The Commission found, in Order No. 571, that "The final rule
               will reduce the existing reporting burden associated with
               Form No. 6 by an estimated 1,628 hours annually, or an
               average of 11 hours per response based on an estimated 148
               responses.  This estimate includes the addition of two new
               schedules, the elimination of several schedules, and
                                                             (continued...)







          Docket No. RM94-2-001          - 7 -

          the overall reduction in regulatory burden to be accomplished by

          the use of the indexing methodology, the addition of Page 700 as

          a safeguard should cause minimal additional burden. 11/  

               While the initial computation for some of the companies

          which have not performed the Opinion No. 154-B calculation may be

          somewhat lengthy and may result in an initial, one-time burden

          for these companies because of the need to bring the data forward

          from 1984 to the current year, any initial burden on making the

          calculations is outweighed by the benefits of having the

          information available to the Commission to carry out its

          regulatory responsibilities.  In addition, for each year

          subsequent to the initial computation, it would only be necessary

          for a company to update the schedules for the most current year.

          Thus, the minimal burden imposed in preparing and filing new page

          700 is entirely justified when compared to the benefits to

          shippers and the Commission of having the information called for

          by this new page.

               D.   The Commission grants rehearing as to AOPL's allegation

          that the Commission erred in retaining depreciation study

          requirements that could result in the disclosure of confidential

          shipper information in contravention of the ICA.  In Order No.
                              

          10/(...continued)
               increasing the reporting thresholds for which oil pipelines
               must analyze and report certain data."  Order No. 571, mimeo
               at 4.

          11/  According to AOPL's own numbers, contained in Attachment A
               to AOPL's comments filed in this proceeding on September 8,
               1994, the burden of producing page 700 shown by some
               companies is as small as four hours per year.  







          Docket No. RM94-2-001          - 8 -

          571, the Commission required that an oil pipeline that desires to

          establish initial depreciation rates or to change its existing

          depreciation rates file certain information supporting such a

          rate.  The Commission, in response to comments on the Notice of

          Proposed Rulemaking (NOPR) in this docket, recognized that

          certain information which had been proposed in the NOPR might

          lead to such disclosure, and therefore modified the information

          originally proposed, providing that the information required by

          section 347.1(e)(vi) of the regulations should be provided in a

          format that would prevent disclosure of information which would

          violate the ICA.  It left to the pipeline the specifics of the

          format to be used to provide such information. 12/  Moreover,

          the Commission also suggested that the pipeline could request

          confidential treatment of the information it provides. 13/

               It was the Commission's intent that the caveats expressed

          not be limited to section 347.1(e)(vi), but rather apply to all

          the Part 347 information that would be provided by pipelines. 

          Therefore, the regulations will be modified to reflect that

          information required by Part 347 of the regulations, release of

          which would violate Section 15(13) of the ICA, must be provided

          in a format that will protect any individual shipper.  Moreover,

          the general statement in Order No. 571 that the information




                              

          12/  Order No. 571, mimeo at 34.

          13/  Id.







          Docket No. RM94-2-001          - 9 -

          provided will be publicly available unless specific confidential

          treatment is sought by the carrier is still applicable. 14/

               E.   Finally, AOPL seeks clarification regarding the use of

          new Page 700 of Form No. 6, in particular the significance of the

          statement that this schedule would "permit a shipper to compare

          the change in a shipper's individual rate with the change in the

          pipeline's average company-wide barrel-mile rate." 15/  AOPL

          claims such a comparison appears to tell a shipper nothing

          concerning the justness and reasonableness of an individual rate. 

               The information reported on Page 700 will show how a

          pipeline's average barrel-mile rate changes from one year to the

          next.  A shipper can then compare the yearly percentage change in

          the average barrel-mile rate with the yearly percentage change in

          the rate it is charged to determine whether there is a

          substantial divergence between the rate of change in the two

          figures such as to warrant a challenge to an indexed rate.  Thus,

          the Page 700 information alone is not intended to show what a

          just and reasonable rate should be.  

          The Commission orders:

               The request for rehearing and clarification is granted in

          part and denied in part, as reflected in the body of this order.






                              

          14/  Order No. 571, mimeo at 34.

          15/  Order No. 571, mimeo at 17.







          Docket No. RM94-2-001          - 10 -

          List of Subjects in 18 CFR part 347

          Pipelines, Reporting and recordkeeping requirements.

          By the Commission.

          ( S E A L )


                                             Lois D. Cashell,
                                                Secretary.


               In consideration of the foregoing, Part 347, Chapter I,

          Title 18, Code of Federal Regulations, is amended, as set forth

          below.

               PART 347 - OIL PIPELINE DEPRECIATION STUDIES

               1.   The authority citation for Part 347 continues to read

          as follows: 

               Authority:  42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App.

          U.S.C. 1-85.

               2.   In  347.1, paragraph (e) introductory text and

          paragraph (e)(5)(vi) are revised to read as follows:

           347.1   Material to support request for newly established or
          changed property account depreciation studies.

               *            *          *          *            *

               (e) Information to be provided.  The information in

          paragraphs (e)(1) through (5) of this section must be provided as

          justification for depreciation changes.  Modifications,

          additions, and deletions to these data elements should be made to

          reflect the individual circumstances of the carrier's properties

          and operations.  Any information in paragraphs (e)(1) through (5)

          of this section, the release of which would violate Section







          Docket No. RM94-2-001          - 11 -

          15(13) of the Interstate Commerce Act, must be provided in a

          format that will protect individual shippers.

               *         *         *        *        *

               (5)       *         *        *

               (vi) A list of shipments and their associated receipt

          points, delivery points, and volumes (in barrels) by type of

          product (where applicable) for the most current year.

               *         *         *        *        *