[Federal Register Volume 89, Number 205 (Wednesday, October 23, 2024)]
[Proposed Rules]
[Pages 84475-84482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24518]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / 
Proposed Rules

[[Page 84475]]



DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 342

[Docket No. RM25-2-000]


Supplemental Review of the Oil Pipeline Index Level

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) proposes 
to amend the index level used to determine annual changes to oil 
pipeline rate ceilings following the decision of the United States 
Court of Appeals for the District of Columbia Circuit in Liquid Energy 
Pipeline Association v. FERC. In place of the index level established 
by order issued December 17, 2020, in Docket No. RM20-14-000, the 
Commission proposes to use the Producer Price Index for Finished Goods 
(PPI-FG) minus 0.21% as the prospective index level for the remainder 
of the five-year period that began July 1, 2021. The Commission invites 
interested persons to submit comments regarding this proposal.

DATES: Initial comments are due November 26, 2024. Reply comments are 
due December 20, 2024.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways. Electronic filing through http://www.ferc.gov, is 
preferred.
    <bullet> Electronic Filing: Documents must be filed in acceptable 
native applications and print-to-PDF, but not in scanned or picture 
format.
    <bullet> For those unable to file electronically, comments may be 
filed by USPS mail or by hand (including courier) delivery.
    [cir] Mail via U.S. Postal Service Only: Addressed to: Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street NE, Washington, DC 20426.
    [cir] Hand (including courier) delivery: Deliver to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
    The Comment Procedures Section of this document contains more 
detailed filing procedures.

FOR FURTHER INFORMATION CONTACT: 

Monil Patel (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8296, <a href="/cdn-cgi/l/email-protection#baf7d5d4d3d694eadbcedfd6fadcdfc8d994ddd5cc"><span class="__cf_email__" data-cfemail="6c2103020500423c0d1809002c0a091e0f420b031a">[email protected]</span></a>
Evan Steiner (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-8792, <a href="/cdn-cgi/l/email-protection#83c6f5e2edadd0f7e6eaede6f1c3e5e6f1e0ade4ecf5"><span class="__cf_email__" data-cfemail="b0f5c6d1de9ee3c4d5d9ded5c2f0d6d5c2d39ed7dfc6">[email protected]</span></a>
Molly Behan (Legal Information), Office of the General Counsel, Federal 
Energy Regulatory Commission, 888 First Street NE, Washington, DC 
20426, (202) 502-8816, <a href="/cdn-cgi/l/email-protection#74391b18180d5a36111c151a34121106175a131b02"><span class="__cf_email__" data-cfemail="4d0022212134630f28252c230d2b283f2e632a223b">[email protected]</span></a>

SUPPLEMENTARY INFORMATION: 
    1. On December 17, 2020, the Commission issued an order in the 2020 
five-year review of the oil pipeline index (Initial Order) establishing 
an index level of Producer Price Index for Finished Goods plus 0.78% 
(PPI-FG+0.78%) for the five-year period beginning July 1, 2021 (Initial 
Index).\1\ On January 20, 2022, the Commission issued an order granting 
rehearing (Rehearing Order) and establishing an index level of PPI-FG-
0.21% (Rehearing Index).\2\ In Liquid Energy Pipeline Association v. 
FERC (LEPA v. FERC),\3\ the United States Court of Appeals for the 
District of Columbia Circuit (D.C. Circuit) held that the Commission 
violated the Administrative Procedure Act (APA) by amending the Initial 
Index without providing notice and an opportunity to comment. 
Accordingly, the court vacated the Rehearing Order and ordered the 
Commission to reinstate the Initial Order.\4\ In compliance with this 
directive, the Commission reinstated the Initial Order by order issued 
September 17, 2024.\5\
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    \1\ Five-Year Rev. of the Oil Pipeline Index, 173 FERC ] 61,245 
(2020).
    \2\ Five-Year Rev. of the Oil Pipeline Index, 178 FERC ] 61,078, 
reh'g denied, 179 FERC ] 61,100 (2022) (Second Rehearing Order).
    \3\ 109 F.4th 543 (D.C. Cir. 2024).
    \4\ Id. at 547-49.
    \5\ Revisions to Oil Pipeline Reguls. Pursuant to the Energy 
Pol'y Act of 1992, 188 FERC ] 61,173 (2024) (Reinstatement Order).
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    2. As discussed below, we remain concerned that the Commission 
erred in establishing the Initial Index. Thus, following LEPA v. FERC, 
we propose to amend the Initial Index prospectively by adopting a 
revised index level of PPI-FG-0.21% for the remainder of the five-year 
period that began on July 1, 2021. We seek comment on this proposal and 
encourage commenters to address all issues related to the appropriate 
index level following LEPA v. FERC.

I. Background

A. Indexing and the Kahn Methodology

    3. The Commission adopted the indexing methodology in compliance 
with the Energy Policy Act of 1992 (EPAct 1992), which required the 
Commission to streamline its procedures related to oil pipeline rates 
and establish ``a simplified and generally applicable ratemaking 
methodology for oil pipelines.'' \6\ Indexing streamlines and 
simplifies ratemaking procedures by allowing oil pipelines to change 
their rates subject to certain ceiling levels, as opposed to making 
cost-of-service filings. Under this methodology, pipelines may adjust 
their ceiling levels effective every July 1 by ``multiplying the 
previous index year's ceiling level by the most recent index published 
by the Commission.'' \7\
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    \6\ Public Law No. 102-486, 1801(a), 1802(a), 106 Stat. 2776, 
3010 (Oct. 24, 1992) (codified at 42 U.S.C. 712 note).
    \7\ 18 CFR 342.3(d)(1). Oil pipelines may adjust their rates to 
the ceiling levels pursuant to the Commission's regulations so long 
as no protest or complaint demonstrates that the index rate change 
substantially diverges from the pipelines cost changes. Id. 
343.2(c)(1).
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    4. The Commission reviews the index level every five years.\8\ 
Beginning with Order No. 561 and in each ensuing five-year review, the 
Commission has adjusted the index level using the Kahn Methodology, 
which calculates each

[[Page 84476]]

pipeline's cost change on a per barrel-mile basis over the prior five-
year period based on FERC Form No. 6, page 700 summary cost-of-service 
data. To remove statistical outliers and spurious data, the Kahn 
Methodology trims the data set by removing an equal number of pipelines 
at the top and bottom of the data set. Then, the Kahn Methodology 
averages the median, mean, and weighted mean to determine a composite 
central tendency, which is compared to the changing value of PPI-FG 
over the relevant five-year period. The index level is set at PPI-FG 
plus (or minus) this differential.
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    \8\ Revisions to Oil Pipeline Reguls. Pursuant to the Energy 
Pol'y Act of 1992, Order No. 561, 58 FR 58753 (Nov. 4, 1993), FERC 
Stats. & Regs. ] 30,985, at 30,941, 30,947, 30,951 (1993) (cross-
referenced at 65 FERC ] 61,109), order on reh'g, Order No. 561-A, 59 
FR 40243 (Aug. 8, 1994), FERC Stats. & Regs. ] 31,000, at 31,093, 
31,099 (1994) (cross-referenced at 68 FERC ] 61,138), aff'd sub nom. 
Ass'n of Oil Pipe Lines v. FERC, 83 F.3d 1424 (D.C. Cir. 1996) (AOPL 
I).
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B. 2020 Five-Year Review

    5. On June 18, 2020, the Commission initiated the 2020 five-year 
review.\9\ The Commission proposed to calculate the index level by (1) 
trimming the data set to the middle 50% and (2) incorporating the 
effects of the Commission's 2018 policy change requiring Master Limited 
Partnership (MLP)-owned pipelines to eliminate the income tax allowance 
and previously accrued Accumulated Deferred Income Taxes (ADIT) 
balances from their page 700 summary costs of service (Income Tax 
Policy Change).\10\ Ten commenters filed comments addressing the 
Commission's proposal.\11\ LEPA, Designated Carriers, and Kinder 
Morgan, Inc. (collectively, Pipelines) supported trimming the data set 
to the middle 80%, rather than the middle 50%, and adjusting the 
reported page 700 data to eliminate the effects of the Income Tax 
Policy Change from the index calculation. By contrast, Joint 
Commenters, Liquids Shippers Group, and CAPP (collectively, Shippers) 
argued that the Commission should continue using the middle 50% and 
reject Pipelines' proposed adjustments to the data set.
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    \9\ Five-Year Rev. of the Oil Pipeline Index, 171 FERC ] 61,239 
(2020) (NOI).
    \10\ Id. PP 9-10; see also Inquiry Regarding the Commission's 
Policy for Recovery of Income Tax Costs, 162 FERC ] 61,227 (Income 
Tax Policy Statement), reh'g denied, 164 FERC ] 61,030 (2018), 
requests for clarification dismissed, 168 FERC ] 61,136 (2019), 
petitions for review dismissed sub nom. Enable Miss. River 
Transmission, LLC v. FERC, 820 F. App'x 8 (D.C. Cir. 2020).
    \11\ Comments were filed by: Liquid Energy Pipeline Association 
(LEPA, formely known as Association of Oil Pipe Lines or AOPL); 
Buckeye Partners, L.P., Colonial Pipeline Company, Energy Trasfer 
LP, Enterprise Products Partners L.P., and Plains All American 
Pipeline, L.P. (collectively, Designated Carriers); Kinder Morgan, 
Inc.; Airlines for America, Chevron Products Company, National 
Proprane Gas Association, and Valero Marketing and Supply Company 
(collectively, Joint Commenters); Apache Corporation Cenovus Energy 
Marketing Services Ltd., ConocoPhillips Company, Devon Gas Services, 
L.P., Equinor Marketing & Trading US Inc., Fieldwood Energy LLC, 
Marathon Oil Company, Murphy Exploration and Production Company--
USA, Ovintiv Marketing Inc., and Pioneer Natural Resources USA, Inc. 
(collectively, Liquids Shippers Group); Canadian Association of 
Petroleum Producers (CAPP); Pipeline Safety Trust; Energy 
Infrastructure Council; and Pipeline and Hazardous Materials Safety 
Administration.
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    6. In the Initial Order, the Commission established the Initial 
Index of PPI-FG+0.78%.\12\ The Commission adopted Pipelines' proposals 
to use the middle 80% and to remove the effects of the Income Tax 
Policy Change from the index calculation.\13\ On January 19, 2021, 
Shippers filed requests for rehearing challenging the Commission's 
determinations, and Pipelines requested rehearing or clarification to 
correct minor errors in the workpapers underlying the Initial Order.
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    \12\ Initial Order, 173 FERC ] 61,245 at P 2.
    \13\ Id. PP 16-20, 25-32.
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    7. In the Rehearing Order, the Commission granted rehearing in part 
and adopted the Rehearing Index of PPI-FG-0.21%. The Commission granted 
Shippers' requests to calculate the index level using the middle 50% 
and unadjusted page 700 data that reflects the effects of the Income 
Tax Policy Change.\14\ The Commission found that the middle 50% 
produces a more accurate measure of normal pipeline cost changes than 
the middle 80%, which includes pipelines with extraordinary cost 
changes that were unrepresentative of ordinary pipeline operations.\15\ 
Furthermore, the Commission found that the index calculation must 
incorporate the Income Tax Policy Change to produce just and reasonable 
rates.\16\ The Commission also granted Pipelines' request to calculate 
the index level using updated page 700 data for 2014 where 
available.\17\
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    \14\ Rehearing Order, 178 FERC ] 61,023 at PP 16-36, 43-58; see 
also id. PP 64-70, 78-88, 95-98 (denying rehearing regarding issues 
raised by Liquids Shippers Group and CAPP).
    \15\ Id. PP 46-50
    \16\ Id. P 17.
    \17\ Id. P 101; see also id. P 104 (denying additional proposal 
raised by Designated Carriers in light of Commission's determination 
to use unadjusted page 700 data that incorporated effects of Income 
Tax Policy Change).
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    8. The Commission directed oil pipelines to recompute their ceiling 
levels to reflect the Rehearing Index and to reduce their rates in 
accordance with those ceiling levels effective March 1, 2022.\18\ 
Thereafter, Pipelines filed petitions for review of the Rehearing Order 
with the D.C. Circuit,\19\ and Joint Commenters filed a request for 
rehearing or clarification, which the Commission denied by order issued 
May 6, 2022.\20\
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    \18\ Id. P 106, ordering para. (B).
    \19\ Pipelines initially appealed the Rehearing Order to the 
Unites States Court of Appeals for the Fifth Circuit (Fifth 
Circuit). However, in May 2022, the Fifth Circuit transferred the 
appeals to the D.C. Circuit. Buckeye Partners, L.P. v. FERC, No. 22-
601000, 2022 WL 1528311 (5th Cir. May 13, 2022).
    \20\ Second Rehearing Order, 179 FERC ] 61,100. Joint Commenters 
filed petitions for review of the Second Rehearing Order in the D.C. 
Circuit, which were consolidated with Pipelines' petitions for 
review of the Rehearing Order.
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C. LEPA v. FERC and Reinstatement Order

    9. In LEPA v. FERC, the D.C. Circuit granted Pipelines' petitions 
and held that the Commission violated the APA by altering the Initial 
Index on rehearing without providing additional notice and an 
opportunity for comment. The court found that the Commission adhered to 
the APA's notice-and-comment requirements when it adopted the Initial 
Index.\21\ However, the court explained that once an agency's rule 
``carrie[s] legal consequences,'' the APA generally requires the agency 
to follow notice-and-comment procedures before amending the rule.\22\ 
The court found that the Initial Index became ``sufficiently final'' by 
July 1, 2021, ``to require that any amendment undergo notice-and-
comment procedures.'' \23\ Because the Commission amended the Initial 
Index without engaging in additional notice-and-comment procedures, the 
court vacated the Rehearing Order and ordered the Commission to 
reinstate the Initial Order.\24\
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    \21\ LEPA v. FERC, 109 F.4th at 547.
    \22\ Id. at 548 (quoting Humane Soc'y v. USDA, 41 F.4th 564, 570 
(D.C. Cir. 2022)) (internal quotation marks omitted).
    \23\ Id. at 549.
    \24\ Id. The court held that because it was vacating the 
Rehearing Order, Joint Commenters' challenges to the Second 
Rehearing Order were moot. Id.
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    10. On September 17, 2024, the Commission issued an order 
reinstating the Initial Order in compliance with the court's 
decision.\25\
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    \25\ Reinstatement Order, 188 FERC ] 61,173 at P 1. The 
Commission reinstated the Initial Index after the D.C. Circuit 
issued the mandate associated with LEPA v. FERC on September 17, 
2024.
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II. Commission Proposal

    11. Following the vacatur of the Rehearing Order in LEPA v. FERC, 
we remain concerned that the Initial Order improperly calculated the 
index level by using the middle 80%, removing the effects of the Income 
Tax Policy Change, and using outdated page 700 data for 2014 for 
certain pipelines. Accordingly, we initiate notice-and-comment 
procedures to consider whether to amend the Initial Index on a 
prospective basis.\26\
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    \26\ See LEPA v. FERC, 109 F.4th at 549; see also 49 U.S.C. app. 
17(9)(g).
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    12. As discussed below, we propose to adopt a revised index level 
of PPI-FG-0.21% for the remainder of the five-

[[Page 84477]]

year period that began on July 1, 2021.\27\ This proposal is based on 
the Kahn Methodology as applied to page 700 data from 2014-2019 and 
results from (1) relying solely on the middle 50%, (2) using unadjusted 
page 700 data that reflects the effects of the Income Tax Policy 
Change, and (3) using updated page 700 data for 2014, where available. 
We seek comments on our proposal and encourage commenters to address 
all issues related to the appropriate index level following LEPA v. 
FERC, including those issues discussed below.\28\ Commenters should 
also renew any arguments raised in requests for rehearing or 
clarification of the Initial Order that they would like for the 
Commission to consider.
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    \27\ This supplemental NOPR applies to the current five-year 
review period. Consistent with its longstanding practice, the 
Commission will initiate a separate process for establishing the 
index level for the five-year period starting July 1, 2026.
    \28\ 5 U.S.C. 553(b)-(c); see also LEPA v. FERC, 109 F.4th at 
549.
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A. Statistical Data Trimming

    13. We propose to amend the Initial Index by calculating a revised 
index level relying solely on the middle 50%. As discussed below, we 
are concerned that the Commission's use of the middle 80% in the 
Initial Order departed from established practice and that the record in 
the 2020 five-year review did not support this change.
    14. As an initial matter, the index aims to reflect the cost 
experience of a typical pipeline during ordinary pipeline 
operations.\29\ The index is not designed to recover extraordinary cost 
changes,\30\ including those resulting from atypical or idiosyncratic 
circumstances,\31\ and the presence of extraordinary cost changes in 
the data set can inflate the index level.\32\
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    \29\ E.g., Five-Year Rev. of Oil Pipeline Pricing Index, 133 
FERC ] 61,228, at P 61 (2010) (2010 Index Review), reh'g denied, 135 
FERC ] 61,172 (2011); Order No. 561-A, FERC Stats. & Regs. ] 31,000 
at 31,097 (``The role of an index is to accommodate normal cost 
changes.'').
    \30\ Extraordinary cost changes are recovered using the 
Commission's alternate ratemaking methodologies, rather than through 
indexing. Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,097 
(``Extraordinary costs can be recovered through either of the 
alternate rate change means--cost of service or settlement rates--as 
provided in [Order No. 561].'').
    \31\ Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,097, 
aff'd, AOPL I, 83 F.3d at 1434; see also 2010 Index Review, 133 FERC 
] 61,228 at P 54.
    \32\ Extraordinary cost changes would affect the composite 
central tendency of the data sample through the weighted mean and 
unweighted mean, which, unlike the median, reflect the cost 
experiences of all pipelines in the sample, including those at the 
upper and lower bounds.
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    15. To avoid inflating the index, the Commission excludes pipelines 
with extraordinary or idiosyncratic cost changes from its analysis. In 
the 2010 and 2015 Index Reviews, the Commission found that the middle 
50% more appropriately adjusts the index level for normal cost changes 
than the middle 80%, which, by definition, includes pipelines 
relatively far removed from the median of the data set.\33\ The 
Commission also concluded that pipelines included in the middle 80% but 
not the middle 50% (i.e., the incremental 30%) are more likely to have 
cost changes resulting from idiosyncratic factors, such as a rate base 
expansion, plant retirement, or localized changes in supply and demand, 
that do not reflect normal industry-wide experience.\34\ Thus, the 
Commission found that the middle 50%, more effectively than the middle 
80%, trims pipelines with anomalous cost changes from the data set 
while avoiding the complexities and distorting effects of manual data 
trimming methodologies.\35\ Following the 2015 Index Review, the D.C. 
Circuit affirmed the Commission's decision to calculate the index level 
based solely upon the middle 50%.\36\
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    \33\ Five-Year Rev. of the Oil Pipeline Index, 153 FERC ] 
61,312, at PP 43-44 (2015) (2015 Index Review), aff'd sub nom. Ass'n 
of Oil Pipe Lines v. FERC, 876 F.3d 336 (D.C. Cir. 2017) (AOPL III); 
2010 Index Review, 133 FERC ] 61,228 at P 61.
    \34\ 2010 Index Review, 133 FERC ] 61,228 at P 61.
    \35\ 2015 Index Review, 153 FERC ] 61,312 at P 42 (citing 2010 
Index Review, 133 FERC ] 61,228 at PP 60-63).
    \36\ AOPL III, 876 F.3d at 342 (stating that the court had 
``little difficulty in finding that the Commission adequately and 
reasonably justified its decision not to consider the middle 80[%] 
of pipelines' cost-change data'' in that proceeding).
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    16. As discussed above, in the Initial Order, the Commission 
departed from its prior practice by using the middle 80%, as opposed to 
the middle 50%. We are concerned, however, that the page 700 data set 
for the 2014-2019 period does not support this change. The scatter plot 
below indicates that the middle 80% in this data set includes several 
pipelines near its upper bound that differ considerably from the other 
pipelines in the sample.\37\
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    \37\ This scatter plot modifies a similar chart submitted by 
Joint Commenters in Docket No. RM20-14-000. Joint Commenters Reply 
Comments, Brattle Group Report at 19, Figure 3 (scatter plot 
illustrating dispersion of the middle 50% and middle 80% in the 
unadjusted 2020 data set). The modifications reflect the adjustments 
proposed herein to the page 700 data set.
[GRAPHIC] [TIFF OMITTED] TP23OC24.007


[[Page 84478]]


    17. Moreover, these pipelines, particularly those at the upper 
bound of the middle 80% range, exert an outsized influence that 
inflates the index calculation. The difference between the middle 50% 
and the middle 80% results primarily from eight pipelines at the upper 
bound of the middle 80%.\38\
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    \38\ As discussed above, the Kahn Methodology calculates a 
composite central tendency by averaging the data sample's median, 
weighted mean, and unweighted mean. See supra P 4. If the top and 
bottom eight pipelines in the middle 80% are removed from the 
sample, the composite central tendency would increase by 3 basis 
points relative to the middle 50%, from -0.21% to -0.18%. By 
contrast, including the top and bottom eight pipelines in the middle 
80% would increase the composite central tendency by an additional 
29 basis points, from -0.18% to 0.11%. See Attach. A, Ex. 6.
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    18. Furthermore, the page 700 data set indicates that the middle 
80% is even more dispersed than in 2015 or 2010,\39\ as illustrated by 
the bar chart below.\40\
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    \39\ When the data sample is highly dispersed, data at the outer 
bounds of the middle 80% are further removed from the remaining data 
and thus can have an outsized and distorting effect if used to 
measure the central tendency.
    \40\ The bar chart modifies a similar chart submitted by Joint 
Commenters in Docket No. RM20-14-000. Joint Commenters Reply 
Comments, Brattle Group Report at 18, Figure 2 (bar chart 
illustrating dispersion of middle 50% and middle 80% in 2010, 2015, 
and the unadjusted 2020 data sets). The modifications reflect the 
adjustments proposed herein to the page 700 data set.
[GRAPHIC] [TIFF OMITTED] TP23OC24.008

    19. In addition, the incremental 30% appears to include pipelines 
with extraordinary cost changes that are not reflective of ordinary 
pipeline operations. For example, in the 2020 five-year review, Joint 
Commenters identified seven pipelines in the incremental 30% whose 
reported cost changes resulted from irregular circumstances, such as 
pipeline ruptures or temporary shutdowns.\41\
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    \41\ Joint Commenters Reply Comments, Brattle Group Report at 
13-17. For example, MPI Services North America, Inc., reported an 
inflated 2019 cost of service per barrel-mile due to a temporary 
shutdown of one of its pipeline segments and Mobil Pipe Line Company 
experienced a pipeline rupture in 2013 that distorted its 2014 cost-
of-service data. Id. at 15-17.
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    20. Although the Initial Order identified three reasons for using 
the middle 80% instead of the middle 50%, we no longer find this 
reasoning persuasive. First, the mere fact that the middle 80% contains 
more data does not support departing from the middle 50%.\42\ The 
middle 50% here includes 81% of industry-wide oil pipeline barrel-
miles,\43\ and thus provides a more representative sample than in 2015 
or 2010, when the Commission relied solely on the middle 50%. In 
particular, the middle 50% in the 2015 and 2010 Index Reviews contained 
56% and 76%, respectively of total barrel-miles subject to the 
index.\44\ Thus, omitting the additional pipelines included in the 
incremental 30% would not deprive the Commission of a robust data 
sample. Furthermore, we are concerned that any benefits of considering 
the larger sample in the middle 80% would not outweigh the risk that 
this additional data will distort the measurement of normal cost 
changes.
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    \42\ See Initial Order, 173 FERC ] 61,245 at P 26.
    \43\ See attach. A, Ex. 1.
    \44\ See 2015 Index Review, 153 FERC ] 61,312 at P 44 n.85; id. 
at attach. A, Ex. 1; 2010 Index Review, 133 FERC ] 61,228 at P 63.
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    21. Second, contrary to the Initial Order, it is not clear that 
using the middle 80% would provide a better measure of ``normal'' cost 
changes in this proceeding.\45\ Rather, as discussed above, the middle 
80% appears to include anomalous data that would distort the 
measurement of the central tendency used to calculate the index 
level.\46\ This suggests that the more tailored data sample in the 
middle 50% provides a superior method of measuring normal cost changes, 
as opposed to extraordinary or idiosyncratic costs.
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    \45\ See Initial Order, 173 FERC ] 61,245 at P27.
    \46\ The Commission stated in the Initial Order that using the 
middle 80% is appropriate because the index average will be 
significantly below the relatively high cost changes at the upper 
bound. Id. PP 27, 32. However, even if the index average is not set 
at the upper bound of the data sample, including the upper bound of 
the middle 80% could nonetheless produce an index average inflated 
by anomalous cost experience. See 2010 Index Review, 133 FERC ] 
61,228 at P 61 (``Using the middle 50[%] ensures that pipelines with 
relatively large cost increases or decreases do not distort the 
index.'').
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    22. Third, the Initial Order sought to distinguish the 2015 and 
2010 Index Reviews on the basis that, unlike in the 2020 review, 
commenters in those proceedings ``presented detailed analyses 
demonstrating that the incremental 30% contained anomalous cost changes 
. . . .'' \47\ However, as in

[[Page 84479]]

those prior reviews, the record in the 2020 review indicates that the 
middle 80% includes outlying cost increases, reflects significant 
dispersion, and includes pipelines with idiosyncratic cost changes. To 
the extent that shippers submitted more detailed analyses in 2015 and 
2010, they presented this evidence to support manual data trimming 
proposals, which the Commission rejected in favor of trimming the data 
set to the middle 50%.\48\ We are concerned that it would be 
incongruous to reject manual data trimming while at the same time 
requiring commenters to present similar analyses to justify continued 
use of the middle 50%.
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    \47\ See Initial Order, 173 FERC ] 61,245 at P 28.
    \48\ 2015 Index Review, 153 FERC ] 61,312 at PP 36, 42; 2010 
Index Review, 133 FERC ] 61,228 at P 62.
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    23. For these reasons, we are no longer persuaded by the 
Commission's reasoning in the Initial Order for using the middle 80%. 
Accordingly, we propose to calculate a revised index level using the 
middle 50% and seek comment on this proposal.

B. Income Tax Policy Change

    24. We are concerned that removing the Income Tax Policy Change 
from the index calculation could result in oil pipeline rates that are 
unjust and unreasonable. Thus, we propose to revise the index level 
prospectively by using unadjusted page 700 data that reflects the 
effects of the Income Tax Policy Change on pipeline cost changes from 
2014-2019.
    25. Several considerations support this proposal. The D.C. Circuit 
and the Commission have concluded that allowing MLP pipelines to 
recover an income tax allowance in addition to a return on equity (ROE) 
determined using the Discounted Cash Flow (DCF) model results in an 
impermissible double recovery of investor-level tax costs and produces 
unjust and unreasonable rates.\49\ Although the Income Tax Policy 
Change eliminated this double recovery by prohibiting MLP pipelines 
from recovering an income tax allowance, oil pipeline rates have not 
incorporated this policy change into going forward rates following the 
vacatur of the Rehearing Order.\50\ Because indexing is the 
Commission's primary ratemaking methodology for oil pipelines and 
because indexed oil pipeline rates must be just and reasonable, we 
believe that the index calculation should address the Income Tax Policy 
Change.
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    \49\ United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir. 
2016), order on remand, SFPP, L.P., Opinion No. 511-C 162 FERC ] 
61,228, at P 22 (2018), reh'g denied, Opinion No. 511-D, 166 FERC ] 
61,142, at PP 90-95 (2019), aff'd sub nom. SFPP, L.P. v. FERC, 967 
F.3d 788, 793-97, 801-03 (D.C. Cir. 2020); see also Income Tax 
Policy Statement, 162 FERC ] 61,227 at P 8. MLP pipelines do not 
incur income taxes at the entity level, but the Commission justified 
permitting MLP pipelines to recover an income tax allowance on the 
basis that their investors pay taxes on their allocated share of the 
MLP's taxable income. See Inquiry Regarding Income Tax Allowances, 
111 FERC ] 61,139, at P 32 (2005). Because the D.C. Circuit and the 
Commission concluded that the MLP pipeline's DCF ROE already 
included investor-level income tax costs, a double recovery resulted 
from permitting an income tax allowance that recovered those same 
tax costs. Opinion No. 511-C, 162 FERC ] 61,228 at P 22.
    \50\ With regard to natural gas pipeline rates, the Commission 
acted to address this double recovery by requiring natural gas 
pipelines to submit a one-time filing for the purpose of evaluating 
the impact of the Income Tax Policy Change and the Tax Cuts and Jobs 
Act on the pipeline's revenue requirement. Interstate & Intrastate 
Nat. Gas Pipelines, Order No. 849, 164 FERC ] 61,031, at P 30 
(2018), reh'g denied, Order No 849-A, 167 FERC ] 61,051 (2019). This 
process allowed for MLP natural gas pipelines to voluntarily reduce 
their rates in response to the Income Tax Policy Change and for the 
Commission to initiate rate investigations pursuant to section 5 of 
the Natural Gas Act where the pipeline appeared to be over-
recovering its cost of service as a result of the policy change. 
E.g., Stagecoach Pipeline & Storage Co., 166 FERC ] 61,199 (2019); 
N. Nat. Gas Co., 166 FERC ] 61,033 (2019). As opposed to initiating 
cost-of-service complaints against oil pipelines, the Commission 
stated that it would incorporate the effects of the Income Tax 
Policy Change in the 2020 five-year review. Income Tax Policy 
Statement, 162 FERC ] 61,227 at PP 8, 46.
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    26. Furthermore, the index is intended to reflect changes in costs 
recoverable under the Opinion No. 154-B methodology,\51\ such as the 
Income Tax Policy Change. The Commission and the D.C. Circuit have long 
recognized that the index should reflect changes in costs recoverable 
under the Opinion No. 154-B methodology.\52\ The index is the primary 
means for adjusting rates to recover those costs, and the Commission 
uses the Opinion No. 154-B methodology cost data reported on page 700 
to calculate the index level.\53\ Here, the Income Tax Policy Change 
altered pipelines' recoverable costs by barring MLP pipelines from 
recovering in 2019 income tax costs that they were permitted to recover 
in 2014.\54\ Thus, by comparing the 2014 data reported on page 700 
under the Commission's previous policy with the 2019 data reported 
under its changed policy, the index calculation will accurately capture 
the effects of the Income Tax Policy Change on costs recoverable under 
Opinion No. 154-B.\55\
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    \51\ The Opinion No. 154-B methodology is the cost-of-service 
ratemaking methodology that the Commission uses for oil pipelines. 
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). The Opinion 
No. 154-B methodology is based on trended original costs, whereby 
the inflationary component of the nominal return is placed in 
deferred earnings and recovered as part of rate base in future 
years. E.g., BP W. Coast Prods., LLC v. FERC, 374 F.3d 1263, 1282-83 
(D.C. Cir. 2004).
    \52\ AOPL III, 876 F.3d at 345 (finding that the Commission 
``has consistently treated the index as a measure of normal 
industry-wide cost-of-service changes''); 2015 Index Review, 153 
FERC ] 61,312 at P 13, aff'd, AOPL III, 876 F.3d at 345-46 (``[T]he 
index is meant to reflect changes to recoverable pipeline costs, 
and, thus, the calculation of the index should use data that is 
consistent with the Commission's [Opinion No. 154-B] cost-of-service 
methodology.''); see also Order no. 561-A, FERC Stats. & Regs. ] 
31,000 at 31,096 (stating that the then-existing Form No. 6 provided 
a ``highly unsatisfactory'' measure of capital cost changes because 
it did ``not contain the information necessary to compute a trended 
original cost (TOC) rate base or a starting rate base'' under the 
Opinion No. 154-B methodology).
    \53\ 2015 Index Review, 153 FERC ] 61,312 at PP 12-13 (adopting 
use of page 700 data to measure oil pipeline cost changes because, 
among other reasons, page 700 data is consistent with the Opinion 
No. 154-B methodology).
    \54\ Although the Income Tax Policy Change applied only to MLP 
pipelines, and not to non-MLP pipelines, this does not provide a 
basis for excluding the Income Tax Policy Change from the index 
calculation. As discussed above, indexing simplifies and streamlines 
oil pipeline ratemaking by allowing pipelines to adjust their rates 
based upon a generally applicable index that reflects industry-wide 
cost experience. E.g., Order No. 561-A, FERC Stats. & Regs. ] 31,000 
at 31,103 (explaining that indexing ``relies upon industry-wide 
average costs, not company-specific costs, to establish rates''). A 
policy change affecting the costs recoverable by particular 
pipelines (such as MLPs) contributes to changes in industry-wide 
recoverable costs and is thus appropriately reflected in the 
calculation of the industry-wide index. By contrast, excluding the 
Income Tax Policy Change from the calculation merely because it 
applied only MLP pipelines would produce an index level that fails 
to fully reflect cost-of-service changes across the industry from 
2014-2019.
    \55\ In contrast, adjusting the data set to remove the effects 
of this policy change would maintain a divergence between indexed 
rates and Opinion no. 154- B recoverable costs.
---------------------------------------------------------------------------

    27. In addition, we believe that incorporating the Income Tax 
Policy Change into the index complies with EPAct 1992's dual mandates 
for just and reasonable rates and simplified and streamlined 
ratemaking.\56\ As the Commission's Opinion No. 154-B methodology 
evolves, oil pipeline rates adjusted via indexing should reflect those 
changes in order to remain just and reasonable. If the Commission omits 
the effects of the Income Tax Policy Change from the index calculation, 
the alternative method for reflecting the elimination of the MLP income 
tax double recovery in rates would be through cost-of-service 
litigation.\57\ We

[[Page 84480]]

are concerned that implementing cost-of-service policy changes in this 
manner would frustrate the statutory goals of efficient and simplified 
ratemaking embodied in EPAct 1992.\58\
---------------------------------------------------------------------------

    \56\ EPAct 1992, at 1801(a).
    \57\ The index calculation for 2021-2026 presents the sole 
opportunity for addressing the MLP income tax double recovery in 
indexed rates via the simplified and streamlined five-year review 
process. As discussed above, the Kahn Methodology calculates the 
index level based on the change in industry-wide page 700 costs from 
the first year of the review period to the last. Thus, it is only 
possible to reflect the Income Tax Policy Change in the instant 
index calculation, which measures cost changes from 2014 (when MLP 
pipelines reported a positive income tax allowance) to 2019 (when 
MLP pipelines reported zero income tax allowance). Capturing this 
decrease in recoverable income tax costs from 2014 to 2019 will 
reduce the index level to incorporate the elimination of the MLP 
income tax double recovery. In contrast, the 2025 five-year review 
will reflect no change in MLP income tax costs because MLP pipelines 
will report zero income tax allowances for both the first and last 
years of the 2019-2024 period.
    \58\ See Ass'n of Oil Pipe Lines v. FERC, 281 F.3d 239, 244 
(D.C. Cir 2002) (AOPL II) (holding that an oil pipeline ratemaking 
regime based in large part on cost-of-service rate proceedings 
``would be inconsistent with Congress's mandate under the EPAct for 
FERC to establish `a simplified and generally applicable ratemaking 
methodology' '' (quoting EPAct 1992, at 1801(a))).
---------------------------------------------------------------------------

    28. We are also concerned that adjusting page 700 data to remove 
the effects of the Income Tax Policy Change conflicts with the 
Commission's historical practice. Before the Initial Order, the 
Commission had not previously adjusted the reported Form No. 6 data 
used to derive the index level. Rather, Order Nos. 561 and 561-A 
``opted for a purely historical analysis'' \59\ for measuring pipeline 
cost changes based on documented cost experience, and in subsequent 
five-year reviews, the Commission calculated the index level using 
reported Form No. 6 data without adjustment. Thus, modifying MLP 
pipelines' reported page 700 data in the Initial Order departed from 
the purely historical analysis on which the Commission has consistently 
relied since establishing the indexing regime.
---------------------------------------------------------------------------

    \59\ Id. at 247 (citing Five-Year Rev. of Oil Pipeline Pricing 
Index, 93 FERC ] 61,266, at 61,855 (2000) (2000 Index Review), aff'd 
in part and remanded, AOPL II, 281 F.3d 239, order on remand, 102 
FERC ] 61,195 (2003) (2000 Remand Order); Order No. 561, FERC Stats. 
& Regs. ] 30,985 at 30,951 (explaining that the Commission ``opted 
for a purely historical analysis'' for calculating the index level 
and ``has adhered to it'').
---------------------------------------------------------------------------

    29. Moreover, our proposal would honor the Commission's assurances 
in the 2018 Income Tax Policy Statement that it would ``incorporate the 
effects of [the Income Tax Policy Change] . . . in the 2020 five-year 
review'' so that oil pipeline rates would reflect these reduced 
costs.\60\ Whereas the Commission acted promptly to eliminate the MLP 
income tax double recovery from natural gas pipeline rates, the 
Commission deferred adjusting oil pipeline rates until the 2020 five-
year review. Failure to incorporate the Income Tax Policy Change into 
the index level would leave MLP oil pipeline rates unaddressed 
indefinitely. Furthermore, we recognize that shippers relied upon the 
Commission's assurances in considering whether to bring challenges 
against oil pipeline rates following the Income Tax Policy Change.
---------------------------------------------------------------------------

    \60\ Income Tax Policy Statement, 162 FERC ] 61,227 at P 8; see 
also Inquiry Regarding the Effect of the Tax Cuts & Jobs Act on 
Commission-Jurisdictional Rates, 162 FERC ] 61,223, at P 4 (2018) 
(``The Commission must ensure that the rates, terms, and conditions 
of jurisdictional services under the Federal Power Act (FPA), the 
Natural Gas Act (NGA), and the Interstate Commerce Act are just, 
reasonable, and not unduly discriminatory or preferential''); id. P 
8 (directing oil pipelines to report on page 700 an income tax 
allowance consistent with the Income Tax Policy Change and the Tax 
Cuts and Jobs Act). As opposed to initiating cost-of-service 
complaints against oil pipelines, deferring action until the 2020 
five-year review best fulfilled EPAct 1992's dual mandates for 
simplified oil pipeline ratemaking and just and reasonable rates. 
See supra note 59.
---------------------------------------------------------------------------

    30. We are no longer persuaded by the reasoning provided in the 
Initial Order for excluding the Income Tax Policy Change from the index 
calculation. Contrary to the Initial Order, we do not believe there is 
a meaningful distinction between changes to the Opinion No. 154-B 
methodology and changes to the costs that pipelines input into that 
methodology and end up reported on page 700.\61\ Rather, changes to the 
Opinion No. 154-B methodology produce corresponding changes to the 
costs that pipelines can recover. Accordingly, for purposes of 
determining the index, any meaningful measure of changes to recoverable 
costs between 2014 and 2019 should reflect the Income Tax Policy 
Change.\62\
---------------------------------------------------------------------------

    \61\ Initial Order, 173 FERC ] 61,245 at P 17 (stating that 
``the purpose of indexing is to allow the indexed rate to keep pace 
with industry-wide cost changes, not to reflect alterations to the 
Commission's Opinion No. 154-B cost-of-service methodology'').
    \62\ In the Initial Order, the Commission stated that ``[j]ust 
as a business must account for changes to its accounting practices 
when comparing costs over two different periods, we must make a 
similar adjustment to the reported page 700 data here to derive an 
`apples-to-apples' comparison of pipeline cost changes.'' Id. 
However, this analogy to accounting methods is misplaced. Whereas an 
accounting methodology simply involves the method of recording 
costs, as explained above, the Income Tax Policy Change directly 
affected the costs the MLP pipelines can recover under the Opinion 
No. 154-B methodology.
---------------------------------------------------------------------------

    31. Additionally, in contrast to the Initial Order, we do not 
believe that reflecting the Income Tax Policy Change would effectuate a 
true-up for prior-period over-recoveries.\63\ Consistent with the 
purposes of the five-year review, incorporating the effects of the 
Income Tax Policy Change in the index calculation would align 
pipelines' future rates with their future costs recoverable under 
Opinion No. 154-B. By failing to reflect the Income Tax Policy Change 
in the calculation of the prospective index, the approach adopted in 
the Initial Order would cause future indexed rates to become estranged 
from future recoverable costs.
---------------------------------------------------------------------------

    \63\ Id. P 18.
---------------------------------------------------------------------------

    32. We likewise question the Initial Order's reasoning that 
``[b]ecause no prior index calculation incorporated the [Commission's 
2005 policy change] allowing MLP pipelines to recover an income tax 
allowance, it is not necessary to reflect the policy change denying 
those pipelines an income tax allowance in the calculation here.'' \64\ 
This statement disregards indexing's purpose and oversimplifies 
historical Commission practice. Indexed rates have always served as a 
means for recovering pipeline income tax costs. Accordingly, the five-
year review index calculation was always intended to incorporate 
changes in pipeline income tax costs, even if the Commission previously 
measured those costs using an imperfect estimate.\65\ Now that the 
Commission uses page 700 data that directly measures income tax costs, 
we believe that the Commission should not disregard this data when 
calculating the index level.
---------------------------------------------------------------------------

    \64\ Id. P 19.
    \65\ Before the 2015 Index Review when the Commission began 
using page 700 data, the Commission estimated pipeline cost changes 
using a rough proxy based on Form No. 6 accounting data. This 
accounting data did not directly measure changes in the income tax 
costs recoverable under Opinion No. 154-B. Id.; see also 2015 Index 
Review, 153 FERC ] 61,312 at PP 14-15 (describing this proxy and its 
deficiencies). The Commission relied on this proxy because direct 
measures of capital costs and income were not available when the 
index was first established. 2015 Index Review, 153 FERC ] 61,312 at 
P 14. Before page 700 was created, the Commission lamented that 
``the measure of the capital cost component of the cost of service 
is highly unsatisfactory'' because Form No. 6 did ``not contain the 
information necessary to compute a trended original cost . . . rate 
base or a starting rate base as allowed for in [Opinion] No. 154-
B.'' Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,096.
---------------------------------------------------------------------------

    33. Moreover, contrary to the findings in the Initial Order,\66\ 
MLP income taxes have been reflected in oil pipeline rates. Before the 
2005 income tax policy change, MLP pipelines could include at least a 
partial income tax allowance in their costs of service.\67\ To the 
extent that prior index calculations did not incorporate the 2005 
policy change allowing MLP pipelines to recover a full

[[Page 84481]]

income tax allowance, we believe that pipeline rates substantially came 
to reflect that policy over time. In particular, as the number of 
pipelines in the Commission's data set expanded,\68\ all initial rates 
and non-indexing rate changes would have reflected MLP pipelines' 
ability to recover a full income tax allowance under the previous 2005 
policy. Although we recognize that prior index reviews imperfectly 
captured the 2005 income tax policy change, the 2005 policy change 
affected oil pipeline rates over the last 15 years. Thus, we do not 
believe that the arguments based on the 2005 income tax policy change 
require excluding the Income Tax Policy Change from the index 
calculation.
---------------------------------------------------------------------------

    \66\ Initial Order, 173 FERC ] 61,245 at P 19.
    \67\ Lakehead Pipe Line Co., Opinion No. 397, 71 FERC ] 61,338 
at 62,314-15 (1995) reh'g denied, Opinion No. 397-A, 75 FERC ] 
61,181 (1996) (permitting partnership entities like MLP pipelines to 
recover an income tax allowance for income attributable to corporate 
partners, but not for income attributable to individuals or other 
non-corporate partners); see also Riverside Pipeline Co., 48 FERC ] 
61,309, at 62,018 (1989) (applying pre-Lakehead policy permitting 
partnership pipelines to recover a full income tax allowance as if 
they were corporations).
    \68\ Notably, 164 of the 277 total oil pipelines in the 
Commission's data set, or 59% have been added since the 2005 five-
year review.
---------------------------------------------------------------------------

    34. For these reasons, we propose to revise the index level 
prospectively by using unadjusted page 700 data that incorporates the 
effects of the Income Tax Policy Change on pipeline recoverable costs 
between 2014 and 2019. We invite comments on this proposal.

C. Appropriate Source of 2014 Page 700 Data

    35. Page 700 includes columns for reporting summaries of cost-of-
service data for both the current year and previous year.\69\ The more 
recently filed data reported in the previous-year column often updates 
the data that was filed in the prior year. As a result, for the first 
year of the index review period in the five-year review, the Commission 
uses updated page 700 data filed in the following year's Form No. 6, 
where available.\70\
---------------------------------------------------------------------------

    \69\ For example, pipelines' reported cost-of-service data for 
the 2014 in their page 700s submitted in April 2015 would be listed 
in the current-year column and cost-of-service data for 2014 would 
shift to the previous-year column in the page 700s submitted in 
April 2016.
    \70\ Five-Year Rev. of the Oil Pipeline Pricing Index, 114 FERC 
] 61,293, at P 40 (2006) (2005 Index Review) (finding that a witness 
was ``correct to use the data contained in [a] resubmitted FERC Form 
No. 6'').
---------------------------------------------------------------------------

    36. In the Initial Order, the Commission inadvertently departed 
from its prior practice by using outdated page 700 data for 2014. 
Although 38 pipelines filed updated 2014 data in April 2016, the 
Initial Order erroneously relied on those pipelines' originally filed 
2014 data as reported in April 2015. Accordingly, we propose to 
calculate a revised index level using updated 2014, page 700 data, 
where available, as reported in the previous-year column in the Form 
No. 6 filings submitted in April 2016. This adjustment would ensure 
that the index calculation reflects the most current page 700 data for 
2014 in accordance with prior Commission practice.\71\
---------------------------------------------------------------------------

    \71\ E.g., 2015 Index Review, 153 FERC ] 61,312 at Workpapers, 
COSdata Tab (noting that ``[w]here available, data for given year is 
taken from the `Previous Year Amount' column of the following year's 
Form 6 (e.g., 2009 data is from column (c) of the 2010 Form 6''); 
2005 Index Review, 114 FERC ] 61,293 at P 40.
---------------------------------------------------------------------------

D. Calculating Prospective Ceiling Levels

    37. We propose that pipelines recalculate their ceiling levels on a 
prospective \72\ basis as though the revised index level was effective 
throughout the five-year period.\73\ This approach will set the going-
forward oil pipeline indexed rates at the proper level in future years. 
Furthermore, this approach will ensure that future rates reflect the 
appropriate use of the middle 50% (not the distortions caused by the 
adoption of the middle 80%) as well as the elimination of the MLP 
income tax allowance.\74\ We also believe that this approach is 
appropriate given the circumstances of this case resulting from the 
flaws in the Initial Order, the timely concerns raised by shippers, and 
the procedural holdings of LEPA v. FERC. Additionally, this approach 
would conform to the Commission's practice in the 2000 five-year 
review, where it adopted a revised index level following a judicial 
remand.\75\ We seek comment upon this proposal. Moreover, commenters 
may address whether, in the alternative, pipelines' ceiling levels 
should only reflect a revised index level as of July 1, 2025, rather 
than for the full five-year period.
---------------------------------------------------------------------------

    \72\ See, e.g., 5 U.S.C. 551(4) (defining ``rule'' under APA 
``as an agency statement of general or particular applicability and 
future effect'' (emphasis added)); Safari Club Int'l v. Zinke, 878 
F.3d 316, 333 (D.C. Cir. 2017) (explaining that ``rules generally 
have only `future effect' '' (citations omitted)); Georgetown Univ. 
Hosp. v. Bowen, 821 F.2d 750, 758 (D.C. Cir. 1987) (``The . . . 
suggestion that a retroactive rulemaking is permissible to remedy a 
procedural defect in a rule would, if accepted, make a mockery of 
the provisions of the APA. . . . [B]oth the express terms of the APA 
and the integrity of the rulemaking process demand that the 
corrected rule, like all other legislative rules, be prospective in 
effect only.'').
    \73\ For example, assume that Pipeline A's ceiling level on June 
30, 2021, was $5.00 and that Pipeline A has not subsequently revised 
its rate by a method other than indexing. See 18 CFR 342.3(d)(5). 
Under our proposal, if the Commission adopts a revised index level 
of PPI-FG-0.21% in this proceeding, Pipeline A's recomputed ceiling 
level would be $6.13941 as of June 30, 2025 ($5.00 x (0.984288 x 
1.087107 x 1.133194 x 1.012647)). See Reinstatement Order, 188 FERC 
] 61,173 at P 1 (listing index multipliers that result from using 
index level of PPI-FG-0.21%).
    \74\ The index is cumulative from year to year, whereby each 
annual index is applied to the pipeline's ceiling level from the 
preceding year. 18 CFR 342.3(d)(1); Order no. 561, FERC Stats. & 
Regs. ] 30,985 at 30,954. In the Reinstatement Order, the Commission 
directed pipelines to recompute their ceiling levels as though the 
Initial Index applied for the full five-year period. Reinstatement 
Order, 188 FERC ] 61,173 at P 1. As a result, if the Commission 
adopts a revised index level that incorporates the Income Tax Policy 
Change, this determination would not be fully reflected in rates 
unless pipelines' ceiling levels are recomputed as though the 
revised index level applied for the full five-year-period. By 
contrast, if ceiling levels were computed as if the revised index 
level applied as of July 1, 2025, rather than for the full five 
years, pipeline rates would only partially reflect the Commission's 
determination to eliminate the MLP income tax allowance from the 
index calculation.
    \75\ 2000 Remand Order, 102 FERC ] 61,195 at PP 1, 31 (allowing 
pipelines to recalculate their ceiling levels as though the revised 
index level adopted on remand was in effect throughout the ongoing 
five-year period).
---------------------------------------------------------------------------

III. Request for Comments

    38. We invite comments on the Commission's proposal to calculate a 
revised index level, as described above. Commenters may address any 
issues regarding the appropriate index level following LEPA v. FERC, 
including, but not limited to, whether the Commission should amend the 
Initial Index by relying solely upon the middle 50%, incorporating the 
Income Tax Policy Change, and using updated page 700 data for 2014. 
Commenters may address the calculation of the revised index level. In 
addition, commenters should renew any arguments raised in requests for 
rehearing or clarification of the Initial Order that they would like 
for the Commission to consider in determining the index level for this 
five-year review period.
    39. In their initial comments, commenters may also describe any 
additional remedial steps not discussed herein that they believe the 
Commission should take following the vacatur of the Rehearing Order in 
LEPA v. FERC. Commenters may also address any potential action that the 
Commission should take regarding the period between (a) the March 1, 
2022 effective date of tariff records filed pursuant to the Rehearing 
Order and (b) September 17, 2024, when the Commission reinstated the 
Initial Order.
    40. We acknowledge that the Commission has not previously 
undertaken a supplemental rulemaking to consider revisions to the index 
level outside of the five-year review process established in Order No. 
561. However, in the present circumstances, we believe that it is 
appropriate to initiate new notice-and-comment procedures given the 
D.C. Circuit's holdings in LEPA v. FERC and our ongoing concerns with 
the Commission's determinations in the Initial Order. Commenters may 
address any issues or concerns associated with

[[Page 84482]]

the proposal to revise the index level during the five-year period.

IV. Comment Procedures

    41. Initial comments are due November 26, 2024. Reply comments are 
due December 20, 2024. Comments must refer to Docket No. RM25-2-000, 
and must include the commenter's name, the organization they represent, 
if applicable, and their address. 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.
    42. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software must be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    43. Commenters that are not able to file comments electronically 
may file an original of their comment by USPS mail or by courier-or 
other delivery services. For submission sent via USPS only, filings 
should be mailed to: Federal Energy Regulatory Commission, Office of 
the Secretary, 888 First Street NE, Washington, DC 20426. Submission of 
filings other than by USPS should be delivered to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.

V. Document Availability

    44. 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).
    45. 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.
    46. User assistance is available for eLibrary and the Commission's 
website during normal business hours from FERC Online Support at (202) 
502-6652 (toll free at 1-866-208-3676) or email at 
<a href="/cdn-cgi/l/email-protection#2c4a495e4f4342404542495f595c5c435e586c4a495e4f024b435a"><span class="__cf_email__" data-cfemail="61070413020e0f0d080f04121411110e131521070413024f060e17">[email protected]</span></a>, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
<a href="/cdn-cgi/l/email-protection#fa8a8f98969399d4889f9c9f889f94999f88959597ba9c9f8899d49d958c"><span class="__cf_email__" data-cfemail="59292c3b35303a772b3c3f3c2b3c373a3c2b363634193f3c2b3a773e362f">[email protected]</span></a>.

    By direction of the Commission.

    Issued: October 17, 2024.
Debbie-Anne A. Reese,
Secretary.
[FR Doc. 2024-24518 Filed 10-22-24; 8:45 am]
BILLING CODE 6717-01-P


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