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.

Proposed Rules Federal Register

84475 

Vol. 89, No. 205 

Wednesday, October 23, 2024 

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. 

5Revisions to Oil Pipeline Reguls. Pursuant to the 

Energy Pol’y Act of 1992, 188 FERC ¶ 61,173 (2024) 

(Reinstatement Order). 

6Public 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). 

8Revisions 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). 

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. 

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. 

• Electronic Filing: Documents must 

be filed in acceptable native 

applications and print-to-PDF, but not 

in scanned or picture format. 

• For those unable to file 

electronically, comments may be filed 

by USPS mail or by hand (including 

courier) delivery. 

Æ Mail via U.S. Postal Service Only: 

Addressed to: Federal Energy 

Regulatory Commission, Secretary of the 

Commission, 888 First Street NE, 

Washington, DC 20426. 

Æ 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, Monil.Patel@ferc.gov 

Evan Steiner (Legal Information), Office 

of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street NE, Washington, DC 

20426, (202) 502–8792, Evan.Steiner@

ferc.gov 

Molly Behan (Legal Information), Office 

of the General Counsel, Federal 

Energy Regulatory Commission, 888 

First Street NE, Washington, DC 

20426, (202) 502–8816, Molly.Behan@

ferc.gov 

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

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 fiveyear 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

4. The Commission reviews the index 

level every five years.8 Beginning with 

Order No. 561 and in each ensuing fiveyear review, the Commission has 

adjusted the index level using the Kahn 

Methodology, which calculates each 


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84476 Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Proposed Rules 

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). 

11Comments 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. 

12 Initial Order, 173 FERC ¶ 61,245 at P 2. 

13 Id. PP 16–20, 25–32. 

14Rehearing 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). 

18 Id. P 106, ordering para. (B). 

19Pipelines 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). 

20Second 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. 

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. 

25Reinstatement 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. 

26See LEPA v. FERC, 109 F.4th at 549; see also 

49 U.S.C. app. 17(9)(g). 

pipeline’s cost change on a per barrelmile 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. 

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. 

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. 

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

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

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 noticeand-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

10. On September 17, 2024, the 

Commission issued an order reinstating 

the Initial Order in compliance with the 

court’s decision.25

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

12. As discussed below, we propose 

to adopt a revised index level of PPI– 

FG–0.21% for the remainder of the fiveVerDate Sep<11>2014 16:04 Oct 22, 2024 Jkt 265001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 E:\FR\FM\23OCP1.SGM 23OCP1

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Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Proposed Rules 84477 

27This 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. 29E.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.’’). 30Extraordinary 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].’’). 

31Order 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. 

32Extraordinary 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. 

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). 

36AOPL 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’ costchange data’’ in that proceeding). 

37This 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. 

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. 

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

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

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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84478 Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Proposed Rules 

38As 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. 

39When 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. 

40The 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. 

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. 

42See Initial Order, 173 FERC ¶ 61,245 at P 26. 

43See attach. A, Ex. 1. 

44See 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. 

45See Initial Order, 173 FERC ¶ 61,245 at P27. 

46The 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.’’). 

47See Initial Order, 173 FERC ¶ 61,245 at P 28. 

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

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

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

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. 

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. 

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 


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Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Proposed Rules 84479 

48 2015 Index Review, 153 FERC ¶ 61,312 at PP 

36, 42; 2010 Index Review, 133 FERC ¶ 61,228 at 

P 62. 

49United 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. 

50With regard to natural gas pipeline rates, the 

Commission acted to address this double recovery 

by requiring natural gas pipelines to submit a onetime 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. 

51The 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). 

52AOPL 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). 

54Although 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 industrywide 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. 

56EPAct 1992, at 1801(a). 

57The 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 

Continued 

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%. 

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. 

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

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 


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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. 

58See 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))). 

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’’). 

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 CommissionJurisdictional 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. 

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. 

63 Id. P 18. 

64 Id. P 19. 

65Before 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. 

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 noncorporate partners); see also Riverside Pipeline Co., 

48 FERC ¶ 61,309, at 62,018 (1989) (applying preLakehead policy permitting partnership pipelines 

to recover a full income tax allowance as if they 

were corporations). 

are concerned that implementing costof-service policy changes in this manner 

would frustrate the statutory goals of 

efficient and simplified ratemaking 

embodied in EPAct 1992.58

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. 

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. 

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

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 priorperiod 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. 

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. 

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 


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68Notably, 164 of the 277 total oil pipelines in 

the Commission’s data set, or 59% have been added 

since the 2005 five-year review. 

69For 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’’). 

71E.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. 

72See, 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.’’). 

73For 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 × (0.984288 × 

1.087107 × 1.133194 × 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%). 

74The 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-yearperiod. 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 fiveyear period). 

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. 

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

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 previousyear 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

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. 

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 


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84482 Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Proposed Rules 

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 

ferconlinesupport@ferc.gov, or the 

Public Reference Room at (202) 502– 

8371, TTY (202) 502–8659. Email the 

Public Reference Room at 

public.referenceroom@ferc.gov. 

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 

DEPARTMENT OF STATE 

22 CFR Parts 120, 121, and 126 

[Public Notice: 12543] 

RIN 1400–AE73 

International Traffic in Arms 

Regulations (ITAR): U.S. Munitions List 

Categories IV and XV 

AGENCY: Department of State. 

ACTION: Proposed rule. 

SUMMARY: The Department of State (the 

Department) proposes to amend the 

International Traffic in Arms 

Regulations (ITAR) to revise U.S. 

Munitions List (USML) Categories IV 

and XV and related sections of the ITAR 

to clarify and standardize the regulatory 

text, add items that warrant designation 

on the USML, and remove those items 

that no longer warrant designation on 

the USML. The Department further 

proposes to add three new license 

exemptions to the ITAR. 

DATES: Send comments on or before 

November 22, 2024. 

ADDRESSES: Interested parties may 

submit comments to the Department by 

any of the following methods: 

• Visit the Regulations.gov website at: 

https://www.regulations.gov and search 

for the docket number DOS–2024–0035. 

• Email: DDTCPublicComments@

state.gov. Commenting parties must 

include RIN 1400–AE73 in the subject 

line of the email message. 

See SUPPLEMENTARY INFORMATION for 

other information about electronic 

filing. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Robert Rasmussen, Office of Defense 

Trade Controls Policy, Department of 

State, telephone (202) 663–2217; email 

DDTCCustomerService@state.gov; 

SUBJECT: International Traffic in Arms 

Regulations: USML Categories IV and 

XV (RIN 1400–AE73). 

SUPPLEMENTARY INFORMATION: The 

Department of State’s Directorate of 

Defense Trade Controls (DDTC) 

regulates the export, reexport, retransfer, 

and temporary import of the defense 

articles and defense services identified 

on the USML at ITAR § 121.1. Items not 

subject to the ITAR or to the exclusive 

licensing jurisdiction of any other 

department or agency of the U.S. 

Government are subject to the Export 

Administration Regulations (EAR, 15 

CFR parts 730 through 774, which 

includes the Commerce Control List 

(CCL) in supplement no. 1 to part 774). 

The EAR is administered and enforced 

by the Bureau of Industry and Security 

(BIS), U.S. Department of Commerce. 

This rule does not modify the list of 

defense articles and defense services 

controlled for purposes of permanent 

import by the Attorney General, as 

enumerated on the U.S. Munitions 

Import List (USMIL) at 27 CFR 447.21. 

Section 38 of the Arms Export Control 

Act (AECA) (22 U.S.C. 2778), the 

authority from which the ITAR is 

derived, requires periodic review to 

determine what articles and services, if 

any, no longer warrant designation on 

the U.S. Munitions List at 22 CFR 121.1. 

In maintaining the USML, DDTC’s 

Office of Defense Trade Controls Policy 

(DTCP) identifies articles and services 

for review through a variety of methods, 

including informal public and 

interagency comment, commodity 

jurisdiction reviews, advisory opinions, 

and technology monitoring. The 

Department maintains the USML such 

that it comprises those defense articles 

or defense services that provide a 

critical military or intelligence 

advantage or, in the case of firearms, 

have an inherently military function. 

The Department, informed by 

consultations with its interagency 

partners, determined that the additional 

defense articles this rule proposes to 

designate on the USML warrant ITAR 

control and those articles it proposes to 

remove from the USML no longer do. 

This rule also proposes to amend and 

clarify certain regulatory text that 

describes items on the USML. 

Further, on December 20, 2023, Vice 

President Kamala Harris convened the 

National Space Council to discuss U.S. 

leadership in space. The Departments of 

State and Commerce were subsequently 

tasked to ‘‘review relevant export 

controls and processes to better enable 

a globally competitive U.S. space 

industrial base while protecting our 

national security and foreign policy 

interests.’’ In addition to clarifying 

existing controls, the Department 

identifies three primary methods to 

meet that objective. First, it presents 

several updates to the USML’s structure, 

terminology, and concepts. Second, it 

proposes three new license exemptions 

within the ITAR and the transition of 


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