4476 Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations 

1 Five-Year Rev. of the Oil Pipeline Index, 86 FR 

9448 (Feb. 16, 2021), 173 FERC ¶ 61,245 (2020) 

(December 2020 Order). 

2 Joint Commenters include: The Airlines for 

America; Chevron Products Company; the National 

Propane Gas Association; and Valero Marketing and 

Supply Company. 

3Liquids Shippers include: Apache Corporation; 

Cenovus Energy Marketing Services Ltd.; 

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

Equinor Marketing & Trading US Inc.; Fieldwood 

Energy LLC; Marathon Oil Company; Murphy 

Exploration and Production Company—USA; 

Ovintiv Marketing, Inc.; and Pioneer Natural 

Resources USA, Inc. 

4 Designated Carriers include: Buckeye Partners, 

L.P.; Colonial Pipeline Company; Energy Transfer 

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

All American Pipeline, L.P. 

5 Inquiry Regarding the Commission’s Policy for 

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

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

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

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 (2020). 

6 18 CFR 342.3(e). 

7Pursuant to the indexing methodology, 

pipelines may increase 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.’’ 18 CFR 342.3(d)(1). 

The Commission publishes an annual index figure 

every May in a notice issued in Docket No. RM93– 

11–000. 

8Revisions to Oil Pipeline Regulations Pursuant 

to Energy Policy Act of 1992, Order No. 561, FERC 

Stats. & Regs. ¶ 30,985, at 30,941 (1993) (crossreferenced at 65 FERC ¶ 61,109), order on reh’g, 

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

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

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

1424 (D.C. Cir. 1996) (AOPL I). 

9 In Order No. 561 and the 2015 and 2010 fiveyear reviews, the Commission relied solely upon 

the middle 50% of the data set. Five-Year Rev. of 

the Oil Pipeline Index, 153 FERC ¶ 61,312, at PP 

42–44 (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); Five-Year Rev. of the Oil 

Pipeline Pricing Index, 133 FERC ¶ 61,228, at P 60 

(2010) (2010 Index Review), reh’g denied, 135 FERC 

¶ 61,172 (2011) (2010 Index Rehearing Order); 

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

31,096–097. In the 2005 and 2000 five-year reviews, 

the Commission averaged the middle 50% with the 

middle 80% but did not justify or address its 

consideration of the middle 80%. 2010 Index 

Review, 133 FERC ¶ 61,228 at P 60. In addition, in 

the 2000 review, considering the middle 80% did 

not alter the index calculation. Id. 

https://www.archives.gov/federal-register/cfr/ 

ibr-locations.html. 

Issued on January 19, 2022. 

Lance T. Gant, 

Director, Compliance & Airworthiness 

Division, Aircraft Certification Service. 

[FR Doc. 2022–01818 Filed 1–26–22; 11:15 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Part 342 

[Docket No. RM20–14–001] 

Five-Year Review of the Oil Pipeline 

Index 

AGENCY: Federal Energy Regulatory 

Commission. 

ACTION: Order on rehearing. 

SUMMARY: The Federal Energy 

Regulatory Commission (Commission) 

addresses arguments raised on rehearing 

of the December 17, 2020 Order 

Establishing Index Level concluding the 

Commission’s five-year review of the 

index level used to determine annual 

changes to oil pipeline rate ceilings 

(December 2020 Order). The December 

2020 Order established an index level of 

Producer Price Index for Finished 

Goods plus 0.78% (PPI–FG+0.78%) for 

the five-year period commencing July 1, 

2021. In this order, the Commission 

grants rehearing of the December 2020 

Order, in part, denies rehearing, in part, 

and establishes an index level of PPI– 

FG–0.21%. 

DATES: This order is applicable 

beginning January 20, 2022. 

FOR FURTHER INFORMATION CONTACT: 

Evan Steiner (Legal Information), Office 

of the General Counsel, 888 First 

Street NE, Washington, DC 20426, 

(202) 502–8792 

Monil Patel (Technical Information), 

Office of Energy Market Regulation, 

888 First Street NE, Washington, DC 

20426, (202) 502–8296 

SUPPLEMENTARY INFORMATION: 

Order on Rehearing 

(Issued January 20, 2022) 

1. On December 17, 2020, the 

Commission issued an order 

establishing an oil pipeline index level 

of Producer Price Index for Finished 

Goods plus 0.78% (PPI–FG+0.78%) for 

the five-year period beginning July 1, 

2021.1 On January 19, 2021, Joint 

Commenters,2 Liquids Shippers Group 

(Liquids Shippers),3 the Canadian 

Association of Petroleum Producers 

(CAPP) (together with Joint Commenters 

and Liquids Shippers, Shippers), the 

Association of Oil Pipe Lines (AOPL), 

and Designated Carriers 4 (together with 

AOPL, Pipelines) requested rehearing or 

clarification of the December 2020 

Order. 

2. As discussed below, we grant the 

requests for rehearing, in part, and deny 

the requests for rehearing, in part. As a 

result, we adopt an index level of PPI– 

FG–0.21%. This departure from the 

December 2020 Order results from: (a) 

Trimming the data set to the middle 

50% of cost changes, as opposed to the 

middle 80%; (b) 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); 5

and (c) correcting the index calculation 

to rely upon updated page 700 cost data 

for 2014. 

3. In addition, as discussed below, we 

direct oil pipelines to recompute their 

ceiling levels for July 1, 2021 through 

June 30, 2022, based upon an index 

level of PPI–FG–0.21%. Consistent with 

§ 342.3(e) of the Commission’s 

regulations,6 any oil pipeline with a 

filed rate that exceeds its recomputed 

ceiling level for July 1, 2021 through 

June 30, 2022 must file to reduce that 

rate to bring it into compliance with the 

pipeline’s recomputed ceiling level. We 

direct such pipelines to submit these 

filings to be effective March 1, 2022. 

I. Background 

A. The Kahn Methodology 

4. The Commission reviews the oil 

pipeline index level 7 every five years.8

Beginning in Order No. 561 and in each 

ensuing five-year review, the 

Commission has adjusted the index 

level using the Kahn Methodology, 

which calculates each pipeline’s cost 

change on a per barrel-mile basis over 

the prior five-year period (e.g., 2014– 

2019 in this proceeding) based upon 

FERC Form No. 6, page 700 summary 

cost-of-service data. In order 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.9

The Kahn Methodology then averages 

three measures of the trimmed data 

sample’s central tendency (the median, 

mean, and weighted mean) to determine 

a composite central tendency and 

compares this average to the changing 

value of PPI–FG over the same five-year 

period. The index level is set at PPI–FG 

plus (or minus) this differential. 

Historically, the index has ranged from 

PPI–FG–1% to PPI–FG+2.65%, and in 

2015, the Commission set the index 

level at PPI–FG+1.23%. 

B. Notice of Inquiry and Comments 

5. On June 18, 2020, the Commission 

issued a Notice of Inquiry (NOI) 

proposing to adopt an index level of 


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

FERC ¶ 61,239 (2020) (NOI). 

11 Id. PP 9–10. 

12 Id. 

13Comments were filed by AOPL, Designated 

Carriers, Kinder Morgan, Inc., Colonial, Joint 

Commenters, Liquids Shippers, CAPP, the Energy 

Infrastructure Council, the Pipeline Safety Trust, 

and the Pipeline and Hazardous Materials Safety 

Administration (PHMSA). 

14 December 2020 Order, 173 FERC ¶ 61,245 at P 

2. 

15 Id. PP 16–20. 

16 Id. PP 25–32. 

17 Id. PP 36–40, 45–50, 52–53. 

18 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 8. 

19From 2005 to 2018, the Commission allowed 

MLP pipelines to claim a full income tax allowance 

in their costs of service. Inquiry Regarding Income 

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

(2005 Income Tax Policy Statement). In a series of 

orders beginning in 2016, the Commission and the 

U.S. Court of Appeals for the District of Columbia 

Circuit (D.C. Circuit) found that allowing MLP 

pipelines to recover both an income tax allowance 

and an ROE determined using the Discounted Cash 

Flow (DCF) model results in an impermissible 

double recovery of tax costs. The Commission 

rectified the double recovery through the Income 

Tax Policy Change in 2018, finding that MLP 

pipelines could no longer recover an income tax 

allowance and could eliminate previously 

accumulated ADIT balances from their costs of 

service. The D.C. Circuit affirmed the Commission’s 

decisions in 2020. See United Airlines, Inc. v. 

FERC, 827 F.3d 122 (D.C. Cir. 2016) (United 

Airlines), order on remand, SFPP, L.P., Opinion No. 

511–C, 162 FERC ¶ 61,228, at P 22 (2018), 

(remanding the Commission’s application of the 

2005 policy), reh’g denied, Opinion No. 511–D, 166 

FERC ¶ 61,142, at PP 90–95 (2019), aff’d, SFPP, L.P. 

v. FERC, 967 F.3d 788, 793–97, 801–03 (D.C. Cir. 

2020) (SFPP); see also Income Tax Policy 

Statement, 162 FERC ¶ 61,227, reh’g denied, 164 

FERC ¶ 61,030, request for clarification dismissed, 

168 FERC ¶ 61,136; petitions review dismissed sub 

nom. Enable Miss. River Transmission, LLC v. 

FERC, 820 F. App’x 8. 

20 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). 

21 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 46. 

22 Id. P 8. 

23 December 2020 Order, 173 FERC ¶ 61,245 at P 

16. Because the 2014 page 700 data reflected the old 

policy whereas the 2019 data reflected the new 

policy, a straightforward application of the 

longstanding Kahn Methodology would have 

incorporated the cost reductions caused by the 

Income Tax Policy Change. AOPL’s and Designated 

Carriers’ proposals for eliminating the effects of the 

Income Tax Policy Change differed. AOPL proposed 

to (1) eliminate the 2014 income tax allowance for 

all pipelines that reduced their income tax 

allowance from a positive number to zero in 

response to the 2018 Income Tax Policy Statement 

and continued reporting zero income tax allowance 

for the remainder of the 2014–2019 period, and (2) 

adjust these pipelines’ 2014 return on rate base to 

reflect the elimination of their ADIT balances. 

Designated Carriers supported AOPL’s adjustments 

and proposed to extend them to all pipelines that 

were owned by MLPs in 2014, including those that 

later converted to business forms eligible to recover 

an income tax allowance. No entity challenges on 

rehearing the Commission’s decision not to adopt 

AOPL’s proposal. 

24The 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 upon trended original costs, 

whereby the inflationary component of the nominal 

return is placed in deferred earnings and recovered 

as a 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). 

25 December 2020 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’’). 

26 Id. P 18. 

PPI–FG+0.09%.10 The NOI proposed to 

calculate the index level by (1) trimming 

the data set to the middle 50% and (2) 

incorporating the effects of the Income 

Tax Policy Change upon pipeline cost 

changes over the 2014–2019 period.11

The Commission explained that 

commenters could address issues 

including, but not limited to, different 

data trimming methodologies and 

whether, and if so how, the Commission 

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

calculation.12

6. Ten commenters filed comments in 

response to the NOI.13 Pipelines urged 

the Commission to use the middle 80%, 

as opposed to the middle 50%, and 

proposed to adjust the reported page 

700 data for 2014 to eliminate the effects 

of the Income Tax Policy Change. 

Shippers, by contrast, argued that the 

Commission should continue using the 

middle 50% and reject Pipelines’ 

proposed adjustments to the data set. In 

addition, Liquids Shippers proposed to 

replace the weighted mean in the Kahn 

Methodology’s calculation of central 

tendency with the weighted median and 

to replace the returns on equity (ROE) 

reported on page 700 for 2014 and 2019 

with standardized, industry-wide ROEs 

for both years. CAPP argued that 

negotiated rate contracts have served to 

reduce pipelines’ risks and urged the 

Commission to require pipelines to 

provide their page 700 workpapers to 

investigate whether the reported page 

700 ROEs reflect these effects. 

C. December 2020 Order and Requests 

for Rehearing 

7. The December 2020 Order 

established an index level of PPI– 

FG+0.78%.14 The Commission adopted 

Pipelines’ proposed adjustments to 

remove the effects of the Income Tax 

Policy Change from the index 

calculation 15 and to use the middle 

80%,16 and declined to adopt Liquids 

Shippers’ and CAPP’s proposals.17 On 

January 19, 2021, Shippers filed 

requests for rehearing challenging these 

determinations and Pipelines requested 

rehearing or clarification to correct 

minor errors in the workpapers 

underlying the December 2020 Order. 

II. Discussion 

A. 2018 MLP Income Tax Policy Change 

1. December 2020 Order 

8. Prior to the December 2020 Order, 

the Commission committed in the 2018 

Income Tax Policy Statement to 

‘‘incorporate the effects of [the Income 

Tax Policy Change] on industry-wide oil 

pipeline costs in the 2020 five-year 

review . . . .’’ 18 Through the Income 

Tax Policy Change, the Commission 

altered its policies so that natural gas 

and oil pipelines organized as MLPs 

could not recover the same tax costs 

twice in their rates.19 Although the 

Commission acted immediately to 

address this double recovery in natural 

gas pipeline rates,20 the Commission 

deferred action regarding oil pipeline 

rates and emphasized that oil pipeline 

rates ‘‘will be addressed in due course’’ 

during the 2020 five-year index 

review.21 The Commission explained 

that by acting in the 2020 five-year 

review, the Commission would ‘‘ensure 

that the industry-wide reduced costs are 

incorporated on an industry-wide 

basis. . . .’’ 22

9. However, when the 2020 five-year 

review arrived, the Commission 

reversed course. In the December 2020 

Order, the Commission declined to 

incorporate the effects of the Income 

Tax Policy Change into the 2020 fiveyear review index calculation. 

Accordingly, the December 2020 Order 

adopted Designated Carriers’ proposal to 

eliminate the effects of the Income Tax 

Policy Change from the index 

calculation by adjusting the reported 

page 700 data for all pipelines that were 

MLPs in 2014 to reduce the 2014 

income tax allowance to zero and to 

revise the 2014 return on rate base to 

reflect the removal of ADIT.23

10. The Commission determined that 

although the index aims to reflect 

changes in recoverable costs, alterations 

to the Opinion No. 154–B 

methodology 24 are distinct from the 

annual changes to pipeline costs that are 

input into that methodology.25 The 

Commission stated that the index is not 

a true-up designed to remedy over- or 

under-recoveries resulting from past 

cost-of-service policy changes, but 

instead simply allows for incremental 

rate adjustments to enable recovery of 

future cost changes.26 The Commission 

also determined that it was not clear 

that the double recovery of MLP 

pipelines’ income tax costs was ever 

incorporated into the index or that MLP 


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27 Id. P 19 & n.37. 

28 Joint Commenters Request for Rehearing at 43– 

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

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

Liquids Shippers Request for Rehearing at 17 

(quoting AOPL III, 876 F.3d at 345; 2015 Index 

Review, 153 FERC ¶ 61,312 at P 13). 

29 Joint Commenters Request for Rehearing at 42– 

46; Liquids Shippers Request for Rehearing at 16– 

19. 

30 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 46; Joint Commenters Request for 

Rehearing at 41–42, 56; Liquids Shippers Request 

for Rehearing at 15. 

31 Joint Commenters Request for Rehearing at 57; 

CAPP Request for Rehearing at 11–13; see also 

Liquids Shippers Request for Rehearing at 15–16. 

32 Joint Commenters Request for Rehearing at 59– 

60. 

33 Id. at 46–47. 

34 Id. at 46. 

35 Id. at 51 (quoting 2015 Index Review, 153 FERC 

¶ 61,312 at P 34). 

36 Id. 

37 Id. at 53. 

38 Id. at 53–55. Under the Percentage Comparison 

Test, the Commission will investigate a protested 

index rate increase filing if the pipeline’s page 700 

revenues exceed its costs and there is a more than 

a 10 percentage-point differential between the index 

rate increase and the change in the prior two years’ 

total cost-of-service data reported on page 700, line 

9. E.g., HollyFrontier Refin. & Mktg. LLC v. SFPP, 

L.P., 170 FERC ¶ 61,133, at P 5 (2020). 

39Liquids Shippers Request for Rehearing at 18– 

19. 

40 2005 Income Tax Policy Statement, 111 FERC 

¶ 61,139 at P 32. 41SFPP, 967 F.3d at 795–97; United Airlines, 827 

F.3d at 136; Income Tax Policy Statement, 162 

FERC ¶ 61,227 at PP 8, 45. MLP pipelines do not 

incur income taxes at the entity level, but the 

Commission justified permitting them to recover an 

income tax allowance on the basis that their 

investors pay taxes on their allocated share of the 

MLP’s taxable income. 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. 

42Pipelines identify only one MLP oil pipeline, 

SFPP, L.P. (the pipeline whose rates were the 

subject of United Airlines), that has adjusted its 

rates in response to the Income Tax Policy Change. 

AOPL Initial Comments at 27–28; Designated 

Carriers Initial Comments at 11, 14. 

43As explained above, the Opinion 154–B 

methodology is the Commission’s cost-of-service 

ratemaking methodology for oil pipelines. See 

supra note 24. 

pipelines benefitted from the 

Commission’s prior policy permitting 

them to recover an income tax 

allowance.27

2. Rehearing Requests 

11. Shippers argue that the 

Commission’s decision to adjust 

reported page 700 data to remove the 

effects of the Income Tax Policy Change 

contravenes established precedent and 

rests upon flawed reasoning. First, 

Shippers contend that both the D.C. 

Circuit and the Commission have found 

that the index aims to track changes in 

recoverable pipeline costs consistent 

with the Opinion No. 154–B 

methodology.28 Shippers argue that the 

Income Tax Policy Change changed 

pipelines’ recoverable costs by requiring 

MLP pipelines to remove the income tax 

allowance and ADIT balances from their 

costs of service. Thus, Shippers contend 

that the index should reflect this policy 

change.29

12. Second, Shippers state that the 

December 2020 Order contradicts the 

Commission’s statement in the 2018 

Income Tax Policy Statement that it 

would ‘‘incorporate the effects’’ of the 

Income Tax Policy Change in this fiveyear review.30 Shippers assert that they 

relied upon this statement and, as a 

result, lost their ability to seek rehearing 

or judicial review of the 2018 Income 

Tax Policy Statement and forewent 

opportunities to challenge oil pipeline 

rates.31 Shippers further claim that the 

Commission’s continued inaction on 

eliminating the MLP income tax double 

recovery from oil pipeline rates, as 

contrasted with its actions to eliminate 

that double recovery from natural gas 

pipeline rates, raises due process 

concerns for oil pipeline shippers.32 In 

addition, Shippers disagree with the 

December 2020 Order’s conclusion that 

reflecting the Income Tax Policy Change 

would convert the index into a true-up 

designed to remedy a prior overrecovery.33

13. Third, Shippers maintain that 

adjusting reported page 700 data is 

unprecedented and departs from the 

Commission’s consistent practice of 

calculating the index level using 

unadjusted data.34 Shippers state that 

the Commission has previously rejected 

proposals to make targeted adjustments 

to the data set by removing pipelines 

with cost changes resulting from 

specific factors because such proposals 

failed to identify other factors that could 

render a pipeline’s data noncomparable.35 Shippers contend that the 

Commission should likewise reject 

Pipelines’ adjustments because they fail 

to consider other factors or policy 

changes.36

14. Fourth, Shippers state that 

regardless of whether prior index 

calculations directly incorporated the 

Commission’s prior policies allowing 

MLP pipelines to recover an income tax 

allowance, the MLP income tax 

allowance became integrated into the 

industry’s recoverable costs and thus 

came to be reflected in the index.37

Shippers also argue that MLP pipelines 

did, in fact, benefit from these policies 

because they allowed MLPs to report 

higher costs on their page 700s, which 

helped to insulate their annual index 

rate increase filings from challenge 

under the Commission’s Percentage 

Comparison Test.38

15. Fifth, Liquids Shippers argue that 

the December 2020 Order further 

distorts the index calculation by 

adjusting the page 700 data of pipelines 

that were MLPs in 2014 and converted 

to C-Corporations after the 2018 Income 

Tax Policy Change. Liquids Shippers 

contend that because these pipelines 

were eligible as C-Corporations to report 

a positive income tax allowance on page 

700 for 2019, reducing their 2014 

income tax allowance to zero fabricates 

an erroneous cost increase between 

2014 and 2019.39

3. Commission Determination 

16. We grant rehearing of the 

December 2020 Order to calculate the 

index level using unadjusted page 700 

data that reflects the effects of the 

Income Tax Policy Change upon 

recoverable pipeline costs. 

a. The Income Tax Policy Change 

Should be Incorporated Into the Index 

Calculation 

17. The index must reflect the Income 

Tax Policy Change in order to produce 

just and reasonable oil pipeline rates. 

Prior to the 2018 Income Tax Policy 

Change, MLP pipelines’ rates could 

recover the same investor-level tax costs 

twice, once in an income tax allowance 

and again in an ROE.40 The D.C. Circuit 

and the Commission both concluded 

that this led to an impermissible double 

recovery of investor-level tax costs and 

produced unjust and unreasonable 

rates.41 The Income Tax Policy Change 

eliminated this double recovery by 

prohibiting MLP pipelines from 

recovering an income tax allowance. 

However, oil pipeline rates have yet to 

incorporate this policy change.42 Thus, 

the impermissible double-recovery has 

not been eliminated from oil pipeline 

rates. Because indexing is the 

Commission’s primary oil pipeline 

ratemaking methodology and because 

indexed oil pipeline rates must be just 

and reasonable, we conclude that the 

index calculation must now address the 

Income Tax Policy Change. 

18. The index was always intended to 

reflect changes to Opinion No. 154–B 

costs such as the elimination of the 

double recovery via the Income Tax 

Policy Change. The Opinion No. 154–B 

methodology defines the costs that oil 

pipelines can recover in rates and the 

index is the primary means for 

recovering those costs.43 Accordingly, 

the Commission and the D.C. Circuit 

have long recognized that the index 

should reflect changes in costs 

recoverable under the Opinion No. 154– 


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44AOPL 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 (lamenting 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). 

45 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). 

46 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. 

47Ass’n of Oil Pipe Lines v. FERC, 281 F.3d 239, 

247 (D.C. Cir. 2002) (AOPL II) (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); Order No. 561, 

FERC Stats. & Regs. ¶ 30,985 at 30,951). 

48Although the Commission has curtailed the 

amount of data it considers in calculating the index 

level via statistical data trimming to the middle 

50%, it has never modified the specific inputs that 

pipelines have recorded in their Form No. 6 filings. 

Similarly, while the Commission adjusts the data 

set to account for pipeline mergers and divestitures 

that occurred during the five-year review period, 

these steps are distinguishable from the adjustments 

to omit the effects of the Income Tax Policy Change 

adopted in the December 2020 Order based upon 

Pipelines’ proposals. Where pipelines filed separate 

page 700 data for the first year of the review period 

(e.g., 2014) and merged later in the review period, 

the Commission adds the separate costs that the 

pipelines reported for the first year and compares 

this sum to the newly combined company’s page 

700 costs reported for the last year of the data set 

(e.g., 2019). 2015 Index Review, 153 FERC ¶ 61,312 

at P 38. Conversely, in the case of divestitures, the 

Commission adds the separate costs the pipelines 

reported for the last year of the data set and 

compares this sum to the formerly combined 

company’s page 700 costs reported for the first year. 

Unlike Pipelines’ proposed adjustments, which 

alter a specific cost item that pipelines reported on 

page 700, this step simply combines the total costs 

that the pipelines reported as separate entities at 

one endpoint of the review period to mirror their 

status as a combined entity at the other endpoint. 

49Public Law 102–486, 1801(a), 106 Stat. 2776, 

3010 (1992) (codified at 42 U.S.C. 712 note). 

50See supra note 19. 

51 Importantly, this proceeding 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 upon the change in industrywide page 700 costs from the first year of the review 

period to the last year. Accordingly, 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 allowance for both the first and last 

years of the 2019–2024 period. 

52See AOPL II, 281 F.3d at 244 (holding that an 

oil pipeline ratemaking regime based in large part 

upon 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))). 

53 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 8; see also Inquiry Regarding the Effect 

of the Tax Cuts and 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 

index review best fulfilled EPAct 1992’s dual 

mandate for simplified oil pipeline ratemaking and 

just and reasonable rates. See supra P 20 & note 51. 

54Specifically, the Commission required 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 upon 

the pipeline’s revenue requirement. Order No. 849, 

164 FERC ¶ 61,031 at P 30. 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 overrecovering 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). In contrast to MLP natural gas 

pipelines, Pipelines identify only one MLP oil 

pipeline, SFPP, L.P. (the pipeline whose rates were 

the subject of United Airlines), that has adjusted its 

rates in response to the Income Tax Policy Change. 

See supra note 42. 

55We recognize that the 2018 Income Tax Policy 

Statement provided non-binding guidance 

regarding the Commission’s future intentions. 

Accordingly, in the NOI initiating this proceeding, 

the Commission invited the commenters to address 

this issue. NOI, 171 FERC ¶ 61,239 at P 10. Our 

determination here is based upon the full 

consideration of the extensive record developed in 

this proceeding. 

B methodology,44 and the Commission 

uses the Opinion No. 154–B 

methodology cost data reported on page 

700 to calculate the index level.45 Here, 

the adoption of the Income Tax Policy 

Change altered those costs by barring 

MLP pipelines from recovering in 2019 

income tax costs that they were 

permitted to recover in 2014. By 

comparing the 2014 data reported on 

page 700 under the Commission’s 

previous policy with the 2019 data 

reported under its revised policy, this 

index calculation will accurately 

capture the effects of the Income Tax 

Policy Change on costs recoverable 

under Opinion No. 154–B.46

19. We also find that adjusting page 

700 data to remove the Income Tax 

Policy Change’s effects conflicts with 

the Commission’s historical practice. 

The Commission has not previously 

adjusted the reported data used to 

derive the index level. Order Nos. 561 

and 561–A ‘‘opted for a purely historical 

analysis’’ 47 for measuring pipeline cost 

changes based upon documented cost 

experience, and in each subsequent 

index review the Commission has 

calculated the index level using 

reported Form No. 6 data without 

adjustment.48 Thus, modifying MLP 

pipelines’ reported income tax 

allowances and returns on rate base 

would depart from the purely historical 

analysis on which the Commission has 

consistently relied since establishing the 

indexing regime. 

20. In addition, incorporating the 

Income Tax Policy Change into the 

index complies with the Energy Policy 

Act of 1992’s (EPAct 1992) dual 

mandate for just and reasonable rates 

and for simplified and streamlined 

ratemaking.49 As stated above, the D.C. 

Circuit and the Commission have 

previously held that an impermissible 

double recovery results from granting 

MLP pipelines an income tax 

allowance.50 Thus, as the Commission’s 

Opinion No. 154–B methodology 

evolves, oil pipeline rates adjusted via 

indexing must 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 only alternative 

method of reflecting the elimination of 

the MLP income tax double recovery in 

rates would be through cost-of-service 

rate litigation.51 We find that 

implementing cost-of-service policy 

changes in this fashion would hinder 

the statutory goals of efficient and 

simplified ratemaking embodied in 

EPAct 1992.52

21. Finally, our holding on rehearing 

honors the Commission’s assurances in 

the 2018 Income Tax Policy Statement. 

There, the Commission committed to 

‘‘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.53 Whereas the Commission acted 

immediately to eliminate the MLP 

income tax double recovery from 

natural gas pipeline rates,54 the 

Commission deferred adjusting oil 

pipeline rates until the 2020 five-year 

index review. Failure to act here would 

leave oil pipeline rates unaddressed 

indefinitely. While Pipelines urge the 

Commission to disregard our assurances 

from the 2018 Income Tax Policy 

Statement, they offer no alternative 

remedy.55 Moreover, we recognize that 


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56 Joint Commenters Request for Rehearing at 57; 

CAPP Request for Rehearing at 11–13; see also 

Liquids Shippers Request for Rehearing at 15–16. 

57 December 2020 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’’). 

58 In the December 2020 Order, the Commission 

stated that ‘‘[j]ust as a business must account for 

changes to its accounting policies 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. 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 that MLP pipelines can recover under the 

Opinion No. 154–B methodology. 

59 Id. P 18. 

60 Id. P 19. 

61Before the 2015 Index Review when the 

Commission began using page 700 data, the 

Commission estimated pipeline cost changes using 

a rough proxy based upon Form No. 6 accounting 

data. This accounting data did not directly measure 

changes in the income tax costs recoverable under 

Opinion No. 154–B. December 2020 Order, 173 

FERC ¶ 61,245 at P 19; see also 2015 Index Review, 

153 FERC ¶ 61,312 at PP 14–15 (describing this 

proxy and its deficiencies). The Commission relied 

upon this proxy because direct measures of capital 

costs and income tax costs 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 Order No. 154– 

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

at 31,096. 

62 Designated Carriers Initial Comments at 17–20; 

see also December Order, 173 FERC ¶ 61,245 at P 

19. 

63 Lakehead Pipe Line Co., L.P., 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 for corporate partners, but not 

for income attributable to individuals or other noncorporate partners); see also Riverside Pipeline Co., 

L.P., 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). 

64Consistent with EPAct 1992’s mandate for a 

simplified and streamlined ratemaking regime, the 

Commission does not scrutinize the costs 

underlying each individual pipeline’s rates when 

developing the industry-wide index. Rather, the 

Commission reaches its determinations based upon 

what is appropriate on balance for the industry as 

a whole. 

65Notably, 164 of the 277 total oil pipelines in 

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

added since the 2005 five-year review. 

66 In urging the Commission to adopt the 

adjustment to the reported page 700 data to 

eliminate the effects of the Income Tax Policy 

Change, neither AOPL nor Designated Carriers 

account for the extent to which the Commission’s 

prior income tax policies permitting MLPs to 

recover an income tax allowance were incorporated 

into pipelines’ existing rates. 

67Specifically, the Commission evaluates cost-ofservice complaints and challenges to annual index 

rate increases based upon the differential between 

costs and revenues on page 700. To the extent that 

an MLP pipeline’s page 700 revenues exceeded its 

costs, the ability to report an income tax allowance 

as a cost on page 700 would have reduced the gap 

between revenues and costs. This lower costrevenue differential would have reduced the 

pipeline’s exposure to cost-of-service rate 

complaints and challenges to index rate changes. 

shippers relied upon our assurances in 

considering whether to bring challenges 

to oil pipeline rates following the 

Income Tax Policy Change.56

b. Reconsidering the December 2020 

Order 

22. As discussed below, we reject the 

reasons provided by the December 2020 

Order for excluding the Income Tax 

Policy Change from the index 

calculation. 

23. First, there is no meaningful 

distinction between changes to the 

Opinion No. 154–B methodology and 

changes to the costs that pipelines input 

into that methodology.57 Rather, 

changes to the Opinion No. 154–B 

methodology produce corresponding 

changes to the costs that pipelines can 

recover. Thus, for purposes of 

determining the index, any meaningful 

measure of changes to recoverable costs 

between 2014 and 2019 must reflect the 

Income Tax Policy Change. The 

December 2020 Order’s adjustments to 

the page 700 data omit the effects of the 

Income Tax Policy Change—as though 

MLP pipelines did not receive an 

income tax allowance in 2014.58 Given 

the purpose of the indexing regime to 

adjust rates for changes to Opinion No. 

154–B recoverable costs, a true ‘‘applesto-apples’’ comparison involves 

comparing the recoverable costs in 2014 

with the recoverable costs in 2019—if 

companies received an income tax 

allowance in 2014 but did not in 2019, 

the index must reflect that reality. 

24. Second, contrary to the statements 

in the December 2020 Order, we find 

that reflecting the Income Tax Policy 

Change does not effectuate a true-up for 

prior-period over-recoveries.59

Consistent with the purposes of the fiveyear review, incorporating the effects of 

the Income Tax Policy Change in the 

index calculation will 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 December 2020 Order 

would cause future indexed rates to 

become estranged from future 

recoverable costs. 

25. Third, we disagree with the 

December 2020 Order’s reasoning that 

‘‘[b]ecause no prior index calculation 

incorporated the [2005 policy] 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.’’ 60 This statement 

disregards indexing’s purpose and 

oversimplifies the Commission’s 

historical 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.61 Now, the Commission uses 

page 700 data that directly measures 

income tax costs. The Commission 

should not disregard this data when 

calculating the index level. 

26. Moreover, the facts here undercut 

Pipelines’ claim that MLP income taxes 

have not been incorporated into 

pipeline rates.62 Prior to the 2005 

income tax policy change, MLP 

pipelines were eligible to include at 

least a partial income tax allowance in 

their costs of service.63 To the extent 

that prior index calculations did not 

incorporate the 2005 income tax policy 

directly, pipeline rates did substantially 

come to reflect that policy over time.64

To explain further, as the number of 

pipelines in the Commission’s data set 

expanded,65 all initial rates and nonindexing rate changes would have 

reflected MLPs 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, we know that 

the 2005 policy change plainly affected 

oil pipeline rates over the last 15 

years.66 Furthermore, Pipelines’ 

argument ignores how MLP pipelines’ 

ability to claim an income tax allowance 

under the previous 2005 policy shielded 

those pipelines’ rates from challenge.67

Therefore, we are not persuaded by 

arguments based upon the 2005 policy 

change that the Commission must 

remove the 2018 Income Tax Policy 

Change from this index calculation. 

27. Fourth, the adjustments adopted 

in the December 2020 Order lead to 

incongruous and unreasonable results 

because they enable pipelines, 

including those with an existing double 

recovery, to increase their rates above 

the levels that would have resulted 

absent the D.C. Circuit’s and the 

Commission’s double-recovery findings. 

The Commission adopted the Income 

Tax Policy Change in response to 

findings by the D.C. Circuit and the 

Commission that MLP pipeline rates 


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68 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 8. 

69All commenters agree that the index should 

reflect the decrease resulting from the Tax Cuts and 

Jobs Act to the income tax allowance recoverable 

by pipelines organized as corporations. December 

2020 Order, 173 FERC ¶ 61,245 at P 10 n.20. 

70E.g., AOPL Initial Comments at 29–31; AOPL 

Reply Comments at 11; Designated Carriers Initial 

Comments at 7, 9–12; see also Kinder Morgan Initial 

Comments at 3–4. 

71 2015 Index Review, 153 FERC ¶ 61,312 at P 13 

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

¶ 31,000 at 31,096). In fact, the Commission 

updated its calculation of the index level to rely 

upon page 700 because it includes actual total costof-service data consistent with Opinion No. 154–B. 

Id. PP 13–14. 

72AOPL Initial Comments at 30 (quoting 

Shehadeh Initial Decl. at 14); Designated Carriers 

Initial Comments at 3, 7–8, 10–11. 

73AOPL III, 876 F.3d at 345 (‘‘[N]either Order No. 

561 nor the subsequent index review orders 

indicate that the index was intended to measure 

something distinct from the costs measured under 

its cost-of-service methodology. Rather, the 

Commission has consistently treated the index as a 

measure of normal industry-wide cost-of-service 

changes . . . .’’). 

74City of Charlottesville v. FERC, 774 F.2d 1205, 

1213–15 (D.C. Cir. 1985) (Scalia, J.). As then-Judge 

Scalia explained: 

[T]he imprecision of the ‘‘actual taxes paid’’ 

formulation is exceeded only by the name of the 

Holy Roman Empire: two out of the three words are 

wrong. Taxes, yes. But not necessarily actual taxes, 

since inexact estimations are often allowed, e.g., a 

nationwide tax allowance applied to all individual 

utilities . . . . And not necessarily taxes paid, since 

tax liability incurred by current activities but in fact 

not paid currently can be charged to present 

ratepayers, e.g., taxes deferred by reason of 

accelerated depreciation but passed on to current 

ratepayers through normalization. So the principle 

should be expressed ‘actual or estimated taxes paid 

or incurred’—whereupon it ceases to constrain the 

Commission with regard to taxes any more than the 

Commission is constrained with regard to its 

treatment of other expenses. Which is as it should 

be. 

Id. at 1215 (emphasis in original) (citing Pub. Sys. 

v. FERC, 709 F.2d 73, 81–82 (D.C. Cir. 1983); 

Tenneco Oil Co. v. FERC, 571 F.2d 834, 844 (5th 

Cir. 1978)). 

75AOPL Reply Comments at 13–14. 

76See 2000 Index Review, 93 FERC at 61,855 

(‘‘The purpose of our indexing methodology is to 

permit adjustment to ceiling rates based on 

historical not anticipated cost changes over some 

future period.’’). 77 Id.; see also id. (rejecting proposed adjustment 

based upon anticipated future cost increases due to 

increased environmental and safety regulations). 78AOPL II, 281 F.3d at 247. 79 2010 Index Review, 133 FERC ¶ 61,228 at PP 

48–55. 80Furthermore, we find that AOPL’s arguments 

are internally inconsistent. AOPL’s reasoning for 

excluding the Income Tax Policy Change because it 

is an extraordinary, one-time policy change would 

apply equally to the Tax Cuts and Jobs Act, yet 

AOPL does not oppose reflecting the Tax Cuts and 

Jobs Act’s effects in the index calculation. AOPL 

Initial Comments at 25–26; AOPL Reply Comments 

at 10. 

81AOPL Reply Comments at 13–14. 

82AOPL III, 876 F.3d at 345 (citing 2015 Index 

Review, 153 FERC ¶ 61,312 at P 18). 

were double recovering those pipelines’ 

income tax costs.68 Absent the D.C. 

Circuit’s and the Commission’s holdings 

prohibiting MLP pipelines from 

recovering an income tax allowance in 

their costs of service, MLP pipelines, 

like corporate pipelines, would have 

reported a reduction in their income tax 

allowances as a result of the Tax Cuts 

and Jobs Act. However, by treating MLP 

pipelines’ income tax liability as zero 

for both 2014 and 2019, Pipelines’ 

adjustments eliminate the downward 

effect the Tax Cuts and Jobs Act would 

have exerted upon MLP pipelines’ 

recoverable income tax costs during the 

2014–2019 period.69 Thus, not only do 

Pipelines’ adjustments eliminate the 

reduction in industry-wide recoverable 

costs resulting from the Income Tax 

Policy Change, but they also diminish 

the separate reduction in MLP 

pipelines’ recoverable costs that would 

have resulted from the Tax Cuts and 

Jobs Act had that policy change not 

occurred. As a result, incorporating 

Pipelines’ adjustments in the costchange analysis would produce a higher 

index level than what would have 

resulted absent the Income Tax Policy 

Change eliminating the MLP income tax 

double recovery. Therefore, we decline 

to adopt Pipelines’ adjustments given 

this incongruous and unreasonable 

result and instead calculate the index 

level using unadjusted page 700 data. 

c. Pipelines’ Remaining Arguments Are 

Unpersuasive 

28. We are unpersuaded by Pipelines’ 

remaining arguments for removing the 

effects of the Income Tax Policy Change 

from the index calculation. Regarding 

their claim that the policy change 

should be excluded because it did not 

affect pipelines’ actual income tax 

costs,70 we find that this argument 

misconstrues the cost changes that the 

index is designed to measure. As 

discussed above, ‘‘the index is meant to 

reflect changes to recoverable pipeline 

costs’’ measured under the Opinion No. 

154–B methodology.71 Thus, the index 

is designed to track changes in the 

income tax costs that pipelines can 

recover under the Commission’s cost-ofservice ratemaking methodology. In 

arguing that the Income Tax Policy 

Change only modified the ratemaking 

treatment of MLP income tax costs 

without affecting actual costs,72

Pipelines overlook that changes in 

ratemaking treatment produce the very 

Opinion No. 154–B cost-of-service 

changes that the index calculation seeks 

to measure.73

29. Moreover, the income tax costs 

that pipelines can recover under 

Opinion No. 154–B are distinct from the 

actual tax costs that pipelines have paid 

to the taxing authority. Instead, as the 

D.C. Circuit has recognized, income tax 

costs recoverable under the 

Commission’s cost-of-service 

methodology are not equivalent to 

‘‘actual taxes paid.’’ 74 Accordingly, 

because recoverable income tax costs do 

not correspond to taxes paid, we reject 

Pipelines’ claim that the index should 

only reflect changes in actual income 

tax costs. 

30. We also reject AOPL’s assertion 

that the Income Tax Policy Change 

should be excluded because it 

represents an extraordinary, one-time 

event that is not representative of likely 

future cost experience.75 As discussed 

above, the Kahn Methodology calculates 

the index level based upon historical 

cost changes, and does not address 

speculative assertions about future 

developments.76 Consistent with this 

approach, the Commission has 

previously rejected similar requests to 

adjust the data set for one-time cost 

changes resulting from events that were 

unlikely to reoccur in the future. For 

example, in the 2000 Index Review, the 

Commission rejected a proposed 

adjustment to address one-time cost 

savings resulting from the establishment 

of the indexing methodology and its 

associated cost efficiency incentives.77

The D.C. Circuit affirmed this decision, 

finding that the Commission reasonably 

adhered to its purely historical analysis 

and ‘‘declined to embroil itself in the 

complexity and iffiness of’’ a forwardlooking methodology.78 Similarly, in the 

2010 Index Review, the Commission 

rejected shipper proposals to manually 

trim the data set to remove pipelines 

that reported one-time cost increases 

attributable to expansions or major rate 

base changes.79 Just as the Commission 

declined to adjust the data sets in those 

proceedings to eliminate the effects of 

one-time events, we likewise decline to 

adjust the data set here to eliminate the 

effects of the Income Tax Policy 

Change.80

31. We disagree with AOPL’s 

contention that the Income Tax Policy 

Change renders the page 700 data not 

‘‘consistent enough,’’ and, therefore, 

that the page 700 data must be adjusted 

to remove the effects of the Income Tax 

Policy Change.81 This argument relies 

upon a passage in AOPL III stating that 

the Commission, in adopting the use of 

page 700 data to measure pipeline cost 

changes, determined in the 2015 Index 

Review that ‘‘the assumptions [required 

by page 700] should reflect established 

ratemaking practices and 

thus should be consistent enough to 

accurately calculate the index.’’ 82 The 

D.C. Circuit’s use of ‘‘consistent’’ refers 

to pipelines’ consistent compliance with 


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83AOPL III, 876 F.3d 345; see also 2015 Index 

Review, 153 FERC ¶ 61,312 at P 18 (‘‘The allocation 

methodologies used by pipelines on page 700 

should reflect established ratemaking practices, and 

thus these allocation methodologies should be 

sufficiently robust to calculate the index. . . . [T]o 

the extent a pipeline’s page 700 ratemaking 

assumptions change over a period of time, pipelines 

are obligated to note them on their page 700.’’). 

Pipelines that were MLPs consistently claimed an 

income tax allowance in 2014 and consistently did 

not claim an income tax allowance in 2019. 

84 Designated Carriers Initial Comments at 10–11 

(citing Opinion No. 511–C, 162 FERC ¶ 61,228 at P 

28; Webb Initial Aff. P 8). 

85Opinion No. 511–C, 162 FERC ¶ 61,228 at P 22, 

aff’d, SFPP, 967 F.3d at 795–97; see also United 

Airlines, 827 F.3d at 136. Moreover, Designated 

Carriers misconstrue the applicable law. Neither the 

D.C. Circuit nor the Commission have held that 

these costs are not properly included in a 

partnership pipeline’s cost of service. Rather, both 

United Airlines and the 2018 Income Tax Policy 

Statement concluded that partnership investors’ 

income tax costs are already recovered by the ROE 

and that allowing partnership pipelines to recover 

an income tax allowance in addition to that ROE 

would impermissibly double recover those costs. 

United Airlines, 827 F.3d at 135–37; 2018 Income 

Tax Policy Statement, 162 FERC ¶ 61,227 at PP 8– 

9, 45. 

86 Designated Carriers Initial Comments at 9, 11– 

12, 14–15 (citing SFPP, L.P., 162 FERC ¶ 61,229, at 

P 8 (2018); Opinion No. 511–C, 162 FERC ¶ 61,228 

at PP 28, 54–57; 2018 Income Tax Policy Statement, 

162 FERC ¶ 61,227 at PP 8, 46, n.83; Webb Initial 

Aff. PP 9, 11). AOPL echoes this argument in its 

reply comments. AOPL Reply Comments at 18–19. 

87 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 46 n.83. 

88See SFPP, L.P., Opinion No. 435, 86 FERC 

¶ 61,022, at 61,093–94 (1999) (‘‘Commission 

practice is to base its decision on the policy in 

effect in the year a regulatory decision is made, and 

then apply that decision to the time frame to which 

the case applies.’’); see also Consol. Edison Co. of 

N.Y. v. FERC, 315 F.3d 316, 323–24 (D.C. Cir. 2003) 

(explaining that an agency may apply a new 

substantive rule to decide a pending proceeding). 

89The Docket No. IS08–390 proceeding addressed 

SFPP’s West Line rates to be effective August 1, 

2008. Opinion No. 511–C, 162 FERC ¶ 61,228 at P 

4. The Docket No. IS09–437 proceeding addressed 

SFPP’s East Line rates to be effective January 1, 

2010. SFPP, L.P., Opinion No. 522–B, 162 FERC 

¶ 61,229 at P 8. 

90 Designated Carriers Initial Comments at 16. 

91SFPP, 967 F.3d at 801 (quoting Old Dominion 

Elec. Coop. v. FERC, 892 F.3d 1223, 1227 (D.C. Cir. 

2018)). 

92 Designated Carriers Initial Comments at 15 

(citing Webb. Aff. P 14). 

93Moreover, even as to SFPP, it is unclear that 

incorporating the Income Tax Policy Change in the 

index calculation would produce the adverse effects 

that Designated Carriers describe. First, after the 

Commission adopted the Income Tax Policy 

Change, SFPP converted to a Schedule-C 

Corporation eligible to recover an income tax 

allowance and defended their rates on that basis in 

their East Line rate case in Docket No. OR16–6–000. 

Second, SFPP’s implementation of the Income Tax 

Policy Change (before its conversion to a CCorporation) actually produced an increase to its 

rates on its West Line system. In response to 

Opinion No. 511–C, SFPP removed the income tax 

allowance and previously accumulated ADIT 

balances from its West Line cost-of-service rates. 

Opinion No. 511–D, 166 FERC ¶ 61,142 at P 59. As 

a result, SFPP’s West Line rates increased to levels 

above the rates established following Opinion No. 

511–B, which included an income tax allowance 

and ADIT balances. Compare SFPP, Compliance 

Filing, Docket No. IS08–390–011, Tab A, COS 

Summary at 2 (filed May 14, 2018) (rates filed in 

response to Opinion No. 511–C), with SFPP, 

Compliance Filing, Docket No. IS08–390–008, Tab 

A, COS Summary at 2 (filed Apr. 6, 2015) (rates 

filed in response to Opinion No. 511–B). Because 

reflecting the Income Tax Policy Change in SFPP’s 

West Line rates resulted in a rate increase, we are 

unconvinced that incorporating this policy change 

in the index calculation would somehow adversely 

impact SFPP for a second time as Designated 

Carriers allege. 

the Commission’s prevailing policies in 

their page 700 filings, not, as AOPL 

argues, that the index level cannot 

reflect policy changes that occur during 

the five-year review period.83 Moreover, 

as discussed above, the index should 

reflect industry-wide changes to 

recoverable costs such as those caused 

by the Income Tax Policy Change—thus, 

it is appropriate for the 2014 page 700 

data to include income tax allowances 

for MLPs while the 2019 page 700 data 

does not. 

32. Finally, we reject Designated 

Carriers’ remaining claims as irrelevant, 

unsupported, or without merit. 

Designated Carriers incorrectly claim 

that income tax allowance costs should 

be removed from the 2014 page 700 data 

for MLP pipelines because the 

Commission has previously found that 

partnership investors’ income tax costs 

are not properly considered costs in a 

partnership pipeline’s regulated cost of 

service.84 To the contrary, the 

Commission and the D.C. Circuit have 

concluded that MLP pipelines incur 

investor-level income tax costs that are 

already reflected in the pipeline’s DCF 

ROE, such that including an income tax 

allowance in the pipeline’s cost of 

service alongside the ROE results in an 

impermissible double recovery.85

Accordingly, the issue in this 

proceeding is whether the index level 

and the resulting pipeline rates should 

reflect the elimination of that double 

recovery. As discussed above, we find 

that by adjusting the data set to 

eliminate MLP pipelines’ 2014 income 

tax allowances, Designated Carriers’ 

proposal would allow the income tax 

double recovery to persist in pipeline 

rates. 

33. Designated Carriers misconstrue 

Commission precedent in arguing that 

Pipelines’ proposed adjustments accord 

with the Commission’s actions applying 

the Income Tax Policy Change 

retroactively in the 2018 Income Tax 

Policy Statement and in Docket Nos. 

IS08–390 and IS09–437.86 In the 2018 

Income Tax Policy Statement, issued on 

March 15, 2018, the Commission 

applied the policy change prospectively 

by directing pipelines to report their 

income tax costs in accordance with its 

revised policy in their upcoming Form 

No. 6 filings due for submission on 

April 18, 2018, which would include 

cost-of-service data for 2017 and 2016.87

The Commission did not apply the new 

policy retroactively to periods before the 

years encompassed by those impending 

filings. In Docket Nos. IS08–390 and 

IS09–437, the Commission applied its 

revised income tax allowance policy in 

pending cost-of-service rate proceedings 

to the time periods at issue,88 which 

predated the 2018 Income Tax Policy 

Change.89 Contrary to Designated 

Carriers’ claim, applying the 

Commission’s new policy to a pipeline 

whose rates were the subject of pending 

proceedings involving earlier time 

periods does not support applying that 

policy retroactively to revise the 

reported cost-of-service data of 

pipelines whose rates were not the 

subject of ongoing litigation. 

34. Designated Carriers’ claim that 

reflecting the Income Tax Policy Change 

in the index calculation would 

constitute retroactive ratemaking 

likewise lacks merit.90 The rule against 

retroactive ratemaking ‘‘prohibits the 

Commission from adjusting current 

rates to make up for a utility’s over- or 

under-collection in prior periods.’’ 91 By 

contrast, the five-year review uses past 

cost changes to calculate the index 

adjustment that pipelines can use to 

adjust their future rates. Accounting for 

reduced recoverable costs in calculating 

the prospective index adjustment does 

not modify current rates to account for 

prior period over- or under-recoveries 

and therefore does not contravene the 

bar against retroactive ratemaking. 

35. Designated Carriers also do not 

provide support for their contention that 

incorporating the Income Tax Policy 

Change in the index would negatively 

impact MLP pipelines twice, such as 

SFPP, whose cost-of-service rates have 

already been revised to remove the 

income tax allowance and ADIT 

balances.92 As discussed above, 

Designated Carriers have only identified 

one pipeline (out of 240 pipelines filing 

page 700 with the Commission) whose 

rates have been lowered to reflect the 

Income Tax Policy Change and thus 

have not shown that this alleged harm 

would affect any pipeline besides 

SFPP.93 More generally, the 

Commission calculates the index level 

based upon normal industry-wide cost 

changes, without regard to the particular 

experiences of individual pipelines. To 

do otherwise would produce 

nonsensical results, as indexing would 

cease to function as a generally 

applicable ratemaking methodology if 

the index was adjusted to account for 


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94 Designated Carriers Initial Comments at 17–20 

(citing Webb Aff. PP 19–22). 

95To the extent that Designated Carriers argue the 

Commission should have retroactively revised 

previously established index levels to allow 

pipelines to recover for prior under collections in 

excess of their then-effective rates, this would 

conflict with both indexing’s purpose and the filed 

rate doctrine. E.g., Ark. La. Gas Co. v. Hall, 453 U.S. 

571, 577 (1981) (explaining that the filed rate 

doctrine ‘‘forbids a regulated entity to charge rates 

for its services other than those properly filed with 

the appropriate federal regulatory authority’’ 

(citation omitted)). Alternatively, if they argue that 

the Commission should adjust the going-forward 

index level upward because prior index 

calculations did not incorporate the 2005 policy 

change, they have not demonstrated that the 

multiple income tax policy changes the 

Commission has adopted since it established the 

indexing regime, including Lakehead and the 2005 

policy change, caused pipelines to under-recover 

their costs on a systematic basis. 

96See supra note 9. 

97 December Order, 173 FERC ¶ 61,245 at P 26. 

98 Id. P 27. 

99 Id. P 28. 

100 Id. 

101 Joint Commenters Request for Rehearing at 

23–26 (citing 2015 Index Review, 153 FERC 

¶ 61,312 at PP 23, 42–44; 2010 Index Review, 133 

FERC ¶ 61,228 at P 61); Liquids Shippers Request 

for Rehearing at 37–38 (citing 2015 Index Review, 

153 FERC ¶ 61,312 at PP 42–44; 2010 Index Review, 

133 FERC ¶ 61,228 at PP 60–63 & n.36). 

102 Joint Commenters Request for Rehearing at 

26–27; Liquids Shippers Request for Rehearing at 

44–45. 

103 Joint Commenters Request for Rehearing at 32. 

104 Id. at 34 (citing 2015 Index Review, 153 FERC 

¶ 61,312 at P 42). In both the 2015 and 2010 Index 

Reviews, shipper commenters proposed manual 

data trimming methodologies in which they 

carefully reviewed the costs for each of the 150–200 

pipelines in the data set to remove those pipelines 

with cost changes resulting from specific factors not 

broadly shared across the industry, such as large 

rate base expansions. See 2015 Index Review, 153 

FERC ¶ 61,312 at PP 19–21 (describing manual data 

trimming proposals); 2010 Index Review, 133 FERC 

¶ 61,228 at PP 34–47 (same). 

105 Joint Commenters Request for Rehearing at 33 

(citing AOPL II, 281 F.3d at 245 (vacating and 

remanding the Commission’s determination in the 

2000 Index Review to decline to engage in 

statistical data trimming as unjustified departure 

from prior practice of trimming to the middle 

50%)). 

106 Id. at 30; Liquids Shippers Request for 

Rehearing at 41–42. 

107 Joint Commenters Request for Rehearing at 30; 

Liquids Shippers Request for Rehearing at 43, 46– 

47. 

108 Joint Commenters Request for Rehearing at 38 

(quoting December 2020 Order, 173 FERC ¶ 61,245 

at P 29). 

109 Id. at 38–39. 

the particular cost changes of each 

individual pipeline. 

36. Finally, to the extent that 

Designated Carriers argue that the 

Commission should have ‘‘trued up’’ 

prior index levels in the 2015 Index 

Review to account for the impact of the 

2005 income tax policy change upon 

recoverable costs, this argument is 

unsupported.94 Designated Carriers do 

not specify the type of analysis they 

believe the Commission should have 

performed in the 2015 Index Review 95

and fail to quantify the impact of this 

analysis upon pipelines’ recoverable 

costs. Furthermore, any arguments 

concerning the Commission’s actions in 

previous index reviews are outside the 

scope of this proceeding. 

B. Statistical Data Trimming 

1. December 2020 Order 

37. In the December 2020 Order, the 

Commission departed from its prior 

practice established in the 2010 and 

2015 Index Reviews of using the middle 

50%.96 Instead, for the first time, the 

Commission relied solely upon the 

middle 80%. The Commission decided 

that it would consider more data in 

measuring industry-wide cost changes 

because using a broader sample should 

enhance the Commission’s calculation 

of the central tendency of industry cost 

experience.97 The Commission further 

stated that ‘‘normal’’ cost changes are 

best defined by using the inclusive data 

sample embodied in the middle 80% in 

order to accurately identify the central 

tendency of industry-wide cost 

changes.98

38. Additionally, the Commission 

held that ‘‘mere generalized concerns’’ 

about outlying data do not justify 

excluding the experiences of pipelines 

included in the middle 80% but not the 

middle 50% (i.e., the incremental 30%) 

from the Commission’s review of 

industry cost changes.99 The 

Commission stated that unlike in prior 

index reviews, the record here does not 

contain ‘‘detailed analyses’’ showing 

that pipelines in the incremental 30% 

experienced anomalous cost changes 

that would skew the index.100

2. Rehearing Requests 

39. Shippers argue that the December 

2020 Order conflicts with precedent and 

fails to justify departing from the 

Commission’s established practice of 

trimming the data set to the middle 

50%. They first contend that using the 

middle 80% contravenes the 

Commission’s findings in the 2015 and 

2010 Index Reviews that the index aims 

to reflect normal cost changes and that 

the middle 50% more effectively 

excludes anomalous cost data than the 

middle 80%, which includes pipelines 

further removed from the median whose 

cost changes may result from 

idiosyncratic circumstances rather than 

ordinary pipeline operations.101

According to Shippers, the December 

2020 Order fails to distinguish those 

findings and instead attempts to 

redefine ‘‘normal’’ cost changes to 

encompass the widest possible range of 

data, regardless of whether that data 

reflects typical experience. Shippers 

argue that the middle 80% in this 

proceeding includes pipelines with 

anomalous cost changes and that the 

central tendency of a data sample that 

includes such unrepresentative data 

fails to reflect normal industry-wide 

cost changes.102 In addition, Shippers 

dispute the December 2020 Order’s 

conclusion that the presence of 

anomalous data in the middle 50% in 

prior reviews supports using the middle 

80% in this proceeding. Shippers argue 

that the December 2020 Order does not 

demonstrate that the middle 50% 

includes unrepresentative data and, 

even if it did, this would not justify 

using a larger sample that likely 

includes more idiosyncratic data.103

40. Similarly, Shippers state that the 

December 2020 Order ignores the 

Commission’s findings in 2015 and 

2010 that trimming to the middle 50% 

provides a simplified and objective 

method for removing unrepresentative 

data that minimizes the need to 

scrutinize individual pipeline data or 

engage in manual data trimming.104

Shippers assert that expanding the data 

sample to the middle 80% discards this 

simplified and effective tool for 

removing outliers without an adequate 

replacement.105

41. Shippers next argue that the 

record in this proceeding does not 

support this departure from established 

practice and in fact provides a stronger 

basis for using the middle 50% than in 

prior index reviews. In particular, 

Shippers state that the middle 50% 

represents a greater percentage of barrelmiles subject to the index (82.2% in the 

NOI data set) than in 2015 (56%) or 

2010 (76%),106 whereas the middle 80% 

is more widely dispersed than in 2015 

or 2010 and includes outlying cost 

increases that are not offset by 

comparable cost decreases.107 Moreover, 

Shippers assert that the December 2020 

Order acknowledged that ‘‘the record 

contains no evidence addressing 

whether the more dispersed cost 

changes in the incremental 30% 

resulted from pipeline-specific factors 

rather than from broadly shared 

circumstances representative of 

ordinary pipeline operations.’’ 108 Given 

the Commission’s previous findings that 

the middle 80% more likely includes 

pipelines with idiosyncratic and 

outlying data, Shippers argue that this 

lack of evidence supports continued use 

of the middle 50%.109

42. Shippers further contend that the 

December 2020 Order erroneously 

places the burden upon shipper 

commenters to justify continued use of 

the middle 50% by faulting them for 


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110 Id. at 35–39; Liquids Shippers Request for 

Rehearing at 51–52. 

111 Joint Commenters Request for Rehearing at 35, 

37. Liquids Shippers observe, moreover, that the 

Commission did not rely upon such analyses when 

it declined to use the middle 80% in the 2015 and 

2010 Index Reviews. Liquids Shippers Request for 

Rehearing at 51 (citing 2015 Index Review, 153 

FERC ¶ 61,312 at P 43; 2010 Index Review, 133 

FERC ¶ 61,228 at P 61). 

112 Joint Commenters Request for Rehearing at 

35–36 (citing Encino Motorcars, LLC v. Navarro, 

136 S. Ct. 2117, 2126 (2016); FCC v. Fox Television 

Stations, Inc., 556 U.S. 502, 515 (2009); Balt. Gas 

& Elec. Co. v. FERC, 954 F.3d 279, 286 (D.C. Cir. 

2020); Air All. Houston v. EPA, 906 F.3d 1049, 1066 

(D.C. Cir. 2018)); Liquids Shippers Request for 

Rehearing at 52 (citing FCC v. Fox Television 

Stations, Inc., 556 U.S. at 515–16). 

113 Joint Commenters Request for Rehearing at 38; 

Liquids Shippers Request for Rehearing at 45–51. 

114 Joint Commenters Request for Rehearing at 38; 

Liquids Shippers Request for Rehearing at 52–53. 

115 2015 Index Review, 153 FERC ¶ 61,312 at PP 

42–44, aff’d, AOPL III, 876 F.3d at 342–44; 2010 

Index Review, 133 FERC ¶ 61,228 at PP 60–63. 

Although the Commission averaged the middle 

50% with the middle 80% in the 2000 and 2005 

five-year reviews, it did not justify or address its 

consideration of the middle 80%. 2010 Index 

Review, 133 FERC ¶ 61,228 at P 60. Moreover, the 

Commission has never relied upon the middle 80% 

alone and provided a detailed explanation in the 

2015 and 2010 Index Reviews why it would not 

consider the middle 80%. As the D.C. Circuit 

explained, ‘‘[n]othing in any of the Commission’s 

past index review orders bound the agency to use 

the middle 80% of pipelines’ cost-change data in 

any later proceeding.’’ AOPL III, 876 F.3d at 353. 

116E.g., 2010 Index Review, 133 FERC ¶ 61,228 at 

P 61; Order No. 561–A, FERC Stats. & Regs. ¶ 31,000 

at 31,097 (‘‘The role of an index is to accommodate 

normal cost changes.’’). 117The Commission has held, and the D.C. 

Circuit has affirmed, that use of an index 

sufficiently high to encompass extraordinary costs 

‘‘would provide windfalls to many oil pipelines by 

allowing rate changes substantially above cost 

changes’’ and ‘‘effectively abdicate [the 

Commission’s] responsibilities for rate regulation 

under the ICA.’’ 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 (interpreting the use of 

‘‘extraordinary’’ in Order Nos. 561 and 561–A as 

referring to ‘‘pipelines experiencing changed per 

barrel-mile costs that were greater than the 

changing costs experienced by other pipelines 

regardless of the causes underlying any particular 

pipeline’s cost changes.’’). 

118Order 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].’’). 119Such cost changes would impact 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. 

120 2010 Index Review, 133 FERC ¶ 61,228 at P 

61; 2015 Index Review, 153 FERC ¶ 61,312 at P 43 

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

middle 80 percent deviate significantly from the 

cost experience of other pipelines’’); id. P 44 

(‘‘Pipelines in the middle 80 percent, as opposed to 

the middle 50 percent, are more likely to have 

outlying cost changes which could result from 

idiosyncratic factors particular to that pipeline.’’). 

121 2010 Index Review, 133 FERC ¶ 61,228 at P 

61. 

122 2015 Index Review, 153 FERC ¶ 61,312 at P 42 

(citing 2010 Index Review, 133 FERC ¶ 61,228 at PP 

60–63). 

123AOPL III, 876 F.3d at 342 (explaining that the 

court had ‘‘little difficulty in finding that the 

Commission adequately and reasonably justified its 

decision not to consider the middle 80 percent of 

pipelines’ cost-change data’’ in that proceeding). 

124This scatter plot modifies a similar chart 

submitted by Joint Commenters. 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 

adopted herein to the page 700 data set. 

failing to present detailed analyses of 

the incremental 30%.110 Shippers state 

that the Commission discouraged 

commenters from submitting such 

evidence by declining to consider 

similar analyses in the 2015 and 2010 

Index Reviews.111 Moreover, Shippers 

assert that it is not incumbent upon 

commenters to justify continued 

application of the Commission’s 

existing policy. Rather, they argue that 

the agency attempting to depart from a 

well-established practice bears the 

burden of explaining why the reasoning 

underlying that practice should no 

longer control.112 Similarly, Shippers 

claim that it was incumbent upon 

Pipelines, as the proponents of a change 

in Commission policy, to justify the 

change by demonstrating that the 

incremental 30% does not contain 

outlying data. Shippers argue that 

Pipelines failed to make this showing 

and that the limited evidence in the 

record analyzing the incremental 30% 

indicates that it contains anomalous 

data that skews the index calculation.113

According to Shippers, this evidence 

was sufficient to justify using the 

middle 50% consistent with established 

practice.114

3. Commission Determination 

43. We are persuaded by Shippers’ 

arguments on rehearing and grant 

rehearing of the December 2020 Order to 

calculate the index level based upon the 

middle 50%, consistent with the 

Commission’s practice in the 2015 and 

2010 Index Reviews.115 We conclude 

that the record in this proceeding does 

not justify departing from the 

Commission’s established practice of 

calculating the index level based solely 

upon the middle 50%. 

a. The Record in This Proceeding 

Supports Using the Middle 50% To 

Calculate the Index Level 

44. As an initial matter, the objective 

of the index is to reflect the cost 

experience of a typical pipeline during 

ordinary pipeline operations.116 The 

index is not designed to recover 

extraordinary cost changes, including 

those resulting from atypical or 

idiosyncratic circumstances.117 These 

extraordinary cost changes are 

recovered using the Commission’s 

alternate ratemaking methodologies 

rather than through indexing.118 In 

addition, the presence of such 

extraordinary cost changes in the data 

set can inflate the index level.119

45. To avoid inflating the index, the 

Commission excludes pipelines with 

extraordinary or idiosyncratic cost 

changes from the analysis. Along these 

lines, 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.120 The 

Commission also concluded that 

pipelines in 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.121

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 laborious and 

subjective manual data trimming 

methodologies.122 Following the 2015 

Index Review, the D.C. Circuit affirmed 

the Commission’s decision to trim the 

data set to the middle 50% instead of 

the middle 80%.123

46. Upon reconsideration of the 

December 2020 Order, we find that the 

record in the instant proceeding does 

not justify a different result. The scatter 

plot below 124 demonstrates that the 

middle 80% in this data set includes 

several pipelines near its upper bound 

that are considerably removed from the 

other pipelines in the sample. 


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125AOPL’s calculations demonstrate that using 

the middle 80% would increase the cost change 

calculation by 41 basis points while only expanding 

the number of barrel-miles in the analysis by 

approximately 14%. Shehadeh Initial Decl., Exhibit 

A11 (calculating that the composite central 

tendency of the cost change data, when 

incorporating AOPL’s proposed adjustments to 

remove the effects of the Income Tax Policy Change, 

increases from 0.90% to 1.31% when expanding 

from the middle 50% to the middle 80%); 

Shehadeh Initial Decl., Exhibit A12 (stating that the 

middle 50% and middle 80% contain 81.9% and 

95.8%, respectively, of total barrel-miles in 2014 

subject to the index). 

126As 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. 

127Attach. A, Exhibit 14. The outsized impact 

these pipelines exert upon the index calculation 

undermines the conclusion in the December 2020 

Order that the dispersion of the middle 80% is not 

relevant because it results from ‘‘just a few 

pipelines at the top of the middle 80%.’’ December 

2020 Order, 173 FERC ¶ 61,245 at P 29. 

Furthermore, this analysis rebuts the statement in 

the December 2020 Order that the record did not 

contain a ‘‘detailed showing’’ that using the 

additional data in the middle 80% would distort 

the index calculation. Id. 

128When 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. 

129The bar chart modifies a similar chart 

submitted by Joint Commenters. 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 adopted herein to the page 700 data 

set. 

47. Furthermore, the pipelines at the 

upper bound of the middle 80% exert 

an outsized influence that inflates the 

index calculation.125 The difference 

between the middle 50% and the 

middle 80% results primarily from 8 

pipelines at the upper bound of the 

middle 80%. Namely, expanding the 

data sample from the middle 50% to the 

middle 70%, which omits the top and 

bottom 8 pipelines in the middle 80%, 

only increases the composite central 

tendency by 3 basis points, from 

¥0.21% to ¥0.18%.126 By contrast, 

expanding the sample to include these 

16 pipelines increases the composite 

central tendency by an additional 29 

basis points, from ¥0.18% to 0.11%.127

In contrast to their outsized effect on the 

index, the 8 pipelines at the upper 

bound of the middle 80% account for 

only 2.10% of total barrel-miles. 

Not only does the middle 80% 

include pipelines at its upper bound 

that diverge considerably from the other 

pipelines in the sample, but the record 

further establishes that the middle 80% 

as a whole is even more dispersed than 

in 2015 or 2010,128 as illustrated in the 

bar chart below.129


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130AOPL, the proponent of changing the 

Commission’s policy to use the middle 80% instead 

of the middle 50%, had the opportunity to provide 

such evidence in its initial comments and reply 

comments. See 5 U.S.C. 556(d) (‘‘Except as 

otherwise provided by statute, the proponent of a 

rule or order has the burden of proof.’’); P.R. v. Fed. 

Mar. Comm’n, 468 F.2d 872, 881 (D.C. Cir. 1972) 

(‘‘Ultimately, the rule requiring the proponent of an 

order to sustain the burden of its justification rests 

on the policy of requiring a person seeking a change 

from the status quo to take on the burden of 

justifying the change.’’); see also S. Ga. Nat. Gas 

Co., 73 FERC ¶ 61,354, at 62,106 (1995) (‘‘[W]here 

there is a ‘settled practice,’ the proponent of a 

change to that practice has the burden of proof.’’). 

131 Joint Commenters Reply Comments, Brattle 

Group Report at 13–17. For example, PMI 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. 

132See AOPL III, 876 F.3d at 343 (noting the 

Commission has ‘‘rejected the precise principle’’ 

that the middle 80% is preferable because it 

includes a larger number of pipelines) (citing 2010 

Index Review, 133 FERC ¶ 61,228 at PP 57, 61); 

2015 Index Review, 153 FERC ¶ 61,312 at P 44 

(rejecting argument that ‘‘the middle 80 percent 

should be used merely because it contains more 

barrel-miles’’). 

133Attach. A, Exhibit 1. 

134 In the 2015 and 2010 Index Reviews, the 

Commission concluded that it was ‘‘unnecessary to 

include the middle 80 percent to obtain a 

representative sample of the data’’ where the 

middle 50% included 56% and 76%, respectively, 

of total barrel-miles subject to the index. 2010 Index 

Review, 133 FERC ¶ 61,228 at P 63; see also 2015 

Index Review, 153 FERC ¶ 61,312 at P 44 n.85 

(concluding that the fact that the middle 50% 

included a lower percentage of barrel-miles than in 

2010 ‘‘is not a sufficient basis to risk including 

more outlying data’’), aff’d, AOPL III, 876 F.3d at 

344. 

135 December Order, 173 FERC ¶ 61,245 at P 26. 

136We disagree with the statement in the 

December 2020 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. Even if the index 

average is not set at the upper bound of the data 

sample, including the upper bound of the middle 

80% nonetheless produces 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.’’). 

137See supra PP 46–50. 

138 December 2020 Order, 173 FERC ¶ 61,245 at 

P 27. The December 2020 Order erroneously 

implied that entities supporting continued use of 

the middle 50% must provide a ‘‘compelling 

showing’’ that using the middle 80% would distort 

the calculation of the index level. Id. Although the 

record here provides such a compelling showing, 

we clarify that entities advocating for a departure 

from the Commission’s practice of using the middle 

50% bear the burden of justifying that change. See 

supra note 129. 

139 December 2020 Order, 173 FERC ¶ 61,245 at 

P 28. 

140 2015 Index Review, 153 FERC ¶ 61,312 at P 

34; see also id. PP 36, 42; 2010 Index Review, 133 

FERC ¶ 61,228 at P 62. 

141 2015 Index Review, 153 FERC ¶ 61,312 at PP 

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

P 62. 

142 In any case, the December 2020 Order 

overstates the absence of evidence regarding 

anomalous data among the 48 pipelines in the 

incremental 30%. Acknowledging that Shippers 

identified 7 pipelines, the December 2020 Order 

stated that for the remaining 41 there is no evidence 

of anomalous data. December 2020 Order, 173 FERC 

¶ 61,245 at P 28. However, this ignores the chart 

above that examined the entire middle 80% and 

showed how those pipelines at the top of the 

middle 80% were inflating the index level. 

48. Additionally, AOPL has presented 

no evidence that the middle 80% in this 

proceeding lacks the type of atypical 

and idiosyncratic cost changes observed 

in the middle 80% in the 2015 and 2010 

Index Reviews.130 To the contrary, the 

record demonstrates that the additional 

data included in the incremental 30% 

contains pipelines with idiosyncratic 

cost changes resulting from 

circumstances that are not broadly 

shared across the industry. For example, 

Joint Commenters identify 7 pipelines 

in the incremental 30% whose reported 

cost changes resulted from irregular 

circumstances or specific factors not 

broadly shared across the industry, such 

as temporary shutdowns or pipeline 

ruptures.131

49. In sum, the record demonstrates 

that the middle 80% in this proceeding 

includes pipelines with extraordinary 

cost changes that are not reflective of 

ordinary pipeline operations. 

Accordingly, we find that for purposes 

of calculating the index level in this 

proceeding, using the more tailored data 

sample embodied by the middle 50% 

produces a more accurate measure of 

‘‘normal’’ cost changes and minimizes 

the risk that the index will be distorted 

by pipelines with unrepresentative cost 

experiences. Pipelines have not 

demonstrated why the instant record is 

distinguishable from the 2015 and 2010 

Index Reviews such that the 

Commission should depart from the 

data trimming methodology it employed 

in those proceedings. 

b. Reconsidering the December 2020 

Order 

50. We believe the reasons given in 

the December 2020 Order for using the 

middle 80% in this proceeding to be in 

error. 

51. First, the mere fact that the middle 

80% includes additional data does not 

support departing from the middle 

50%.132 The middle 50% already 

includes 81% of industry-wide oil 

pipeline barrel-miles,133 which is 

significantly more than the barrel-miles 

used in prior index reviews.134

Moreover, the middle 80% only 

incorporates an additional 15% more of 

the industry’s barrel-miles. Thus, 

although using the middle 50% 

excludes 48 pipelines from the costchange analysis,135 omitting these 

pipelines does not deprive the 

Commission of a robust data sample. 

Moreover, any benefits of considering 

the larger data sample do not outweigh 

the risk, discussed above, that this 

additional data will distort the 

measurement of normal cost changes. 

52. Second, we disagree with the 

December 2020 Order and find that for 

purposes of this proceeding, ‘‘normal’’ 

cost changes are best measured using a 

more tailored data sample that excludes 

the anomalous and idiosyncratic data in 

the middle 80%.136 For the reasons 

discussed above,137 this record 

demonstrates that ‘‘including data from 

the middle 80% distorts our 

measurement of the industry-wide 

central tendency [used to calculate the 

index level].’’ 138 Rather, using the 

middle 50% is more consistent with the 

index’s purpose of allowing recovery for 

normal cost changes, not extraordinary 

costs. 

53. Third, in the December 2020 

Order, the Commission sought to 

distinguish the 2010 and 2015 Index 

Reviews on the basis that, unlike in the 

instant review, commenters in those 

proceedings ‘‘presented detailed 

analyses demonstrating that the 

incremental 30% contained anomalous 

cost changes . . . .’’ 139 However, we no 

longer find this reasoning persuasive 

because, as in prior reviews, the present 

record demonstrates the middle 80% 

includes outlying cost increases, reflects 

significant dispersion, and includes 

pipelines with idiosyncratic cost 

changes. Although shippers submitted 

more detailed analyses in 2010 and 

2015, they presented this evidence to 

support manual data trimming 

proposals that required a labor-intensive 

pipeline-by-pipeline analysis of page 

700 data. Finding manual data trimming 

to be highly subjective, the Commission 

rejected this approach because ‘‘[a]ny 

potential improvement from manual 

data trimming is outweighed by the 

increase in the potential for error or 

manipulation.’’ 140 Rather, the 

Commission concluded that, instead of 

manual data trimming, using the middle 

50% more effectively addressed those 

same issues in a manner that was more 

consistent with simplified and 

streamlined ratemaking.141 We conclude 

that it would be incongruous to reject 

such manual data trimming while at the 

same time requiring commenters to 

present similar analyses to justify 

continued use of the middle 50%.142

c. AOPL’s Remaining Arguments Are 

Not Persuasive 

54. We reject AOPL’s remaining 

arguments in support of using the 


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143AOPL Initial Comments at 19–20 (quoting 

2010 Index Rehearing Order, 135 FERC ¶ 61,172 at 

P 41). 

144AOPL III, 876 F.3d at 343 (citing 2010 Index 

Rehearing Order, 135 FERC ¶ 61,172 at P 41 & n.38). 

145 Id. (citing 2010 Index Review, 133 FERC 

¶ 61,228 at PP 57, 61). 

146AOPL Initial Comments at 20–21; AOPL Reply 

Comments at 8–9 (citing Shehadeh Initial Decl. at 

24). A lognormal distribution is a continuous 

probability distribution of a random variable whose 

logarithm is normally distributed. 

147 2015 Index Review, 153 FERC ¶ 61,312 at P 43 

(‘‘using the middle 80 percent would skew the 

index upward based upon these outlying cost 

increases, which is contrary to the objective of the 

index to reflect normal industry-wide cost 

changes’’), aff’d, AOPL III, 876 F.3d at 344. 

148See Liquids Shippers Reply Comments at 24 

(citing Crowe Reply Aff. at 4–5). 

149We also question the mathematical reasoning 

underlying AOPL’s argument. Specifically, a 

lognormal distribution occurs when performing a 

natural logarithm transformation of a data set 

produces a normal distribution. However, it is not 

possible to take the natural logarithm of negative 

numbers. Id. at 24–25. Because the data set here 

contains negative numbers, it cannot be 

lognormally distributed. 

150AOPL Initial Comments at 21–22 (citing 

Shehadeh Initial Decl. at 21–22). 

151See 2010 Index Review, 133 FERC ¶ 61,228 at 

P 61 (‘‘Even when accurate data is reported, 

pipelines in the middle 80, as opposed to the 

middle 50, are more likely to have cost changes 

resulting from factors particular to that pipeline, 

such as a rate base expansion, plant retirement, or 

localized changes in supply and demand.’’). 

152See AOPL III, 876 F.3d at 343 (rejecting 

AOPL’s argument that the Commission was 

precluded from excluding the middle 80% when 

‘‘that data is available and accurate’’); id. at 339 

(‘‘[C]ontrary to AOPL’s assertion, nothing in any of 

FERC’s past index review orders bound the agency 

to use the middle 80 percent of pipelines’ costchange data.’’). 

153Consistent with the Commission’s historical 

practice, nothing in this order precludes 

commenters from proposing modifications to the 

Kahn Methodology, including different data 

trimming methodologies, in future five-year reviews 

based upon the records in those proceedings. See 

NOI, 171 FERC ¶ 61,239 at P 8 (‘‘We invite 

interested persons to submit comments regarding 

. . . any alternative methodologies for calculating 

the index level for the five-year period commencing 

July 1, 2021. Commenters may address issues that 

include, but are not limited to, different data 

trimming methodologies . . . .’’). 

154Liquids Shippers Initial Comments at 13–15. 

155 Id. at 17–19. 

156 Id. at 16–19. 

157 Id. at 20 n.45; Crowe Initial Aff. at 8–9. 

158 December 2020 Order, 173 FERC ¶ 61,245 at 

P 36. 

middle 80% as unpersuasive. First, 

AOPL erroneously claims that the 

Commission should use the middle 80% 

based upon its previous recognition that 

‘‘it is preferable to apply the larger data 

set when the additional data is available 

using the Kahn Methodology.’’ 143

However, the D.C. Circuit rejected this 

exact argument following the 2015 

Index Review, finding that the quoted 

language ‘‘addressed FERC’s approach 

to selecting the pool of pipelines whose 

costs should be measured at all—not the 

portion of the resulting data to trim 

before calculating the normal industry 

change in costs.’’ 144 Further, the court 

explained that the Commission had in 

fact rejected the argument that it is 

preferable to use a larger data sample 

merely because additional data is 

available. Instead, the Commission 

concluded that the middle 50% more 

appropriately adjusts the index level for 

normal cost changes, notwithstanding 

the fact that it contains less data than 

the middle 80%.145 We reject AOPL’s 

argument for the same reasons here. 

55. Second, we dismiss AOPL’s claim 

that the middle 80% provides a more 

accurate measure of industry cost 

changes merely because it resembles a 

lognormal distribution.146 As the 

Commission found in the 2015 Index 

Review and as the D.C. Circuit affirmed, 

to the extent that the middle 80% data 

conforms to a lognormal distribution, 

outlying cost increases per barrel-mile 

will not be offset by similarly outlying 

cost decreases.147 This concern is 

illustrated in the instant record, where 

the middle 80% includes multiple 

pipelines with cost increases above 

100% and no pipelines with cost 

decreases of negative 100%.148 Thus, 

using the middle 80% would skew the 

index upward based upon these 

outlying cost increases, which is 

contrary to the index’s objective of 

reflecting normal cost changes.149

56. Third, AOPL misconstrues 

Commission precedent in claiming that 

reliance on the middle 50% is only 

appropriate where there are concerns of 

erroneous data.150 Although use of the 

middle 50% in Order No. 561 was based 

in part upon concerns about erroneous 

data, the Commission has relied upon 

the middle 50% to exclude not only 

inaccurate data, but also extraordinary 

data that is unrepresentative of normal 

cost experience.151 As the D.C. Circuit 

explained when upholding the 

Commission’s continued use of the 

middle 50% in the 2015 Index Review, 

the Commission provided extensive 

justification for its ongoing reliance on 

the middle 50% in both the 2010 and 

2015 Index Reviews.152 Thus, even 

where the reported page 700 data is 

accurate, it remains necessary to use the 

middle 50% to avoid including outlying 

data that exerts a disproportionate 

impact on the index calculation. 

57. In sum, we conclude that the 

evidence does not support departing 

from the Commission’s established 

practice of trimming the data set to the 

middle 50%. Pipelines have presented 

the same arguments that the 

Commission rejected in the 2010 Index 

Review and that the Commission and 

the D.C. Circuit rejected in the 2015 

Index Review. Pipelines also presented 

no evidence demonstrating that the 

middle 80% contains fewer pipelines 

with idiosyncratic cost changes than in 

2010 and 2015. Moreover, as articulated 

above, the record in this proceeding 

provides less support for using the 

middle 80% than in 2015 or 2010 

because the middle 50% includes a 

considerably higher percentage of 

industry-wide barrel-miles (81% in 

2020 versus 76% in 2010 and 56% in 

2015) and the middle 80% of this data 

set is more dispersed. We therefore 

grant Shippers’ requests for rehearing to 

calculate the index level using the 

middle 50%.153

C. Liquids Shippers’ Proposal To 

Calculate the Composite Measure of 

Central Tendency Using the Weighted 

Median 

58. Liquids Shippers argued in their 

comments that the weighted mean of the 

data set in this proceeding accords 

undue weight to two pipelines, Colonial 

and Enbridge Energy, L.P. (Enbridge). 

Liquids Shippers asserted that these 

pipelines are substantial outliers in 

terms of barrel-miles and cost 

changes 154 and that both reported 

inaccurate page 700 data for 2014 and 

2019.155 Because the weighted mean 

affords these pipelines significant 

weight, Liquids Shippers argued that 

using it to calculate the composite 

measure of central tendency will skew 

the index upwards and fail to track 

normal industry-wide cost changes.156

To remedy this issue, Liquids Shippers 

proposed to replace the weighted mean 

in the index calculation with the 

median of the barrel-mile weighted cost 

changes in the middle 50% (weighted 

median), as calculated by their witness 

Elizabeth H. Crowe. Alternatively, if the 

Commission decides not to replace the 

weighted mean with the weighted 

median, Liquids Shippers proposed 

reducing the weighting afforded to the 

weighted mean in the Kahn 

Methodology from 33.3% to 20% or 

10%.157

1. December 2020 Order 

59. The December 2020 Order 

declined to adopt Liquids Shippers’ 

proposals. First, the Commission found 

that removing the weighted mean from 

the index calculation would conflict 

with longstanding Commission 

precedent relying upon the weighted 

mean and with Dr. Kahn’s testimony in 

the Order No. 561 rulemaking 

proceeding endorsing its use.158 Second, 

the Commission explained that the 

index aims to track cost changes among 


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159 Id. P 37. 

160 Id. PP 38–39. 

161 Id. P 40. 

162Liquids Shippers Request for Rehearing at 56– 

57. Liquids Shippers assert that Enbridge and 

Colonial reported annual cost changes of 3.1% and 

4.3%, respectively, both of which exceed the 

median of the data set (0.05%), the unweighted 

mean of the middle 80% (1.45%), and the 

unweighted mean of the middle 50% (0.29%). Id. 

(citing December 2020 Order, 173 FERC ¶ 61,245 at 

Workpapers, Exhibit 5 Tab, Column P, Lines 21 and 

35; id. at Workpapers, Exhibit 1 Tab, Column F, 

Lines 11–12; id. at Workpapers, Exhibit 5 Tab, 

Column Q, Line 184). 

163Specifically, Liquids Shippers state that 

Colonial and Enbridge represent 40% of the total 

barrel-miles in the untrimmed data set of 160 

pipelines and 48% of the total barrel-miles in the 

middle 50% sample used in the NOI. Liquids 

Shippers Request for Rehearing at 54–55. 

164 Id. at 65–66. 

165 Id. at 58, 65–67. Liquids Shippers state that 

removing Enbridge and Colonial from the data set 

would cause the index level proposed in the NOI 

to decrease from PPI–FG+0.09% to PPI–FG–0.34%. 

Id. at 57 (citing Liquids Shippers Initial Comments 

at 15–16; Crowe Initial Aff. at 6–7). Given this 

effect, Liquids Shippers argue that affording these 

pipelines significant weight will skew the index 

upward. Id. at 58. 

166 Id. at 67. 

167 Id. at 64, 67. 

168 Id. at 62–63 (quoting AOPL II, 281 F.3d at 

241). 

169 Id. at 63. 

170 Id. at 68 (citing December 2020 Order, 173 

FERC ¶ 61,245 at P 40 n.87). 

171 Id. at 68–69. 

172 Id. at 69. 

173 December 2020 Order, 173 FERC ¶ 61,245 at 

P 36. 

174See supra note 129. 

175Liquids Shippers Request for Rehearing at 63. 

176 December 2020 Order, 173 FERC ¶ 61,245 at 

P 38 (citing Shehadeh Reply Decl. at 11 & App. B, 

Ex. 1). In fact, as explained in the December 2020 

Order, the pipeline reflecting the weighted median 

using such a calculation would be Enbridge (which 

as discussed below, Liquids Shippers allege should 

be removed as an outlier from the data set). Id. P 

40. 

177 Id. P 39. 

178 Id. 

179 Id. n.84. 

180For example, a median reflecting the pipeline 

with the next lowest weighted percentage change 

(Wildcat Liquids Caddo LLC) would reduce Ms. 

Crowe’s result from 0.57% to ¥1.74% (a decrease 

of over 200%), whereas a median reflecting the next 

highest weighted percentage change (reported by 

Wesco Pipeline, LLC) would reduce the result by 

an even greater amount, from ¥0.57% to ¥2.28% 

(a decrease of 400%). Id. n.85. 

pipelines of all sizes and that discarding 

the weighted mean or reducing the 

weighting it receives in the analysis 

would upset the balance between large 

and small pipelines that the Kahn 

Methodology achieves.159 Third, the 

Commission determined that Liquids 

Shippers’ calculation of the weighted 

median was methodologically flawed 

and did not provide a useful measure of 

central tendency for purposes of 

calculating the index.160 Fourth, the 

Commission concluded that Liquids 

Shippers’ challenges to Colonial’s and 

Enbridge’s page 700 data are misplaced 

and unavailing on the merits.161

2. Rehearing Request 

60. Liquids Shippers renew their 

arguments that Colonial and Enbridge 

are outliers in terms of cost changes 162

and barrel-miles 163 and that these 

pipelines reported inaccurate page 700 

data for 2014 and 2019.164 As a result, 

Liquids Shippers argue that using the 

weighted mean in this proceeding skews 

the index level upwards, fails to reflect 

industry-wide cost changes, and 

increases the likelihood that inaccurate 

or erroneous page 700 data will distort 

the index calculation.165 Liquids 

Shippers argue that the December 2020 

Order failed to address their evidence 

that Colonial and Enbridge are outliers 

in terms of barrel-miles or acknowledge 

the errors in those pipelines’ page 700 

data. Although the Commission has 

previously declined to consider 

challenges to individual pipelines’ page 

700 inputs, Liquids Shippers state that 

this proceeding is distinct because of 

the substantial weight the weighted 

mean accords to Colonial and 

Enbridge.166

61. Liquids Shippers further argue 

that the December 2020 Order erred in 

relying upon earlier index proceedings 

to justify using the weighted mean in 

this case. Liquids Shippers contend that 

this proceeding is distinguishable from 

prior five-year reviews because the 

weighted mean is heavily influenced by 

just two pipelines and a commenter has 

demonstrated that two outlying 

pipelines skew the weighted mean.167

Furthermore, Liquids Shippers state that 

there is limited judicial and 

Commission precedent addressing use 

of the weighted mean and that existing 

precedent supports only the use of some 

weighted measure of central 

tendency.168 Liquids Shippers maintain 

that they do not object to the 

Commission taking pipeline size into 

account or according additional weight 

to larger pipelines when calculating the 

index level, so long as two pipelines 

like Colonial and Enbridge are not 

permitted to skew the result.169

62. In addition, Liquids Shippers 

object to the December 2020 Order’s 

suggestion that shippers should 

challenge the inputs in a particular 

pipeline’s page 700 by filing a 

complaint.170 Liquids Shippers state 

that a cost-of-service complaint against 

a pipeline’s base rates is unlikely to 

result in changes to its page 700 and 

that there would be no commercial 

benefit for a shipper to file a complaint 

for the sole purpose of challenging the 

pipeline’s page 700 inputs.171 Liquids 

Shippers argue that by requiring 

shippers to challenge page 700 inputs in 

a complaint or litigated rate proceeding, 

the Commission is insulating pipelines’ 

page 700 data from meaningful 

review.172

3. Commission Determination 

63. We are unpersuaded by Liquids 

Shippers’ arguments and deny 

rehearing. As the December 2020 Order 

explains, replacing the weighted mean 

in the calculation of the composite 

central tendency would contravene 

longstanding Commission practice 

dating to the rulemaking proceeding 

that established the indexing regime.173

As discussed below, although no 

commenter has previously challenged 

the use of the weighted mean in the 

Kahn Methodology, we find that Liquids 

Shippers have not justified departing 

from the Commission’s well-established 

policy.174

64. As an initial matter, Liquids 

Shippers acknowledge that the Kahn 

Methodology appropriately relies upon 

a weighted measure of central 

tendency 175 but fail to propose a 

credible alternative to the weighted 

mean. As discussed above, the 

December 2020 Order rejected Liquids 

Shippers’ proposed weighted median 

calculation as methodologically flawed. 

The Commission explained that the 

established statistically appropriate 

method for calculating the weighted 

median, as applied to pipeline cost 

changes, is to order the pipelines by 

cost-change percentage, compute each 

pipeline’s share of total barrel-miles, 

and identify the pipeline whose share of 

total barrel-miles causes the cumulative 

share to reach 50%.176 However, rather 

than identify the pipeline that causes 

the cumulative share of total barrelmiles represented in the sample to reach 

50%, Ms. Crowe derives the median 

value of the weighted cost-change 

percentages for 2019 without regard to 

the barrel-miles represented above and 

below that cost change.177 Unlike the 

correct calculation of the weighted 

median, Ms. Crowe does not order 

pipelines by cost changes, and instead 

orders them by cost change times barrelmiles.178 The Commission found that 

under this approach, it is unclear 

whether the median pipeline of a given 

sample reported (a) relatively high cost 

changes and low barrel-miles or (b) 

relatively low cost changes and high 

barrel-miles.179 The Commission also 

observed that a small shift in the data 

sample’s median would produce 

significant and multidirectional changes 

in the calculation’s result.180 Thus, the 


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181 Id. 

182 Id. n.86 (citing AOPL II, 281 F.3d at 241). 

Specifically, the Commission explained that 

because Ms. Crowe orders the pipelines by barrelmile cost change times barrel-miles, a pipeline with 

high barrel-miles would likely only lie near the 

median of the data sample if it reported extremely 

low cost changes. Id. 

183The Commission observed that both Colonial 

and Enbridge are included in the middle 50% of 

cost changes, which indicates that their cost 

experiences did not diverge significantly from 

industry norms. December 2020 Order, 173 FERC 

¶ 61,245 at P 40. 

184See Liquids Shippers Request for Rehearing at 

65–66 (acknowledging the Commission’s findings 

but arguing that they do ‘‘not respond to [Liquids 

Shippers’] evidence or [their] concerns that 

Enbridge Energy and Colonial skew the index due 

to being extreme outliers in terms of barrel-miles 

. . . .’’). 

185The 2014–2019 cost changes in the middle 

50% ranged from ¥32.23% to 28.97%. Colonial’s 

cost change of 23.72% lies well within the middle 

50%’s upper bound, while Enbridge’s cost change 

of 3.43% lies close to the median of the sample. 

186 December 2020 Order, 173 FERC ¶ 61,245 at 

P 37. 

187AOPL II, 281 F.3d at 241. 

188Whereas removing the cost changes of 

Colonial and Enbridge would reduce the 

unweighted mean by 7 basis points (from ¥0.20% 

to ¥0.27%), removing the cost changes of Wesco 

Pipeline LLC, Hilcorp Pipeline Company, LLC, and 

Black Bear Liquids LLC increases the unweighted 

mean by the same magnitude of 7 basis points (from 

¥0.20% to ¥0.13%). Attach. A, Exhibit 13. 

189 December 2020 Order, 173 FERC ¶ 61,245 at 

P 37. 

190Liquids Shippers Request for Rehearing at 63, 

65–66. 

191As discussed above, although Liquids 

Shippers contend that another approach to 

weighting pipeline cost changes may achieve a 

better balance between large and small pipelines, 

they have not justified an alternative to the 

weighted mean. 

192 December 2020 Order, 173 FERC ¶ 61,245 at 

P 40; see also AOPL I, 83 F.3d at 1437 (holding that 

the Commission did not err in Order No. 561 by 

declining to periodically review individual pipeline 

costs and instead requiring shippers to challenge 

individual pipeline rates via protests or 

complaints); Calnev Pipe Line L.L.C., 127 FERC 

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

made quite clear that it will not review allegations 

regarding the appropriateness of a pipeline’s cost of 

service or the accuracy of its accounting in an index 

proceeding. Such allegations must be included in 

a complaint once the index-based filing becomes 

effective.’’ (citing SFPP, L.P., 123 FERC ¶ 61,317 

(2008); BP W. Coast Prods. LLC v. SFPP, L.P., 121 

FERC ¶ 61,243 (2007))). 

193NOI, 171 FERC ¶ 61,239 at P 11. 

194Liquids Shippers allege that when using the 

data set underlying the NOI proposal, removing 

Enbridge and Colonial from the middle 50% 

reduces the index level by 43 basis points (from 

PPI–FG+0.09% to PPI–FG–0.34%). Liquids 

Shippers Request for Rehearing at 57 (citing Liquids 

Shippers Initial Comments; Crowe Initial Aff. at 6– 

7). Similarly, removing those pipelines from the 

middle 50% of the data set adopted in the instant 

order would reduce the index level by 44 basis 

points, from PPI–FG–0.21% to PPI–FG–0.65%. 

Attach. A, Exhibit 8. 

195Removing Enbridge from the middle 50% but 

not Colonial, increases the index level from PPI– 

FG–0.21% to PPI–FG–0.14%. Attach. A, Exhibit 9. 

196Lowering Enbridge’s page 700 ROE from 

12.71% to either 9.84% or 10.85% would reduce 

Continued 

Commission determined that this 

calculation produces ‘‘haphazard 

results’’ that ‘‘do not reflect a 

convergence towards a central tendency 

of industry-wide cost changes.’’ 181 The 

Commission further explained that Ms. 

Crowe’s methodology would ‘‘nullify 

the influence of larger pipelines upon 

the index calculation and thereby defeat 

the purpose of relying upon a weighted 

measure of central tendency.’’ 182 On 

rehearing, Liquids Shippers do not 

address these findings or attempt to 

rectify the identified flaws in Ms. 

Crowe’s weighted median calculation. 

Thus, even if we were inclined to 

replace the weighted mean with a 

different weighted measure of central 

tendency, Liquids Shippers present no 

credible alternative. 

65. In addition, we remain 

unpersuaded by Liquids Shippers’ 

claims that the weighted mean needs to 

be modified or replaced because two 

large pipelines, Colonial and Enbridge, 

allegedly skew the index calculation. 

First, the December 2020 Order found 

that the record indicates that neither 

Colonial nor Enbridge reported outlying 

cost changes,183 and Liquids Shippers 

do not refute these findings on 

rehearing.184 Although both Colonial 

and Enbridge reported barrel-mile cost 

changes above the median in the middle 

50%, this does not make them outliers 

in terms of cost changes.185 Second, the 

fact that the weighted mean in this 

proceeding ascribes additional weight to 

two pipelines with high barrel-miles 

does not support removing this measure 

of central tendency or reducing its 

weighting in the Kahn Methodology. 

Rather, the Kahn Methodology includes 

the weighted mean in the calculation of 

central tendency specifically to provide 

appropriate weight to large pipelines 

like Colonial and Enbridge whose cost 

changes are highly reflective of industry 

cost experience.186 This additional 

weighting is necessary to ensure that 

‘‘minor firms do not skew the 

result.’’ 187 Because unweighted 

measures of central tendency weight all 

cost changes equally without regard to 

pipeline size, failing to incorporate a 

weighted measure would allow the cost 

experiences of small pipelines to 

obscure the experiences of pipelines 

that represent a much larger share of the 

industry’s barrel-miles. In this 

proceeding, for instance, three small 

pipelines representing 0.00073% of the 

barrel-miles in the middle 50% 

influence the sample’s unweighted 

mean by the same degree as Colonial 

and Enbridge, which represent 50.04% 

of the barrel-miles in the middle 

50%.188 Thus, the fact that the weighted 

mean accords significant weight to 

Colonial and Enbridge is fully 

consistent with its role in the index 

calculation and does not skew the index 

calculation as Liquids Shippers 

allege.189 To the extent that Liquids 

Shippers oppose use of the weighted 

mean in this proceeding because it 

provides significant weighting to the 

two largest pipelines,190 we find that 

this concern does not justify eliminating 

the weighted mean from the index 

calculation in the absence of a credible 

alternative.191

66. Moreover, we continue to find that 

Liquids Shippers’ challenges to the 

reported page 700 data of Colonial and 

Enbridge are outside the scope of this 

proceeding. As the December 2020 

Order explains, indexing proceedings 

are not an appropriate forum for 

challenging specific pipelines’ page 700 

inputs.192 In the five-year review, the 

Commission must review pipeline cost 

changes on an industry-wide basis to 

establish the generic index that 

pipelines may use to adjust their rates 

going forward. Allowing commenters to 

litigate individual pipelines’ page 700 

inputs would risk expanding this review 

into a wide-ranging rate proceeding 

involving complex cost-of-service issues 

that would require significant time to 

resolve. Given that the Commission 

must consider industry-wide cost 

changes based upon data for over 160 

pipelines and must complete each fiveyear review in order to establish the 

index level for use in index filings to be 

effective on July 1 of the following 

year,193 it would be unworkable to 

permit challenges to individual pipeline 

page 700 inputs in this proceeding. 

67. Furthermore, we are not 

persuaded by Liquids Shippers’ claim 

that reporting errors by Colonial and 

Enbridge are skewing the index level 

upwards by 43 basis points.194

Regarding Enbridge, this argument is 

particularly unpersuasive. First, 

removing Enbridge from the middle 

50%, while retaining Colonial in that 

sample, actually increases the index 

level rather than decreasing it as Liquids 

Shippers imply.195 Second, correcting 

Enbridge’s alleged reporting errors only 

marginally influences the index 

calculation. Liquids Shippers claim that 

the 12.71% ROE that Enbridge reported 

on page 700 for 2019 exceeds both the 

9.84% ROE that it reported for 2014 and 

the 10.85% ROE that many pipelines 

reported on page 700 for 2019. However, 

adjusting Enbridge’s 2019 page 700 ROE 

from 12.71% to 9.84% or 10.85% would 

only impact the index level by 2 basis 

points.196


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the index level from PPI–FG–0.21% to PPI–FG– 

0.23%. Attach. A, Exhibit 10. 

197Liquids Shippers Request for Rehearing at 59– 

60 (citing Crowe Initial Aff. at 5–6). 

198Using the data set adopted in this proceeding, 

adjusting Colonial’s capital structure to 50% equity 

and 50% debt while preserving the composition of 

the middle 50% increases the index level by one 

basis point, from PPI–FG–0.21% to PPI–FG–0.20%. 

Attach. A, Exhibit 11. 

199The instructions on page 700 require pipelines 

to determine their page 700 inputs consistent with 

the Opinion No. 154–B cost-of-service 

methodology. To comply with this instruction, a 

pipeline must adhere to the Commission’s 

application of the Opinion No. 154–B methodology 

in proceedings involving the pipeline’s rates. 

200Liquids Shippers Request for Rehearing at 84. 

201Liquids Shippers Initial Comments at 21–23. 

202 Id. at 25–28. In support of this argument, 

Liquids Shippers contend that two pipelines 

submitted updated Form No. 6 filings in July 2020 

indicating that the page 700 ROEs they reported in 

April 2020 did not comply with the Commission’s 

then-applicable policy relying solely upon the DCF 

model. Liquids Shippers Request for Rehearing at 

76–77 (citing Liquids Shippers Initial Comments at 

25–28) (referring to updated Form No. 6 filings of 

Plains Pipeline, LP, and Rocky Mountain Pipeline 

System LLC). 

203Ms. Crowe stated that 45 pipelines reported a 

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

Initial Aff. at 11–12. However, based upon a review 

of Form No. 6 filings submitted in 2016, the 

Commission found in the December 2020 Order that 

54 pipelines reported this ROE for 2014 in the 

column on page 700 for previous year data. 

December 2020 Order, 173 FERC ¶ 61,245 at P 43 

n.97. 

204Liquids Shippers Initial Comments at 30–31; 

Crowe Initial Aff. at 11 (citing Trial Staff, Exhibit 

S–00057 (Direct and Answering Cost-Based Rate 

Testimony of Commission Trial Staff Witness 

Robert J. Keyton), Docket Nos. OR18–7–002 et al. 

(filed Jan. 14, 2020)). 

205 December 2020 Order, 173 FERC ¶ 61,245 at 

P 45. 

206 Id. P 46. 

207 Id. P 47. 

208 Id. P 48. 

209 Id. P 49. 

210 Id. P 50. 

211Liquids Shippers Request for Rehearing at 70– 

72 (citing El Paso Nat. Gas Co., Opinion No. 528, 

145 FERC ¶ 61,040, at P 592 (2013)). For instance, 

Liquids Shippers state that among the 160 pipelines 

in the untrimmed data set, the reported page 700 

ROEs for 2019 range from 0.9% to 22.3%. Among 

the pipelines in the middle 50%, Liquids Shippers 

state that the 2019 page 700 ROEs range from 7.2% 

to 18.8%. Id. 

68. Similarly, although Colonial 

accounts for most of the 44 basis-point 

shift in the index calculation that results 

from removing Colonial and Enbridge 

from the middle 50%, correcting 

Colonial’s alleged reporting errors 

produces only a de minimis change in 

the index level. Liquids Shippers argue 

that Colonial reported in its 2014 and 

2019 page 700 filings that it is 92% 

financed by equity, but reported on its 

balance sheet and in an ongoing rate 

proceeding that it is 100% financed by 

debt.197 However, adjusting Colonial’s 

capital structure to 50% equity and 50% 

debt produces a mere one-basis-point 

change to the index level.198

Accordingly, given these relatively 

minor effects, we are unpersuaded by 

Liquids Shippers’ claim that using the 

weighted mean in this proceeding 

increases the likelihood that page 700 

reporting errors will skew the index 

calculation. 

69. Furthermore, we find that 

requiring shippers to challenge page 700 

inputs outside of the five-year review 

process does not present an infeasible 

approach. First, Liquids Shippers’ 

argument that a cost-of-service 

complaint is unlikely to result in a 

change to the pipeline’s page 700 

reporting is without merit. For example, 

if the Commission determines in a costof-service rate proceeding that a 

pipeline set its rates based upon an 

inaccurate capital structure, the pipeline 

would be required to implement this 

determination in its subsequent page 

700 reporting.199 Second, we are 

unpersuaded by Liquids Shippers’ claim 

that a complaint challenging a 

pipeline’s page 700 inputs would bring 

shippers ‘‘no commercial benefits.’’ 200

Where a shipper believes that a pipeline 

may have reported inaccurate or 

erroneous information on its page 700, 

initiating a complaint proceeding 

provides the parties and the 

Commission with a full opportunity to 

develop an evidentiary record that 

would allow for a meaningful review of 

the challenged page 700 inputs. If the 

complaint is successful, the 

Commission would direct the pipeline 

to revise its page 700 to correct any 

errors or inaccuracies. These revisions, 

in turn, could alter the cost and revenue 

data on which shippers and the 

Commission rely in evaluating cost-ofservice complaints against the pipeline’s 

rates and challenges to the pipeline’s 

annual index rate changes. Thus, 

although we recognize the burden and 

expense associated with filing a 

complaint, we disagree with Liquids 

Shippers’ claim that there would be no 

commercial benefits to filing a 

complaint against a pipeline’s page 700 

inputs. 

D. Liquids Shippers’ Proposal To Adopt 

Standardized ROEs for 2014 and 2019 

70. Liquids Shippers argued in their 

comments that the reported page 700 

ROEs conflict with the Commission’s 

cost-of-service ratemaking methodology 

because they are self-reported and vary 

substantially.201 In addition, Liquids 

Shippers maintained that uncertainty 

surrounding the Commission’s oil 

pipeline ROE policy at the time 

pipelines submitted their page 700 

filings for 2019 undermined the 

reliability of the reported ROEs for 

2019.202 Thus, Liquids Shippers urged 

the Commission to replace pipelines’ 

reported page 700 ROEs for 2014 and 

2019 with standardized ROEs for 

purposes of calculating the index level. 

For 2014, Liquids Shippers proposed a 

standardized ROE of 10.29%, which 54 

pipelines reported in their 2014 page 

700 filings.203 For 2019, Liquids 

Shippers proposed to use the 10.02% 

ROE that Trial Staff proposed in an 

ongoing Colonial rate proceeding based 

upon data for the six-month period 

ending in November 2019.204

1. December 2020 Order 

71. The December 2020 Order 

declined to adopt standardized ROEs for 

2014 and 2019 and concluded that 

Liquids Shippers have not demonstrated 

that the reported page 700 ROEs are 

unreliable or inconsistent with 

Commission policy.205 First, the 

Commission rejected Liquids Shippers’ 

argument that page 700 ROEs are 

unreliable simply because they are selfreported, reasoning that the instructions 

on page 700 required pipelines to 

determine ROE consistent with the 

Commission’s then-applicable policy of 

relying solely upon the DCF model.206

Second, the Commission found that 

variation among page 700 ROEs does 

not indicate that this data is unreliable 

and that such variation may result from 

differences in proxy group composition 

and relative risk.207 Third, the 

Commission rejected Liquids Shippers’ 

contention that pipelines were 

uncertain as to the Commission’s oil 

pipeline ROE policy when they 

submitted their 2019 Form No. 6 filings. 

The Commission found that pipelines 

had adequate notice of the prevailing 

policy through the page 700 instruction 

requiring pipelines to determine ROE 

consistent with the then-current 

Opinion No. 154–B methodology.208

Fourth, the Commission found that 

Liquids Shippers have not supported 

their proposed standardized ROEs.209

Finally, the Commission concluded that 

determining standardized ROEs would 

complicate the five-year review process 

and undermine indexing’s purpose as a 

simplified and streamlined ratemaking 

regime.210

2. Rehearing Request 

72. Liquids Shippers contend that the 

December 2020 Order erred by failing to 

replace the reported 2014 and 2019 page 

700 ROEs with Liquids Shippers’ 

proposed standardized ROEs. They 

repeat their argument that the reported 

page 700 ROEs cannot be consistent 

with the Commission’s cost-of-service 

methodology because they vary 

substantially.211 Liquids Shippers 


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212 Id. at 73 (citing Liquids Shippers Initial 

Comments at 23–24; Crowe Initial Aff. at 9–10). 

213 Id. at 78. 

214 Id. at 81 (citing December 2020 Order, 173 

FERC ¶ 61,245 at PP 46–47; Revisions to & 

Electronic Filing of the FERC Form No. 6 & Related 

Uniform Sys. of Accounts, Order No. 620, FERC 

Stats. & Regs. ¶ 31,115, at 31,959–60 (2000) (crossreferenced at 93 FERC ¶ 61,262), reh’g denied, 

Order No. 620–A, 94 FERC ¶ 61,130 (2001)). 

215 Id. at 82–83 (citing Opinion No. 528, 145 

FERC ¶ 61,040 at P 595; AOPL, Comments, Docket 

No. PL19–4–000, at 15 (filed June 26, 2019)). 

216 Id. at 83 (citing Opinion No. 528, 145 FERC 

¶ 61,040 at P 592; Composition of Proxy Groups for 

Determining Gas and Oil Pipeline Return on Equity, 

123 FERC ¶ 61,048 (2008) (Proxy Group Policy 

Statement)). 

217As discussed in the December 2020 Order, 

Liquids Shippers assert that the Commission 

initiated a review of its ROE policy in Docket No. 

PL19–4–000 on March 21, 2019, but did not clarify 

its policy until it issued a policy statement revising 

its ROE methodology for natural gas and oil 

pipelines on May 21, 2020. Id. at 74–75 (citing 

Inquiry Regarding the Commission’s Policy for 

Determining Return on Equity, 171 FERC ¶ 61,155 

(2020) (ROE Policy Statement); Inquiry Regarding 

the Commission’s Policy for Determining Return on 

Equity, 166 FERC ¶ 61,207 (2019)). Because oil 

pipelines were required to submit page 700 cost-ofservice data for 2019 in April 2020, Liquids 

Shippers allege that pipelines were not certain of 

the Commission’s prevailing policy when pipelines 

reported their 2019 ROEs. Id. at 75–76. 

218 Id. at 85–86 (citing December 2020 Order, 173 

FERC ¶ 61,245 at P 48). 

219 Id. at 86. 

220 December 2020 Order, 173 FERC ¶ 61,245 at 

P 49. 

221Liquids Shippers Request for Rehearing at 87. 

222 Id. at 88–89. 

223 Id. at 89. 

224 Id. at 89–90. 

225 Id. at 90–91. 

226As discussed, Liquids Shippers, as the 

proponent of a change to the Kahn Methodology, 

bears the burden of justifying that change. See 

supra note 129. 

227Not only do Liquids Shippers fail to justify 

their proposed standardized ROEs, but they also fail 

to correctly incorporate those ROEs into pipelines’ 

page 700 cost-of-service calculations. Because ROE 

forms part of the return on rate base for which nonMLP pipelines may recover an income tax 

allowance, any adjustment to the page 700 ROEs 

should include corresponding changes to the 

pipeline’s page 700 income taxes. However, in 

adjusting the reported page 700 ROEs, Ms. Crowe 

fails to reflect the resulting income tax changes in 

pipelines’ page 700 cost-of-service calculations. See 

Crowe Initial Aff. at App. 4. 

228 December 2020 Order, 173 FERC ¶ 61,245 at 

P 49. 

emphasize that these ROEs were 

selected by the pipelines themselves. 

Furthermore, Liquids Shippers contend 

that the page 700 ROEs fail to accurately 

capture changing market conditions 

between 2014 and 2019 because some 

pipelines reported a 2019 page 700 ROE 

that was significantly higher than their 

2014 page 700 ROE, while other 

pipelines reported a 2019 ROE that was 

significantly lower than their 2014 

ROE.212 Liquids Shippers state that to 

the extent there is limited evidence 

addressing whether the page 700 ROEs 

conflict with the Commission’s policy, 

the absence of more concrete evidence 

‘‘does not give rise to a negative 

inference that such evidence does not 

exist.’’ 213

73. Liquids Shippers also challenge 

the Commission’s finding that variations 

in the reported page 700 ROEs could 

result from differences in proxy group 

composition and relative risk. Liquids 

Shippers claim that the December 2020 

Order cites no evidence for this 

conclusion, despite the fact that the 

Commission has access to the 

workpapers underlying pipelines’ page 

700 ROE calculations.214 In addition, 

Liquids Shippers contend that the 

Commission overstates the degree of 

variation that can result from these 

factors. Regarding proxy group 

composition, Liquids Shippers state that 

there is a small number of eligible oil 

pipeline proxy group members, such 

that there is limited, if any, potential for 

variation in the proxy group that may be 

used from pipeline to pipeline.215

Regarding differences in risk, Liquids 

Shippers contend that the Commission 

has recognized that most pipelines fall 

within the same broad range of average 

risk, such that the median of the proxy 

group results is sufficient to compensate 

most pipelines for their investments.216

74. Furthermore, Liquids Shippers 

reiterate their earlier argument that 

uncertainty surrounding the 

Commission’s oil pipeline ROE 

methodology in April 2020 undermines 

the reliability of the reported page 700 

ROEs for 2019.217 Liquids Shippers 

dispute the Commission’s finding that 

pipelines received adequate notice of 

the Commission’s prevailing ROE policy 

through the page 700 instruction 

requiring pipelines to determine ROE 

consistent with the then-current 

Opinion No. 154–B methodology.218

They argue that the ‘‘mere existence of 

a rule does not guarantee compliance 

with that rule’’ and that the Commission 

had an affirmative obligation to 

investigate whether ambiguities in its 

prevailing ROE policy affected the 2019 

page 700 ROEs.219

75. In addition, Liquids Shippers 

contend that the Commission applied an 

unreasonably strict standard in rejecting 

their proposed standardized ROEs. 

Liquids Shippers state that in order to 

determine an ROE that ‘‘accurately 

measures the investor-required cost of 

equity for all pipelines in the data 

set,’’ 220 Liquids Shippers would need to 

provide evidence establishing the 

financial and business risks for more 

than 100 pipelines.221

76. Liquids Shippers also disagree 

with the Commission’s conclusion that 

replacing reported page 700 ROEs with 

standardized ROEs would improperly 

complicate the five-year review. Liquids 

Shippers state that because standardized 

ROEs would only serve as benchmarks 

for measuring pipeline cost changes,222

‘‘establishing a standardized ROE may 

not require the same rigor as, e.g., 

determining an allowable ROE to be 

included in an oil pipeline’s just and 

reasonable rates.’’ 223 Liquids Shippers 

contend, moreover, that determining 

standardized ROEs in each five-year 

review would not be a prohibitive 

undertaking. Because most pipeline 

ROEs would fall at the median of the oil 

proxy group, Liquids Shippers state that 

the Commission would not have to 

perform an individualized analysis of 

every oil pipeline to determine a 

standardized ROE.224 Additionally, 

Liquids Shippers observe that 

Commission Trial Staff regularly 

develops proposed ROEs in cost-ofservice rate proceedings. Finally, 

Liquids Shippers contend that it is 

inconsistent for the Commission to 

reject their proposal to adopt 

standardized ROEs as incompatible with 

simplified and streamlined ratemaking 

while also adopting Pipelines’ proposals 

to adjust the reported page 700 data to 

remove the effects of the Income Tax 

Policy Change.225

3. Commission Determination 

77. We deny rehearing and sustain the 

Commission’s determination in the 

December 2020 Order. We continue to 

find that Liquids Shippers have not 

adequately demonstrated that the 

reported page 700 ROEs for 2014 and 

2019 are unreliable or inconsistent with 

Commission policy such that the 

Commission should revise the Kahn 

Methodology to replace those figures 

with standardized ROEs.226

78. As an initial matter, Liquids 

Shippers fail to present usable 

alternatives to the ROEs that pipelines 

reported on page 700. As the 

Commission concluded in the December 

2020 Order, we find that Liquids 

Shippers have not supported their 

proposed standardized ROEs.227

Regarding their proposed industry-wide 

2014 ROE, Liquids Shippers’ arguments 

on rehearing do not explain why an 

ROE figure that only 29% of pipelines 

reported for that year accurately 

measures the investor-required cost of 

equity for all pipelines in the data 

set.228 Likewise, for the 2019 ROE, we 

reject Liquids Shippers’ proposal to use 

an ROE that one participant proposed in 

an ongoing hearing for use in Colonial’s 

rates. Neither the Presiding Judge nor 

the Commission have opined on this 


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229 Id. The initial decision addressing Colonial’s 

cost-based rates, including its just and reasonable 

ROE, is scheduled to issue by April 29, 2022. 

Epsilon Trading, LLC v. Colonial Pipeline Co., 

Docket No. OR18–7–002 (Dec. 2, 2021). 

230Although this figure was proposed in the 

ongoing hearing by Commission Trial Staff, Trial 

Staff are non-decisional employees for purposes of 

that proceeding. 18 CFR 385.2201(c)(3) (2021) 

(defining ‘‘decisional employee’’ to exclude ‘‘an 

employee designated as part of the Commission’s 

trial staff in a proceeding’’); Separation of 

Functions, 101 FERC ¶ 61,340, at P 7 (2002) (‘‘A 

‘non-decisional employee’ is a member of the 

Commission’s trial staff in a proceeding . . . .’’). 

231 December 2020 Order, 173 FERC ¶ 61,245 at 

P 49. 

232Whereas approximately 29% of filing 

pipelines reported a 10.29% ROE for 2014 (54/184 

= 0.293), Liquids Shippers state that 69 of 160, or 

approximately 43%, of filing pipelines reported a 

10.85% ROE for 2019. Liquids Shippers Request for 

Rehearing at 80 (citing Liquids Shippers Initial 

Comments at 29–32; Crowe Initial Aff. at 10–11)). 

233Using the 10.85% ROE for 2019 with the 

10.29% ROE for 2014 reduces the index from PPI– 

FG–0.21% to PPI–FG–0.32%, whereas using the 

10.02% ROE for 2019 with the same ROE for 2014 

reduces the index level from PPI–FG–0.21% to PPI– 

FG–0.76%. Attach. A, Exhibit 12. 

234Ms. Crowe states that the widely reported 

10.85% ROE should not be used as the standardized 

ROE for 2019 because it ‘‘is unsupported by any 

explanation or derivation, and there is no evidence 

this ROE was derived in a manner consistent with 

Commission policy.’’ Crowe Initial Aff. at 11. It is 

unclear, however, why this critique would not 

apply with equal force to the 10.29% ROE that she 

proposes to use for 2014. To the extent that Ms. 

Crowe proposes to use a widely reported ROE for 

2014 on the understanding that Trial Staff had not 

proposed an ROE based upon 2014 data in an oil 

pipeline rate proceeding, this understanding is 

incorrect. To the contrary, in a rate proceeding 

involving SFPP, L.P., in Docket No. OR16–6–000, 

Trial Staff proposed an ROE of 10.24% based upon 

2014 data. Trial Staff, Exhibit S–24 (Direct and 

Answering Testimony of Commission Trial Staff 

Witness Robert J. Keyton), Docket No. OR16–6–000, 

at 61:15–17 (filed Sept. 14, 2016). 

235 December 2020 Order, 173 FERC ¶ 61,245 at 

P 49. 

236Liquids Shippers Initial Comments at 24. 

237 December 2020 Order, 173 FERC ¶ 61,245 at 

P 46 (citing BP W. Coast Prods. LLC v. SFPP, L.P., 

121 FERC ¶ 61,243, at P 9 (2007)). 

238 Id. n.103. Along similar lines, reporting overly 

low cost data in the last year of one review period 

in an effort to skew the index calculation 

downward would similarly harm pipelines’ 

interests by establishing a lower cost baseline in the 

first year of the next period. 

239 Id. P 46. 

240See Shehadeh Reply Decl. at 18–19 

(comparing annualized cost changes of pipelines in 

middle 80% that reported 10.85% ROE for 2019 

and pipelines that reported ROEs other than 

10.85% and concluding that ‘‘cost change and ROE 

are not positively correlated’’). 

241Emera Maine v. FERC, 854 F.3d 9, 26 (D.C. Cir. 

2017). 

ROE proposal.229 Moreover, this 

proposal was challenged by the other 

litigants in that proceeding and Liquids 

Shippers have presented no evidence 

that this particular ROE was more 

appropriate than the other litigants’ 

proposed ROEs.230 In addition, even if 

the Commission had adopted a 

proposed ROE for Colonial in that rate 

case, the December 2020 Order explains 

that given the diversity of the oil 

pipeline industry, we cannot simply 

assume that any single ROE could 

reflect the investor-required return for 

all pipelines in the data set.231

79. We conclude, moreover, that Ms. 

Crowe determines her proposed 

standardized ROEs using an 

inconsistent approach that deflates the 

index level. Ms. Crowe asserts that the 

Commission should adopt 10.29% as 

the standardized ROE for 2014 because 

54 of 184 filing pipelines reported that 

figure on page 700. Liquids Shippers 

also acknowledge that an even greater 

percentage of filing pipelines reported a 

10.85% ROE on page 700 for 2019.232

However, rather than adopt this widely 

reported figure as the standardized ROE 

for 2019, Ms. Crowe instead proposes to 

use an untested 10.02% ROE that 

remains subject to Commission 

evaluation in the ongoing Colonial rate 

proceeding. This unexplained 

inconsistency materially affects the 

index level: Whereas using a 10.85% 

ROE for 2019 with the proposed 10.29% 

ROE for 2014 would reduce the index 

level by 11 basis points, using a 10.02% 

ROE for 2019 as Ms. Crowe proposes 

with the same ROE for 2014 would 

reduce the index level by 55 basis 

points.233 Liquids Shippers neither 

acknowledge these effects nor justify 

their proposal to use a widely reported 

ROE as the standardized ROE for 2014 

but not for 2019.234

80. In addition, we reject Liquids 

Shippers’ claim that the Commission 

applied an unreasonably strict standard 

in requiring them to demonstrate that 

their proposed standardized ROEs 

‘‘accurately measure[ ] the investorrequired cost of equity for all pipelines 

in the data set.’’ 235 As Liquids Shippers 

acknowledge,236 ROE is a major 

component of the page 700 summary 

cost of service and therefore 

significantly affects the Commission’s 

measurement of industry-wide cost 

changes in the five-year review. Thus, 

where a commenter proposes to replace 

the reported page 700 ROEs of every 

pipeline in the data set with 

standardized, industry-wide figures, it is 

not unreasonable to require commenters 

to demonstrate that those standardized 

figures accurately measure the cost of 

equity for all pipelines in the data set. 

Otherwise, a standardized ROE that 

does not accurately reflect the costs of 

equity of pipelines in the data set could 

skew the index calculation by distorting 

the measurement of those pipelines’ per 

barrel-mile equity cost changes during 

the review period. To the extent that 

satisfying this standard would impose 

significant evidentiary burdens, this 

supports maintaining the Commission’s 

simplified approach of measuring equity 

cost changes using reported page 700 

ROEs. 

81. Liquids Shippers’ remaining 

arguments for replacing the reported 

page 700 ROEs with standardized ROEs 

are unavailing. Contrary to Liquids 

Shippers’ argument, we again conclude 

that the fact that page 700 ROEs are selfreported (like all other page 700 data 

used in this proceeding) does not 

demonstrate that this data is unreliable 

or fails to capture the returns that 

investors demand in the market. As the 

December 2020 Order explains, the 

instructions on page 700 required 

pipelines to determine their ROE for 

each year during the 2014–2019 period 

using the DCF model. Pipelines 

submitted page 700 under oath and 

subject to sanction if there were 

purposeful errors in their reported 

data.237 Moreover, the Commission’s 

five-year review process reduces the 

incentive or ability for pipelines to 

report inaccurate data in an effort to 

skew the index calculation. The 

Commission calculates the index level 

based upon changes in cost over the 

applicable review period, rather than 

total costs in a given year. Because the 

last year of any particular review period 

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

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

attempt by pipelines to distort the index 

calculation by reporting inflated cost 

data in the last year of one period would 

harm their interests by establishing a 

higher cost baseline in the first year of 

the next period.238 Given these facts, we 

continue to find that Liquids Shippers 

have not demonstrated that the reported 

page 700 ROE data is unreliable merely 

because pipelines self-reported.239

82. We also remain unpersuaded that 

variation among page 700 ROEs 

indicates that the reported ROE data is 

unreliable. As an initial matter, it is not 

clear from the record that the level of a 

pipeline’s page 700 ROE correlates with 

that pipeline’s annualized cost changes 

such that variations in ROE would 

materially affect the index 

calculation.240 In any event, however, 

the D.C. Circuit has recognized that ‘‘the 

zone of reasonableness creates a broad 

range of potentially lawful ROEs rather 

than a single just and reasonable 

ROE.’’ 241 Thus, mere variation in the 

page 700 ROEs does not establish that 

those ROEs are not just and reasonable. 

Rather, as the Commission found in the 

December 2020 Order, multiple factors 

can cause the DCF model to yield 

different results for different 


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242 Id. P 47. For instance, in a recent oil pipeline 

cost-of-service rate proceeding, the potential proxy 

group member companies included three pipelines 

with DCF returns near 10%, one pipeline with a 

DCF return of 21.17%, and one pipeline with a DCF 

return of 51.14%. Chevron Prods. Co. v. SFPP, L.P., 

Opinion No. 571, 172 FERC ¶ 61,207, at P 152 

(2020). 

243Historically, the Commission has required that 

each proxy group company satisfy the following 

criteria. First, the company’s stock must be publicly 

traded. Second, the company must be recognized as 

an oil pipeline company and its stock must be 

recognized and tracked by an investment 

information service such as Value Line. Third, 

pipeline operations must constitute at least 50% of 

the company’s assets or operating income over the 

most recent three-year period (50% standard). E.g., 

ROE Policy Statement, 171 FERC ¶ 61,155 at P 58 

(citing Proxy Group Policy Statement, 123 FERC 

¶ 61,048 at P 8). In addition to these criteria, the 

Commission has historically declined to include 

Canadian companies in pipeline proxy groups. Id. 

(citing Opinion No. 528, 145 FERC ¶ 61,040 at P 

626; Kern River Gas Transmission Co., Opinion No. 

486–B, 126 FERC ¶ 61,034 at P 60, order on reh’g 

and compliance, Opinion No. 486–C, 129 FERC 

¶ 61,240 (2009)). 

244 Id. PP 60, 65. 

245The Commission maintains a flexible 

approach to forming natural gas and oil pipeline 

proxy groups. For example, the Commission retains 

the discretion to enforce or relax the 50% standard 

based upon the record in each proceeding. Id. PP 

64–65. Similarly, the Commission has explained 

that it will consider proposals to include Canadian 

companies in pipeline proxy groups on a case-bycase basis. Id. P 66. Furthermore, given the ongoing 

difficulties in forming pipeline proxy groups of 

sufficient size, the Commission has stated that it 

‘‘will consider adjustments to [its] ROE policies 

where necessary.’’ Id. P 64. 

246For example, in Opinion No. 571, the 

Commission adopted a proxy group of Buckeye 

Partners LP, Magellan Midstream Partners LP, 

Enterprise Products Partners, LP, and Enbridge 

Energy Partners, LP, which produced a median DCF 

result of 10.54%. Opinion No. 571, 172 FERC 

¶ 61,207 at P 52. However, substituting Kinder 

Morgan Inc. in the place of Enbridge would have 

reduced the median DCF result to 10.195%, a 

difference of over 30 basis points. See id. 

247 December 2020 Order, 173 FERC ¶ 61,245 at 

P 47 (citing BP Pipelines (Alaska) Inc., Opinion No. 

502, 123 FERC ¶ 61,287 at P 195, order on reh’g and 

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

denied, 127 FERC ¶ 61,317 (2009), aff’d sub nom. 

Flint Hills Res. Alaska, LLC v. FERC, 726 F.3d 881 

(D.C. Cir. 2010)). 

248This is particularly true where, due to the 

declining number of proxy group companies, it may 

become necessary for the Commission to include 

Canadian companies or companies that do not 

satisfy the 50% standard to form a proxy group of 

sufficient size. Including these more diverse 

companies in the proxy group could necessitate 

setting the subject pipeline’s ROE above or below 

the median due to differences in risk. 

249 December 2020 Order, 173 FERC ¶ 61,245 at 

P 47 (citing 2015 Index Review, 153 FERC ¶ 61,312 

at P 17). 

250 Id. P 53. 

251 December 2020 Order, 173 FERC ¶ 61,245 at 

P 48. As discussed above, we find that the 

Commission’s five-year review process reduces the 

incentive or ability for pipelines to report 

inaccurate data in an effort to skew the index 

calculation. See supra P 82. 

252 December 2020 Order, 173 FERC ¶ 61,245 at 

P 48. 

253 Id. P 50 (citing NOI, 171 FERC ¶ 61,239 at P 

11). 

pipelines.242 Contrary to Liquids 

Shippers’ claim, we disagree that the 

December 2020 Order overstates the 

degree to which pipeline ROEs may 

vary as a result of differences in proxy 

group composition. In forming proxy 

groups, the Commission applies specific 

criteria to ensure that the proxy group 

members are risk-appropriate and 

comparable to the pipeline whose rate is 

being determined.243 Although the 

number of companies satisfying the 

Commission’s historical proxy group 

criteria in pipeline proceedings has 

declined in recent years,244 this does 

not support the conclusion that a single 

proxy group would be appropriate for 

every oil pipeline. Rather, the 

Commission has explained that it will 

apply its proxy group criteria flexibly 

depending upon the particular record in 

each proceeding when necessary to form 

a proxy group of sufficient size.245 Thus, 

even under current market conditions, 

the appropriate proxy group can vary 

from pipeline to pipeline based upon 

the specific facts in the proceeding. Any 

difference in proxy group composition 

can cause the DCF model to produce 

different results for different 

pipelines.246

83. Similarly, we continue to find that 

variation among page 700 ROEs may 

result from differences in relative risk. 

The December 2020 Order explains that 

although the Commission typically sets 

an oil pipeline’s real ROE at the median 

of the DCF results, it may set the ROE 

above or below the median where the 

record demonstrates that the pipeline 

faces anomalously high or low risks.247

Thus, even when using an identical 

proxy group, the appropriate placement 

of a pipeline’s ROE within the proxy 

group results turns upon an 

individualized, fact-specific analysis of 

its business and financial risks relative 

to the risk profiles of the proxy group 

members. Because oil pipelines’ risk 

levels may differ based upon factors 

such as location, size, and business 

model, it is unsurprising that ROEs 

would vary to some degree across the oil 

pipeline industry.248 Contrary to 

Liquids Shippers’ argument, this 

variation does not demonstrate that the 

page 700 ROEs are inaccurate or 

inconsistent with Commission policy. In 

addition, to the extent a particular 

pipeline’s per barrel-mile equity cost 

changes departed substantially from 

industry norms, that pipeline would not 

be among the middle 50% used to 

calculate the index level.249

84. We conclude, moreover, that 

Liquids Shippers’ have not supported 

their argument that the Commission 

should have audited pipelines’ page 700 

workpapers to review their ROE 

calculations. As the December 2020 

Order explains, the Commission does 

not scrutinize the inputs underlying 

individual pipelines’ page 700 data.250

Thus, analyzing individual pipeline 

page 700 workpapers would depart from 

the Commission’s established practice. 

85. Furthermore, we reject Liquids 

Shippers’ claim that the page 700 ROEs 

fail to capture changing market 

conditions because some pipelines 

reported ROE increases from 2014 to 

2019 while other pipelines reported 

ROE decreases. As discussed above, oil 

pipelines have diverse business models 

and risk levels that can cause page 700 

ROEs to vary from pipeline to pipeline. 

Merely because two entities are part of 

the same industry does not dictate that 

they will experience market changes in 

similar ways such that their ROEs will 

shift in the same direction over a given 

five-year period. Accordingly, we are 

not persuaded that the page 700 ROEs 

fail to adequately track changing market 

conditions over the review period 

simply because some pipelines’ ROEs 

increased from 2014 to 2019 while other 

pipelines’ ROEs decreased. 

86. In addition, we remain 

unpersuaded by Liquids Shippers’ 

assertion that pipelines were uncertain 

as to the Commission’s prevailing oil 

pipeline ROE methodology when they 

submitted their 2019 Form No. 6 filings 

in April 2020. Because the Commission 

had not yet revised its longstanding 

policy of determining ROE using only 

the DCF model at the time of those 

filings, the Form No. 6 instructions 

requiring pipelines to complete page 

700 in accordance with the thenapplicable Opinion No. 154–B 

methodology provided pipelines with 

adequate notice of the requirement to 

determine their 2019 ROEs using only 

the DCF model.251 We again conclude 

that the fact that two pipelines (out of 

254 pipelines that submitted Form No. 

6 filings in 2020) later indicated that 

they did not adhere to the page 700 

instructions in developing their ROEs 

does not present sufficient evidence of 

widespread uncertainty regarding the 

Commission’s applicable policy that 

would undermine our confidence in the 

reliability of the data set.252

87. Finally, Liquids Shippers’ 

arguments on rehearing do not refute 

the Commission’s finding that replacing 

reported page 700 ROEs with 

standardized ROEs would improperly 

complicate and prolong the five-year 

review process in violation of EPAct 

1992’s mandate for simplified and 

streamlined ratemaking.253 We are 


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254 Id. 

255CAPP Initial Comments at 2–5. 

256 December 2020 Order, 173 FERC ¶ 61,245 at 

P 52 (quoting 2015 Index Review, 153 FERC 

¶ 61,312 at P 28). 

257 Id. 

258 Id. P 53. 

259 Id. 

260CAPP Request for Rehearing at 24–25. 

261 Id. at 21. CAPP argues that the Commission 

has recognized in other proceedings that negotiated 

rate contracts with shipper volume commitments 

have become more prevalent in the oil pipeline 

industry and serve to transfer risk from the pipeline 

to its shippers and reduce the pipeline’s cost of 

equity. Id. at 23–24 (quoting Enbridge Pipelines (S. 

Lights) LLC, 144 FERC ¶ 61,044, at P 71 n.209 (2013) 

(‘‘[T]here is no disagreement that most of the 

business and financial risks of the Southern Lights 

Pipeline have been transferred to the Committed 

Shippers through the TSAs during their term.’’)). 

Thus, CAPP argues that the impacts of negotiated 

rate contracts upon pipeline risks are a documented 

reality and warrant investigation in the five-year 

review. Id. at 26. 

262 Id. at 22–23. 

263 Id. at 24–25. 

264 Id. at 28. 

265 Id. at 31. 

266 Id. at 31–32. 

267 Id. 

268 Id. at 32. 

269 Id. at 21–22. 

unpersuaded by Liquids Shippers’ claim 

that determining a standardized ROE 

may not require the ‘‘same rigor’’ as 

determining an ROE in a litigated costof-service rate proceeding. Liquids 

Shippers do not describe what this less 

rigorous determination would resemble 

or how it would differ from the ROE 

analysis the Commission performs using 

the Opinion No. 154–B methodology. In 

addition, the fact that Trial Staff 

regularly performs ROE analyses in 

litigated rate proceedings has no bearing 

on whether it would be appropriate or 

feasible for the Commission to do so for 

every pipeline whose page 700 data is 

examined in the five-year review. 

Accordingly, Liquids Shippers do not 

persuasively rebut the Commission’s 

finding that determining a just and 

reasonable ROE on an industry-wide 

basis would be a complex and factintensive inquiry that could require 

considerable time and resources to 

resolve.254 Moreover, we reject as 

irrelevant Liquids Shippers’ comparison 

of their standardized ROE proposal to 

Pipelines’ proposal to adjust the data set 

to remove the effects of the Income Tax 

Policy Change, as we decline on 

rehearing to adopt Pipelines’ proposed 

adjustments. 

E. CAPP’s Argument Regarding 

Negotiated Rate Contracts 

88. CAPP argued in its comments that 

the Commission should quantify the 

effects of negotiated rate contracts upon 

oil pipelines’ reported costs of equity. 

CAPP stated that these contracts 

typically contain provisions such as 

shipper volume commitments that serve 

to transfer risk from the pipeline to its 

shippers and that failing to reflect 

pipelines’ reduced risks in the page 700 

data could improperly inflate the index 

calculation. CAPP recognized that the 

Commission found in the 2015 Index 

Review that the page 700 total cost of 

service would reflect any reduction in 

the pipeline’s risk. However, CAPP 

argued that the page 700 data in this 

proceeding does not indicate whether 

this occurred over the 2014–2019 

period. To provide increased 

transparency, CAPP requested that the 

Commission require pipelines to 

provide shippers with the workpapers 

underlying their page 700 

calculations.255

1. December 2020 Order 

89. The December 2020 Order rejected 

CAPP’s arguments as unpersuasive. 

First, the Commission reiterated its 

conclusion in the 2015 Index Review 

that ‘‘[t]o the extent that volume 

commitments in [negotiated rate] 

agreements have reduced the pipeline’s 

risk, the page 700 total costs of service 

would reflect this reduction in the 

embedded costs of equity and costs of 

debt.’’ 256 The Commission explained 

that these effects would tend to reduce 

pipeline costs and thereby produce a 

lower index level, rendering CAPP’s 

concerns unfounded. The Commission 

further determined that CAPP provided 

no basis for the Commission to conclude 

that the reported page 700 data fails to 

adequately account for pipelines’ risks 

in measuring changes in cost of equity 

and cost of debt.257 Second, the 

Commission found that CAPP had not 

supported its request for the 

Commission to review individual 

pipeline data to evaluate the effects of 

contract rates on the pipeline’s risk.258

In addition, the Commission found that 

such a review would exceed the scope 

of the five-year review and conflict with 

streamlined and simplified 

ratemaking.259

2. Rehearing Request 

90. CAPP challenges the 

Commission’s determination in the 

December 2020 Order in several 

respects. First, CAPP asserts that the 

Commission cited no evidence to 

support its conclusion that reduced 

pipeline risks resulting from negotiated 

rate contracts are embedded in the 

reported page 700 data.260 CAPP argues 

that the December 2020 Order 

acknowledged that differences in risk 

can produce variations in ROE but 

nonetheless declined to investigate 

whether pipelines’ reported page 700 

ROEs appropriately reflect their risks.261

CAPP further states that without 

reviewing the page 700 workpapers, the 

Commission cannot evaluate pipelines’ 

reported capital structures, identify the 

proxy group companies used to 

determine each pipeline’s page 700 

ROE, or evaluate the placement of the 

pipeline’s ROE within the DCF 

results.262 CAPP claims that it would 

not be complicated for the Commission 

to verify whether the reported ROEs 

accurately reflect reduced pipeline 

risks. Thus, CAPP states that its request 

to require pipelines to provide their 

page 700 workpapers is modest.263

91. Second, CAPP asserts that the 

range of the reported page 700 ROEs 

during the 2014–2019 period exceeds 

the range of a reasonable DCF analysis. 

CAPP maintains that this disparity in 

reported ROEs provides a sufficient 

basis for the Commission to investigate 

how pipelines determined these 

figures.264 In addition, CAPP argues that 

the fact that ROEs may vary due to 

differences in proxy group composition 

and relative risk supports its 

proposal.265 Regarding proxy group 

composition, CAPP argues that if a 

pipeline charges contract rates, its page 

700 ROE would only reflect the 

pipeline’s reduced risk if the proxy 

group it uses to perform the DCF 

analysis includes pipelines that also 

charge contract rates.266 Because page 

700 does not disclose the proxy group 

that the pipeline used to determine its 

reported ROE, CAPP argues that the 

Commission should examine the page 

700 workpapers to determine whether 

pipelines construed their DCF proxy 

groups in accordance with Commission 

policy. Along similar lines, CAPP states 

that if the Commission believes that 

variation in reported ROEs results from 

differences in relative risk, the 

Commission should investigate how 

pipelines’ risk levels are affecting their 

page 700 data.267 CAPP states, 

moreover, that credit ratings of oil 

pipelines do not reflect a wide 

divergence of risks.268

92. Third, CAPP objects to the 

Commission’s finding that CAPP 

provided no basis for determining that 

the reported page 700 data fails to 

adequately account for pipelines’ risks. 

CAPP states that because page 700 does 

not include information necessary to 

evaluate the pipeline’s ROE analysis, 

CAPP cannot make this showing 

without access to pipelines’ page 700 

workpapers.269 CAPP states that to the 

extent the December 2020 Order 

suggests that shippers should attempt to 


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270 Id. at 28. 

271 Id. at 33 (citing December 2020 Order, 173 

FERC ¶ 61,245 at P 50). 

272 Id. at 30, 33. 

273 December 2020 Order, 173 FERC ¶ 61,245 at 

P 52 (quoting 2015 Index Review, 153 FERC 

¶ 61,312 at P 28). Reflecting these reduced risks 

would tend to reduce pipeline costs and thereby 

produce a lower index level, rendering CAPP’s 

concerns unfounded. Id. 

274CAPP Request for Rehearing at 28. 

275As discussed above, to the extent a particular 

pipeline’s per barrel-mile equity cost changes 

departed substantially from industry norms, that 

pipeline would not be among the middle 50% used 

to calculate the index level. Moreover, even if a 

pipeline with outlying equity cost changes is 

included in the middle 50%, that pipeline’s cost 

changes would likely not significantly affect the 

central tendency of that 80-pipeline sample. 

Finally, as discussed above, it is not clear from the 

record that the level of a pipeline’s page 700 ROE 

correlates with that pipeline’s annualized cost 

changes such that variations in ROE would 

materially affect the index calculation. See 

Shehadeh Reply Decl. at 18–19. 

276 December 2020 Order, 173 FERC ¶ 61,245 at 

P 52. 

277 Id. P 53. 

278CAPP Initial Comments at 5. 

279Revisions to Indexing Policies and Page 700 of 

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

280 Id. 

281These potential confidentiality concerns relate 

to shipper information protected by section 15(13) 

of the Interstate Commerce Act and the pipeline’s 

competitive business information. Revisions to 

Indexing Policies and Page 700 of FERC Form No. 

6, 157 FERC ¶ 61,047, at P 49 (2016). 

282As discussed above, the proponent of a change 

in Commission policy bears the burden of justifying 

that change. See supra note 129. 

283Negotiated committed shipper contracts only 

incorporate indexing when both the pipeline and 

the committed shippers accept such terms. 2015 

Index Review, 153 FERC ¶ 61,312 at P 49 n.94. 

284To the extent that the index should be 

adjusted in light of the reduced risks associated 

with contract rates, CAPP’s argument would 

support adopting an adder to increase the ROE of 

pipelines that charge contract rates to reflect the 

higher risks faced by pipelines with non-contract 

rates. 

285See Five-Year Review of 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’’). 

286AOPL Request for Rehearing at 2–3; 

Designated Carriers Request for Rehearing at 7–8, 

11. 

287AOPL Request for Rehearing at 2–3; 

Designated Carriers Request for Rehearing at 4, 7; 

see also AOPL Request for Rehearing, Shehadeh 

Aff. at attach. A (listing 38 pipelines that filed 

updated page 700 data for 2014). 

perform DCF analyses of pipelines 

known to charge contract rates and 

compare the results with those 

pipelines’ reported ROEs, it would be 

more efficient for the Commission to 

investigate the reported ROEs as part of 

the five-year review.270

93. Finally, CAPP challenges the 

Commission’s conclusion that 

investigating pipelines’ page 700 ROEs 

would conflict with Commission 

precedent declining to scrutinize the 

inputs underlying individual pipelines’ 

page 700 data.271 CAPP contends that 

this argument is inconsistent with the 

Commission’s decision to adjust MLP 

pipelines’ reported page 700 data to 

remove the effects of the Income Tax 

Policy Change.272

3. Commission Determination 

94. We deny rehearing. First, CAPP 

provides no basis for altering the 

Commission’s conclusion that ‘‘[t]o the 

extent that volume commitments in 

[negotiated rate] agreements have 

reduced the pipeline’s risk, the page 700 

total cost of service would reflect this 

reduction in the embedded costs of 

equity and costs of debt.’’ 273 Although 

CAPP emphasizes that variation in the 

page 700 ROEs indicates that 

‘‘something may be amiss’’ with this 

data,274 we again conclude that such 

variation may result from legitimate 

factors such as differences in proxy 

group composition and relative risk and 

does not demonstrate that the reported 

data is inaccurate or inconsistent with 

Commission policy.275 Accordingly, we 

continue to find that CAPP has not 

substantiated its claim that the reported 

ROEs fail to adequately account for 

pipelines’ risks in measuring changes in 

costs of equity and costs of debt.276

95. Second, in any case, CAPP has not 

rebutted the Commission’s conclusion 

that reviewing individual pipeline data 

would exceed the scope of the five-year 

review and conflict with EPAct 1992’s 

mandates for simplified and streamlined 

ratemaking. The Kahn Methodology 

measures cost changes on a generic, 

industry-wide basis. Thus, in 

calculating the index level, the 

Commission does not scrutinize the 

inputs underlying individual pipelines’ 

page 700 data.277

96. Third, we continue to find that 

CAPP’s request to review individual 

pipeline data to evaluate the effects of 

contract rates upon the pipeline’s risk is 

unsupported. As CAPP 

acknowledges,278 the Commission has 

declined to require pipelines to provide 

workpapers to shippers 279 and 

explained that the dissemination of this 

data would impose considerable 

industry-wide costs upon pipelines 280

and raise potential confidentiality 

concerns.281 CAPP’s arguments do not 

address these issues. Accordingly, we 

continue to find that CAPP has not 

provided a basis for the Commission to 

depart from existing policy to require 

pipelines to provide page 700 

workpapers in the five-year review.282

97. Fourth, we are not persuaded that 

an intensive review of individual 

pipeline page 700 data would be 

appropriate even if the reported ROEs 

for 2014 and 2019 do not fully reflect 

reductions in risk resulting from 

contract rates. As an initial matter, the 

Commission calculates the index level 

based upon pipeline cost changes over 

the prior five-year period, rather than 

pipeline costs at a particular time. Thus, 

to the extent that a pipeline reported an 

ROE that does not reflect the risks it 

faces charging contract rates in both 

2014 and 2019, those errors would tend 

to cancel out without distorting the 

measurement of industry-wide cost 

changes. More broadly, CAPP has not 

demonstrated why the index should 

reflect the lower risks associated with 

contract rates. The five-year review 

calculates the index level used to adjust 

non-contract rates,283 and under CAPP’s 

own argument, pipelines with noncontract rates face higher risks than 

pipelines with contract rates. Thus, we 

are unpersuaded that the page 700 data 

used to calculate the index level should 

reflect the lower risks associated with 

contract rates.284

F. Appropriate Source of 2014 Page 700 

Data 

1. Background 

98. Page 700 includes columns for 

reporting both current-year and 

previous-year summary cost-of-service 

data. Thus, for example, pipelines 

reported cost-of-service data for 2014 in 

their page 700s submitted in April 2015 

(in the current-year column) and in 

April 2016 (in the previous-year 

column). The more recently filed data 

reported in the previous-year column 

often updates the data that was filed in 

the prior year. Accordingly, 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.285

2. Requests for Rehearing and 

Clarification 

99. Pipelines assert that the December 

2020 Order errs by relying upon 

outdated page 700 data for 2014.286

Pipelines state that although 38 

pipelines filed updated 2014 page 700 

data in April 2016, the December 2020 

Order erroneously relied upon those 

pipelines’ originally filed 2014 data as 

reported in April 2015.287 Pipelines 

state that because the December 2020 

Order did not discuss this departure 

from past practice, the use of these 

pipelines’ originally filed data appears 


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288AOPL Request for Rehearing at 3; Designated 

Carriers Request for Rehearing at 7–9. 

289AOPL Request for Rehearing at 1–3. 

Designated Carriers request that the Commission 

clarify that it intended to calculate the index level 

using updated page 700 data for 2014 as reported 

in the previous-year column in page 700 filings 

submitted in April 2016. Designated Carriers 

Request for Rehearing at 1–2, 4–5. If the 

Commission denies this request for clarification, 

Designated Carriers request rehearing of the 

December 2020 Order to the extent that it does not 

rely upon this updated data. Id. 

290E.g., NOI, 171 FERC ¶ 61,239 at Workpapers, 

COSsort Tab, Column C; 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. 

291 Designated Carriers Request for Rehearing at 

18–19. 

292 Id. at 19. 

293 Id. 

294 Id. at 20–21. 

295 Id. at 4–5. 

296 Id. at 12–14, 18–21. 

297Concurrently with this order, the Commission 

is issuing a Notice of Annual Change in the 

Producer Price Index for Finished Goods in Docket 

No. RM93–11–000. Revisions to Oil Pipeline 

Regulations Pursuant to the Energy Policy Act of 

1992, 178 FERC ¶ 61,046 (2022) (Notice). As 

described in the Notice, oil pipelines must 

recompute their ceiling levels for July 1, 2021 

through June 30, 2022 by multiplying their ceiling 

levels for July 1, 2020 through June 30, 2021 by 

0.984288. Id. 

298 18 CFR 342.3(e). The filing requirements of 18 

CFR 342.3(e) are included in the FERC–550 

information collection and approved by the Office 

of Management and Budget (under OMB Control 

No. 1902–0089). 

299Oil pipelines that filed to revise their rates 

effective on or after July 1, 2021 using one of the 

Commission’s alternative ratemaking methodologies 

are not required to recompute their ceiling levels or 

make an interim rate change filing. See id. 

342.3(d)(5) (‘‘When an initial rate, or rate changed 

by a method other than indexing, takes effect during 

the index year, such rate will constitute the 

applicable ceiling level for that index year.’’). 

300 Id. 341.14. 

to have been inadvertent.288 Thus, 

Pipelines request rehearing and/or 

clarification to correct this apparent 

departure from past practice.289

3. Commission Determination 

100. We agree with Pipelines’ 

arguments and grant rehearing to rely 

upon updated page 700 data for 2014, as 

reported in the previous-year column of 

page 700 filings submitted in April 

2016. This adjustment ensures that the 

index calculation reflects the most 

current page 700 data for 2014 and 

accords with the Commission’s prior 

practice of relying upon updated data 

reported in the previous-year column of 

the following year’s Form No. 6, where 

available.290 Accordingly, we grant 

Pipelines’ requests for rehearing and 

clarify that where a pipeline updates its 

page 700 data for the first year of the 

index review period in the previousyear column of the following year’s 

Form No. 6, it is the Commission’s 

policy to calculate the index level using 

that updated data. 

G. Application of Adjustments to 2014 

Page 700 Data 

1. Request for Clarification or Rehearing 

101. Designated Carriers assert that in 

adopting their proposal to eliminate the 

effects of the Income Tax Policy Change 

from the index calculation, the 

December 2020 Order failed to adjust 

the 2014 page 700 data for two MLP 

pipelines, MPLX Ozark Pipe Line LLC 

and Lambda Energy Gathering, LLC.291

Designated Carriers state that neither of 

these pipelines filed Form No. 6 in 2014 

because they formed as a result of 

mergers or acquisitions of MLP 

predecessor entities that occurred 

during the 2014–2019 period.292

However, because these pipelines’ MLP 

predecessor entities filed page 700 data 

for 2014, Designated Carriers assert that 

the Commission should have adjusted 

the predecessor entities’ 2014 page 700 

data to remove the effects of the Income 

Tax Policy Change.293 Designated 

Carriers state that the December 2020 

Order does not explain why the 

Commission did not adjust the 2014 

page 700 data for the predecessor 

entities as it did for all other pipelines 

that were MLPs in 2014.294

102. Thus, Designated Carriers request 

that the Commission clarify that it 

intended to adjust the 2014 page 700 

data of the predecessor entities of MPLX 

Ozark Pipe Line LLC and Lambda 

Energy Gathering, LLC, to eliminate the 

2014 income tax allowance and adjust 

the 2014 return on rate base to reflect 

the removal of ADIT.295 If the 

Commission denies this request for 

clarification, Designated Carriers request 

rehearing of the December 2020 Order to 

the extent that it fails to adopt the 

foregoing adjustments.296

2. Commission Determination 

103. We deny Designated Carriers’ 

request for clarification or rehearing. As 

discussed above, we grant rehearing of 

the December 2020 Order to incorporate 

the effects of the Income Tax Policy 

Change in the index calculation using 

unadjusted page 700 data. Given that we 

do not adopt Pipelines’ proposed 

adjustments to the data set to remove 

the effects of the Income Tax Policy 

Change, we deny Designated Carriers’ 

request to apply those adjustments to 

the predecessor entities of MPLX Ozark 

Pipe Line LLC and Lambda Energy 

Gathering, LLC. 

III. 2021–2026 Oil Pipeline Index 

104. Based upon the foregoing, we 

grant rehearing of the December 2020 

Order, in part, deny rehearing, in part, 

and establish an index level of PPI–FG– 

0.21% for the five-year period beginning 

July 1, 2021. 

IV. Interim Rate Change Filings 

105. Consistent with the 

Commission’s action in this order, oil 

pipelines must recompute their ceiling 

levels and rates to be effective March 1, 

2022. Specifically, pipelines must revise 

the ceiling levels that became effective 

July 1, 2021, to reflect an index level of 

PPI–FG–0.21% instead of the index 

level adopted in the December 2020 

Order.297 Any oil pipeline with a filed 

rate that exceeds its recomputed ceiling 

level must file to reduce that rate to 

bring it into compliance with the 

pipeline’s recomputed ceiling level as 

required by § 342.3(e) of the 

Commission’s regulations.298 We direct 

such pipelines to submit these filings to 

be effective March 1, 2022.299 To the 

extent that pipelines are unable to 

submit these filings 30 days in advance 

of the March 1, 2022 effective date, 

pipelines may seek waiver of the 30-day 

notice requirement.300

The Commission Orders 

(A) The requests for clarification or 

rehearing of the December 2020 Order 

are granted in part and denied in part, 

as discussed in the body of this order. 

(B) Oil pipelines are directed to 

recompute their ceiling levels for July 1, 

2021 through June 30, 2022 based upon 

an index level of PPI–FG–0.21%, as 

discussed in the body of this order. 

(C) Oil pipelines with filed rates that 

exceed their recomputed ceiling levels 

must file to reduce the rate to bring it 

into compliance with the recomputed 

ceiling level to be effective March 1, 

2022, as discussed in the body of this 

order. 

By the Commission. Commissioner Danly 

is concurring in part and dissenting in part 

with a separate statement attached. 

Commissioner Christie is concurring in 

part and dissenting in part with a separate 

statement attached. 


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1 Five-Year Rev. of the Oil Pipeline Index, 173 

FERC ¶ 61,245 (2020) (December 2020 Order). 

2This does not mean that I agree with all of the 

reasoning provided for the aspects of rehearing that 

are denied. Therefore, I concur in the result for the 

parts of the Commission’s decision that deny 

rehearing. 

3 Five-Year Rev. of the Oil Pipeline Index, 178 

FERC ¶ 61,023, at P 2 (2022) (Oil Index Rehearing 

Order). 

4 Inquiry Regarding the Commission’s Policy for 

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

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

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

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 (2020). 

5Oil Index Rehearing Order, 178 FERC ¶ 61,023 

at P 2. 

6See id. PP 43–58. 

7See id. P 43. 

8 December 2020 Order, 173 FERC ¶ 61,245 at P 

26 (explaining that the Commission’s use of ‘‘the 

middle 50% would exclude 48 pipelines from the 

Commission’s review of industry-wide cost changes 

over the 2014–2019 period’’) (citation omitted). 

9Oil Index Rehearing Order, 178 FERC ¶ 61,023 

at P 57 (emphasis added). 

10 2018 Income Tax Policy Statement, 162 FERC 

¶ 61,227 at P 8. 

11My colleagues acknowledge that the ‘‘2018 

Income Tax Policy Statement provided non-binding 

guidance regarding the Commission’s future 

intentions.’’ Order Index Rehearing Order, 178 

FERC ¶ 61,023 at P 21 n.55. 

12See id. P 17 (‘‘The index must reflect the 

Income Tax Policy Change in order to produce just 

and reasonable oil pipeline rates.’’); id. (‘‘Because 

indexing is the Commission’s primary oil pipeline 

ratemaking methodology and because indexed oil 

pipeline rates must be just and reasonable, we 

conclude that the index calculation must now 

address the Income Tax Policy Change.’’); id. P 20 

(‘‘Thus, as the Commission’s Opinion No. 154–B 

methodology evolves, oil pipeline rates adjusted via 

indexing must reflect those changes in order to 

remain just and reasonable.’’). 

13 December 2020 Order, 173 FERC ¶ 61,245 at P 

17 (footnotes omitted). 

14 Id. P 18. 

15 Id. 

16 Id. P 19. 

17See Oil Index Rehearing Order, 178 FERC 

¶ 61,023 at P 101. 

Issued: January 20, 2022. 

Kimberly D. Bose, 

Secretary. 

Department of Energy 

Federal Energy Regulatory Commission 

Five-Year Review of the Oil Pipeline 

Index 

Docket No. RM20–14–001 

(Issued January 20, 2022) 

DANLY, Commissioner, Concurring in 

Part and Dissenting in Part 

1. Today’s order grants rehearing of 

the December 2020 Order,1 in part, 

denies rehearing, in part, and 

establishes an index level of PPI–FG– 

0.21%. My separate statement focuses 

only on the aspects of today’s order that 

depart from the Commission’s December 

2020 Order.2 I dissent from the 

Commission’s decision 3 to grant 

rehearing and depart from the December 

2020 Order by (1) trimming the data set 

to the middle 50% of cost changes, as 

opposed to the middle 80%; 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 balances from their page 700 

summary costs of service (Income Tax 

Policy Change).4 I concur in the 

Commission’s decision to grant 

rehearing for the purpose of correcting 

the index calculation based upon 

updated page 700 cost data for 2014.5

2. We must ask a threshold question 

every time we make a decision: Does the 

Commission have the legal authority to 

do what it is doing? In some cases, the 

Commission, acting within its authority, 

may take any of a number of approaches 

so long as it adequately explains its 

decision under the Administrative 

Procedure Act. In such instances, a 

robust record may provide substantial 

evidence for several legitimate 

approaches and the Commission’s 

ultimate decision then turns on a 

collective judgment call. This is such a 

case. 

3. As an initial matter, I agree that the 

Commission is obligated to ensure that 

the pipelines charge just and reasonable 

rates and I remain convinced that the 

December 2020 Order’s decisions to 

trim the data set to the middle 80% and 

not to incorporate the effects of the 

Income Tax Policy Change would have 

resulted in just and reasonable indexed 

rates. In my view, based on the ample 

record before us, the Commission could 

have sustained that decision in both 

respects. Nothing in parties’ arguments 

on rehearing, or in the record compel 

the Commission to find otherwise. 

4. First, I dissent from the 

Commission’s decision to trim the data 

set to the middle 50% of cost changes 6

and disagree with the Commission’s 

conclusion that ‘‘the record in this 

proceeding does not justify departing 

from the Commission’s established 

practice of calculating the index level 

based solely upon the middle 50%.’’ 7 I 

would have sustained the Commission’s 

decision to trim the data set to the 

middle 80% for the reasons articulated 

in the December 2020 Order: It is 

consistent with the purpose of the 

statute, when possible, to use a ‘‘broader 

sample of data [in order to] enhance the 

Commission’s calculation of the central 

tendency of industry cost experience.’’ 8

I simply do not agree with the 

Commission’s assertion that, in order to 

ensure just and reasonable rates, ‘‘it 

remains necessary to use the middle 

50% to avoid including outlying data.’’ 9

5. Second, I dissent from the 

Commission’s decision to incorporate 

the effects of the Income Tax Policy 

Change. I would have sustained the 

Commission’s decision in the December 

2020 Order to adopt Designated 

Carriers’ proposed adjustment to remove 

the effects of the Income Tax Policy 

Change from the page 700 data used to 

calculate the index. I acknowledge that 

the Commission previously stated that it 

‘‘will incorporate the effects of this 

Revised Policy on industry-wide oil 

pipeline costs in the 2020 five-year 

review of the oil pipeline index 

level.’’ 10 A prior Commission, however, 

cannot bind a future Commission’s 

decisions.11 Further, I disagree with the 

Commission’s repeated statements in 

today’s order that the Commission’s 

decision to incorporate the effects of the 

Income Tax Policy Change in the index 

is required to ensure just and reasonable 

rates.12 In my view, the reasons 

provided in the Commission’s December 

2020 Order remain persuasive, 

including the following: (1) ‘‘The 

purpose of indexing is to allow the 

indexed rate to keep pace with industrywide cost changes, not to reflect 

alterations to the Commission’s Opinion 

No. 154–B cost-of-service 

methodology;’’ 13 (2) ‘‘[t]he index allows 

for incremental rate adjustments to 

enable pipelines to recover normal cost 

changes in future years;’’ 14 (3) the index 

‘‘is not a true-up designed to remedy 

prior over-or under-recoveries in preexisting rates resulting from cost-ofservice policy changes during the prior 

five-year period;’’ 15 and (4) it remains 

unclear ‘‘that the double recovery of 

MLP pipelines’ income tax costs was 

ever incorporated into the index.’’ 16

6. Third, I concur with the 

Commission’s decision to grant 

rehearing to correct the index 

calculation such that it relies on 

updated page 700 cost data for 2014 and 

with the Commission’s clarification that 

‘‘where a pipeline updates its page 700 

data for the first year of the index 

review period in the previous-year 

column of the following year’s Form No. 

6, it is the Commission’s policy to 

calculate the index level using that 

updated data.’’ 17

7. While it would have been better for 

the Commission to reaffirm the 

December 2020 Order as discussed 

above, it is necessary for me to 

acknowledge that the Commission is 

acting in accordance with the law and 

the majority’s decision to reverse parts 


jspears on DSK121TN23PROD with RULES1
4498 Federal Register / Vol. 87, No. 19 / Friday, January 28, 2022 / Rules and Regulations 

1 Five-Year Review of the Oil Pipeline Index, 178 

FERC ¶ 61,023 (2022) (Order). 

2 Id. P 37 & n.9. 

3 December 2020 Order, 173 FERC ¶ 61,245 at P 

16. 

4 Id. PP 16–20. 

of the December 2020 Order will likely 

withstand judicial review. I am 

surprised, however, to see the majority’s 

seeming vitriol over what amounts to a 

judgment call. 

For these reasons, I respectfully concur in 

part and dissent in part. 

lllllllllllllllllllll

James P. Danly, 

Commissioner. 

Department of Energy 

Federal Energy Regulatory Commission 

Five-Year Review of the Oil Pipeline 

Index 

Docket No. RM20–14–001 

(Issued January 20, 2022) 

CHRISTIE, Commissioner, Concurring 

in Part and Dissenting in Part 

1. I concur with most of today’s 

order,1 most significantly the restoration 

of the use of the middle 50% of the data 

set for determining the index. As today’s 

order notes, the December 2020 Order’s 

move to the middle 80% was an 

unjustified departure from the 

Commission’s settled practice of relying 

on the middle 50%.2 Because the 50% 

range represents the established practice 

over the past decade, restoring it is more 

consistent with the principle of 

regulatory certainty than the December 

2020 Order’s reliance on the 80% range 

without sufficient justification. 

2. Consistent with this principle of 

regulatory certainty, however, I dissent 

from the portion of today’s order that 

reverses the determination in the 

December 2020 order declining to 

incorporate the effects of the Income 

Tax Policy Change into the 2020 index 

calculation. In what it described as ‘‘an 

issue of first impression,’’ the 

Commission, in that order, adopted a 

proposal submitted by Designated 

Carriers in response to a previously 

issued NOPR.3 The December 2020 

Order explained the Commission’s 

reasoning.4

3. The Income Tax Policy Change 

presented a unique factual circumstance 

that had yet to be considered by the 

Commission’s indexing policies. It thus 

constitutes a ‘‘one-off.’’ It fell to a 

differently constituted Commission to 

determine whether, and if so how, the 

index calculation must be adjusted to 

address the Income Tax Policy Change. 

That Commission made its decision. I 

was not on the Commission in 

December 2020. If I had been, I may 

have voted for a different treatment of 

the tax issue, but unlike the change of 

the data set range—which disturbed 

without adequate justification an 

established practice—this unique tax 

issue was one in which there were valid 

arguments on both sides. What I or other 

members of this Commission might 

have done, however, if we had been 

given the opportunity in 2020, matters 

much less than what the Commission 

sitting in December 2020 actually did 

do: Namely, consider the pros and cons 

of an issue and make a decision based 

on the arguments and evidence in the 

record. Accordingly, I believe that the 

principle of regulatory certainty argues 

for leaving that ‘‘one-off’’ decision on 

the tax issue alone. 

For these reasons, I respectfully concur in 

part and dissent in part. 

lllllllllllllllllllll

Mark C. Christie, 

Commissioner. 

[FR Doc. 2022–01544 Filed 1–27–22; 8:45 am] 

BILLING CODE 6717–01–P 

DEPARTMENT OF THE INTERIOR 

Office of Surface Mining Reclamation 

and Enforcement 

30 CFR Part 925 

[SATS No. MO–048–FOR; Docket ID: OSM– 

2019–0001; S1D1S SS08011000 SX064A000 

212S180110; S2D2S SS08011000 

SX064A000 21XS501520] 

Missouri Regulatory Program 

AGENCY: Office of Surface Mining 

Reclamation and Enforcement, Interior. 

ACTION: Final rule; approval of 

amendment. 

SUMMARY: We, the Office of Surface 

Mining Reclamation and Enforcement 

(OSMRE), are approving an amendment 

to the Missouri regulatory program 

(Missouri program) under the Surface 

Mining Control and Reclamation Act of 

1977 (SMCRA or the Act). As a result of 

Missouri’s Red Tape Reduction 

Initiative (Executive Order 17–03), 

Missouri proposes amendments and 

rescissions to its Missouri Coal Mining 

Regulations in order to reduce the 

volume of these regulations without 

reducing the program’s requirements. 

Missouri proposed amendments to 

multiple sections of its regulations to 

incorporate by reference the 

corresponding Federal regulations. 

Missouri also proposed to rescind 

multiple sections of its regulations that 

will be incorporated by reference in the 

aforementioned proposed amended 

sections. Missouri intends these 

revisions to its program to remain as 

effective as the Federal regulations. 

DATES: The effective date is February 28, 

2022. 

FOR FURTHER INFORMATION CONTACT: Bill 

Joseph, Chief, Alton Field Division, 

Office of Surface Mining Reclamation 

and Enforcement, 501 Belle Street, Suite 

216, Alton, Illinois 62002. Telephone: 

(618) 463–6463 extension 5109. Email: 

bjoseph@osmre.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background on the Missouri Program 

II. Submission of the Amendment 

III. OSMRE’s Findings 

IV. Summary and Disposition of 

Comments 

V. Statutory and Executive Order 

Reviews 

I. Background on the Missouri Program 

Subject to OSMRE’s oversight, Section 

503(a) of the Act permits a State to 

assume primacy for the regulation of 

surface coal mining and reclamation 

operations on non-Federal and nonIndian lands within its borders by 

demonstrating that its program includes, 

among other things, State laws and 

regulations that govern surface coal 

mining and reclamation operations in 

accordance with the Act and consistent 

with the Federal regulations. See 30 

U.S.C. 1253(a)(1) and (7). 

Based on these criteria, the Secretary 

of the Interior conditionally approved 

the Missouri program effective 

November 21, 1980. You can find 

background information on the Missouri 

program, including the Secretary’s 

findings, the disposition of comments, 

and conditions of approval of the 

Missouri program in the November 21, 

1980, Federal Register (45 FR 77027). 

You can also find later actions 

concerning the Missouri program and 

program amendments at 30 CFR 925.10, 

925.12, 925.15 and 925.16. 

II. Submission of the Amendment 

By letter dated February 8, 2019 

(Administrative Record No. MO–684), 

Missouri sent us an amendment to its 

program under SMCRA (30 U.S.C. 1201 

et seq.) at its own initiative. 

We announced the receipt of the 

proposed amendment in the May 1, 

2019, Federal Register (84 FR 18433). In 

the same document, we opened the 

public comment period and provided an 

opportunity for a public hearing or 

meeting on the adequacy of the 

amendment. We did not hold a public 

hearing or meeting because no one 

requested one. We did not receive any 

public comments on the proposed 


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