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[Federal Register Volume 89, Number 237 (Tuesday, December 10, 2024)]
[Notices]
[Pages 99249-99250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28960]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD22-7-000]

Oil Pipeline Capacity Allocation Issues and Anomalous Conditions

AGENCY: Federal Energy Regulatory Commission.

ACTION: Termination of notice of inquiry proceeding.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
terminating the notice of inquiry (NOI) proceeding considering oil 
pipeline capacity allocation issues that arise under anomalous 
conditions.

DATES: The NOI proceeding is terminated as of December 10, 2024.

FOR FURTHER INFORMATION CONTACT: 
Adrianne Cook (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426. (202) 502-8849. [email protected].
Caitlin Tweed (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426. (202) 502-8073. [email protected].

SUPPLEMENTARY INFORMATION: On February 17, 2022, the Commission issued 
a Notice of Inquiry (NOI) in the captioned proceeding to explore oil 
pipeline capacity allocation issues that arise when anomalous 
conditions affect the demand for oil pipeline capacity and, in 
particular, the availability of pipeline capacity for transporting jet 
fuel to supply airports following the onset of the COVID-19 pandemic. 
The Commission sought comment on what actions, if any, the Commission 
should consider to address those allocation issues.\1\ Specifically, 
the Commission requested comment on: (a) historical examples of 
anomalous conditions; (b) whether current prorationing policies 
sufficiently address anomalous conditions; (c) whether the Commission 
should take actions to mitigate the effects of anomalous conditions; 
and (d) whether secondary market transactions could improve access to 
pipeline capacity during anomalous conditions.\2\
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    \1\ Oil Pipeline Capacity Allocation Issues & Anomalous 
Conditions, 87 FR 10355 (Feb. 24, 2022), 178 FERC ] 61,105 (2022) 
(NOI).
    \2\ Id. P 9, A1-A4.
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    For the reasons set forth below, we exercise our discretion to 
terminate the proceeding in Docket No. AD22-7-000.

I. Background

    As detailed in the NOI,\3\ interstate oil pipelines are regulated 
as common carriers under the Interstate Commerce Act (ICA).\4\ Oil 
pipelines use prorationing to allocate capacity among shippers when 
their total nominations exceed the pipeline's capacity. The Commission 
does not prescribe a particular prorationing methodology but requires 
any such methodology to be consistent with the ICA. As relevant to this 
proceeding, a history-based methodology gives preference to shippers 
with a history of shipping on the pipeline.\5\
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    \3\ Id. P 2.
    \4\ 49 U.S.C. app. 1 (1988).
    \5\ Suncor Mktg. Inc. v. Platte Pipe Line Co., 132 FERC ] 
61,242, at P 25 (2010). In contrast, a pro rata methodology awards 
available capacity to shippers in proportion to their nominations 
each nomination cycle, regardless of how much service, if any, they 
have taken in the past. Id. P 26; see also, NOI, 178 FERC ] 61,105 
at P 4 nn.6-7 (providing simplified examples of pro rata and 
history-based methodologies).
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    The COVID-19 pandemic significantly impacted the demand for oil 
pipeline capacity. In particular, some industry participants raised 
concerns that the demand for jet fuel disproportionately decreased as 
compared with other oil products such as road fuels, which could have 
reduced allocations of capacity to jet fuel transportation on pipelines 
that used a history-based prorationing methodology.\6\ The issue was 
raised formally in two Commission proceedings. First, in May 2021, 
SFPP, L.P. (SFPP) filed a tariff revision proposing a temporary change 
to its prorationing policy that would allow jet fuel shippers to obtain 
access to additional capacity that its tariff reserves for new 
shippers.\7\ Other SFPP shippers protested the proposal, and SFPP 
subsequently withdrew the filing. Second, in August 2021, Airlines \8\ 
filed a request for emergency relief, asking the Commission to direct 
SFPP to prioritize jet fuel shipments on its North Line to the Reno 
terminal serving Reno-Tahoe International Airport to prevent jet fuel 
shortages. The filing was protested, and the Commission denied the 
request for emergency relief because Airlines did not establish that 
the circumstances constituted a public health emergency warranting 
extraordinary relief under section 1(15) of the ICA.\9\
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    \6\ NOI, 178 FERC ] 61,105 at P 7.
    \7\ Docket No. IS21-322-000 (Withdrawn).
    \8\ Airlines include Airlines for America; Airlines Council 
International-North America; American Association of Airport 
Executives; International Air Transport Association; National Air 
Carrier Association; Regional Airline Association; and Southwest 
Airlines Pilots Association.
    \9\ Airlines for Am., 176 FERC ] 61,065, at PP 14-16 (2021).
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II. NOI and Comments

    On February 17, 2022, the Commission issued the NOI seeking 
comments on oil pipeline capacity allocation issues that arise under 
anomalous conditions, and in particular, the availability of pipeline 
capacity for transporting jet fuel to supply airports following the 
onset of the COVID-19 pandemic.\10\ Fifteen commenters--including 
pipelines, Airlines, and non-jet fuel shippers--filed comments in 
response to the NOI.\11\
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    \10\ The Commission sought comment on: (a) pipelines and 
airports where airlines anticipate receiving capacity below their 
anticipated fuel needs; (b) pipelines that were not in prorationing 
over the prior 12 months that would have been in prorationing if jet 
fuel had shipped at 2019 levels; (c) total capacity on pipelines 
that transport jet fuel; (d) how nominations and capacity awarded 
for non-jet fuel products have changed during the COVID-19 pandemic; 
(e) actions the Commission should consider to address concerns 
regarding pipeline capacity to airport destinations; and (f) whether 
expansions on pipelines serving airports would help address jet fuel 
needs. NOI, 178 FERC ] 61,105 at P 9, B1-B7.
    \11\ Comments were filed by: Airlines; the American Fuel & 
Petrochemical Manufacturers (AFPM); Liquid Energy Pipeline 
Association (LEPA) (formerly known as Association of Oil Pipe Lines 
or AOPL); Buckeye Partners, L.P.; the Canadian Association of 
Petroleum Producers (CAPP); Chevron Products Company (a Chevron 
U.S.A. Division), HollyFrontier Refining & Marketing LLC, and Valero 
Marketing and Supply Company (collectively, CHV Shippers); Colonial 
Pipeline Company (Colonial); Enterprise Products Partners L.P. 
(Enterprise); Explorer Pipeline Company (Explorer); ConocoPhillips 
Company, Devon Gas Services, L.P., Marathon Oil Company, Murphy 
Exploration and Production Company-USA, Ovintiv Marketing Inc., and 
Pioneer Natural Resources USA, Inc. (collectively, Liquids Shippers 
Group); Magellan Midstream Partners, L.P. (Magellan); SIGMA: 
America's Leading Fuel Marketers, and the National Association of 
Truckstop Operators (SIGMA/NATSO); QT Fuels Incorporated, Pilot 
Travel Centers LLC, Saratoga Rack Marketing LLC, Southern Counties 
Oil Co. dba SC Fuels, Pro Petroleum LLC, RaceTrac, Inc., and Love's 
Travel Stops & Country Stores, Inc. (collectively Surface 
Transportation Fuel Shippers); and Tallgrass Energy, LP (Tallgrass). 
In addition, the City of Phoenix Aviation Department, a member of 
Airlines through its trade association, filed separate comments.

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[[Page 99250]]

    In general, Airlines contend that existing policies are not suited 
to addressing the conditions created by the COVID-19 pandemic and claim 
that further action is necessary to prevent jet fuel supply 
constraints; Airlines state, however, that industry-wide action is not 
necessary at this time. Airlines state that because the pandemic 
disrupted jet fuel shipping patterns on a sustained yet temporary 
basis, shipper histories adjusted to reflect shippers' temporarily 
reduced demand. Because history-based prorationing policies are 
designed to preserve shippers' relative capacity allocations, Airlines 
argue that jet fuel shippers will be unable to rebuild their shipper 
histories to pre-pandemic levels absent Commission action.\12\ 
Moreover, Airlines contend that shippers cannot rely upon secondary 
market transactions to restore lost shipper histories \13\ and that 
Airlines have limited ability to ship on behalf of others to maintain 
history during periods of reduced demand.\14\ Airlines request that the 
Commission remain receptive to case-specific proposals to resolve 
capacity constraints.\15\
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    \12\ Airlines Initial Comments at 10-11; Airlines Reply Comments 
at 16-17.
    \13\ Airlines Initial Comments at 19-24; Airlines Reply Comments 
at 26-27.
    \14\ Airlines Initial Comments at 9-10; see also Airlines Reply 
Comments at 17-19.
    \15\ E.g., Airlines Initial Comments at 8, 11-12; Airlines Reply 
Comments at 3-4.
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    In addition, Airlines argue that the Commission should consider 
taking three generic actions to address the effects of the COVID-19 
pandemic upon jet fuel capacity allocations. First, Airlines request 
that the Commission confirm that it could exercise authority to direct 
pipelines to reset shipper histories to 2019 levels.\16\ Second, 
Airlines request that the Commission require pipelines to provide data 
from 2019 to the present regarding volumes of products nominated and 
shipped, available pipeline capacity, and months when the pipeline was 
in prorationing.\17\ Third, Airlines request that the Commission take 
action to encourage expansions by emphasizing that pipelines can 
conduct expansions for one product and by increasing the annual 
reporting requirements on Form No. 6.\18\
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    \16\ Airlines Initial Comments at 13-14, 29; Airlines Reply 
Comments at 6-9. Airlines state that for purposes of future 
anomalous conditions, the Commission could direct pipelines to 
freeze shipper histories when it is recognized that anomalous 
conditions are occurring. Airlines Initial Comments at 13.
    \17\ Airlines Initial Comments at 15-19.
    \18\ Id. at 31-32 (citing SFPP, L.P., 169 FERC ] 61,001, at PP 
44-46, 51 (2019); SFPP, L.P., 168 FERC ] 61,058, at P 15 (2019); CHS 
Inc. v. Enter. TE Prods. Pipeline Co., 155 FERC ] 61,178, at P 15 
(2016)); Airlines Reply Comments at 9-10. Airlines request that the 
Commission require pipelines to provide additional information on 
Form No. 6 to aid in identifying where declining to expand capacity 
may reflect an abuse of market power. Airlines Initial Comments at 
33-34.
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    By contrast, pipelines and non-jet fuel shippers urge the 
Commission to take no action.\19\ They argue that existing history-
based prorationing policies sufficiently address the allocation of 
capacity during anomalous conditions. Commenters argue that pipeline 
capacity is finite and that any action to increase the capacity 
allocated to jet fuel shippers will reduce the capacity allocated to 
other products, which could produce fuel shortages, market disruptions, 
and increased costs for consumers.\20\ Commenters contend that this 
result would confer an undue preference upon jet fuel shippers, violate 
pipelines' obligation to provide service upon reasonable request, and 
conflict with Commission precedent.\21\
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    \19\ E.g., LEPA Reply Comments at 2, 5; CHV Shippers Initial 
Comments at 3; Colonial Initial Comments at 1, 3; Enterprise Initial 
Comments at 7; SFPP Reply Comments at 1, 8; SIGMA/NATSO Initial 
Comments at 1, 4; Surface Transportation Fuel Shippers Initial 
Comments at 1, 17, 20, 22.
    \20\ E.g., AOPL Initial Comments at 6-7; Enterprise Initial 
Comments at 2-5, 7; Explorer Comments at 4; SIGMA/NATSO Initial 
Comments at 3; Surface Transportation Fuel Shippers Initial Comments 
at 1, 14; Tallgrass Initial Comments at 3-4.
    \21\ E.g., AFPM Initial Comments at 3; AOPL Initial Comments at 
3-4; Colonial Initial Comments at 2, 15, 18, 20; Magellan Initial 
Comments at 5; CHV Shippers Initial Comments at 4-5 (citing Suncor, 
132 FERC ] 61,242 at P 24); Liquids Shippers Group Initial Comments 
at 3-4 (same); Surface Transportation Fuel Shippers Initial Comments 
at 1-2, 7, 21 (same).
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    Airlines provided data from 2019 through April 2022 related to jet 
fuel pipeline deliveries and jet fuel use at certain airports in order 
to allow the Commission to compare jet fuel deliveries from before the 
COVID-19 pandemic to 2021 and the first half of 2022.\22\
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    \22\ See Airlines Initial Comments, Ex. A and Ex. C; Airlines 
Reply Comments at Ex. A.
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III. Discussion

    At this time and based upon this record, we are not persuaded to 
take further action in this proceeding related to oil pipeline capacity 
allocation issues arising from the COVID-19 pandemic and other 
anomalous conditions. The record provides an insufficient basis for 
initiating industry-wide policy changes. In particular, the record may 
no longer reflect market conditions.\23\ Accordingly, we exercise our 
discretion to terminate the proceeding in Docket No. AD22-7-000.
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    \23\ The most recent actual data in the record is from April 
2022.
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    Although we are not taking further action in this proceeding, we 
are committed to working with pipeline and shipper groups to address 
problems related to oil pipeline capacity constraints and allocation 
issues as they may arise. We continue to monitor and evaluate the 
Commission's policies governing the allocation of oil pipeline 
capacity. Interested entities are encouraged to contact the Commission 
with any concerns regarding the effects of anomalous conditions on oil 
pipeline capacity allocation that may arise in the future.

    By the Commission.

    Issued: December 4, 2024.
Carlos D. Clay,
Acting Deputy Secretary.
[FR Doc. 2024-28960 Filed 12-9-24; 8:45 am]
BILLING CODE 6717-01-P
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