Five-Year Review of the Oil Pipeline Index

DEPARTMENT OF ENERGY <SUBAGY>Federal Energy Regulatory Commission</SUBAGY> <CFR>18 CFR Part 342</CFR> <DEPDOC>[Docket No. RM26-6-000]</DEPDOC> <SUBJECT>Five-Year Review of the Oil Pipeline Index</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Energy Regulatory Commission, Department of Energy. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Federal Energy Regulatory Commission (Commission) invites comments on its proposed index level used to determine annual changes to oil pipeline rate ceilings. The Commission proposes to use the Producer Price Index for Finished Goods (PPI-FG)−1.42% as the index level for the five-year period commencing July 1, 2026. The Commission invites interested persons to submit comments regarding this proposal and any alternative methodologies for calculating the index. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> Initial Comments are due December 24, 2025, and Reply Comments are due January 14, 2026. </DATES> <HD SOURCE="HED">ADDRESSES:</HD> Comments, identified by docket number, may be filed in the following ways. Electronic filing through <E T="03">http://www.ferc.gov,</E> is preferred. • <E T="03">Electronic Filing:</E> Documents must be filed in acceptable native applications and print-to-PDF, but not in scanned or picture format. • For those unable to file electronically, comments may be filed by USPS mail or by hand (including courier) delivery. ○ <E T="03">Mail via U.S. Postal Service Only:</E> Addressed to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE, Washington, DC 20426. ○ <E T="03">Hand (Including Courier) Delivery:</E> Deliver to: Federal Energy Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852. The Comment Procedures Section of this document contains more detailed filing procedures. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Monil Patel (Technical Information), Office of Energy Market Regulation, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8296. <E T="03">Monil.Patel@ferc.gov.</E> Evan Steiner (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8792. <E T="03">Evan.Steiner@ferc.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> 1. The Commission annually applies an index to existing oil pipeline transportation rate ceilings to establish new rate ceiling levels. <SU>1</SU> <FTREF/> The Commission reexamines the index level every five years. <SU>2</SU> <FTREF/> In this notice of proposed rulemaking (NOPR), the Commission invites comments on its proposal to use the Producer Price Index for Finished Goods (PPI-FG)  <SU>3</SU> <FTREF/> minus 1.42% (PPI-FG−1.42%) as the index level for the next five years beginning July 1, 2026. <SU>4</SU> <FTREF/> <FTNT> <SU>1</SU>  Indexing allows oil pipelines to change their tariff rates so long as those rates remain at or below certain ceiling levels. 18 CFR 342.3(a). </FTNT> <FTNT> <SU>2</SU>  The five-year index review process was established in Order No. 561. <E T="03">See Revisions to Oil Pipeline Reguls. Pursuant to the Energy Pol'y Act of 1992,</E> Order No. 561, 58 FR 58753 (Nov. 4, 1993), FERC Stats. & Regs. ¶ 30,985 (1993) (cross-referenced at 65 FERC ¶ 61,109), <E T="03">order on reh'g,</E> Order No. 561-A, 59 FR 40243 (Aug. 8, 1994), FERC Stats. & Regs. ¶ 31,000 (1994) (cross-referenced at 68 FERC ¶ 61,138), <E T="03">aff'd, Ass'n of Oil Pipe Lines</E> v. <E T="03">FERC,</E> 83 F.3d 1424 (D.C. Cir. 1996) ( <E T="03">AOPL I</E> ). </FTNT> <FTNT> <SU>3</SU>  The PPI-FG is determined and issued by the Bureau of Labor Statistics, U.S. Department of Labor. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Attach. A, Ex. 1 tab. </FTNT> 2. As discussed below, interested persons are invited to submit comments regarding the Commission's proposal and any alternative methodologies for calculating the index level. The Commission will finalize the index level at the conclusion of this proceeding. In accordance with 5 U.S.C. 553(b)(4), a summary of this rule may be found at <E T="03">www.regulations.gov</E> by searching for “RIN 1902-AG33.” <HD SOURCE="HD1">I. Background</HD> 3. The Energy Policy Act of 1992 (EPAct 1992) required the Commission to establish a “simplified and generally applicable” ratemaking methodology that was consistent with the just and reasonable standard of the Interstate Commerce Act. <SU>5</SU> <FTREF/> To implement this mandate, the Commission issued Order No. 561 establishing an indexing methodology that allows oil pipelines to change rates based upon an annual index as opposed to making cost-of-service filings. <SU>6</SU> <FTREF/> The use of an industry-wide index avoids expensive and time-consuming proceedings associated with cost-of-service ratemaking and litigation for individual pipelines while still allowing pipelines to efficiently set rates that are commensurate with industry-wide costs. Furthermore, updating the index every five years to reflect oil pipeline industry costs changes helps ensure that rates are just and reasonable for shippers and pipelines. Each year, pipelines adjust their rate ceilings effective July 1 using an index multiplier that the Commission publishes in May based on recent changes in the PPI-FG (a measure of inflation) and the current index level. <SU>7</SU> <FTREF/> <FTNT> <SU>5</SU>  Public Law 102-486, 1801(a), 106 Stat. 2776, 3010 (Oct. 24, 1992), codified at 42 U.S.C. 7172 note. </FTNT> <FTNT> <SU>6</SU>  Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,947. </FTNT> <FTNT> <SU>7</SU>  18 CFR 342.3(d)(1), (2); <E T="03">see also, e.g., Revisions to Oil Pipeline Regulations Pursuant to the Energy Pol'y Act of 1992,</E> 90 FR 21917 (May 22, 2025), 191 FERC ¶ 61,134 (2025) (calculating the index for the July 1, 2025—June 30, 2026, index year using the index level established in the 2020 five-year review). </FTNT> 4. In this proceeding, the Commission is conducting its five-year review of the oil pipeline index level. When the Commission established indexing in Order No. 561, the Commission committed to review the index level every five years to ensure that the index level chosen by the Commission adequately reflects changes to industry costs and to ensure that oil pipeline indexed rates remain just and reasonable. <SU>8</SU> <FTREF/> The Commission explained that its responsibilities under the ICA, to both shippers and pipelines, require monitoring of the relationship between the change in the chosen index level and the actual cost changes experienced by industry. <SU>9</SU> <FTREF/> On appeal of Order No. 561, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) upheld the indexing methodology based in part on the Commission's commitment to undertake regular five-year reviews. the Commission has conducted a review of the index level every five years. <SU>12</SU> <FTREF/> While continuing to use PPI-FG as the basis of the index level, <SU>13</SU> <FTREF/> the Commission has recalibrated the index level each time so that it continued to reflect the relationship between oil pipeline cost changes and PPI-FG. <SU>14</SU> <FTREF/> The generally applicable changes to the oil pipeline index necessarily require notice and comment rulemaking. <SU>15</SU> <FTREF/> <FTNT> <SU>8</SU>   <E T="03">See</E> Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,941 (“To ensure that the operation of the index meets the Commission's responsibility under the ICA to ensure that rates are just and reasonable, the Commission will undertake an examination of the relationship between the annual change in the [PPI-FG-1%] index and the actual cost changes experienced by the oil pipeline industry every five years, beginning in the year 2000 upon the availability of the final index for calendar year 1999.”); <E T="03">id.</E> at 30,947 (“[T]he Commission will review the appropriateness of the index in relation to industry costs every five years, beginning July 1, 2000.”); <E T="03">id.</E> at 30,951 (“[T]o ensure that the change in [PPI-FG-1%] continues to fulfill this objective in the future, the Commission will conduct a periodic review of this index every five years.”); <E T="03">id.</E> at 30,952 (The Commission “will review the choice of the index every 5 years.”); Order No. 561-A, FERC Stats. & Regs. ¶ 31,000 at 31,093 (“To ensure over time that this nexus between the changes in the index and the cost changes experienced by the typical pipeline will be maintained, the Commission will conduct a review of the PPI-FG index every five years, beginning in the year 2000.”); <E T="03">id.</E> at 31,099 (The Commission's decision on the index level “will be reviewed every five years, beginning with the year 2000.”); <E T="03">id.</E> at 31,105 (“The concern . . . that under the indexing system pipeline rates will increasingly diverge from actual pipeline costs . . . has been addressed by the Commission in its structuring of the index system. . . . [U]nder the final rule, every five years beginning in the year 2000, the Commission will examine the relationship between changes in the index (PPI-1) and actual cost changes experienced by the oil pipeline industry.”); <E T="03">see also</E> 49 U.S.C. app. 1(5), 2, 3(1). </FTNT> <FTNT> <SU>9</SU>  Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,952 (“[T]he Commission believes that its responsibilities under the ICA, to both shippers and pipelines, requires monitoring the relationship between the [PPI-FG-1%] and the actual cost changes experienced by the industry. The Commission will ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 51k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━