Notice2024-28960
Oil Pipeline Capacity Allocation Issues and Anomalous Conditions
Primary source
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Published
December 10, 2024
Issuing agencies
Energy DepartmentFederal Energy Regulatory Commission
Abstract
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.
Full Text
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<title>Federal Register, Volume 89 Issue 237 (Tuesday, December 10, 2024)</title>
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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 [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[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. <a href="/cdn-cgi/l/email-protection#642500160d050a0a014a270b0b0f24020116074a030b12"><span class="__cf_email__" data-cfemail="e0a1849289818e8e85cea38f8f8ba086859283ce878f96">[email protected]</span></a>.
Caitlin Tweed (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426. (202) 502-8073. <a href="/cdn-cgi/l/email-protection#ecaf8d8598808582c2b89b898988ac8a899e8fc28b839a"><span class="__cf_email__" data-cfemail="0447656d70686d6a2a507361616044626176672a636b72">[email protected]</span></a>.
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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