Notice2026-03660
Oil Pipeline Affiliate Committed Service
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 24, 2026
Issuing agencies
Energy DepartmentFederal Energy Regulatory Commission
Abstract
The Federal Energy Regulatory Commission (Commission) is withdrawing the proposed policy statement that proposed to revise the Commission's policy for evaluating whether contractual committed transportation service on oil pipelines complies with the Interstate Commerce Act where the only shipper to obtain the contractual committed service is the pipeline's affiliate.
Full Text
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<title>Federal Register, Volume 91 Issue 36 (Tuesday, February 24, 2026)</title>
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[Federal Register Volume 91, Number 36 (Tuesday, February 24, 2026)]
[Notices]
[Pages 8856-8858]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03660]
[[Page 8856]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. PL23-1-000]
Oil Pipeline Affiliate Committed Service
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Withdrawal of proposed policy statement.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
withdrawing the proposed policy statement that proposed to revise the
Commission's policy for evaluating whether contractual committed
transportation service on oil pipelines complies with the Interstate
Commerce Act where the only shipper to obtain the contractual committed
service is the pipeline's affiliate.
DATES: The proposed policy statement published on December 22, 2022 (87
FR 78670) is withdrawn as of February 19, 2026.
FOR FURTHER INFORMATION CONTACT:
Evan Steiner (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426, (202) 502-8792, <a href="/cdn-cgi/l/email-protection#7f3a091e11512c0b1a16111a0d3f191a0d1c51181009"><span class="__cf_email__" data-cfemail="4603302728681532232f282334062023342568212930">[email protected]</span></a>
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#763712041f17181813583519191d361013041558111900"><span class="__cf_email__" data-cfemail="6120051308000f0f044f220e0e0a21070413024f060e17">[email protected]</span></a>
SUPPLEMENTARY INFORMATION:
1. On December 16, 2022, the Commission issued a proposed policy
statement to revise its policy for evaluating whether contractual
committed transportation service on oil pipelines complies with the
Interstate Commerce Act (ICA) \1\ where the only shipper to agree to
the service is the pipeline's affiliate (Affiliate-Only Committed
Service).\2\ For the reasons discussed below, we exercise our
discretion to withdraw the Proposed Policy Statement and terminate this
proceeding.
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\1\ 49 U.S.C. app. 1 et seq.
\2\ Oil Pipeline Affiliate Committed Serv., 87 FR 78670 (Dec.
22, 2022) 181 FERC ] 61,206 (2022) (Proposed Policy Statement).
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I. Background
2. Under the ICA, oil pipelines are common carriers that must
provide transportation service to shippers on reasonable request.\3\
Historically, pipelines have offered transportation service on a walk-
up basis without having contracts with shippers. Since the mid-
1990s,\4\ however, the Commission has approved transportation rates and
terms of service pursuant to long-term contracts with ship-or-pay
obligations. Because committed contract shippers are not similarly
situated to uncommitted shippers, they may receive service as defined
by the contract (contractual committed service) that differs from
uncommitted service.\5\
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\3\ 49 U.S.C. app. 1(4) (``It shall be the duty of every common
carrier subject to this chapter to provide and furnish
transportation upon reasonable request therefor.''); Magellan
Midstream Partners, L.P., 161 FERC ] 61,219, at P 12 (2017)
(Magellan I) (``By definition, a pipeline is a common carrier, and
is bound by the ICA to ship product as long as a reasonable request
for service is made by a shipper . . . .''), order on reh'g &
clarification, 181 FERC ] 61,207 (2022).
\4\ See Express Pipeline P'ship, 76 FERC ] 61,245 (Express I),
reh'g denied, 77 FERC ] 61,188 (1996) (Express II).
\5\ See Express I, 76 FERC at 62,254.
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3. Contractual committed service complies with the ICA's common-
carriage and nondiscrimination requirements when the same rates and
terms are offered in a public open season where all interested shippers
have an equal opportunity to obtain the committed service.\6\ When the
open season results in an arm's-length agreement, the Commission
presumes that the contractual committed service is just and reasonable
and nondiscriminatory.\7\ In these circumstances, the presence of a
nonaffiliated contracting shipper supports a presumption of
reasonableness and nondiscrimination because the Commission assumes
that nonaffiliated shippers are sophisticated parties that can be
relied upon to protect their own interests from those of the
pipeline.\8\
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\6\ See, e.g., Sea-Land Serv., Inc. v. Interstate Commerce
Comm'n, 738 F.2d 1311, 1317 (D.C. Cir. 1984) (``[C]ontract rates can
be accommodated to the principle of nondiscrimination by requiring a
carrier offering such rates to make them available to any shipper
willing and able to meet the contract's terms.''); Enter. Crude
Pipeline LLC, 166 FERC ] 61,224, at P 11 (2019) (``The vital element
of the contracting arrangements . . . has been an open season that
provided all shippers equal opportunity to avail themselves of the
offered capacity.''); Express II, 77 FERC at 61,756.
\7\ E.g., Tesoro High Plains Pipeline Co., 148 FERC ] 61,129, at
P 23 (2014) (``The Commission honors the contract terms entered into
by sophisticated parties that engage in arms-length negotiation.'');
Seaway Crude Pipeline Co., 146 FERC ] 61,151, at P 25 (2014)
(``Absent a compelling reason, it would be improper to second guess
the business and economic decisions made between sophisticated
businesses when entering negotiated rate contracts.'').
\8\ E.g., Targa NGL Pipeline Co., 181 FERC ] 61,210, at P 9
(2022) (citing Sea-Land, 738 F.2d at 1316-17; Express I, 76 FERC at
62,254) (``Where a nonaffiliated shipper agrees to a pipeline's
contract rate, the Commission can presume that the agreement
responds to competitive conditions.'').
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II. Proposed Policy Statement
4. In the Proposed Policy Statement, the Commission stated that
where an open season results in an Affiliate-Only Committed Service,
there may be no arm's-length transaction to support a presumption of
reasonableness and nondiscrimination.\9\ The Commission observed that
parties have raised concerns in various proceedings that pipelines may
afford undue preferences to their affiliates in open seasons for
committed capacity \10\ and expressed concern that the Commission's
present policies may not adequately address these issues to ensure
fairness to nonaffiliated shippers.\11\
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\9\ Proposed Policy Statement, 181 FERC ] 61,206 at PP 5, 7.
\10\ Id. P 6 (citing, e.g., Blue Racer NGL Pipelines, LLC, 162
FERC ] 61,220, at P 16 (2018); N.D. Pipeline Co., 147 FERC ] 61,121,
at P 20 (2014)).
\11\ Id. PP 5-6.
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5. In light of these concerns, the Commission proposed to revise
its policy for evaluating whether an open season resulting in
Affiliate-Only Committed Service is just, reasonable, and not unduly
discriminatory under the ICA. First, the Commission proposed a safe-
harbor mechanism whereby pipelines could demonstrate that Affiliate-
Only Committed Service rates are just, reasonable, and not unduly
discriminatory by showing that the rate offered in the open season was
at or below the cost of service over the full term of the
agreement.\12\ Second, the Commission proposed to evaluate the non-rate
terms in Affiliate-Only Committed Service contracts, such as minimum
volume commitments, minimum term-length requirements, deficiency
provisions, and duty-to-support clauses, to determine whether the terms
were structured to unduly discriminate against nonaffiliates.\13\
[[Page 8857]]
Third, the Commission proposed to adopt a rebuttable presumption that
Affiliate-Only Committed Service is unduly discriminatory and not just
and reasonable where the affiliate, before or shortly after the
contract service begins, remarkets the capacity to nonaffiliated
shippers (Remarketing Presumption).\14\ The Commission requested
comment on these proposals.\15\
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\12\ Id. PP 12-18. The Commission proposed two ways of
satisfying the safe harbor. First, a pipeline could (i) provide
cost-of-service support for the initial rate, (ii) provide in the
contract that adjustments to the rate over the term of the contract
by the pipeline would be pursuant to the Commission's cost-of-
service and indexing regulations, (iii) provide in the contract that
the committed shipper has the right to directly challenge the
committed rate on a cost-of-service basis during the term, and (iv)
provide that whenever the rate is established or changed during the
contract term on a cost-of-service basis, the cost of service will
be set at a 100% load factor (or other reasonable limit). Id. P 14.
Second, a pipeline could (i) provide cost-of-service estimates to
support the contract rate for the entire contract term, (ii) provide
in the contract that the committed shipper may have a one-time right
to challenge the cost-of-service showing made in the pipeline's
initial filing, and (iii) apply a 100% load factor (or other
reasonable limit). Id. P 15.
\13\ Id. P 22. The Commission proposed to consider multiple
factors in evaluating non-rate terms, including whether the term
departs from industry standards, imposes excessive burdens or risk
on nonaffiliates, or does not appear reasonably tailored to further
legitimate business objectives. Id.
\14\ Id. PP 23-24. The Commission stated that where a
nonaffiliate purchases remarketed capacity after an open season, the
fact that no nonaffiliate contracted with the pipeline for the same
capacity in the open season suggests that the contract terms were
not competitive. Id. P 23.
\15\ Id. PP 2, 19-20, 25-27.
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III. Comments
6. There were nine comments filed in response to the Proposed
Policy Statement.\16\ Pipelines oppose the Commission's proposals and
request that the Commission withdraw the Proposed Policy Statement,
while Shippers support the proposals and urge the Commission to expand
the proposed guidance.
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\16\ Comments were filed by: Liquid Energy Pipeline Association
(LEPA); Bridger Pipeline LLC, Energy Transfer LP, and Marathon Pipe
Line LLC (together, Indicated Carriers); DCP Midstream, LP;
Enterprise Products Operating LLC (Enterprise); TC Energy Corp. (TC
Energy); Targa Resources Corp. (Targa); Energy Infrastructure
Council (EIC) (collectively, Pipelines); Airlines for America and
the National Propane Gas Association (together, Joint Commenters);
and Shell Trading (US) Company (Shell) (together with Joint
Commenters, Shippers).
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7. Pipelines state that the fact that a pipeline's affiliate is the
only shipper to agree to a contract does not demonstrate that the
pipeline structured the contract to exclude nonaffiliates.\17\
Pipelines argue that the proposed guidance would conflict with the
regulatory framework of the ICA, which is narrower in scope than the
Federal Power Act (FPA) or Natural Gas Act (NGA).\18\ Pipelines
maintain that adopting the proposed guidance would create regulatory
uncertainty and inhibit infrastructure development by discouraging
affiliate contracts used to support new pipeline projects.\19\
Pipelines further contend that the proposed guidance is unsupported by
sufficient evidence of actual discrimination.\20\ Moreover, Pipelines
state that the Commission's existing policies adequately protect
against affiliate preferences by allowing shippers to file protests or
complaints.\21\
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\17\ E.g., Targa Initial Comments at 5-7, 10-11; DCP Midstream
Initial Comments at 5-6; LEPA Initial Comments at 12-13; Indicated
Carriers Initial Comments at 30-31.
\18\ LEPA Initial Comments at 7-9.
\19\ E.g., id. at 6, 15; Indicated Carriers Initial Comments at
2, 10, 27, 38, 46; Enterprise Initial Comments at 4 & n.17; Targa
Initial Comments at 15-16; TC Energy Initial Comments at 3-5; DCP
Midstream Initial Comments at 2-3; EIC Initial Comments at 1, 3.
\20\ LEPA Initial Comments at 18-20 (citing Nat'l Fuel Gas
Supply Corp. v. FERC, 468 F.3d 831 (D.C. Cir. 2006)); Indicated
Carriers Initial Comments at 12 (citing Associated Gas Distribs. v.
FERC, 824 F.2d 981, 1019-20 (D.C. Cir. 1987)); LEPA Reply Comments
at 3-5; Indicated Carriers Reply Comments at 5-12; Enterprise Reply
Comments at 2-4.
\21\ E.g., Indicated Carriers Initial Comments at 16-19; TC
Energy Initial Comments at 3, 5-6; EIC Reply Comments at 5.
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8. Pipelines contend that the proposed safe harbor would increase
cost-of-service rate litigation in violation of the Energy Policy Act
of 1992 (EPAct 1992) and interfere with the contracting process by
imposing specific contractual terms.\22\ Moreover, Pipelines claim that
the Proposed Policy Statement does not provide meaningful guidance
regarding how the Commission would evaluate non-rate terms.\23\ In
addition, Pipelines state that the Remarketing Presumption is
unsupported because an affiliate's ability to remarket capacity shortly
after an open season does not establish that the pipeline structured
the contract for that capacity to exclude nonaffiliates.\24\
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\22\ E.g., LEPA Initial Comments at 7-9, 11, 15-17, 24-27, 28-
39; Indicated Carriers Initial Comments at 31-33; Enterprise Initial
Comments at 8-9, 16, 23; TC Energy Initial Comments at 4; Targa
Initial Comments at 16-17; EIC Reply Comments at 5.
\23\ LEPA Initial Comments at 28-29; Targa Initial Comments at
17-18.
\24\ E.g., LEPA Initial Comments at 30-32; Indicated Carriers
Initial Comments at 43-44; DCP Midstream Initial Comments at 7;
Enterprise Initial Comments at 20-21. For instance, Pipelines state
that an affiliated shipper may not intend to remarket capacity when
it participates in an open season but later decide to remarket based
on changes in market conditions. LEPA Initial Comments at 30-32.
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9. Shippers contend that the proposed guidance accords with the ICA
by ensuring that Affiliate-Only Committed Service is just, reasonable,
and non-discriminatory. Additionally, Shippers state that the guidance
conforms to EPAct 1992 because it is limited in scope and merely builds
upon the Commission's existing policies.\25\ Shippers dispute
Pipelines' claims that the Commission lacks sufficient evidence to
adopt the proposed guidance,\26\ arguing that it is self-evident that
the absence of arm's-length negotiations between pipelines and
affiliated shippers can facilitate self-dealing.\27\ Furthermore,
Shippers maintain that the Commission's existing protest and complaint
procedures are insufficient because nonaffiliated shippers lack insight
into pipelines' dealings with their affiliates.\28\
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\25\ Joint Commenters Reply Comments at 6-7, 13-14, 21-22; Shell
Reply Comments at 5-6.
\26\ Joint Commenters Reply Comments at 12-16.
\27\ Shell Reply Comments at 12-13.
\28\ Joint Commenters Reply Comments at 4, 16-17; Shell Reply
Comments at 10-11.
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10. Shippers argue that Pipelines' opposition to the safe harbor
and the Remarketing Presumption is misplaced. Shippers contend that the
safe harbor would not interfere with the contracting process because
pipelines would remain free to justify Affiliate-Only Committed Service
rates using other methods.\29\ Shippers urge the Commission to expand
the safe harbor to apply to all contract rates, including those with
nonaffiliates.\30\ In addition, Shippers argue that the Remarketing
Presumption is logical because a nonaffiliated shipper's decision to
obtain capacity from the pipeline's affiliate, rather than directly
from the pipeline in the open season, raises questions regarding the
integrity of the open season.\31\
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\29\ Shell Reply Comments at 19-20.
\30\ Joint Commenters Initial Comments at 2, 17, 19-24.
\31\ Joint Commenters Reply Comments at 26; Shell Reply Comments
at 17, 19-21.
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IV. Discussion
11. Upon review of the comments, we are not persuaded to adopt the
Proposed Policy Statement. Accordingly, we withdraw the Proposed Policy
Statement and terminate this proceeding.
12. As reinforced by the record developed in this proceeding, we
find that the issues discussed in the Proposed Policy Statement are
best considered on a case-by-case basis, rather than through an
industry-wide policy statement.\32\ The record contains insufficient
specific examples of discriminatory open season terms and conditions to
merit an industry-wide policy statement. Moreover, each open season for
committed capacity presents unique circumstances, and there are likely
different ways for pipelines to demonstrate that open seasons that
result in committed service with Affiliate-Only contracts comply with
the ICA. Accordingly, we find it unnecessary to issue an industry-wide
policy statement to provide generic guidance regarding the information
sufficient to demonstrate that Affiliate-Only Committed Service is
just, reasonable, and not unduly discriminatory or preferential.
Although we decline to address this matter on a generic basis, a non-
affiliated shipper may demonstrate in an individual proceeding that a
pipeline's open season terms and conditions result in undue
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discrimination, such as through a demonstration of overly burdensome
terms, whereby only affiliated shippers could contract for the service.
The Commission will address issues related to Affiliate-Only Committed
Service if they arise in individual proceedings. We reiterate that
pipelines proposing to implement Affiliate-Only Committed Service have
the burden to include sufficient information to support a finding that
the Affiliate-Only Committed Service complies with the ICA.\33\
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\32\ See LEPA Initial Comments at 6, 15; Indicated Carriers
Initial Comments at 9, 19; Enterprise Initial Comments at 6-8; EIC
Reply Comments at 5.
\33\ E.g., ONEOK Elk Creek Pipeline, L.L.C., 167 FERC ] 61,277,
at P 4 (2019) (``An oil pipeline bears the burden of demonstrating
that proposed rates and changes to its tariff are just and
reasonable.'').
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13. For these reasons, based on the existing record, we conclude
that issues related to Affiliate-Only Committed Services can be
addressed on a case-by-case basis, rather than through a generic policy
statement. We therefore exercise our discretion to withdraw the
Proposed Policy Statement and terminate this proceeding.
The Commission Orders
The Proposed Policy Statement is hereby withdrawn and Docket No.
PL23-1-000 is hereby terminated.
By the Commission.
Issued: February 19, 2026.
Debbie-Anne A. Reese,
Secretary.
[FR Doc. 2026-03660 Filed 2-23-26; 8:45 am]
BILLING CODE 6717-01-P
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