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Rule2026-08264

Five-Year Review of the Oil Pipeline Index

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Published

April 28, 2026

Effective

June 29, 2026

Issuing agencies

Energy DepartmentFederal Energy Regulatory Commission

Abstract

The Federal Energy Regulatory Commission (Commission) issues this Final Order concluding its five-year review of the index level used to determine annual changes to oil pipeline rate ceilings. The Commission establishes an index level of Producer Price Index for Finished Goods minus 0.55% (PPI-FG-0.55%) for the five-year period beginning July 1, 2026.

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[Federal Register Volume 91, Number 81 (Tuesday, April 28, 2026)]
[Rules and Regulations]
[Pages 22920-22948]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08264]

[[Page 22919]]

Vol. 91

Tuesday,

No. 81

April 28, 2026

Part II

Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 342

Five-Year Review of the Oil Pipeline Index; Final Rule

Federal Register / Vol. 91 , No. 81 / Tuesday, April 28, 2026 / Rules
and Regulations

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 342

[Docket No. RM26-6-000]

Five-Year Review of the Oil Pipeline Index

AGENCY: Federal Energy Regulatory Commission.

ACTION: Order establishing index level.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) issues
this Final Order concluding its five-year review of the index level
used to determine annual changes to oil pipeline rate ceilings. The
Commission establishes an index level of Producer Price Index for
Finished Goods minus 0.55% (PPI-FG-0.55%) for the five-year period
beginning July 1, 2026.

DATES: This order is effective June 29, 2026.

FOR FURTHER INFORMATION CONTACT: Evan Steiner (Legal Information),
Office of the General Counsel, 888 First Street NE, Washington, DC
20426, (202) 502-8792, <a href="/cdn-cgi/l/email-protection#baffccdbd494e9cedfd3d4dfc8fadcdfc8d994ddd5cc">[email&#160;protected]</a>.
Monil Patel (Technical Information), Office of Energy Market
Regulation, 888 First Street NE, Washington, DC 20426, (202) 502-8296,
<a href="/cdn-cgi/l/email-protection#bbf6d4d5d2d795ebdacfded7fbdddec9d895dcd4cd">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:
1. On November 20, 2025, the Commission issued a Notice of Proposed
Rulemaking initiating the five-year review to establish the oil
pipeline index level for the July 1, 2026 to June 30, 2031 period.\1\
The NOPR requested comment regarding its proposal to adopt an index
level of Producer Price Index for Finished Goods minus 1.42% (PPI-FG-
1.42%) and any alternative methodologies for calculating the index
level.\2\
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\1\ Five-Year Rev. of the Oil Pipeline Index, 193 FERC ] 61,145,
at P 6 (2025) (NOPR).
\2\ Id. PP 6-7.
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2. For the reasons discussed below, we adopt an index level of PPI-
FG-0.55%. The departure from the NOPR results from (a) adopting the
Liquid Energy Pipeline Association (LEPA) proposal to adjust the data
set to account for the Commission's 2020 policy change regarding the
determination of the allowed rate of return on equity (ROE) for oil
pipelines and (b) other minor corrections to the data set used to
calculate the index level. As proposed in the NOPR, we continue to (a)
exclude from the data set pipelines' resubmitted cost data for 2019 and
(b) trim the data set to the middle 80% of cost changes. The
Commission's indexing calculations and other data analysis are set
forth in Attachment A to this order. As discussed below, we decline to
adopt the other changes to the index calculation that commenters
propose.

I. Background

A. Establishment of the Indexing Methodology

3. The Energy Policy Act of 1992 (EPAct 1992) required the
Commission to establish a ``simplified and generally applicable''
ratemaking methodology \3\ in accordance with the just-and-reasonable
standard of the Interstate Commerce Act (ICA).\4\ To implement this
mandate, the Commission issued Order No. 561 \5\ and companion
orders,\6\ adopting an indexing methodology that allows oil pipelines
to change their rates subject to certain ceiling levels as opposed to
making cost-of-service filings and mandating annual reporting of
summary cost and throughput data in pipeline annual reports (FERC Form
No. 6, page 700).\7\
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\3\ Public Law 102-86, 1801(a), 106 Stat. 3010 (Oct. 24, 1992),
codified at 42 U.S.C. 7172 note. The mandate to establish a
simplified and generally applicable ratemaking methodology
specifically excluded the Trans-Alaska Pipeline System (TAPS), or
any pipeline delivering oil, directly or indirectly, into TAPS. Id.
1804(2)(B).
\4\ 49 U.S.C. app. 1(5).
\5\ Revisions to Oil Pipeline Reguls. Pursuant to Energy Pol'y
Act of 1992, Order No. 561, 58 FR 58753 (Nov. 4, 1993), FERC Stats.
& Regs. ] 30,985 (1993) (cross-referenced at 65 FERC ] 61,109),
order on reh'g, Order No. 561-A, 59 FR 40243 (Aug. 8, 1994), 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).
\6\ Cost-of-Serv. Reporting & Filing Requirements for Oil
Pipelines, Order No. 571, 59 FR 59137 (Nov. 16, 1994), FERC Stats. &
Regs. ] 31,006 (cross-referenced at 69 FERC ] 61,102), order on
reh'g and clarification, Order No. 571-A, 60 FR 356 (Jan. 4, 1995),
FERC Stats. & Regs. ] 31,012 (1994) (cross-referenced at 69 FERC ]
61,411), aff'd sub nom. AOPL I, 83 F.3d 1424.
\7\ Under indexing, oil pipelines change their rate 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). Pipelines may adjust their rates
to a level that does not exceed the ceiling levels pursuant to the
Commission's regulations so long as no protest or complaint
demonstrates that the index rate change so substantially diverges
from the pipeline's cost changes that the rate is unjust and
unreasonable. Id. 343.2(c)(1).
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4. In Order No. 561, the Commission committed to review the index
level every five years to ensure that it adequately reflects changes to
industry costs.\8\ The Commission conducted five-year index reviews in
2000,\9\ 2005,\10\ 2010,\11\ 2015,\12\ and 2020.\13\ In the 2020
review, the Commission established an index level of PPI-FG + 0.78% for
the five-year period beginning July 1, 2021.\14\ The index level
established herein results from the Commission's sixth five-year review
of the index level.
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\8\ Order No. 561, FERC Stats. & Regs. ] 30,985 at 30,941,
30,947, 30,951; Order No. 561-A, FERC Stats. & Regs. ] 31,000 at
31,093, 31,099, 31,105.
\9\ Five-Year Rev. of Oil Pipeline Pricing Index, 93 FERC ]
61,266 (2000) (2000 Index Review), aff'd in part and remanded sub
nom. Ass'n of Oil Pipe Lines v. FERC, 281 F.3d 239 (D.C. Cir. 2002)
(AOPL II), order on remand, 102 FERC ] 61,195 (2003) (2000 Remand
Order), aff'd sub nom. Flying J Inc. v. FERC, 363 F.3d 495 (D.C.
Cir. 2004).
\10\ Five-Year Rev. of Oil Pipeline Pricing Index, 114 FERC ]
61,293 (2006) (2005 Index Review).
\11\ Five-Year Rev. of Oil Pipeline Pricing Index, 133 FERC ]
61,228 (2010) (2010 Index Review), reh'g denied, 135 FERC ] 61,172
(2011) (2010 Rehearing Order).
\12\ Five-Year Rev. of Oil Pipeline Index, 153 FERC ] 61,312
(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).
\13\ Five-Year Rev. of Oil Pipeline Index, 173 FERC ] 61,245
(2020) (2020 Index Review), order on reh'g, 178 FERC ] 61,023
(January 2022 Rehearing Order), reh'g denied, 179 FERC ] 61,100
(2022), vacated sub nom. Liquid Energy Pipeline Ass'n v. FERC, 109
F.4th 543 (D.C. Cir. 2024) (LEPA v. FERC), order following vacatur,
188 FERC ] 61,173 (2024), order on reh'g, 193 FERC ] 61,137 (2025).
\14\ 2020 Index Review, 173 FERC ] 61,245 at P 9.
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B. Kahn Methodology

5. In Order No. 561 and in each five-year review, the Commission
has calculated the index level using a methodology developed by Dr.
Alfred E. Kahn.\15\ The Kahn Methodology uses summary Opinion No. 154-B
cost-of-service data from Form No. 6, page 700,\16\ from the prior
five-year period to determine an appropriate adjustment to be applied
to PPI-FG. The calculation is as follows. Each pipeline's cost change
is calculated on a per-barrel-mile basis over the previous five-year
period (e.g., the years 2019-2024 in this proceeding). To remove
statistical outliers and potentially spurious data, the resulting data
set is trimmed (e.g., to the middle 80% or middle 50%) by removing an
equal number of pipelines from the top or bottom of the distribution.
The Kahn Methodology then calculates three measures of the trimmed
dataset's central tendency: median, mean, and weighted mean.\17\ The
Kahn

[[Page 22921]]

Methodology calculates (a) a composite central tendency by averaging
the median, mean, and weighted mean and (b) the difference between the
composite central tendency of per-barrel-mile cost changes and the
percentage change in PPI-FG over the prior five-year period.\18\ The
Commission then sets the index level for the next five index years at
PPI-FG plus or minus this differential.
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\15\ The United States Court of Appeals for the District of
Columbia Circuit (D.C. Circuit) has affirmed the Commission's use of
the Kahn Methodology. AOPL I, 83 F.3d at 1433-37; Flying J Inc. v.
FERC, 363 F.3d at 497-500.
\16\ The 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). Every April
18, pipeline companies must file a summary Opinion No. 154-B cost-
of-service on page 700 for each of the prior two years.
\17\ The weighted mean assigns a different weight to each
pipeline's cost change based on the pipeline's total base-year
barrel-miles (e.g., 2019 barrel-miles).
\18\ The Kahn Methodology determines the prospective index level
by comparing pipeline cost changes and changes in inflation (PPI-FG)
over the prior five years. Thus, in this index review, we calculate
the index level that will apply beginning July 1, 2026, based on the
difference between (a) industry-wide cost changes from 2019-2024 and
(b) changes in PPI-FG over the same period. To the extent that the
index adopted herein does not reflect the actual future difference
between changes in PPI-FG and oil pipeline costs during the 2026-
2031 period, those differences will be reflected in future index
reviews.
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C. 2025 Five-Year Review

6. On November 20, 2025, the Commission issued the NOPR initiating
the five-year review to establish the index level for the July 1, 2026
to June 30, 2031 period. The NOPR proposed an index level of PPI-FG--
1.42% and requested comment on this proposal and any alternative
methodologies for calculating the index level.\19\ The Commission
explained that commenters could address issues including, but not
limited to, different data trimming methodologies; whether, and if so
how, the Commission should adjust the data set to address the effects
of the 2020 change in Commission policy for determining oil pipelines'
allowed rate of return on equity (ROE Policy Change); \20\ and whether,
and if so how, the index calculation should incorporate revised cost
data for 2019 submitted by 61 pipelines in April-June 2025.\21\
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\19\ NOPR, 193 FERC ] 61,145 at PP 6-7.
\20\ Inquiry Regarding the Comm'n's Pol'y of Determining Return
on Equity, 171 FERC ] 61,155 (2020) (ROE Policy Statement).
\21\ NOPR, 193 FERC ] 61,145 at P 7.
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II. Commenters

7. Initial comments in response to the NOPR were due on December
24, 2025, and reply comments were due on January 20, 2026.\22\ Pipeline
comments were filed by LEPA, Designated Carriers,\23\ and Kinder
Morgan, Inc. (collectively, Pipelines). Shipper comments were filed by
Joint Commenters,\24\ Liquids Shippers Group (Liquids Shippers),\25\
EPR Shippers,\26\ Shell Trading (US) Company (STUSCO), and the Canadian
Association of Petroleum Producers (CAPP) (collectively, Shippers).
Additional comments were filed by the Energy Infrastructure Council
(EIC), Pipeline Safety Trust, and the U.S. Department of
Transportation, Pipeline and Hazardous Materials Safety Administration
(PHMSA).
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\22\ Pursuant to the NOPR, reply comments were originally due on
January 14, 2026. See id. P 29 (providing that reply comments were
due 51 days after publication of the NOPR in the Federal Register,
which occurred on November 24, 2025). By notice issued January 8,
2026, the Commission granted LEPA's unopposed request to extend the
deadline for reply comments to January 20, 2026.
\23\ Designated Carriers include Buckeye Partners, L.P.,
Colonial Pipeline Company (Colonial), Energy Transfer LP (Energy
Transfer), Enterprise Products Partners L.P. (Enterprise), and
Plains All American Pipeline, L.P. (Plains).
\24\ Joint Commenters include Air Transport Association of
America, Inc., d/b/a Airlines for America, Chevron Products Company,
the National Propane Gas Association, and Valero Marketing and
Supply Company.
\25\ Liquids Shippers include Apache Corporation, Cenovus Energy
Marketing Services Ltd., ConocoPhillips Company, Devon Gas Services,
L.P., Husky Marketing and Supply Company, Occidental Energy
Marketing Inc., Ovintiv Marketing Inc., and Talos Energy Inc.
\26\ EPR Shippers include ExxonMobil Oil Corporation, PennEnergy
Resources, LLC, and Range Resources--Appalachia, LLC.
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8. Commenters discuss numerous issues related to the proposed index
level, including data trimming, addressing the ROE Policy Change,
incorporating resubmitted 2019 cost data, and treatment of pipeline
cost changes attributable to regulatory obligations and other factors.
In addition, to the extent the Commission trims the data set to the
middle 80%, CAPP proposes to determine central tendency using the
geometric mean, rather than the composite central tendency. Commenters
propose varying index levels, including LEPA's proposal to adopt an
index level of at least PPI-FG--0.04%,\27\ Designated Carriers'
proposal of PPI-FG + 0.83%,\28\ Joint Commenters' and Liquids Shippers'
proposals of PPI-FG--1.64%,\29\ and CAPP's proposal of PPI-FG--
1.85%.\30\
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\27\ LEPA Reply Comments at 1-2; see also Kinder Morgan Comments
at 1, 5 (supporting LEPA's comments); EIC Comments at 2, 15-16
(same).
\28\ Designated Carriers Reply Comments at 2.
\29\ Joint Commenters Reply Comments at 1-2; Liquids Shippers
Reply Comments at 2; see also EPR Shippers Reply Comments at 5-6
(supporting Joint Commenters' and CAPP's comments).
\30\ CAPP Reply Comments at 1.
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III. Discussion

9. We adopt an index level of PPI-FG--0.55% for the five-year
period beginning July 1, 2026. As discussed below, we adopt the NOPR's
proposal to calculate the index level using the middle 80% of cost
changes and adopt LEPA's proposed adjustments to the cost data used to
derive the index level to account for the ROE Policy Change .
Consistent with the NOPR, we decline to incorporate resubmitted 2019
cost data filed by 61 pipelines in April-June 2025, and the index level
adopted in this final order relies on pipelines' originally submitted
2019 cost data.\31\ We decline to adopt CAPP's proposal to calculate
the central tendency of the middle 80% using the geometric mean. We
also address arguments regarding pipeline costs resulting from
regulatory obligations and other proposed adjustments to the page 700
data set.
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\31\ For ease of reference, this order refers to ``originally
submitted 2019 cost data'' to distinguish from the more recently
submitted 2019 cost data filed between April-June 2025.
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A. ROE Policy Change

1. NOPR Proposal
10. In the NOPR, the Commission proposed to calculate the index
level without adjusting the 2019 data to reflect the ROE Policy Change
that occurred during the 2019-2024 data period subject to this review.
Whereas the Commission previously relied solely on the discounted cash
flow (DCF) model for determining ROE for oil pipelines pursuant to the
Opinion No. 154-B methodology, the Commission now averages the results
of the DCF and Capital Asset Pricing Model (CAPM) analyses.\32\ During
the 2019-2024 data period at issue in this proceeding, the Commission
adopted the ROE Policy Statement.\33\ Although pipelines filed their
2019 cost data before the ROE Policy Change in 2020 and their 2024 cost
data after the ROE Policy Change, in the NOPR the Commission proposed
not to adjust the data to account for the ROE Policy Change. The
Commission observed that it has never adjusted ROE data as part of a
prior index review. In addition, the Commission expressed concern that
adjusting the data to address the ROE Policy Change would be a complex
endeavor that would conflict with indexing's purpose as a simplified
and streamlined process.\34\ The Commission encouraged commenters to
address whether, and if so, how, it should address the ROE Policy
Change in the index calculation.\35\
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\32\ The DCF and CAPM models are described in the ROE Policy
Statement. ROE Policy Statement, 171 FERC ] 61,155 at PP 18, 28, 50.
\33\ ROE Policy Statement, 171 FERC ] 61,155.
\34\ NOPR, 193 FERC ] 61,145 at P 13.
\35\ Id. P 14.
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2. Comments
11. Pipelines argue that the Commission should adjust the page 700
data to account for the ROE Policy Change. Pipelines contend that this
adjustment is necessary to calculate an

[[Page 22922]]

index level that accurately measures cost changes during the 2019-2024
period and predicts the likely rate of future cost changes.\36\
Pipelines state that the ROE Policy Change did not affect pipelines'
actual equity costs and instead only changed how pipelines report
allowed equity costs on page 700.\37\ Thus, Pipelines contend that the
Commission should adjust the reported cost data to derive an ``apples-
to-apples'' comparison of pipeline costs between 2019 and 2024 under
consistent ratemaking policies.\38\
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\36\ LEPA Initial Comments at 13-15, 17-18; Kinder Morgan
Comments at 3.
\37\ LEPA Initial Comments at 13-15 (citing id., Declaration of
Ramsey D. Shehadeh, Ph.D., at 13 (Shehadeh Initial Decl.));
Designated Carriers Initial Comments at 10.
\38\ LEPA Initial Comments at 15; LEPA Reply Comments at 29;
Designated Carriers Initial Comments at 6; Kinder Morgan Comments at
3.
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12. To account for the ROE Policy Change, LEPA proposes to replace
the ROEs that pipelines reported on page 700 for 2019 under the
Commission's prior policy with revised ROEs that reflect the DCF/CAPM
methodology adopted in the ROE Policy Statement.\39\ Specifically,
LEPA's experts Dr. Shehadeh and Dr. Webb derive a revised 2019 ROE by
averaging the pipeline's originally filed DCF ROE for 2019 with an
8.30% CAPM return.\40\ They calculate the 8.30% CAPM return using the
proxy group that the Commission adopted in Opinion No. 586, modifying
the calculation the Commission adopted in Opinion No. 586 to use
financial data for the six-month period ending December 31, 2019,
rather than the six-month period ending February 29, 2020.\41\ LEPA's
experts explain that the revised ROEs must be flowed through the
remainder of each pipeline's page 700 summary cost of service in order
to derive a total cost of service that can be used in the index
calculation. Accordingly, LEPA's experts use each pipeline's revised
2019 ROE to adjust their originally reported page 700 allowed return on
rate base and income tax allowances for 2019. LEPA's experts then use
these adjusted figures to compute a revised 2019 total cost of service
for use in the index calculation.\42\
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\39\ LEPA Initial Comments at 13-14.
\40\ Id. at 17; Shehadeh Initial Decl., App. A Sec. II.C.
\41\ LEPA Initial Comments, Declaration of Dr. Michael J. Webb,
at PP 13-14 (Webb LEPA Decl.).
\42\ Shehadeh Initial Decl., App. A Sec. II.C.
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13. LEPA contends that its proposed adjustments are consistent with
Commission precedent and the purpose of indexing. LEPA states that the
index aims to track actual changes in industry-wide recoverable costs,
not changes to the costs that the Commission allows or deems
recoverable under the Opinion No. 154-B methodology.\43\ According to
LEPA, its proposal would restore consistency to the page 700 ROE data
using a straightforward adjustment that conforms with EPAct 1992's
mandate for simplified ratemaking.\44\ Pipelines observe that in the
2020 Index Review, the Commission similarly adjusted the page 700 data
to account for the Commission's 2018 income tax policy change for
Master Limited Partnership (MLP)-owned pipelines (Income Tax Policy
Change).\45\ Although the Commission rejected a proposal in the 2020
Index Review to replace pipelines' reported ROEs with standardized
ROEs,\46\ LEPA argues that its proposed adjustments are distinguishable
because they ensure that the page 700 data reflects consistent policies
following the ROE Policy Change.\47\
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\43\ LEPA Initial Comments at 18 (citing 2020 Index Review, 173
FERC ] 61,245 at P 17 n.31).
\44\ Id. at 17; LEPA Reply Comments at 26-27.
\45\ LEPA Initial Comments at 14; LEPA Reply Comments at 23-24
(citing 2020 Index Review, 173 FERC ] 61,245 at P 16); EIC Comments
at 19-20. While the Commission issued a supplemental notice of
proposed rulemaking (Supplemental NOPR) in October 2024 proposing to
recalculate the index level using unadjusted data that reflected the
effects of the Income Tax Policy Change, see Suppl. Rev. of Oil
Pipeline Index Level, 189 FERC ] 61,030 (2024), LEPA argues that
this proposal has no legal force because the Commission subsequently
withdrew the Supplemental NOPR. LEPA Reply Comments at 23; see also
Suppl. Rev. of Oil Pipeline Index Level, 193 FERC ] 61,136 (2025)
(Supplemental NOPR Withdrawal) (withdrawing Supplemental NOPR).
\46\ 2020 Index Review, 173 FERC ] 61,245 at PP 45-50.
\47\ LEPA Initial Comments at 17-18; LEPA Reply Comments at 23.
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14. Shippers oppose LEPA's proposed adjustments and urge the
Commission to adopt the NOPR's proposal to use unadjusted data that
incorporates the effects of the ROE Policy Change. Shippers argue that
the index aims to reflect changes in costs recoverable under the
Commission's Opinion No. 154-B methodology.\48\ Shippers contend that
because the ROE Policy Change altered the equity costs that pipelines
can recover under Opinion No. 154-B, the index should reflect the
policy change's effects.\49\ Shippers state that excluding the ROE
Policy Change from the index calculation would cause pipelines' indexed
rates to diverge from the costs recoverable under Opinion No. 154-
B.\50\
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\48\ Joint Commenters Initial Comments at 44-45 (citing AOPL
III, 876 F.3d at 345-46; 2015 Index Review, 153 FERC ] 61,312 at P
13); Liquids Shippers Reply Comments at 9.
\49\ E.g., Joint Commenters Initial Comments at 44-46; Joint
Commenters Reply Comments at 17. Shippers contend that changes to
costs recoverable under Opinion No. 154-B represent ``actual'' cost
changes that should be captured in the index calculation. Joint
Commenters Initial Comments at 45; Joint Commenters Reply Comments
at 16.
\50\ Joint Commenters Reply Comments at 19; Liquids Shippers
Reply Comments at 10 (citing Reply Aff. of Elizabeth H. Crowe at 6,
8 (Crowe Reply Aff.)).
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15. Shippers further argue that LEPA's adjustments would distort
the index calculation by overstating pipeline cost changes during the
2019-2024 period. CAPP states that LEPA's proposed CAPM ROE for 2019 is
20% lower than the DCF ROEs that 82% of pipelines reported for.\51\
Thus, Shippers argue that using LEPA's ROE proposal would inflate the
measure of industry-wide cost changes between 2019-2024 by establishing
a lower cost baseline for 2019.\52\ Joint Commenters contend that this
outcome creates inconsistencies with the data used in the 2020 Index
Review and undermines the index as a measure of historical cost
changes.\53\
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\51\ CAPP Reply Comments, Christensen Associates Reply Report at
8-9 (Christensen Reply Report) (stating that 176 of 215 pipelines
that filed page 700 data for 2019 reported ROEs above 10.3%).
\52\ See Joint Commenters Reply Comments at 24-25; CAPP Reply
Comments, Christensen Reply Report at 8.
\53\ Joint Commenters Reply Comments at 24-25 (citing id.,
Brattle Group Reply Report at PP 85-87 (Brattle Reply Report)).
Specifically, Joint Commenters state that when using unadjusted page
700 data and trimming to the middle 80%, industry-wide costs
increased by 6.7% from 2014-2019 and by 18.1% from 2019-2024, for a
cumulative increase of 24.8% between 2014-2024. Id. at 25 (citing
Brattle Reply Report at P 87). However, Joint Commenters state that
adopting LEPA's adjustments to the 2019 data in this proceeding
would erroneously imply that industry-wide costs increased by 24.7%
from 2019-2024, inflating the measure of cumulative cost changes
from 2014-2024 to 33.1%. Id. (citing Brattle Reply Report at P 87).
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16. In addition, Shippers contend that removing the effects of the
ROE Policy Change would complicate the five-year review process in
violation of EPAct 1992's mandates for simplified and streamlined
ratemaking.\54\ For instance, Liquids Shippers state that LEPA's
proposal would involve both (a) replacing the pipeline's reported page
700 ROEs with a revised ROE and (b) using the revised ROE to determine
an adjusted total cost of service for each pipeline.\55\ Liquids
Shippers state that these calculations are significantly more complex
than the data adjustments adopted in the 2020 Index Review to address
the Income Tax Policy Change.\56\ Additionally, Joint Commenters state
that if the Commission omits the effects of the

[[Page 22923]]

ROE Policy Change from the index calculation, the only alternative
method of reflecting the policy change in rates would be through
burdensome cost-of-service litigation.\57\
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\54\ Joint Commenters Initial Comments at 48 (citing 2020 Index
Review, 173 FERC ] 61,245 at P 50); EPR Shippers Initial Comments at
13-14 (same); STUSCO Initial Comments at 9; STUSCO Reply Comments at
8.
\55\ Liquids Shippers Reply Comments at 8 (citing Shehadeh
Initial Decl. at 20).
\56\ Id. at 8-9 (citing Crowe Reply Aff. 5).
\57\ Joint Commenters Initial Comments at 48 (citing id.,
Brattle Group Report at P 162 (Brattle Initial Report)).
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17. Shippers argue, moreover, that adopting LEPA's adjustments
would depart from Commission precedent. Shippers emphasize that the
Commission has never previously adjusted ROE data in an index review
and specifically declined to replace pipelines' reported ROEs in the
2020 Index Review.\58\ Although the Commission adjusted the data set in
the 2020 Index Review to address the Income Tax Policy Change, Shippers
argue that the Commission has since expressed concerns with this
decision because it departed from the Commission's longstanding
practice of using unadjusted data.\59\ Joint Commenters state that
adjusting the reported data to exclude the ROE Policy Change would
conflict with the Commission's treatment of a 2005 accounting order in
the 2010 Index Review.\60\ Moreover, Joint Commenters contend that
adjusting 2019 ROEs to reflect a 2020 policy change would conflict with
the Commission's method for evaluating whether rates remain
grandfathered under EPAct 1992, which measures cost of equity in prior
periods using the methodology then in effect.\61\
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\58\ E.g., EPR Shippers Initial Comments at 13-14 (citing NOPR,
193 FERC ] 61,145 at P 13; 2020 Index Review, 173 FERC ] 61,245 at P
50); Joint Commenters Reply Comments at 20-21 (citing 2020 Index
Review, 173 FERC ] 61,245 at P 49); CAPP Reply Comments at 3.
\59\ STUSCO Initial Comments at 10 (citing Supplemental NOPR,
189 FERC ] 61,030 at P 28). Shippers acknowledge that the Commission
has withdrawn the Supplemental NOPR that proposed to recalculate the
index level adopted in the 2020 Index Review using unadjusted data
that incorporates the Income Tax Policy Change. However, STUSCO
states that the Commission withdrew this proposal for prudential
reasons without endorsing the 2020 Index Review's reasoning for
adjusting the reported data. Id. (citing Supplemental NOPR
Withdrawal, 193 FERC ] 61,136 at PP 31-33).
\60\ Joint Commenters state that although the Commission revised
its policies governing the accounting treatment of integrity
management costs in 2005, it calculated the index level in the 2010
Index Review using unadjusted Form No. 6 data that reflected both
the previous and revised accounting policies. Joint Commenters
Initial Comments at 47 (citing 2010 Index Review, 133 FERC ] 61,228
at PP 120, 125; Jurisdictional Pub. Utils. & Licensees, 111 FERC ]
61,501 (2005) (2005 Accounting Order)).
\61\ Id. at 45 (citing Tesoro Refin. & Mktg. Co. v. Calnev Pipe
Line LLC, 134 FERC ] 61,214, at P 68 (2011)); Joint Commenters Reply
Comments at 18 (same).
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18. Furthermore, Shippers argue that LEPA's adjustments suffer from
methodological flaws. Shippers contend that using a single CAPM result
for all pipelines in the data sample is improper because pipelines'
ROEs can vary based upon differences in risk.\62\ Similarly, Shippers
state that it is unclear whether LEPA's proposed CAPM ROE and the
pipeline's originally filed DCF ROE reflect the same proxy group \63\
or whether LEPA's proposed CAPM analysis conforms with the CAPM
analyses that pipelines used in reporting their 2024 ROEs.\64\ CAPP
states that averaging LEPA's proposed CAPM return with pipelines'
originally filed 2019 ROEs produces a weighted average cost of equity
of 9.61%, which is less than the industry-wide cost of equity for every
year since 2013.\65\ CAPP further states that whereas LEPA's proposal
implies that industry-wide ROEs increased from 2019-2024, a DCF
analysis of LEPA's proxy group used to determine its ROEs shows that
ROEs declined over this period.\66\
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\62\ Joint Commenters Reply Comments at 20-21 (citing 2020 Index
Review, 173 FERC ] 61,245 at P 49); CAPP Reply Comments, Christensen
Reply Report at 6-7 (citing ROE Policy Statement, 171 FERC ] 61,155
at P 6).
\63\ Joint Commenters Reply Comments at 20, 23 (citing ROE
Policy Statement, 171 FERC ] 61,155 at PP 58-66) (arguing that the
Commission's policy contemplates using a single proxy group to
determine a pipeline's ROE). CAPP further argues that Dr. Webb
improperly applies size premium adjustments to the members of his
CAPM proxy group based upon their size relative to the companies in
the S&P 500, rather than their size relative to other pipelines in
the page 700 data set. CAPP Reply Comments, Christensen Reply Report
at 7-8.
\64\ CAPP Reply Comments, Christensen Reply Report at 10.
\65\ Id. at 9.
\66\ Id. at 9-10 (stating that DCF ROEs declined from 12.53% in
2019 to 11.32% in 2024).
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19. Shippers claim, moreover, that Dr. Shehadeh committed several
errors in applying LEPA's proposed adjustments.\67\ For example, Joint
Commenters state that Dr. Shehadeh proposes to adjust the 2019 data for
pipelines that reported identical ROEs throughout the 2019-2024 period,
even though the ROE Policy Change did not affect those pipelines' page
700 reporting.\68\
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\67\ Joint Commenters Reply Comments at 23-24 (citing Brattle
Reply Report at PP 110-111) (arguing that LEPA erred by (a)
adjusting Mustang Pipe Line LLC's (Mustang) 2019 ROE, which was
already revised to reflect the DCF/CAPM methodology, (b) averaging
its 8.30% CAPM result, which reflects a full year of operations,
with Enterprise Crude Pipeline LLC's (Enterprise Crude) reported
5.43% DCF ROE for 2019, which reflects only six months of
operations, (c) applying its adjustments to Total Petrochemicals
Pipeline USA, Inc. (Total), which reported a negative rate base in
2019, and (d) averaging its CAPM ROE with Bridger Pipeline LLC's
(Bridger) original 2019 ROE, which a Commission audit report found
was not determined using the DCF methodology).
\68\ Id. (citing Brattle Reply Report at PP 108-109) (observing
that Dr. Shehadeh proposes to adjust Colonial Pipeline Company's and
CITGO Pipeline Company's original page 700 ROEs for 2019
notwithstanding that those pipelines reported consistent ROEs for
every year between 2019-2024).
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3. Commission Determination
20. After consideration and upon review of the comments, we modify
our proposal in the NOPR and find that it is reasonable to adjust the
page 700 data set to account for the ROE Policy Change in 2020.\69\ As
such, in calculating the index level, we average each pipeline's
originally reported ROE for 2019 with the 8.30% CAPM ROE proposed by
LEPA.\70\ As further explained below, however, for those pipelines that
filed identical ROEs throughout the 2019-2024 period, we find it
reasonable to use the ROE reported on page 700 for both 2019 and 2024
without adjustment given that the ROE Policy Change did not affect how
the pipeline reported its ROE. In addition, we find it reasonable to
apply LEPA's proposed corresponding adjustments to pipelines' original
2019 income tax allowance, return on rate base, and total cost of
service in calculating the index level.\71\
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\69\ E.g., Vanda Pharms., Inc. v. Ctrs. for Medicare & Medicaid
Servs., 98 F.4th 483, 498 (4th Cir. 2024) (``The notice-and-comment
procedure is designed so that an agency can float a potential rule
to the public without committing itself to enacting the proposed
rule's content.''); see also FCC v. Fox Television Stations, Inc.,
556 U.S. 502, 515 (2009).
\70\ As discussed in section III.B, we decline to use the
resubmitted 2019 cost data that 61 pipelines filed in 2025 to
calculate the index level. Accordingly, we apply the same
adjustments to the data for those 61 pipelines as to the rest of the
data set, as discussed in this section.
\71\ Shehadeh Initial Decl. at 49-50.
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21. We find that adjusting the data used to calculate the index
level to account for the ROE Policy Change is consistent with the
Commission's findings addressing changes to the Opinion No. 154-B
methodology in the most recent 2020 Index Review.\72\ In that
proceeding, the Commission adjusted pipelines' reported cost data for
2014 to account for the Income Tax Policy Change,\73\ which altered the
Opinion No. 154-B methodology by requiring MLP pipelines to eliminate
the income tax allowance and previously accrued Accumulated Deferred
Income Taxes balances from their page 700 summary costs of service.\74\
Consistent with the NOPR, we

[[Page 22924]]

have considered these issues anew,\75\ and we continue to find the
reasoning in the 2020 Index Review persuasive and applicable here.
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\72\ When addressing this issue for the first time in the 2020
Index Review, the Commission adjusted the reported page 700 data for
2014 to account for the Income Tax Policy Change. 2020 Index Review,
173 FERC ] 61,245 at PP 16-20.
\73\ 2020 Index Review, 173 FERC ] 61,245 at PP 16-20.
\74\ Inquiry Regarding the Comm'n's Pol'y for Recovery of Income
Tax Costs, 162 FERC ] 61,227, at PP 8, 45-46 (2018).
\75\ NOPR, 193 FERC ] 61,145 at P 14 n.32.
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22. First, we conclude that the adjustments to the data to account
for the ROE Policy Change are necessary to calculate an index level
that accurately tracks actual industry-wide cost changes. As the
Commission explained in the 2020 Index Review, although the Commission
calculates the index level using Opinion No. 154-B cost data reported
on FERC Form No. 6, page 700, changes to the Opinion No. 154-B
methodology are distinct from pipelines' actual annual cost
changes.\76\ Thus, where the Commission modifies an Opinion No. 154-B
cost-of-service policy used to measure recoverable costs partway
through the five-year review period, the Opinion No. 154-B costs of
service reported on page 700 for the first and last years of the period
will reflect different sets of policies.\77\ Here, because the
Commission adopted the ROE Policy Change in 2020, pipelines reported
cost data for 2019 and 2024 using different ROE methodologies.
Accordingly, adjusting the data set to account for the policy change
enhances the index calculation by allowing an ``apples-to-apples''
comparison of pipeline cost data measured using a single set of Opinion
No. 154-B cost-of-service policies.\78\ By contrast, using data that
reflect one set of Opinion No. 154-B policies for 2019 and another for
2024 provides a less accurate measure of pipelines' actual cost
changes.
---------------------------------------------------------------------------

\76\ 2020 Index Review, 173 FERC ] 61,245 at P 17.
\77\ Id.
\78\ Id. (``Just as a business must account for changes to its
accounting policies when comparing its costs over two different
periods, we must make a similar adjustment to the reported page 700
data . . . to derive an `apples-to-apples' comparison of pipeline
cost changes.'').
---------------------------------------------------------------------------

23. Second, we conclude that it would be improper for the
Commission to use unadjusted cost data that captures the downward
effects of the ROE Policy Change on industry-wide page 700 costs. As
the Commission stated in the 2020 Index Review, indexing allows for
incremental rate adjustments to allow pipelines to recover normal cost
changes in future years.\79\ The index should not function as a vehicle
for incorporating into rates cost-of-service policy changes that
occurred during the prior five-year period.\80\ Thus, we find that it
is reasonable to calculate the index level using adjusted 2019 cost
data that reflects the same ROE methodology as the 2024 cost data.
---------------------------------------------------------------------------

\79\ Id. P 18.
\80\ Id.; see also Order No. 561, FERC Stats. & Regs. ] 30,985
at 30,950 (explaining that indexing ``merely preserves the value of
just and reasonable rates in real economic terms'' by allowing
pipelines to implement inflation-based adjustments ``to preserve
[rates'] real value in real terms'').
---------------------------------------------------------------------------

24. We also find that LEPA's proposed approach for modifying the
2019 cost data to account for the ROE Policy Change is reasonable based
on the record. LEPA's calculation of an 8.30% CAPM return is consistent
with the Commission's application of the ROE Policy Statement in
Opinion No. 586. In addition, averaging LEPA's calculated 8.30% CAPM
return with pipelines' originally filed DCF-based ROEs produces cost
data that is more consistent with the ROE Policy Statement for purposes
of calculating the index level. Furthermore, because ROE is an input
used to determine income tax allowance, return on rate base, and total
cost of service, adjusting pipelines' 2019 ROE data necessitates
corresponding adjustments to pipelines' originally reported income tax
allowances, returns on rate base, and total costs of service for 2019
to fully address the effects of the ROE Policy Change in calculating
the index level.
25. However, we decline to adopt LEPA's proposal to adjust the 2019
cost data for pipelines that reported an identical ROE for each year of
the 2019-2024 period.\81\ We agree with Joint Commenters that in these
circumstances, the ROE Policy Change does not appear to have affected
how the pipeline reported its ROE on page 700, and it is not clear that
each of these pipeline's 2019 data reflect different Opinion No. 154-B
policies than their 2024 data. Thus, because the ROE Policy Change did
not render those pipelines' 2019 data inconsistent with their 2024
data, it is unnecessary to adjust their 2019 data to address the policy
change's effects.
---------------------------------------------------------------------------

\81\ See Attach. A at Ex. 8 tab (listing 20 pipelines that filed
a single ROE value for the full 2019-2024 period).
---------------------------------------------------------------------------

26. We are unpersuaded by Shippers' arguments against adjusting the
2019 cost data to account for the ROE Policy Change. We disagree with
Shippers' claims that adjusting pipelines' 2019 page 700 ROEs using
LEPA's CAPM result will inflate the index level. To the extent that
pipelines' adjusted 2019 ROEs reflecting the updated combined DCF/CAPM
methodology fall below their originally reported 2019 ROEs reflecting
the prior DCF-only methodology,\82\ this does not establish that
adjusting 2019 cost data will distort the index calculation. To the
contrary, as discussed above, this approach better accounts for actual
industry-wide cost changes during the 2019-2024 period by measuring
pipeline costs in 2019 and 2024 using the same set of ratemaking
policies. We are likewise unconvinced by Joint Commenters' argument
that using 2019 data in this index review that differs from the 2019
data used in the 2020 review will produce a distorted measure of
pipeline cost changes from 2014-2024.\83\ Our task in this proceeding
is to calculate the index based upon pipeline cost changes from 2019-
2024,\84\ and following the ROE Policy Change, comparing pipelines'
2024 cost data (which reflects the updated ROE methodology) with the
unadjusted 2019 data considered in the 2020 Index Review (which
reflects the prior ROE methodology) would result in an inaccurate
measure of industry cost changes.
---------------------------------------------------------------------------

\82\ See Joint Commenters Reply Comments at 24-25; CAPP Reply
Comments, Christensen Reply Report at 8-9.
\83\ Joint Commenters Reply Comments at 24-25 (citing Brattle
Reply Report at PP 85-87). The dissent refers to this concern as a
``stitching problem.'' We note that the Commission's prior index
published in 2020 contained a similar ``stitching problem'' caused
by the adjustments to account for the Income Tax Policy Change. The
Commission treats each five-year period as an independent study
period, and within this framework accounts for actual changes in
costs, which in these cases required adjustments that lead to the
effect noted here.
\84\ We adjust pipelines' previously reported 2019 cost data in
this proceeding for the limited purpose of measuring industry-wide
cost changes from 2019-2024 to calculate the index level that will
apply beginning July 1, 2026. The data adjustments adopted herein do
not apply for any purpose beyond the index calculation performed in
this proceeding.
---------------------------------------------------------------------------

27. Similarly unavailing is Shippers' argument that adjusting the
data set used to calculate the index level to address the ROE Policy
Change would complicate the five-year review process in violation of
EPAct 1992. To the contrary, the adjustments adopted herein provide a
straightforward solution to the page 700 data inconsistencies resulting
from the ROE Policy Change. We acknowledge Liquids Shippers' claim that
these adjustments are more complex than the data adjustments addressing
the Income Tax Policy Change in the 2020 Index Review.\85\ However, any
additional complexity relative to the Income Tax Policy Change that
occurred during the 2020 Index Review period does not dissuade us from
adjusting the data to reflect the ROE Policy Change. Although we
recognize that any changes to the reported page 700 data introduce a
degree of additional complexity, we conclude that the benefits of more
accurately measuring actual industry cost changes during the five-year
review period by using consistent ratemaking

[[Page 22925]]

policies support adjusting the reported data notwithstanding these
concerns. Along similar lines, while Joint Commenters contend that
omitting the effects of the ROE Policy Change from the index will
increase cost-of-service litigation,\86\ this argument rests on
speculation and, in any case, does not justify leaving the data
inconsistencies resulting from the policy change unaddressed.
---------------------------------------------------------------------------

\85\ Liquids Shippers Reply Comments at 8-9 (citing Crowe Reply
Aff. 5).
\86\ Joint Commenters Initial Comments at 48 (citing Brattle
Initial Report at P 162).
---------------------------------------------------------------------------

28. We disagree with Shippers' claim that adjusting the reported
data to address the ROE Policy Change conflicts with Commission
precedent. As an initial matter, this approach conforms with the 2020
Index Review, where the Commission similarly adjusted the reported page
700 data to account for the Income Tax Policy Change.\87\ Although the
Commission has not previously revised ROE data in an index review,\88\
this fact does not dissuade us from adjusting the ROE data here.\89\
Furthermore, while the Commission declined to adjust pipelines'
reported ROEs in the 2020 Index Review,\90\ the adjustments rejected in
that proceeding are distinguishable from those adopted here. In
contrast to this proceeding, where the reported data for 2019 and 2024
reflect different ROE policies, the data considered in the 2020 Index
Review reflected a single ROE policy.\91\ As a result, because there
was no intervening change to the Commission's ROE policy for oil
pipelines during the 2014-2019 review period, the Commission reasonably
declined to adopt the proposed adjustments to the pipeline cost data
consistent with its general policy of calculating the index level using
pipeline cost data as reported on FERC Form No. 6, page 700.
---------------------------------------------------------------------------

\87\ 2020 Index Review, 173 FERC ] 61,245 at PP 16-20. Contrary
to Shippers' suggestion that the Commission departed from the
reasoning in the 2020 Index Review in the January 2022 Rehearing
Order and the Supplemental NOPR, the 2020 Index Review remains valid
precedent because the D.C. Circuit has vacated the January 2022
Rehearing Order and the Commission has withdrawn the Supplemental
NOPR. LEPA v. FERC, 109 F.4th at 549 (vacating January 2022
Rehearing Order); Supplemental NOPR Withdrawal, 193 FERC ] 61,136 at
P 21; see also, e.g., Keystone-Conemaugh Projects v. EPA, 100 F.4th
434, 446 (3d Cir. 2024) (citing Ala. Power Co. v. EPA, 40 F.3d 450,
456 (D.C. Cir. 1994)) (``[A] vacated agency action is a nullity that
has no force and effect.'').
\88\ EPR Shippers Initial Comments at 13-14; CAPP Reply Comments
at 3; see also NOPR, 193 FERC ] 61,145 at P 13 (observing that
``[t]he Commission has never adjusted ROE in a prior index
proceeding'').
\89\ Because this proceeding marks the first index review where
the Commission revised its ROE policy for oil pipelines during the
relevant review period, the need to adjust the Form No. 6 data to
reflect consistent ROE policies did not arise in any prior review.
\90\ 2020 Index Review, 173 FERC ] 61,245 at PP 45-50.
\91\ See id. P 46 (explaining that the Commission's policies
required pipelines to determine their page 700 ROEs using the DCF-
only method in both 2014 and 2019).
---------------------------------------------------------------------------

29. We likewise disagree with Joint Commenters' claim that removing
the effects of the ROE Policy Change is inconsistent with the
Commission's treatment of the 2005 Accounting Order. Unlike the ROE
Policy Change, the 2005 Accounting Order did not modify the
Commission's Opinion No. 154-B methodology and instead merely clarified
how pipelines should report new integrity management costs using the
Commission's existing policies.\92\ Because the Commission's policies
were the same before and after the 2005 Accounting Order, it was
unnecessary to modify the Form No. 6 data used to calculate the index
level in the 2010 Index Review. In any case, regardless of the
Commission's determinations in the 2010 Index Review, our task in this
proceeding is to calculate the index level based upon pipeline cost
changes from 2019-2024, and for the reasons explained above, we find
that adjusting the data to account for the ROE Policy Change provides a
more accurate measure of actual industry-wide cost changes.
---------------------------------------------------------------------------

\92\ 2005 Accounting Order, 111 FERC ] 61,501 at P 1 (explaining
that the 2005 Accounting Order ``interprets the Commission's
existing accounting rules''). To the extent that some pipelines
revised their accounting practices in response to the 2005
Accounting Order because they previously did not adhere to the
Commission's preexisting policies, see id. PP 8, 19, a shift in
accounting practices by only a subset of pipelines in the data set
would not necessarily justify an adjustment to data used in the
industry-wide index. See Supplemental NOPR Withdrawal, 193 FERC ]
61,136 at PP 32, 34. By contrast, because the ROE Policy Change
revised the policies that all pipelines must follow in determining
their page 700 ROE, an adjustment to the index level calculation is
appropriate here.
---------------------------------------------------------------------------

30. Joint Commenters' argument that removing the effects of the ROE
Policy Change conflicts with the Commission's grandfathering policies
is similarly unavailing. Pursuant to EPAct 1992, the Commission
determines whether rates are no longer subject to grandfathering
protection by measuring changes in the pipeline's actual ROE to
evaluate whether a ``substantial change'' has occurred in the
``economic circumstances of the oil pipeline which were a basis for the
rate.'' \93\ In applying this substantial-change analysis, the
Commission has found that changes in the Commission's ratemaking
policies contribute to changes in the ``economic circumstances'' that
formed a basis for the grandfathered rate.\94\ Accordingly, this policy
arises from the specific language governing grandfathered rates in
section 1803(b)(1)(A) of EPAct 1992 and is thus separate from the
indexing methodology established pursuant to section 1801(a).\95\ For
the reasons discussed above, we conclude that using adjusted pipeline
cost data based upon a consistent ROE methodology will produce a more
accurate measure of actual industry-wide cost changes for purposes of
calculating the index level in this proceeding.
---------------------------------------------------------------------------

\93\ EPAct 1992 1803(b)(1)(A); see also, e.g., Opinion No. 586,
185 FERC ] 61,126 at P 363 (citing Tesoro, 134 FERC ] 61,214 at PP
2, 59, 63).
\94\ See Opinion No. 586, 185 FERC ] 61,216 at P 416; Tesoro,
134 FERC ] 61,214 at P 68.
\95\ Compare EPAct 1992 1801(a) with id. 1803(b)(1)(A).
---------------------------------------------------------------------------

31. Furthermore, we are unpersuaded by Shippers' claims that LEPA's
adjustments are flawed because they average pipelines' reported ROEs
for 2019 with the single CAPM return proposed by LEPA.\96\ We
acknowledge that in the 2020 Index Review, the Commission expressed
concerns with adopting a single ROE for all pipelines in the data
sample.\97\ It is also true that pipelines' ROEs can vary based upon
differences in risk.\98\ However, unlike the 2020 Index Review, the
instant industry-wide index review involves distinct circumstances
where pipelines' cost data for the first and last years of the review
period reflect different ROE policies. To the extent that LEPA's
proposed CAPM return does not precisely measure the cost of equity for
all pipelines in the data set, this imprecision is justified by the
need to resolve the data incongruities resulting from the ROE Policy
Change. We find that averaging LEPA's proposed single CAPM return with
pipelines' originally filed 2019 DCF ROEs provides a reasonable method
of addressing the ROE Policy Change that coheres with EPAct 1992's
mandates for simplified and streamlined ratemaking.\99\ Shippers

[[Page 22926]]

have not proposed a superior alternative adjustment.\100\
---------------------------------------------------------------------------

\96\ Joint Commenters Reply Comments at 20-21 (citing 2020 Index
Review, 173 FERC ] 61,245 at P 49); CAPP Reply Comments, Christensen
Reply Report at 6-7 (citing ROE Policy Statement, 171 FERC ] 61,155
at P 6).
\97\ 2020 Index Review, 173 FERC ] 61,245 at P 49 (finding that
Liquids Shippers had not demonstrated that their proposed
standardized ROE figure accurately measures the investor-required
cost of equity for all pipelines in the data set).
\98\ Id. (``Given that oil pipelines have diverse business
models and different risk levels, we cannot simply assume that any
single ROE could reflect the investor-required return for all
pipelines in the data set.'').
\99\ Further, as explained above, Dr. Webb's 8.30% CAPM return
adheres to the Commission's determinations in Opinion No. 586,
whereas Liquids Shippers' proposed 2019 ROE in the 2020 Index Review
was solely based on testimony by one participant in the rate
proceeding. Id. (noting that Liquids Shippers' proposed 2019 ROE was
``a figure that a participant has proposed in an ongoing hearing on
which neither the Presiding Judge nor the Commission have opined'').
For this reason, the Commission concluded in the 2020 Index Review
that determining a just and reasonable ROE would be a fact-intensive
inquiry that could complicate and prolong the five-year review
process in violation of EPAct 1992. Id. P 50. In contrast here,
LEPA's proposed ROE does not raise the same level of concerns
because it is based on the Commission's prior determinations in
Opinion No. 586.
\100\ To the extent that other pipelines may have calculated
different CAPM results for 2019 (see Brattle Reply Report at PP 94,
110 (referencing revised Form No. 6 filings by Plains, Rocky
Mountain, and Mustang in 2020 and 2021)) or different CAPM results
could be calculated in 2019, LEPA's proposed CAPM result of 8.30% is
the only CAPM result in the record where the Commission and other
participants in this proceeding are aware of how it was calculated.
Moreover, LEPA's CAPM analysis is consistent with Opinion No. 586.
---------------------------------------------------------------------------

32. Moreover, to the extent that Shippers' arguments imply that the
Commission is obligated to determine an individualized CAPM return for
each pipeline in the data set, we find this would be a complex and
difficult undertaking that runs counter to EPAct 1992's mandate and is
not necessary to develop a reasonable measure of actual industry-wide
cost changes during this five-year review period. For the same reasons,
we find that the adjustments to account for the ROE Policy Change are
just and reasonable notwithstanding Shippers' arguments that the proxy
group used in LEPA's proposed CAPM analysis may differ from the proxy
groups that pipelines used to determine their original 2019 ROEs.\101\
As Joint Commenters observe, in determining an individual pipeline's
just and reasonable ROE in a cost-of-service rate proceeding, the
Commission has performed the DCF and CAPM analyses using a single proxy
group.\102\ However, in these circumstances, we find that LEPA's
proposed adjustment is a reasonable approach to resolving the data
incongruities resulting from the ROE Policy Change.\103\ In contrast,
determining a separate CAPM return for each pipeline in the data set
using the same proxy group used in developing its originally reported
DCF return would be a complex undertaking that would complicate and
prolong the five-year review process contrary to EPAct 1992.\104\
---------------------------------------------------------------------------

\101\ Joint Commenters Reply Comments at 23 (citing ROE Policy
Statement, 171 FERC ] 61,155 at PP 58-66).
\102\ See Opinion No. 586, 185 FERC ] 61,126 at PP 114, 129
(determining oil pipeline's DCF and CAPM returns using identical
proxy group); Panhandle E. Pipe Line Co., Opinion No. 885, 181 FERC
] 61,211, at PP 168, 170 (2022) (determining natural gas pipeline's
DCF and CAPM returns using identical proxy group), order on reh'g,
Opinion No. 885-A, 184 FERC ] 61,181 (2023).
\103\ The only DCF/CAPM result in the record that is based on a
matching proxy group was developed by LEPA's expert Dr. Webb, in
which he used a DCF result of 10.12% and a CAPM result of 8.30%,
leading to an ROE of 9.21%. However, using that combined DCF/CAPM
result for every pipeline would lead to a lower ROE and lower
overall 2019 total cost of service for 212 out of 244 pipelines in
the data set, thereby leading to a higher index level. Attach. A at
Ex. 14 tab. No commenter has advocated for such an approach in this
record.
\104\ See 2020 Index Review, 173 FERC ] 61,245 at P 49.
Developing a proxy group can be an extensive endeavor on a full
record involving specific consideration of each proxy group member.
See, e.g., Chevron Prods. Co. v. SFPP, L.P., Opinion No. 571, 172
FERC ] 61,207, at PP 148-189 (2020). Moreover, we lack information
regarding the proxy group used by every pipeline for the originally
filed 2019 page 700 ROEs, and so we would have no way of ensuring
that the originally filed DCF return would use the same proxy group
as LEPA's proposed CAPM return.
---------------------------------------------------------------------------

33. Shippers' remaining challenges to LEPA's proposed ROE are
likewise unpersuasive.\105\ We reject Joint Commenters' argument that
LEPA's DCF/CAPM result is inaccurate because it differs from the
revised 2019 ROEs that three pipelines filed in 2020 and 2021 following
the ROE Policy Statement.\106\ Since those pipelines filed their
revised ROEs, the Commission further refined the application of its ROE
methodology for oil pipelines in Opinion No. 586.\107\ Thus, applying
the ROE policy that incorporates the changes adopted in Opinion No. 586
necessarily produces a different result than ROE analyses that predate
Opinion No. 586. Similarly, CAPP's argument that a DCF analysis of the
companies in Dr. Webb's proxy group shows that ROE costs declined
between 2019-2024 does not undermine Dr. Webb's calculations.\108\ The
DCF and CAPM analyses are different calculations that use different
data.\109\ Accordingly, to the extent that pipeline returns from 2019-
2024 determined using the DCF/CAPM ROE method differed from the returns
using the DCF ROE method over the same period, this does not establish
that the DCF/CAPM returns are inaccurate. For these reasons, we are
likewise unpersuaded by CAPP's claim that LEPA's proposed 8.30% CAPM
return is lower than both (a) the DCF returns that most pipelines
reported for 2019 and (b) the industry-wide average DCF returns since
2013.\110\ Because the CAPM and DCF analyses use different data, the
fact that LEPA's 8.30% CAPM return differs from pipelines' reported DCF
returns does not demonstrate that the CAPM return provides an
inaccurate measure

[[Page 22927]]

of pipelines' ROE costs.\111\ Furthermore, contrary to CAPP's claim,
Dr. Webb's use of size-premium adjustments based on each proxy group
member's size relative to the companies in the S&P 500 conforms to the
Commission's policy.\112\
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\105\ We are not persuaded by Joint Commenters' argument that
LEPA's adjustments are flawed based on their treatment of Enterprise
Crude, Total, Bridger, and Mustang. See Joint Commenters Reply
Comments at 23-24 (citing Brattle Reply Report at PP 110-111). We
recognize that Enterprise Crude's original 2019 ROE reflects only
six months of operations, whereas LEPA's CAPM result reflects 12
months of operations. However, even if Enterprise Crude's original
ROE is adjusted to resolve this concern, Enterprise Crude would fall
outside the middle 80% sample that we use to calculate the index
level. See Attach. A at Model tab. Likewise, regarding Joint
Commenters' statement that Total reported a negative rate base for
2019, we do not consider Total's data in deriving the index because
it is not within the middle 80%. Moreover, although a Commission
audit report concluded that Bridger did not adhere fully to the
Commission's policy in determining its 2019 ROE, the report
concluded that Bridger used methods that ``captured the spirit'' of
the Commission's policy. Audit of Bridger Pipeline LLC, Docket No.
FA19-10-000, at 71 (issued Sept. 23, 2021). In any case, Joint
Commenters themselves incorporate Bridger's reported 2019 ROE in
calculating their proposed index level. See Brattle Initial Report,
Workpaper 1, ``WP Table 2'' tab at cell Z211 (reflecting total cost
of service reported in Bridger's 2019 Form No. 6, which incorporates
the ROE addressed in the audit report). Finally, we recognize that
Mustang filed a revised 2019 ROE in 2021 that reflects the ROE
Policy Statement. Although LEPA initially applied its adjustments to
Mustang's revised ROE, LEPA filed supplemental comments on January
28, 2026, to correct this error. In either case, the treatment of
Mustang has no effect on the index level.
\106\ Joint Commenters Reply Comments at 21-22 (citing Brattle
Reply Report at P 84 & n.44).
\107\ Specifically, the Commission revised its application of
the CAPM analysis by (a) adopting Bloomberg-based betas instead of
Value Line betas and (b) using short-term growth estimates published
by the Institutional Brokers' Estimate System (IBES) and Value Line,
rather than IBES estimates alone, in determining the CAPM risk
premium. Opinion No. 586, 185 FERC ] 61,126 at PP 125-126.
\108\ Moreover, CAPP has not demonstrated that its DCF analysis
for 2024 complies with the Commission's policy. First, CAPP
determines its 2024 DCF return using a proxy group of only three
companies. CAPP Reply Comments, Attach. F at DCF (2024) tab.
However, the Commission has declined to use three-member proxy
groups and explained that proxy groups should contain ``at least
four, and preferably at least five members, if representative
members can be found.'' Opinion No. 586, 185 FERC ] 61,126 at P 91 &
n.254 (citing ROE Policy Statement, 171 FERC ] 61,155 at P 59); Kern
River Gas Transmission Co., Opinion No. 486-B, 126 FERC ] 61,034, at
P 104 (2009) (explaining that the Commission has found that proxy
groups of ``three members were too small'' (citing Williston Basin
Interstate Pipeline Co., 104 FERC ] 61,036, at P 35 (2003))).
Furthermore, there is no evidence that CAPP considered additional
companies that could be included in the proxy group. Second, CAPP
does not demonstrate that the three companies in its proxy group
satisfy the Commission's criteria for proxy group membership. In
developing its proposed CAPM ROE for 2019, LEPA used the five-member
proxy group adopted in Opinion No. 586, which the Commission found
was reasonable based on a study period from September 2019-February
2020. In addition, LEPA presents unrebutted testimony from its
expert Dr. Webb that the members of the Opinion No. 586 proxy group
continue to satisfy the Commission's proxy group criteria during
LEPA's proposed study period from July 2019-December 2019. Webb LEPA
Decl. at P 13. By contrast, although CAPP proposes to exclude two of
the five Opinion No. 586 proxy group companies because they are no
longer publicly traded, see Christensen Reply Report at 10 n.10, it
does not address whether the remaining three companies continue to
satisfy the Commission's proxy group criteria during its proposed
July 2024-December 2024 study period.
\109\ See ROE Policy Statement, 171 FERC ] 61,155 at PP 4-5, 8
(describing inputs to DCF model and CAPM analysis).
\110\ Christensen Reply Report at 8-9.
\111\ For example, LEPA presents CAPM and DCF analyses of the
Opinion No. 586 proxy group for both 2014 and 2019. In both years,
the CAPM analysis produced lower returns than the DCF analysis. LEPA
Reply Comments, Decl. of Dr. Michael J. Webb at PP 7-8 (determining
CAPM returns of 9.47% for 2014 and 9.17% for 2019, compared to DCF
returns of 13.62% for 2014 and 10.12% for 2019).
\112\ See Opinion No. 586, 185 FERC ] 61,126 at P 129 (adopting
a CAPM analysis incorporating Duff & Phelps size premium
adjustments, which adjust the proxy group members' cost-of-equity
estimates based on their size relative to the S&P 500); Ex. MJW-L2
at ``Size Adjustment'' tab (applying Duff & Phelps size premiums
approved in Opinion No. 586).
---------------------------------------------------------------------------

34. We also reject CAPP's claim that Dr. Webb's CAPM analysis may
differ from the CAPM analyses that pipelines used in preparing their
page 700 ROEs for 2024. As discussed above, Shippers have not
demonstrated that Dr. Webb's CAPM analysis conflicts with the
Commission's policy. Moreover, Form No. 6 instructs pipelines to
determine their page 700 ROEs in accordance with the Commission's cost-
of-service policies,\113\ and CAPP does not allege that pipelines' page
700 ROEs for 2024 do not comply with this requirement.
---------------------------------------------------------------------------

\113\ See FERC Form No. 6, page 700 at Instruction (2) (``The
values [on page 700] shall be computed consistent with the
Commission's Opinion No. 154-B et al. methodology.'').
---------------------------------------------------------------------------

35. In addition to the issues raised by the comments and consistent
with the discussion above, we are no longer concerned about removing
the effects of the ROE Policy Change discussed in the NOPR. Although
the NOPR stated that the Commission has never adjusted the ROE in prior
indexing proceedings,\114\ the adjustment to account for the ROE Policy
Change is consistent with the 2020 Index Review requiring removal of
the effects of other policy changes.\115\ Moreover, our analysis of the
record also alleviates the concern expressed in the NOPR that the
adjustment for the ROE Policy Change would be unduly complicated and
inconsistent with indexing's purpose as a simplified and streamlined
process.\116\ As discussed above, the record has provided a workable
means for making the appropriate adjustments to account for the ROE
Policy Change.
---------------------------------------------------------------------------

\114\ NOPR, 193 FERC ] 61,145 at P 13.
\115\ 2020 Index Review, 173 FERC ] 61,245 at PP 16-20
(adjusting the reported page 700 data for 2014 to account for the
Income Tax Policy Change). This is also the first time the
Commission's ROE policy for oil pipelines changed since the
Commission began using the page 700 to calculate the index level in
the 2015 Index Review. 2015 Index Review, 153 FERC ] 61,312 at PP
12-18. Prior to 2015, the Commission calculated the index level
using accounting data on Form No. 6 that does not directly
incorporate an ROE.
\116\ NOPR, 193 FERC ] 61,145 at P 13.
---------------------------------------------------------------------------

36. Finally, we disagree with the dissent's arguments opposing the
adjustments to account for the ROE Policy Change. The dissent
recognizes that it is preferable to calculate the index level using
cost data that reflects consistent policies. Although the dissent
argues that the appropriate remedy for the data inconsistencies
resulting from the ROE Policy Change was for pipelines to file updated
2019 cost data in 2020,\117\ the dissent acknowledges that this remedy
is unavailable because most pipelines did not make such filings (nor
were they required to do so). Thus, the fact remains that the 2019 and
2024 cost data in the record reflect different ratemaking policies. The
Commission need not leave the asymmetry unaddressed, as the dissent
suggests, merely because pipelines did not file updated data in 2020.
On balance, given the record before us, we find that the superior
approach is to account for the ROE Policy Change through the
adjustments to the 2019 cost data adopted herein. Recognizing that
these adjustments, like any other approach, are not exact,\118\ we
nonetheless conclude that they will produce a more accurate measure of
industry-wide cost changes from 2019-2024 than using unadjusted data
reported under different policies. Moreover, we find that our
determinations in this order sufficiently respond to the dissent's
other contentions.\119\
---------------------------------------------------------------------------

\117\ As discussed above, following the ROE Policy Change in
2020, the Commission further refined its ROE methodology in 2023 in
Opinion No. 586. Thus, even if pipelines had filed revised 2019 cost
data in 2020 to reflect the ROE Policy Change, that revised 2019
data would not reflect the same ROE policy as 2024 cost data filed
after Opinion No. 586. Supra P 33.
\118\ For instance, we acknowledge that LEPA's single CAPM
result may not precisely measure the cost of equity of each pipeline
in the data set. Supra P 31. Moreover, we recognize that by adopting
these adjustments, we are comparing 2024 data that incorporates
individually reported CAPM returns with 2019 data that incorporates
a single, industry-wide CAPM return. However, as discussed above, we
find that it is preferable, on balance, to address the data
asymmetry resulting from the ROE Policy Change by making these
adjustments, notwithstanding that this approach (as would any other)
entails some imprecision.
\119\ Supra PP 31-32 (responding to argument that the
adjustments improperly use a single CAPM result for all pipelines in
the data sample); supra PP 28, 31 (responding to argument that the
adjustments conflict with the Commission's determinations in the
2020 Index Review); supra P 26 (responding to argument that the
adjustments create a ``stitching problem'' resulting from
inconsistencies with the 2019 cost data used in the 2020 Index
Review).
---------------------------------------------------------------------------

B. Resubmitted Form No. 6s

1. NOPR Proposal
37. The Commission proposed in the NOPR to calculate the index
level using pipelines' originally filed 2019 cost data, rather than the
resubmitted 2019 cost data that 61 pipelines filed in April-June 2025.
The Commission observed that the resubmitted data was filed five years
after the 2019 cost data was originally due for submission and that a
similarly significant volume of late Form No. 6 resubmissions had not
arisen in any prior five-year index review. The Commission stated that
while many of the changes involved revisions to ROE and capital
structure, some pipelines made additional changes to other cost
components unrelated to ROE, such as rate base and operating
expenses.\120\ In addition, the Commission stated that pipelines
included limited explanation or supporting calculations for the
proposed changes to their original data. Furthermore, the Commission
expressed concern that using the resubmitted 2019 cost data could
introduce biases to the index level calculation because only some
pipelines filed resubmitted data. The Commission requested comment on
whether, and if so, how, the index calculation should incorporate the
resubmitted 2019 cost data.\121\
---------------------------------------------------------------------------

\120\ Id. P 15 n.33.
\121\ Id. P 16.
---------------------------------------------------------------------------

2. Comments
38. LEPA contends that the Commission should use resubmitted 2019
cost data that pipelines filed in 2025 in calculating the index. LEPA
argues that Dr. Webb's testimony addresses the Commission's concern
that the resubmitted data lacks support by providing calculations
supporting the revised 2019 ROEs included in the resubmittals.\122\ In
response to the Commission's concern that using the revised data could
bias the index level calculation because only some pipelines updated
their data,\123\ LEPA states that its proposed adjustments resolve this
concern by adjusting the 2019 cost data for all pipelines in the data
set, including those that did not resubmit their Form No. 6.\124\
---------------------------------------------------------------------------

\122\ LEPA Initial Comments at 19 (citing Webb Decl. at P 18;
Ex. MJW-L2).
\123\ NOPR, 193 FERC ] 61,145 at P 16.
\124\ LEPA Initial Comments at 19-20 (citing Shehadeh Decl. at
App. A).
---------------------------------------------------------------------------

39. Shippers argue that the Commission should use pipelines'
originally filed 2019 cost data and decline to consider the recently
resubmitted data. Shippers contend that the resubmitted Form No. 6s are

[[Page 22928]]

untimely and contain limited support for the changes to the originally
reported page 700 cost data, including changes to cost-of-service items
unrelated to ROE.\125\ To the extent that pipelines revised their
original data to reflect the Commission's determinations in Opinion No.
586, Shippers argue that reflecting this 2023 decision in page 700 data
for 2019 would contravene the requirement for pipelines to complete
page 700 in accordance with the Opinion No. 154-B methodology effective
at the time of filing.\126\ Moreover, because all pipelines that
resubmitted their 2019 data reported the 9.21% revised ROE prepared by
Dr. Webb, Shippers contend that the resubmissions reflect a coordinated
effort to skew the index upward by altering the page 700 data set.\127\
Shippers state that incorporating the resubmitted data in the index
level calculation would undermine the reliability of Form No. 6 data
and encourage similar untimely resubmissions in the future.\128\
---------------------------------------------------------------------------

\125\ Liquids Shippers Initial Comments at 14-17; EPR Shippers
Initial Comments at 15; STUSCO Initial Comments at 11-12; STUSCO
Reply Comments at 9.
\126\ Joint Commenters Initial Comments at 49-50 (citing 2020
Index Review, 173 FERC ] 61,245 at P 48; Brattle Initial Report at P
166); Liquids Shippers Initial Comments at 15 (citing Aff. of
Elizabeth H. Crowe at 10-11 (Crowe Initial Aff.)).
\127\ Joint Commenters Initial Comments at 49 (citing Brattle
Initial Report at P 164); Liquids Shippers Initial Comments at 15-16
(citing Crowe Initial Aff. 9 & n.11).
\128\ EPR Shippers Initial Comments at 16; STUSCO Initial
Comments at 11-12.
---------------------------------------------------------------------------

3. Commission Determination
40. Consistent with the proposal in the NOPR, we decline to
incorporate into the index level calculation the 2019 cost data that 61
pipelines resubmitted between April and June 2025 and will rely on
pipelines' originally submitted 2019 cost data.\129\ As explained in
the NOPR, the resubmissions were filed five years after the cost data
was originally due to be submitted.\130\ A similarly significant volume
of late filings of cost data has not arisen in prior five-year review
proceedings.\131\
---------------------------------------------------------------------------

\129\ See NOPR, 193 FERC ] 61,245 at P 16.
\130\ Id.
\131\ Id.
---------------------------------------------------------------------------

41. Moreover, as the Commission stated in the NOPR, the resubmitted
2019 cost data lack supporting calculations or explanations for the
late filings.\132\ The record created by the comments does not resolve
this concern. Although LEPA argues that the record includes an
explanation for the ROE calculations in the resubmitted 2019 cost data,
the resubmitted 2019 cost data include several other departures from
the originally filed data.\133\ These additional departures \134\
remain unexplained.\135\
---------------------------------------------------------------------------

\132\ The filings themselves merely state that ``[t]he cost of
service results have been updated to reflect the most current
interpretation of the FERC methodology outlined in Opinion No. 154-
B, 31 FERC ] 61,377, as modified and clarified by subsequent
rulings.'' See, e.g., Buckeye Pipe Line Transportation LLC, Revised
2020 FERC Form No. 6 Report, at page 2 (filed June 16, 2025). Other
pipelines added that ``2019 and 2020 data has been restated using a
revised [ROE] calculation consistent with the ROE methodology
approved by the Commission in Opinion No. 586.'' Express Pipeline,
LLC, Revised 2020 FERC Form No. 6 Report, at page 700 (filed May 2,
2025). However, these pipelines did not explain how or why the
holdings in Opinion No. 586 prompted the modifications to the
pipelines' 2019 cost data.
\133\ NOPR, 193 FERC ] 61,245 at P 15 n.33.
\134\ Including the resubmitted Form No. 6 filings would change
the index level from PPI-FG--0.55%, as adopted in this order, to
PPI-FG--0.22%. The substantial majority of this differential (22 out
of 33 basis points) results from the unexplained modifications as
opposed to the revised ROEs. Attach. A at Ex. 12 tab.
\135\ Page 700 instructs pipelines making ``major changes to
[their] application of the Opinion No. 154-B et al. methodology'' to
``describe such changes in a footnote.'' Form No. 6, page 700 at
Instruction (6); see also id., General Instruction IX (``Whenever .
. . pages [of Form No. 6] refer to figures from a previous period
the figures reported must be based upon those shown by the report of
the previous period or an appropriate explanation given as to why
different figures were used.''). Here, although the resubmissions
state generally that the pipelines were updating their previously
reported 2019 cost data to reflect the current interpretation of the
Opinion No. 154-B methodology, they did not describe or explain the
changes to cost data unrelated to ROE.
---------------------------------------------------------------------------

42. Finally, although using the resubmitted 2019 cost data in
calculating the index level would help to reflect the ROE Policy
Change, we find that the ROE Policy Change is sufficiently and more
effectively addressed by the adjustment to the originally filed 2019
cost data discussed in section III.A of this order. Specifically,
because only 61 pipelines resubmitted new 2019 cost data, using the
ROEs in the resubmitted filings and making the adjustment discussed in
section III.A to the ROEs for the remaining pipelines could lead to
inconsistent treatment of the ROEs across the whole data set.
Accordingly, as proposed in the NOPR, we are not including the late
submitted 2019 cost data in the calculation of the index level.\136\
---------------------------------------------------------------------------

\136\ The ROE Policy Statement issued May 21, 2020, one month
after pipelines filed their 2019 page 700s in April 2020.
Accordingly, in the ROE Policy Statement, the Commission encouraged
pipelines to file updated 2019 cost data that reflected the ROE
Policy Change by July 21, 2020. ROE Policy Statement, 171 FERC ]
61,155 at P 92; see also Notice Establishing Date for Filing Updated
Data, Docket No. PL19-4-000 (issued July 7, 2020). However, the
Commission did not commit to use this updated data in any future
index review. See id. (stating that ``reflecting the revised [ROE]
methodology in page 700 data for 2019 may help the Commission better
estimate industry-wide cost changes for purposes of the five-year
review'' but that ``the Commission will address this issue further
in the five-year review''). Only two pipelines filed updated 2019
cost data in July 2020, only three months after 2019 cost data was
due. Here, by contrast, the resubmitted 2019 cost data filed in 2025
were submitted five years after the data was originally due.
Moreover, unlike the resubmissions contemplated by the ROE Policy
Statement, the 61 resubmissions filed in 2025 include significant,
unexplained changes to page 700 cost-of-service items unrelated to
ROE.
---------------------------------------------------------------------------

C. Data Trimming

1. NOPR Proposal
43. The Commission proposed in the NOPR to calculate the index
level by trimming the data set to the middle 80%, consistent with its
practice in the 2020 Index Review.\137\ The Commission stated that
considering a larger data sample should enhance the calculation of the
central tendency of industry cost experience. Here, the Commission
observed that the middle 80% provides a more robust sample of industry
cost experience compared to the middle 50%.\138\ In addition, the
Commission preliminarily found that using the more inclusive data
sample in the middle 80% would aid the Commission in identifying the
central tendency of industry-wide cost changes that reflects the
``normal'' cost changes recoverable by the index.\139\ The Commission
encouraged commenters to address whether it should continue to trim the
data set to the middle 80% or adopt an alternative approach to data
trimming.\140\
---------------------------------------------------------------------------

\137\ NOPR, 193 FERC ] 61,245 at P 8.
\138\ Id. P 9.
\139\ Id. P 10.
\140\ Id. P 11.
---------------------------------------------------------------------------

2. Comments
44. LEPA states that the Commission should calculate the index
level by trimming the data set to the middle 80%,\141\ consistent with
the 2020 Index Review.\142\ Although the Commission relied solely on
the middle 50% in the 2015 and 2010 Index Reviews, LEPA contends that
the Commission's approach in those proceedings does not require using
the middle 50% here.\143\ LEPA argues that absent concerns about

[[Page 22929]]

introducing erroneous or outlying data, a larger data sample provides a
superior basis for evaluating normal cost changes and that excluding
the additional data in the middle 80% would bias the index
downwards.\144\ Pipelines further state that considerations that the
Commission has previously found support trimming to the middle 50%
should not control here. Pipelines argue that although the Commission
found in Order No. 561 that data reporting errors supported restricting
its analysis to the middle 50%, subsequent improvements in reporting
accuracy have resolved this concern.\145\ Moreover, according to
Pipelines, the fact that the middle 80% is more widely dispersed than
the middle 50% does not establish that the middle 80% contains outlying
or anomalous data.\146\
---------------------------------------------------------------------------

\141\ LEPA Initial Comments at 20-22. Kinder Morgan and EIC
support LEPA's proposal to use the middle 80%. Kinder Morgan Initial
Comments at 1, 3; EIC Initial Comments at 5, 20.
\142\ LEPA Initial Comments at 21 (citing 2020 Index Review, 173
FERC ] 61,245 at PP 28, 63). LEPA also observes that the Commission
considered the middle 80% in the 2005 and 2000 Index Reviews, where
it determined the index level using an average of the middle 80% and
middle 50%. LEPA Reply Comments at 11 (citing 2005 Index Review, 114
FERC ] 61,293 at PP 4, 33; 2000 Remand Order, 102 FERC ] 61,194 at
PP 24-25, 28).
\143\ LEPA Reply Comments at 11.
\144\ Id. at 10, 13-14 (citing id., Reply Declaration of Ramsey
D. Shehadeh, Ph.D., at 12-13 (Shehadeh Reply Decl.)); see also
Designated Carriers Initial Comments at 19 (citing id., Aff. of Dr.
Michael J. Webb ] 8 (Webb Initial Aff.)); Designated Carriers Reply
Comments at 15.
\145\ LEPA Reply Comments at 13 (citing 2005 Index Review, 114
FERC ] 61,293 at P 48 & n.20; Shehadeh Reply Decl. at 12);
Designated Carriers Initial Comments at 18, 29 (citing Webb Initial
Aff. ] 7).
\146\ LEPA Reply Comments at 15 (citing Shehadeh Reply Decl. at
6); Designated Carriers Reply Comments at 14-15.
---------------------------------------------------------------------------

45. Although Designated Carriers do not oppose LEPA's proposal to
use the middle 80%,\147\ they recommend that the Commission trim the
data set using the Ferguson Kurtosis test (Ferguson Test) \148\ as
applied by their witness Dr. Webb.\149\ Designated Carriers state that
to obtain an accurate measure of industry cost experience, the
Commission should use the broadest possible sample of cost data that
excludes statistical outliers.\150\ Designated Carriers state that
trimming to the middle 80% removes all cost changes in the top and
bottom 10% of the data set without examining whether those observations
represent statistical outliers. By contrast, Designated Carriers
contend that the Ferguson Test provides a superior approach because it
only omits observations that represent true statistical outliers and
retains all remaining data.\151\ Here, Designated Carriers state that
the Ferguson Test indicates that only 14 pipelines in the full data set
constitute potential outliers.\152\ Because trimming to the middle 80%
would exclude 40 pipelines from the cost-change analysis, Designated
Carriers state that this approach could bias the index calculation by
removing relevant data.\153\
---------------------------------------------------------------------------

\147\ See Designated Carriers Reply Comments at 9 (stating that
trimming to the middle 80% is the ``most restrictive approach the
Commission should potentially adopt''); see also Designated Carriers
Initial Comments at 19 (citing Webb Initial Aff. ] 10); Designated
Carriers Reply Comments, Reply Aff. of Dr. Michael J. Webb at P 30
(Webb Reply Aff.).
\148\ The Ferguson Test begins with the full data set and
evaluates whether the data point furthest removed from the median
conforms to a normal distribution. If the value does not conform to
a normal distribution, the Ferguson Test classifies the value as a
statistical outlier and removes it from the data set. This process
repeats until the data point furthest from the median adheres to a
normal distribution. See Webb Initial Aff. ] 30. In performing this
analysis here, Dr. Webb (a) transforms the full data set to a normal
distribution by taking the natural logarithm of each cost-change
observation and (b) applies the Ferguson Test to the log-transformed
data set. Id. PP 27-28.
\149\ Designated Carriers Initial Comments at 7, 17-29;
Designated Carriers Reply Comments at 9-10; Webb Initial Aff. ]] 29-
34; Ex. MJW-D16 at 1-27.
\150\ Designated Carriers Initial Comments at 19-20.
\151\ Id. at 19-20, 24-25.
\152\ Ex. MJW-D16 at 19-24 (showing that the Ferguson Test
identifies 14 pipelines as statistical outliers using the revised
data set that incorporates LEPA's adjustments to account for ROE
Policy Change and other proposed changes); see also Designated
Carriers Initial Comments at 26-27; Webb Initial Aff. at PP 34-35.
Dr. Webb attests that a separate statistical outlier test, the
D'Agostino K-Squared test, produces similar results. Webb Initial
Aff. ]] 31-32, 34-35.
\153\ Designated Carriers Initial Comments at 19, 26 (citing
Webb Initial Aff. ] 8).
---------------------------------------------------------------------------

46. Shippers oppose Pipelines' proposals and urge the Commission to
trim the data set to the middle 50% consistent with its practice in
Order No. 561 and in the 2010 and 2015 Index Reviews.\154\ Shippers
state that the Commission has previously found that using the middle
50% provides a simple and transparent method of excluding anomalous
data while minimizing the need to analyze individual pipeline
data.\155\ Shippers argue that the middle 80% here contains anomalous
and extraordinary costs that would skew the index upwards and frustrate
the index's goal of measuring normal cost changes.\156\ For instance,
Shippers argue that pipelines in the incremental 30% (i.e., pipelines
that are included in the middle 80% but not the middle 50%) reported
cost changes resulting from major transactions, operational incidents,
accounting changes, partial-year operating data, and other factors
unrepresentative of typical experience.\157\ CAPP contends that
pipelines in the incremental 30% experienced weaker correlations
between changes in total costs and barrel-miles than pipelines in the
middle 50%, indicating that the middle 80% includes anomalous and
unrepresentative cost changes.\158\ Shippers also state that the middle
80% is more dispersed than the middle 50% in this proceeding and the
middle 80% in prior reviews, indicating that it contains extraordinary
cost changes.\159\ Shippers further argue that it is unnecessary to use
the middle 80% to obtain a representative sample of industry experience
because the middle 50% contains a greater percentage of barrel-miles
subject to the index (82%) than in the 2015 (56%) or 2010 Index Reviews
(76%).\160\ Joint Commenters contend that the Commission should only
use the middle 80% if it performs a detailed review to verify that it
excludes anomalous costs.\161\
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\154\ Joint Commenters Initial Comments at 23-24; Liquids
Shippers Initial Comments at 8-9 (citing 2015 Index Review, 153 FERC
] 61,312 at PP 43, 60; 2010 Index Review, 133 FERC ] 61,228 at P 61;
Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,097); EPR
Shippers Initial Comments at 2-3, 6-7 (citing 2015 Index Review, 153
FERC ] 61,312 at P 42; 2010 Index Review, 133 FERC ] 61,228 at PP
54, 61; Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,097).
Shippers state that although the Commission used the middle 80% in
the 2020 Index Review, it later cast doubt upon its reasoning for
that decision. E.g., EPR Shippers Initial Comments at 4-5, 9 (citing
Supplemental NOPR, 189 FERC ] 61,030 at PP 13-23; January 2022
Rehearing Order, 178 FERC ] 61,023 at P 43); STUSCO Initial Comments
at 7 (citing Supplemental NOPR, 189 FERC ] 61,030 at PP 13-23;
January 2022 Rehearing Order, 178 FERC ] 61,023 at PP 37, 43-58).
\155\ Joint Commenters Initial Comments at 24-25 (citing 2015
Index Review, 153 FERC ] 61,312 at PP 22-30, 36, 42-44 & nn. 80,
83); Liquids Shippers Initial Comments at 8 (citing 2010 Index
Review, 133 FERC ] 61,228 at P 61); EPR Shippers Initial Comments at
3, 6 (citing 2015 Index Review, 153 FERC ] 61,312 at P 44; 2010
Index Review, 133 FERC ] 61,228 at P 61).
\156\ E.g., Joint Commenters Initial Comments at 28-29, 36; EPR
Shippers Initial Comments at 8-9; CAPP Initial Comments at 3-4;
STUSCO Reply Comments at 5-6. Shippers contend that anomalous data
in the middle 80% exerts a significant influence upon the sample's
central tendency and thus would skew the index calculation. Joint
Commenters Initial Comments at 31-33 (citing Brattle Initial Report
at PP 113, 117-118 & fig. 24); Liquids Shippers Initial Comments at
10-11 (citing Crowe Initial Aff. 5-6); STUSCO Initial Comments at 5-
6.
\157\ Joint Commenters Initial Comments at 36-39 (citing Brattle
Initial Report at PP 62, 65-66, 69-76, 80-84 & Figures 5-9, 11-12);
Brattle Initial Report at P 101 & Figure 17; Liquids Shipper Initial
Comments at 10; Crowe Initial Aff. 3-5.
\158\ CAPP Initial Comments, Christensen Initial Report at 18-
19.
\159\ Joint Commenters Initial Comments at 34 (citing Brattle
Initial Report at P 91 & fig. 15); Liquids Shippers Initial Comments
at 11 (citing Crowe Initial Aff. 6); EPR Shippers Initial Comments
at 10-11; STUSCO Reply Comments at 5.
\160\ Joint Commenters Initial Comments at 28-29 (citing AOPL
III, 876 F.3d at 342-44; 2015 Index Review, 153 FERC ] 61,312 at P
55 n.85; 2010 Index Review, 133 FERC ] 61,228 at P 63; Brattle
Initial Report at P 125 & fig. 25); Liquids Shippers Initial
Comments at 11-12 (citing Crowe Initial Aff. 7); EPR Shippers
Initial Comments at 9; STUSCO Initial Comments at 5.
\161\ Joint Commenters Initial Comments at 27.
---------------------------------------------------------------------------

47. Shippers contend that LEPA's arguments do not justify using the
middle 80%. Shippers state that LEPA's reliance on the 2020 Index
Review is

[[Page 22930]]

misplaced because the Commission subsequently disavowed its reasoning
for using the middle 80% in that proceeding.\162\ Thus, Joint
Commenters contend that the Commission's established practice is to use
the middle 50%.\163\ Furthermore, Shippers argue that the mere fact
that the middle 80% includes additional data does not support
introducing the extraordinary cost changes in the incremental 30%.\164\
Shippers state that Pipelines have not performed a detailed review of
the incremental 30% to confirm that it does not include anomalous
data.\165\
---------------------------------------------------------------------------

\162\ Id. at 24-25; Joint Commenters Reply Comments at 6 (citing
Supplemental NOPR, 189 FERC ] 61,030 at P 20).
\163\ Id.
\164\ STUSCO Initial Comments at 6; Joint Commenters Reply
Comments at 6-7; STUSCO Reply Comments at 5.
\165\ Joint Commenters Reply Comments at 5-9.
---------------------------------------------------------------------------

48. Finally, Shippers oppose Designated Carriers' proposal to trim
the data set using the Ferguson Test. Shippers contend that this
proposal departs from the Commission's longstanding use of statistical
data trimming under the Kahn Methodology.\166\ Moreover, Shippers state
that the Ferguson Test only identifies statistical outliers in the
tails of the distribution and does not assess whether cost changes are
unrepresentative of normal experience because they resulted from
idiosyncratic circumstances or data-reporting errors.\167\
---------------------------------------------------------------------------

\166\ Liquids Shippers Reply Comments at 13-14; STUSCO Reply
Comments at 6-7.
\167\ Joint Commenters Reply Comments at 8, 13-14 (citing
Brattle Reply Report at P 60); STUSCO Reply Comments at 7.
---------------------------------------------------------------------------

3. Commission Determination
49. We adopt the NOPR's proposal to calculate the index level by
trimming the data set to the middle 80%. In the NOPR, the Commission
invited commenters to address whether the Commission should trim the
data set to the middle 80% or adopt an alternative approach to data
trimming.\168\ Based on our review of the resulting record, we conclude
that using the middle 80% is appropriate for this proceeding.
---------------------------------------------------------------------------

\168\ NOPR, 193 FERC ] 61,145 at P 11.
---------------------------------------------------------------------------

50. First, we continue to find that it is appropriate to consider
more data in measuring industry-wide cost changes rather than less. The
Kahn Methodology determines the index level by deriving the central
tendency of a statistically trimmed data sample.\169\ As the Commission
explained in the 2020 Index Review, considering a larger data sample
should enhance the calculation of the central tendency of industry cost
experience.\170\ In this proceeding, using the middle 80% incorporates
the cost experiences of 155 pipelines out of 195 pipelines in the full
data set, representing 94% of industry-wide barrel-miles.\171\ Thus,
the middle 80% provides a highly robust sample of industry cost trends
during the 2019-2024 period. In contrast, confining our analysis to the
middle 50% would exclude 58 additional pipelines (for a total of 98
pipelines excluded) and remove 10% of industry barrel-miles, providing
a more limited representation of industry experience.\172\
---------------------------------------------------------------------------

\169\ 2020 Index Review, 173 FERC ] 61,245 at P 26.
\170\ Id.
\171\ See Attach. A at Ex. 3 tab.
\172\ LEPA argues that the Commission should use the middle 80%
because it conforms more closely to a lognormal distribution than
the middle 50%. LEPA Initial Comments at 21-22 (citing Shehadeh
Initial Decl. at 23-26); LEPA Reply Comments at 9-10, 15 (citing
Shehadeh Reply Decl. at 6-7, 9-10, 21-22 & Exs. A17-A19). Shippers
argue that conformity with a lognormal distribution does not
establish that a sample excludes anomalous data. E.g., Joint
Commenters Reply Comments at 10-12; EPR Shippers Reply Comments at
3; STUSCO Reply Comments at 6. Given the objections in the record,
we do not rely on this argument in deciding to use the middle 80%
here. See 2020 Index Review, 173 FERC ] 61,245 at P 22 n.65
(declining to rely on this argument); 2015 Index Review, 153 FERC ]
61,312 at P 43 (same).
---------------------------------------------------------------------------

51. Second, we conclude that for purposes of this index review,
``normal'' cost changes are best defined by incorporating the inclusive
sample in the middle 80%.\173\ As the Commission found in the 2020
Index Review, prematurely discarding data before determining the
central tendency could skew the index such that it does not reflect
industry-wide cost trends.\174\ Using the more inclusive sample
embodied by the middle 80% allows the Commission to accurately identify
the central tendency of industry-wide cost changes that represents the
``normal'' cost changes recoverable through the index.\175\
---------------------------------------------------------------------------

\173\ 2020 Index Review, 173 FERC ] 61,245 at P 27.
\174\ Id.
\175\ Id.
---------------------------------------------------------------------------

52. Third, the middle 80% of this data set achieves a reasonable
balance that incorporates a wide spectrum of industry experience while
removing data that could distort the index calculation. As illustrated
below, a scatter plot of the full data set indicates that the middle
80% sample (shown in orange) excludes cost changes in the left and
right tails of the distribution (shown in blue) that diverge more
significantly from the remainder of the dataset and could have a
distorting effect on the mean and weighted mean, which comprise two-
thirds of the composite measure of central tendency.

[[Page 22931]]

[GRAPHIC] [TIFF OMITTED] TR28AP26.000

53. We are not persuaded by Shippers' objections to using the
middle 80%. Contrary to Shippers' claims,\176\ using the middle 80% for
this data set will not produce an index level that allows pipelines to
recover extraordinary costs.\177\ To the extent that the middle 80%
includes relatively high cost changes near its upper bound, the index
is set using the composite central tendency of the trimmed sample and
thus will be significantly below the upper bound.\178\
---------------------------------------------------------------------------

\176\ E.g., Joint Commenters Initial Comments at 26, 40-41
(citing AOPL I, 83 F.3d at 1434; Order No. 561-A, FERC Stats. &
Regs. ] 31,000 at 31,097); EPR Shippers Initial Comments at 7-8
(citing Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,097);
STUSCO Reply Comments at 5 (same).
\177\ 2020 Index Review, 173 FERC ] 61,245 at P 32. We observe,
moreover, that the mean and weighted mean of the middle 80%
represent the 55th and 53rd percentiles of the full data set.
Furthermore, in a data set of 195 pipelines, the mean of the middle
80% is only 10 pipelines away from the median. This undermines
Shippers' arguments that considering the additional data in the
middle 80% will inflate the index level calculation.
\178\ Id.
---------------------------------------------------------------------------

54. Furthermore, Shippers' analyses of individual pipelines in the
middle 80% do not persuade us to limit our analysis of industry cost
experience to the middle 50%. Shippers contend that the middle 80%
includes several individual pipelines reporting cost changes that
result from idiosyncratic factors, including significant shifts in rate
base or barrel miles.\179\ However, as the Commission explained in the
2020 Index Review, the mere presence of pipelines with anomalous cost
changes in a data sample is not sufficient reason to use an alternative
sample.\180\ We further conclude that Joint Commenters' analysis
overstates the degree to which cost changes in the incremental 30%
resulted from factors that they consider ``anomalous.'' For instance,
Joint Commenters argue that cost changes are anomalous where the
pipeline reported ``significant'' changes in rate base due to factors
such as expansions or retirements, acquisitions or divestitures,
inconsistent accounting or reporting practices, or other operational
changes or irregularities.\181\ However, for several of these
pipelines, Dr. Webb explains that the change in rate base was largely
attributable to normal depreciation,\182\ which Joint Commenters
acknowledge is not an ``anomalous'' event warranting exclusion from the
data set.\183\
---------------------------------------------------------------------------

\179\ Joint Commenters Initial Comments at 36-39; Brattle
Initial Report, Attach. E at 1-10, 12-13; Liquids Shippers Initial
Comments at 10-11; Crowe Initial Aff. 4-5 & Ex. 2.
\180\ 2020 Index Review, 173 FERC ] 61,245 at P 28. In the 2015
and 2010 Index Reviews, the Commission recognized that the middle
50% likely includes pipelines with cost changes resulting from
anomalous or pipeline-specific factors. 2015 Index Review, 153 FERC
] 61,312 at P 33 n.60 (observing that 26 of the 41 pipelines that
commenters proposed to exclude for reporting ``non-comparable'' data
were included in the middle 50%); 2010 Index Review, 133 FERC ]
61,228 at P 48 n.25 (observing that 7 of the 25 pipelines that a
commenter proposed to exclude for experiencing rate base expansions
were included in the middle 50%). Just as the presence of those
pipelines did not preclude use of the middle 50% in earlier reviews,
we conclude that the pipelines Shippers identify do not preclude use
of the middle 80% in this proceeding.
\181\ Joint Commenters Initial Comments at 36-39; Brattle
Initial Report, Attach. E at 1-10, 12-13; see also Liquids Shippers
Initial Comments at 10; Crowe Initial Aff. at 4-5.
\182\ Webb Reply Aff. ]] 14-19.
\183\ Brattle Initial Report, Attach. E at 13 (stating that
although Heartland Pipeline Company's rate base declined by over 50%
between 2019-2024, this change was not anomalous because it
``appears due to normal depreciation of rate base'').
---------------------------------------------------------------------------

55. As a general matter, we disagree with Shippers' claims that the
Commission should exclude pipelines from the data set merely because
they experienced significant shifts in rate base or throughput during
the review period. The industry-wide index level should reflect the
diversity of industry cost experience. Changes in barrel-mile costs
resulting from business circumstances such as rate base investments or
volume shifts contribute to the industry-wide cost trends that the
index seeks to capture.\184\ We recognize that the Commission used the
middle 50% in the 2015 and 2010 Index Reviews because it found that the
middle 80% was more likely to include cost changes resulting from
pipeline-specific factors.\185\ However, the Commission reconsidered
those decisions in the 2020 Index Review,\186\ and we conclude based on
this record that using a larger sample capturing a wider array of
industry cost experience will produce a central tendency that better
represents ``normal'' cost changes. Furthermore, where a pipeline
experiences idiosyncratic cost changes that depart substantially from
industry norms, that pipeline will not be

[[Page 22932]]

included within the middle 80% used to calculate the index.\187\
---------------------------------------------------------------------------

\184\ See 2010 Index Review, 133 FERC ] 61,228 at P 51
(explaining that ``large rate base changes can reflect changing
pipeline costs'' and that ``[t]he cost of new investment associated
with rate base increases reflects industry cost experience related
to pipeline infrastructure on a barrel-mile basis''); see also Webb
Reply Aff. ] 33 (attesting that pipeline expansions, retirements,
acquisitions, and divestitures constitute ``a regular part of the
industry landscape for pipeline companies'').
\185\ 2015 Index Review, 153 FERC ] 61,312 at P 44; 2010 Index
Review, 133 FERC ] 61,228 at P 61.
\186\ 2020 Index Review, 173 FERC ] 61,245 at P 30.
\187\ See id. P 47.
---------------------------------------------------------------------------

56. Moreover, Shippers' own evidence indicates that a significant
number of the cost changes that they describe as anomalous are included
in the middle 50% and are not restricted to the middle 80%.\188\ Even
if a higher number of Shippers' identified pipelines fall within the
incremental 30%,\189\ we are not persuaded to restrict our analysis to
the middle 50% solely on that basis when that narrower sample includes
pipelines with cost changes resulting from similar factors as those
that affected the identified pipelines falling within the incremental
30%.
---------------------------------------------------------------------------

\188\ Specifically, while Shippers claim that 55 pipelines in
the data set reported anomalous cost changes, only 30 of those
pipelines fall within the incremental 30%, and of the remaining 25
pipelines, 22 are included in the middle 50%. Compare Attach. A at
Ex. 13 tab (listing pipelines in the incremental 30%), with Brattle
Initial Report, Attach. E at 1-13 (listing pipelines that Joint
Commenters claim reported anomalous cost changes), and Crowe Initial
Aff. 4 (listing pipelines that Liquids Shippers claim reported
anomalous cost changes). The remaining three pipelines fall outside
the middle 80% in the top or bottom 10% of the data set.
\189\ See Joint Commenters Initial Comments at 30-31 (citing
Brattle Initial Report at P 86 & fig. 13).
---------------------------------------------------------------------------

57. Shippers' remaining arguments for using the middle 50% are
unpersuasive. Contrary to Shippers' claim that the Commission's
established practice is to use the middle 50% to calculate the index
level, the Commission trimmed the data set to the middle 80% in the
2020 Index Review,\190\ and we find that the record supports adhering
to that approach here. Moreover, while we recognize that the middle 50%
includes a greater percentage of industry barrel-miles than in 2015 or
2010,\191\ we find that using a broader sample that more fully reflects
the diversity of industry cost experience will provide a better measure
of normal cost changes in this proceeding.\192\
---------------------------------------------------------------------------

\190\ As discussed above, we reject Shippers' arguments that the
2020 Index Review is no longer valid precedent because the
Commission expressed concerns with that order's reasoning in the
now-vacated January 2022 Rehearing Order and the now-withdrawn
Supplemental NOPR. See supra note 83.
\191\ E.g., Joint Commenters Initial Comments at 28-29 (citing
Brattle Initial Report at P 125 & fig. 25); Liquids Shippers Initial
Comments at 11-12 (citing Crowe Initial Aff. 7).
\192\ 2020 Index Review, 173 FERC ] 61,245 at P 31.
---------------------------------------------------------------------------

58. We are similarly unconvinced by Shippers' claims that the
Commission should exclude the additional data in the middle 80% merely
because it is more widely dispersed than the middle 50% in this
proceeding or the middle 80% in the 2015 or 2010 Index Reviews.\193\
Because the middle 80% includes cost changes further removed from the
median, it is unsurprising that the middle 80% is more widely dispersed
than the middle 50%.\194\ Rather than justifying the exclusion of this
additional data, the higher dispersion of the middle 80% here reflects
that it captures a broader array of industry cost experience than the
middle 50%. As discussed above, we find that using this more
comprehensive sample will enhance the calculation of the central
tendency of industry-wide cost changes. Additionally, we observe that
the middle 80% of this data set is more narrowly dispersed than the
data set in the 2020 Index Review where the Commission relied on the
middle 80%.\195\
---------------------------------------------------------------------------

\193\ E.g., Joint Commenters Initial Comments at 34; Liquids
Shippers Initial Comments at 11; EPR Shippers Initial Comments at
10-11; STUSCO Reply Comments at 5.
\194\ See Webb Reply Aff. ] 38.
\195\ The dispersion of the middle 80% here is 33.80%, compared
to 35.17% in the 2020 Index Review.
---------------------------------------------------------------------------

59. In addition, we are unpersuaded by Joint Commenters' reliance
on the 2015 Index Review in arguing that the Commission must perform a
manual, pipeline-by-pipeline examination of the incremental 30% to
verify that it excludes anomalous cost changes.\196\ As explained in
the 2020 Index Review,\197\ we have reconsidered the Commission's
findings in the 2015 Index Review and now find based on the record here
that the benefits of considering the additional data in the middle 80%
outweigh concerns about introducing anomalous data. Accordingly, we
find that it is unnecessary to undertake a manual examination of the
incremental 30%.\198\ Similarly, we find it unnecessary to perform a
manual, pipeline-by-pipeline examination of the pipelines in the first
and tenth deciles, which are excluded by our decision to trim the data
set to the middle 80%.
---------------------------------------------------------------------------

\196\ Joint Commenters Initial Comments at 24-27 (citing 2015
Index Review, 153 FERC ] 61,312 at PP 22-30, 42-44 & nn. 80, 83).
\197\ 2020 Index Review, 173 FERC ] 61,245 at P 30.
\198\ The Commission has previously expressed concerns that
manual data trimming requires subjective decisions and would
introduce biases and complexity to the index level calculation. 2015
Index Review, 153 FERC ] 61,312 at PP 34-36; 2010 Index Review, 133
FERC ] 61,228 at PP 49-50. The record here does not dispel these
concerns.
---------------------------------------------------------------------------

60. We disagree with CAPP's argument that the middle 80% includes
anomalous data because pipelines in the incremental 30% exhibited weak
or negative correlations between changes in total costs and barrel-
miles.\199\ As an initial matter, CAPP does not provide workpapers or
calculations to support their analysis. In any event, as discussed
above, the index calculation should reflect a broad array of industry
cost experience. Thus, to the extent that the correlation between costs
and barrel-miles differs for pipelines in the incremental 30% compared
to those in the middle 50%, it is not unreasonable for the index to
reflect these differences. Moreover, CAPP's evidence indicates that for
most pipelines in the incremental 30%, changes in total costs were
positively correlated with changes in barrel-miles.\200\
---------------------------------------------------------------------------

\199\ CAPP Initial Comments, Christensen Initial Report at 18-
19. A positive correlation indicates that the pipeline's total costs
increased along with increases in barrel-miles, while a negative
correlation indicates that total costs declined as barrel-miles
increased. Id.
\200\ Id. at 19, fig. 8. Only pipelines near the middle 80%'s
upper bound exhibited negative correlations between total costs and
barrel-miles. Id.
---------------------------------------------------------------------------

61. We acknowledge that the dissent raises concerns with trimming
the data set to the middle 80% as opposed to the middle 50%. However,
we find that the reasoning in this section adequately addresses the
dissent's contentions.
62. Finally, we decline to adopt Designated Carriers' proposal to
trim the data set using the Ferguson Test. As an initial matter, using
the Ferguson Test would depart from the Commission's longstanding
practice under the Kahn Methodology of calculating the index level
using the central tendency of a statistically trimmed data sample by
removing an equal number of pipelines from the top and bottom of the
data set.\201\
---------------------------------------------------------------------------

\201\ 2020 Index Review, 173 FERC ] 61,245 at P 26. Thus, in
Order No. 561 and in each successive index review, the Commission
has determined the index level using the central tendency of the
middle 50%, middle 80%, or an average of the middle 50% and middle
80%. 2020 Index Review, 173 FERC ] 61,245 at PP 25-32 (using middle
80%); 2015 Index Review, 153 FERC ] 61,312 at PP 42-44 (using middle
50%); 2010 Index Review, 133 FERC ] 61,228 at PP 60-63 (same); 2005
Index Review, 114 FERC ] 61,293 at P 28 (using average of middle 50%
and middle 80%); 2000 Remand Order, 102 FERC ] 61,195 at P 24
(same); Order No. 561-A, FERC Stats. & Regs. ] 31,000 at 31,096-97
(using middle 50%).
---------------------------------------------------------------------------

63. In addition, we find that using the Ferguson Test would risk
incorporating data that distorts the index calculation. The Ferguson
Test as applied by Dr. Webb identifies outliers based upon whether they
conform to the data set's lognormal distribution.\202\ However, given
the lognormal distribution of the data set, inclusion of all or nearly
all of

[[Page 22933]]

the long right and left tails can distort the measure of central
tendency by incorporating cost changes that diverge significantly from
the cost changes in the rest of the data set.\203\ The scatter plot
below illustrates this concern in the present record.
---------------------------------------------------------------------------

\202\ As discussed above, to apply the Ferguson Test, Dr. Webb
transforms the data set from a lognormal distribution to a normal
distribution by taking the natural logarithm of each cost-change
observation. The Ferguson Test then removes cost changes in the
extreme tails until the remaining data conforms with the expected
distribution. See Webb Initial Aff. ]] 29-30.
\203\ In trimming to the middle 80% in the 2020 Index Review,
the Commission expressly declined to rely on arguments that the
middle 80% excluded anomalous or extraordinary costs merely because
it conformed to a lognormal distribution. 2020 Index Review, 173
FERC ] 61,245 at P 28 n.65.
[GRAPHIC] [TIFF OMITTED] TR28AP26.001

As shown above, using the Ferguson Test here would incorporate cost
changes outside the middle 80% in the left and right tails (shown in
orange) that diverge significantly from the upper and lower bounds of
the middle 80%.\204\ Including these additional pipelines would have a
pronounced effect on the index level calculation, increasing the
composite central tendency by 87 basis points relative to the middle
80% (from 4.06% to 4.93%).\205\
---------------------------------------------------------------------------

\204\ As applied by Designated Carriers, the Ferguson Test would
retain all cost changes between the 5th-97th percentiles of the full
data set, thus trimming less data than in any prior index review.
See supra note 191; see also AOPL II, 281 F.3d at 245-46 (remanding
the Commission's decision in the 2000 Index Review to use the full
data set without trimming); 2000 Remand Order, 102 FERC ] 61,195 at
PP 24-25 (calculating the index level on remand using an average of
the middle 50% and middle 80%).
\205\ See Attach. A, Ex. 12 tab.
---------------------------------------------------------------------------

64. By contrast, as discussed above, trimming to the middle 80%
achieves a reasonable balance that provides a broad sample of industry
cost experience while excluding data in the distribution's tails that
could skew the index. Because the middle 80% of this data set provides
a highly robust sample comprising approximately 94% of industry barrel-
miles,\206\ it is unnecessary to use the Ferguson Test to obtain an
adequate representation of normal industry cost experience.
---------------------------------------------------------------------------

\206\ Shehadeh Reply Decl. at 13; Shehadeh Reply Workpapers at
Ex. B2 tab.
---------------------------------------------------------------------------

D. CAPP's Proposal To Calculate Central Tendency Using the Geometric
Mean

1. Comments
65. CAPP states that if the Commission calculates the index level
by trimming the data set to the middle 80%, it should determine the
sample's central tendency using the geometric mean,\207\ rather than
the composite that averages the median, simple mean, and weighted mean.
According to CAPP, when determining the central tendency of a
positively skewed distribution, the geometric mean is superior to the
simple mean, which will overstate the sample's central tendency.\208\
CAPP states that formal statistical tests demonstrate that the middle
80% reflects a positively skewed lognormal distribution.\209\ Thus, if
the Commission uses the middle 80% instead of the middle 50%, CAPP
recommends that the Commission determine central tendency using the
geometric mean alone.\210\
---------------------------------------------------------------------------

\207\ The geometric mean is a type of average for positive
numbers, calculated by multiplying n numbers together and taking the
nth root.
\208\ CAPP Initial Comments at 3; Christensen Initial Report at
16.
\209\ Christensen Initial Report at 14-16.
\210\ Id. at 14-15; CAPP Initial Comments at 4.
---------------------------------------------------------------------------

66. LEPA opposes CAPP's proposal to replace the composite central
tendency with the geometric mean. LEPA contends that using the
geometric mean of a trimmed sample like the middle 80% will bias the
index downwards by understating pipeline cost changes.\211\ By
contrast, LEPA argues that the Kahn Methodology provides a balanced
representation of industry cost experience by using the composite
central tendency that averages the median, which is identical for the
full data set and the middle 80%, with the simple mean and weighted
mean.\212\ LEPA further states that the Commission declined to use the
geometric mean to determine central tendency in a prior index
review.\213\
---------------------------------------------------------------------------

\211\ LEPA Reply Comments at 18-19 (citing Shehadeh Reply Decl.
at 22-23). Specifically, Dr. Shehadeh states that because the cost-
change data set is positively skewed with a long right tail,
removing the top 10% of the data set to derive the middle 80% has a
greater effect than removing the bottom 10%, thereby reducing the
geometric mean. As a result, Dr. Shehadeh states that relying solely
on the geometric mean will bias the index downwards. See Shehadeh
Reply Decl. at 22-23. By contrast, Dr. Shehadeh states that the Kahn
Methodology mitigates this effect by incorporating the median, which
is identical for the full data set and the middle 80%, in the
composite central tendency. Id. at 23.
\212\ LEPA Reply Comments at 17-18; Shehadeh Reply Decl. at 21,
23.
\213\ LEPA Reply Comments at 18-19; Shehadeh Reply Decl. at 22
n.56 (citing 2005 Index Review, 114 FERC ] 61,293 at PP 4, 17).
---------------------------------------------------------------------------

2. Commission Determination
67. We decline to adopt CAPP's proposal to calculate the central
tendency of the middle 80% using the

[[Page 22934]]

geometric mean. Replacing the composite central tendency with the
geometric mean would depart from longstanding Commission practice. The
Kahn Methodology calculates the median, simple mean, and weighted mean
of the data sample and averages the results to derive a composite
measure of central tendency.\214\ In the rulemaking proceeding that
established the indexing regime, Dr. Kahn explained that the composite
``represents a pragmatic effort to provide a single reflection of the
behavior of `industry' costs for comparison with the changes in the
PPI-FG.'' \215\ The Commission credited Dr. Kahn's testimony and has
used the composite central tendency in all subsequent five-year
reviews,\216\ including in reviews where it considered the middle
80%.\217\ The Commission has also specifically declined to calculate
central tendency using the geometric mean.\218\
---------------------------------------------------------------------------

\214\ E.g., 2020 Index Review, 173 FERC ] 61,245 at P 5; 2015
Index Review, 153 FERC ] 61,312 at P 5; see also AOPL I, 83 F.3d at
1433.
\215\ Crysen Refining Inc., Lion Oil Company, and Sinclair Oil
Corporation, Testimony of Dr. Alfred E. Kahn, Docket No. RM93-11-
000, at 9 (filed Aug. 12, 1993) (Kahn Testimony).
\216\ 2020 Index Review, 173 FERC ] 61,245 at P 5; 2015 Index
Review, 153 FERC ] 61,312 at P 5; 2010 Index Review, 133 FERC ]
61,228 at P 8; 2005 Index Review, 114 FERC ] 61,293 at P 28; see
also 2000 Remand Order, 102 FERC ] 61,195 at P 23.
\217\ 2020 Index Review, 173 FERC ] 61,245 at P 63; 2005 Index
Review, 114 FERC ] 61,293 at P 28; 2000 Remand Order, 102 FERC ]
61,195 at P 23.
\218\ 2005 Index Review, 114 FERC ] 61,293 at PP 34-36.
---------------------------------------------------------------------------

68. CAPP has not convinced us to depart from this longstanding
consistent practice. We are unpersuaded by CAPP's argument that using
the composite central tendency of the middle 80% will bias the index
level calculation because it incorporates the simple mean. As explained
by Dr. Kahn, the simple mean, along with the median and weighted mean,
``captures a significant aspect of the composite results from an
industry perspective.'' \219\ Although the Commission has recognized
that the simple mean is sensitive to outlying data observations in a
skewed distribution,\220\ the simple mean receives only one-third
weighting in the composite central tendency. Averaging the simple mean
with the median, which is the same for the full data set and the middle
80%, and the weighted mean mitigates distortions that could result from
using the simple mean alone.
---------------------------------------------------------------------------

\219\ Kahn Testimony at 9.
\220\ See Order No. 561-A, FERC Stats. & Regs. ] 31,000 at
31,097.
---------------------------------------------------------------------------

69. Moreover, there are some concerns about adopting the geometric
mean as the sole measure of central tendency in calculating the index
level. Dr. Shehadeh asserts that because the cost-change values are
independent observations, the geometric mean is not an appropriate
measure of central tendency for pipeline cost changes.\221\ Of course,
we recognize that CAPP argues that the geometric mean provides the
central tendency for a lognormal data set.\222\ However, whatever
arguments and counterarguments may be made regarding the adoption of
the geometric mean, the record on these issues is limited.
---------------------------------------------------------------------------

\221\ See Shehadeh Reply Decl. at 22 (explaining that CAPP
inappropriately applies the geometric mean ``across pipelines'' to
determine central tendency as opposed to using the geometric mean to
measure ``the average change in costs across time'' (emphases
omitted)).
\222\ See Christensen Initial Report at 16 & n.20.
---------------------------------------------------------------------------

70. Furthermore, if we were to adopt CAPP's proposal to use the
geometric mean as the sole measure of central tendency, we would also
be abandoning the use of the weighted mean.\223\ As the Commission has
explained, the weighted mean makes an important contribution because
particularly large pipelines, which move a disproportionate amount of
barrels and involve a particularly large proportion of industry
investment, provide especially important insight into pipeline cost
changes.\224\
---------------------------------------------------------------------------

\223\ We acknowledge that in a lognormal distribution, the
median is the equivalent to the geometric mean. However, the
composite used in the Kahn Methodology already incorporates the
median. Moreover, the Commission's methodology for calculating the
index level has long relied on two additional measures of central
tendency (mean and weighted mean) in addition to the median to
obtain a more comprehensive measure of the central tendency. Kahn
Testimony at 9 (explaining that the median, simple mean, and
weighted mean each ``captures a significant aspect of the composite
results from an industry perspective'').
\224\ E.g., 2020 Index Review, 173 FERC ] 61,345 at P 37
(``[T]he Kahn Methodology strikes a balance between large and small
pipelines by determining the central tendency of the cost data using
two measures that do not take pipeline size into account (the median
and the mean) together with the weighted mean, which weights each
pipeline's cost change by its transported volumes. Including the
weighted mean in this analysis ensures that the cost-change
calculation takes sufficient account of pipeline size so that `minor
pipelines do not skew' the result.'' (quoting AOPL II, 281 F.3d at
241)).
---------------------------------------------------------------------------

71. In sum, we are not convinced to change our calculation of
central tendency to adopt the geometric mean. Rather, we find that it
is just and reasonable to maintain our current approach of determining
the central tendency based upon a composite of median, simple mean, and
weighted mean.\225\
---------------------------------------------------------------------------

\225\ CAPP states that the Commission should consider adopting
periodic rate rebasing, whereby the Commission would reset pipeline
rates to the cost-of-service level on a recurring basis through
conventional rate proceedings. Christensen Initial Report at 24-25,
28; CAPP Initial Comments at 5. Alternatively, CAPP suggests that
the Commission adopt an earnings-sharing mechanism, which would
require pipelines to share with shippers a percentage of their
earnings that exceed a specified level, or an off-ramp mechanism,
where the Commission would evaluate a pipeline's rates in a cost-of-
service rate proceeding when the pipeline's ROE exceeds a specified
threshold. Christensen Initial Report at 25-26. LEPA urges the
Commission to reject CAPP's proposals as outside the scope of the
five-year review. LEPA Reply Comments at 32. We decline to adopt
periodic rate rebasing or an earnings-sharing or off-ramp mechanism.
CAPP's proposals are outside the scope of this proceeding, which
addresses the appropriate index level that pipelines may use to
adjust their rates over the 2026-2031 period.
---------------------------------------------------------------------------

E. Pipeline Cost Changes Resulting From Regulatory Obligations and
Other Developments

1. Comments
72. Pipelines state that they have experienced significant
increases in costs related to electric power, labor and materials, and
pipeline safety and integrity requirements, and claim that these costs
will likely continue to increase in the future.\226\ In support of this
argument, Designated Carriers submit affidavits from pipeline
representatives attesting that their companies experienced substantial
cost increases during the 2019-2024 period.\227\ In addition, LEPA
submits a declaration from William R. Byrd describing new and
continuing regulatory obligations related to pipeline safety and
integrity that have affected pipelines' costs.\228\ Mr. Byrd also
identifies proposed legislation that could increase pipelines'
obligations and compliance costs in the future.\229\ Pipelines argue
that their ability to invest in new and existing pipeline
infrastructure depends on the Commission adopting an index level that
accurately reflects rising industry costs.\230\
---------------------------------------------------------------------------

\226\ LEPA Initial Comments at 8, 23-26 (citing Declaration of
William R. Byrd at 2, 9-14 (Byrd Decl.)); Designated Carriers
Initial Comments at 11-14 (citing Webb Aff. ]] 40-41; Exs. MJW-D1,
MJW-D2, MJW-D3, MJW-D4, and MJW-D5).
\227\ Designated Carriers Initial Comments, Ex. 2 at PP 2-5
(Aff. of Shane Brock on behalf of Colonial); id., Ex. 3 at P 2 (Aff.
of Justify Kleiderer on behalf of Enterprise (Kleiderer Aff.)); id.,
Ex. 5 at PP 3-5 (Aff. of Todd Stamm on behalf of Energy Transfer).
\228\ Byrd Decl. at 2-12.
\229\ Id. at 12-13.
\230\ LEPA Initial Comments at 8, 27 (citing 2005 Index Review,
114 FERC ] 61,293 at PP 60, 63); Designated Carriers Initial
Comments at 9-10, 15-16. In particular, Designated Carriers state
that existing returns on rate base may be insufficient to justify
capital investment. Designated Carriers Initial Comments at 14-17
(citing id., Ex. 3 at P 3 (Aff. of Sharon Spurlin on behalf of
Plains); Kleiderer Aff. ] 3; Stamm Aff. ] 6). In addition,
Designated Carriers state that pipelines may decline to propose
cost-of-service rate changes to recover their increased costs due to
the burdens and uncertainty associated with rate litigation. Id. at
16-17.

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[[Page 22935]]

73. Pipeline Safety Trust and EIC make similar assertions. Pipeline
Safety Trust states that pipeline safety requirements have increased
over the past five years and that the Commission should adopt an index
level that enables necessary investments in pipeline maintenance and
integrity.\231\ EIC concurs with Pipelines' arguments regarding
increasing costs and states that pipelines' ability to invest in
building and operating facilities requires a predictable regulatory
environment.\232\ EIC represents that various factors, including the
COVID-19 pandemic, have restricted pipelines' access to capital.\233\
Thus, EIC encourages the Commission to adopt an index level that
enables pipelines to attract investment in new and existing
infrastructure, which EIC states will benefit consumers and help the
United States meet rising global energy demand.\234\
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\231\ Pipeline Safety Trust Comments at 1-2.
\232\ EIC Comments at 9, 18.
\233\ Id. at 10-14.
\234\ Id. at 2-3, 5-6, 8-10, 15-17.
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74. PHMSA states that although it takes no position on the specific
index level the Commission should adopt, it urges the Commission to
advance policies that will encourage investment in the maintenance and
integrity of oil pipelines and provide incentives to repair and replace
higher-risk infrastructure.\235\
---------------------------------------------------------------------------

\235\ PHMSA Comments at 1.
---------------------------------------------------------------------------

75. Shippers dispute Pipelines' and EIC's contentions and state
that the Commission has previously found that future costs are
speculative and inappropriate for inclusion in the index level
calculation.\236\ Shippers contend that cost increases related to
power, labor, and pipeline safety or integrity measures incurred during
the 2019-2024 period are already reflected in the page 700 data used to
derive the index.\237\ In addition, Shippers argue that future cost
increases will be captured in future index reviews and that pipelines
may seek to recover those costs in the interim through cost-of-service
rate filings, where appropriate.\238\ Finally, Shippers state that a
higher index is not necessary to encourage investment in pipeline
infrastructure and, in any case, the Commission must avoid setting the
index at a level that produces unjust and unreasonable rates.\239\
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\236\ Joint Commenters Reply Comments at 32 (citing 2020 Index
Review, 173 FERC ] 61,245 at P 58); Liquids Shippers Reply Comments
at 18-19 (citing 2020 Index Review, 173 FERC ] 61,245 at P 58; 2010
Index Review, 133 FERC ] 61,228 at P 125); see also EPR Shippers
Reply Comments at 5 (citing AOPL II, 281 F.3d at 247).
\237\ Joint Commenters Reply Comments at 32-35; Liquids Shippers
Reply Comments at 16; STUSCO Reply Comments at 11.
\238\ Joint Commenters Reply Comments at 28-30; Liquids Shippers
Reply Comments at 17; STUSCO Reply Comments at 12; CAPP Reply
Comments at 6.
\239\ Joint Commenters Reply Comments at 36-38; Liquids Shippers
Reply Comments at 19-20; EPR Shippers Reply Comments at 5.
---------------------------------------------------------------------------

2. Commission Determination
76. We decline to alter our calculation of the index level based
upon commenters' general arguments concerning pipeline cost changes
during the 2019-2024 period or in future periods. To the extent that
pipelines incurred increased power, labor and materials, or regulatory
compliance costs during the 2019-2024 period, those cost changes are
reflected in pipeline cost data reported on FERC Form No. 6, page
700.\240\ We likewise decline to adjust the index level calculation
based upon projections of future cost changes occurring after the
conclusion of the 2019-2024 period. As the Commission has explained,
future cost projections related to regulatory changes or other
developments are speculative and inappropriate for inclusion in the
index.\241\ Changes to pipeline costs that occur after the 2019-2024
period concluded on December 31, 2024 are outside the scope of this
index review and will be incorporated as reflected in the page 700 data
used in future index calculations.\242\
---------------------------------------------------------------------------

\240\ If a pipeline experiences a substantial divergence between
its actual costs and the rate resulting from application of the
index, it may file to change its rate using the Commission's cost-
of-service methodology. 18 CFR 342.4(a); see also Order No. 561,
FERC Stats. & Regs. ] 30,985 at 30,957 (explaining that ``such
circumstances as increased safety or environmental regulations may
justify the use of a cost-of-service methodology'').
\241\ 2020 Index Review, 173 FERC ] 61,245 at P 58; 2010 Index
Review, 133 FERC ] 61,228 at P 125; see also AOPL II, 281 F.3d at
247 (affirming the Commission's practice of calculating the index
level based upon historical cost experience rather than predictions
about future cost changes).
\242\ Cost changes experienced during the 2024-2029 period will
be addressed in the 2030 index review.
---------------------------------------------------------------------------

F. Other Proposed Adjustments to Data Set

1. Comments
77. LEPA proposes to modify the data underlying the Commission's
proposal in the NOPR in several respects.\243\ First, whereas the
Commission's proposal only includes pipelines that filed page 700 cost
data for every year of the 2019-2024 period, LEPA states that the
Commission should include all pipelines that filed cost data for 2019
and 2024, even if they did not file data for one or more years between
2020-2023.\244\ LEPA contends that the absence of cost data between
2020-2023 does not preclude the Commission from comparing the
pipeline's cost changes from 2019-2024.\245\ Second, LEPA states that
the Commission's proposal improperly excludes ExxonMobil Pipeline
Company (ExxonMobil) on the basis that it transports volumes related to
TAPS.\246\ LEPA argues that the Commission should include ExxonMobil in
the data set because the significant majority of its volumes in 2019
and 2024 did not relate to TAPS.\247\ Third, LEPA proposes to adjust
the 2019 cost data reported by four pipelines to correct errors or
reflect subsequently filed updates.\248\ Fourth, whereas the NOPR's
proposal excluded CITGO Pipeline Company (CITGO Pipeline) and CITGO
Products Pipeline Company (CITGO Products Pipeline), LEPA proposes to
include these pipelines and to adjust their reported 2024 cost data to
correct alleged data discrepancies.\249\
---------------------------------------------------------------------------

\243\ LEPA Initial Comments at 9-10; LEPA Reply Comments at 30-
31. Designated Carriers support LEPA's proposed revisions to the
data set. Designated Carriers Reply Comments at 8-9.
\244\ LEPA Initial Comments at 9; Shehadeh Initial Decl. at 15-
16, 44-45.
\245\ Id.
\246\ LEPA Initial Comments at 10; Shehadeh Initial Decl. at 15
n.23, 45.
\247\ Shehadeh Initial Decl. at 45 (stating that approximately
95% of ExxonMobil's throughput in 2019 and 2024 did not relate to
TAPS operations).
\248\ LEPA proposes to adjust the 2019 cost data reported by (a)
Contango Resources, LLC, (b) Enterprise Crude Pipeline LLC, (c)
Enterprise Interstate Crude LLC, and (iv) Oryx Southern Delaware Oil
Gathering & Transport LLC. Shehadeh Initial Decl. at 45, Ex. A7 &
A11a.
\249\ Id. at 46-47; Shehadeh Suppl. Reply Workpapers at Ex. B7 &
Ex. B11a tabs.
---------------------------------------------------------------------------

78. Joint Commenters oppose LEPA's proposal to include pipelines
that did not file page 700 cost data for one or more years between
2020-2023. Joint Commenters contend that this approach would
incorporate data filed by pipelines that did not operate continuously
throughout the 2019-2024 review period.\250\ In addition, Shippers
disagree with LEPA's proposal to include ExxonMobil.\251\ Shippers
contend that even if TAPS-related transportation represents a small
portion of ExxonMobil's operations, the Commission has consistently
excluded pipelines with any TAPS-related

[[Page 22936]]

operations from the data set used to calculate the index level.\252\
Moreover, CAPP opposes LEPA's proposal to include CITGO Pipeline in the
data set,\253\ while Joint Commenters support including CITGO
Pipeline.\254\ Both Joint Commenters and CAPP oppose LEPA's proposed
adjustments to CITGO Pipeline's and CITGO Products Pipeline's reported
2024 cost data.\255\ Joint Commenters and CAPP contend that even if
there are discrepancies in those pipelines' reported 2024 cost data,
there is no evidence that these discrepancies affected their reported
total costs of service.\256\ Shippers do not oppose LEPA's proposed
adjustments to the four pipelines' 2019 cost data.\257\
---------------------------------------------------------------------------

\250\ Brattle Reply Report at P 153. For instance, Joint
Commenters state that LEPA's approach would include Chisholm
Pipeline Company (Chisholm), whose 2024 cost data only reflects a
partial year of operations between March-December 2024. Id. Although
CAPP agrees with LEPA's proposal, it argues that the Commission
should exclude Chisholm because it reported partial-year 2024 cost
data. CAPP Reply Comments at 6; Christensen Reply Report at 14.
\251\ Brattle Reply Report at P 156; CAPP Reply Comments at 6;
Christensen Reply Report at 14.
\252\ Brattle Reply Report at P 156; Christensen Reply Report at
14.
\253\ Christensen Reply Report at 14. CAPP argues that the
Commission should exclude CITGO Pipeline because its reported 2024
cost data is identical to its reported 2023 cost data.
\254\ Brattle Initial Report at P 200, Attach. D at 3; Brattle
Reply Report at P 159.
\255\ Brattle Reply Report at P 159; CAPP Reply Comments at 6;
Christensen Reply Report at 14.
\256\ Id.
\257\ Brattle Reply Report at PP 157-158.
---------------------------------------------------------------------------

79. Joint Commenters propose adjustments related to the treatment
of mergers and divestitures and to incorporate updated Form No. 6 data
where available.\258\ LEPA contends that Joint Commenters incorrectly
decline to reflect a merger between Targa Gulf Coast NGL Pipeline LLC
(Targa Gulf Coast) and Targa NGL Pipeline Company LLC (Targa NGL). LEPA
otherwise supports Joint Commenters' proposed data adjustments.\259\
---------------------------------------------------------------------------

\258\ Joint Commenters Initial Comments at 51; Brattle Initial
Report at PP 200-202 & Attach. D (listing Joint Commenters' proposed
data adjustments); see also Attach. A, Ex. 2 (listing 17 mergers and
acquisitions reflected in the data set).
\259\ LEPA Reply Comments at 30-31; Shehadeh Reply Decl. at 16-
19.
---------------------------------------------------------------------------

2. Commission Determination
80. We adopt Joint Commenters' unopposed adjustments to the data
set and LEPA's unopposed adjustments to four pipelines' 2019 cost
data.\260\ Furthermore, we adopt LEPA's proposal to reflect the merger
between Targa Gulf Coast and Targa NGL. In October 2020, Targa NGL
submitted a tariff filing canceling its last remaining transportation
service because Targa Gulf Coast had leased 100% of the capacity on
Targa NGL's pipeline.\261\ Accordingly, we revise the data set to
combine these pipelines' cost data as appropriate.
---------------------------------------------------------------------------

\260\ See Brattle Initial Report, Attach. D at 1-4 (listing
Joint Commenters' unopposed adjustments); Shehadeh Suppl. Workpapers
at Ex. B11a tab, rows 3-9 (listing LEPA's unopposed adjustments).
\261\ Targa NGL Pipeline Co., Tariff Filing, Docket No. IS21-45-
000 at 1 (filed Oct. 30, 2020).
---------------------------------------------------------------------------

81. We likewise adopt LEPA's and Joint Commenters' proposals to
include CITGO Pipeline and CITGO Products Pipeline in the data set.
Although the Commission's proposal in the NOPR excluded these pipelines
because they did not report updated cost data for 2020 or 2023 in the
previous-year column of their Form No. 6 filings submitted in the
following years,\262\ we conclude that they are appropriately included
in the data set using their originally reported 2020 and 2023 cost data
reported in the current-year column of their originally submitted Form
No. 6 filings for those years.\263\ However, we decline to adopt LEPA's
proposed adjustments to CITGO Pipeline's and CITGO Products Pipeline's
2024 cost data. To the extent that these pipelines' 2024 cost data
reflect discrepancies, we find that these discrepancies did not affect
the page 700 total cost-of-service values that the Commission uses to
calculate the index level.
---------------------------------------------------------------------------

\262\ See NOPR, 193 FERC ] 61,145, Workpapers at Model tab
(stating that both CITGO Pipeline and CITGO Products Pipeline were
excluded from the data set underlying the NOPR proposal).
\263\ See Brattle Initial Report, Attach. D at 3.
---------------------------------------------------------------------------

82. We decline to adopt LEPA's proposal to adjust the data set by
including pipelines that did not file page 700 cost data for one or
more years between 2020-2023. The Commission's practice is to calculate
the index level using a data set composed of pipelines that filed Form
No. 6 data for the full five-year review period at issue.\264\ Adopting
LEPA's proposal would only introduce one additional pipeline, Wildrose
Pipeline Company (Wildrose), to the data set.\265\ However, Wildrose's
predecessor entity reported zero barrel-miles for 2022,\266\ indicating
that Wildrose and its predecessor were not in continuous operation
throughout the 2019-2024 review period. On balance, we conclude that
the record does not support departing from the Commission's established
practice to include Wildrose in the data set.\267\
---------------------------------------------------------------------------

\264\ E.g., 2005 Index Review, 114 FERC ] 61,293 at P 41
(``Without complete data for [the full review period], a company
cannot be included in the dataset.'').
\265\ LEPA states that adopting its proposal would introduce
three additional pipelines to the data set: (a) Chisholm; (b) BP
Pipelines (North America), Inc.; and (c) Wildrose (including its
predecessor entity, Hawthorn Oil Transportation (North Dakota),
Inc.). Shehadeh Initial Decl. at 15 n.25. However, we exclude
Chisholm from the data set because its 2024 cost data reflects a
partial year of operations. See Attach. A at Exh. 4 tab & Check tab.
Moreover, BP Pipelines (North America), Inc. is included in the data
set through its merger with BP Midstream Partners LP Company and BP
Midwest Product Pipelines Holdings LLC. Thus, adopting LEPA's
proposal to include pipelines that filed cost data in 2019 and 2024
but did not file cost data for at least one year between 2020-2023
would only introduce Wildrose to the data set.
\266\ Brattle Reply Report at P 153.
\267\ In any case, excluding Wildrose from the data set produces
no material change in the resulting index level.
---------------------------------------------------------------------------

83. We are likewise not persuaded to adopt LEPA's proposal to
include ExxonMobil in the data set. Congress specifically excluded TAPS
and ``any pipeline delivering oil directly or indirectly into [TAPS]''
from the provisions of EPAct 1992.\268\ Accordingly, the Commission has
consistently excluded pipelines that transport TAPS-related volumes,
including ExxonMobil,\269\ from the data used to derive the index
level.\270\ Because the record establishes that ExxonMobil transported
volumes associated with TAPS operations during the 2019-2024
period,\271\ we exclude ExxonMobil from the data set in accordance with
the Commission's established practice.
---------------------------------------------------------------------------

\268\ EPAct 1992 1804(2)(B).
\269\ E.g., 2020 Index Review, 173 FERC ] 61,245, Attach. A at
TAPS tab (including ExxonMobil among pipelines excluded from data
set as TAPS pipelines); 2015 Index Review, 153 FERC ] 61,312,
Attach. A at Company Exclusions tab (excluding ExxonMobil from the
data set used to calculate the index level in the 2015 Index
Review). We observe that LEPA's witness Dr. Shehadeh proposed to
exclude ExxonMobil as a TAPS asset in prior index reviews. Ass'n of
Oil Pipe Lines, Decl. of Ramsey D. Shehadeh, Ph.D., Docket No. RM15-
20-000, Workpapers at Ex. A9 tab (filed Aug. 24, 2015) (including
ExxonMobil among the ``TAPS Assets'' excluded from proposed data
set); Ass'n of Oil Pipe Lines, Decl. of Ramsey D. Shehadeh, Ph.D.,
Docket No. RM10-25-000, Workpapers at Ex. A13 tab (filed Aug. 20,
2010) (same).
\270\ See, e.g., 2010 Rehearing Order, 135 FERC ] 61,172 at P 16
(``[T]he TAPS pipelines are . . . not subject to the index
adjustment due to the provisions of the EPAct.'').
\271\ Shehadeh Initial Decl. at 45 (acknowledging that
approximately 5% of ExxonMobil's transported volumes in 2019 and
2024 related to TAPS operations); Brattle Reply Report at P 156
(stating that in 2024, ExxonMobil reported a higher number of
barrel-miles associated with TAPS operations (23.8 billion barrel-
miles) than with non-TAPS operations (22.4 billion barrel-miles)).
---------------------------------------------------------------------------

IV. Determination of Prospective Oil Pipeline Index Level

84. Based on the foregoing, we calculate as follows the index level
to determine annual changes to oil pipeline rate ceilings for the five-
year period July 1, 2026 through June 30, 2031. First, as shown in
Attachment A (Exhibit 4, Check tab), we assemble a data set of pipeline
cost data from FERC Form No. 6 annual reports, excluding TAPS pipelines
and those pipelines that did not file Form No. 6, page 700 data or
filed incomplete data. Second, as shown in Attachment A (Model tab), we
calculate each pipeline's cost change on a per barrel-mile basis over
the prior

[[Page 22937]]

five-year period, 2019-2024. Third, we adjust pipelines' 2019 cost data
to account for the ROE Policy Change, as discussed above in section
III.A. Fourth, to remove statistical outliers and potentially spurious
data, we trim the data set to those pipelines in the middle 80% of cost
changes. Fifth, as shown in Attachment A (Exhibit 1), we calculate
three measures of the trimmed dataset's central tendency: the median,
the mean, and a weighted mean. Sixth, we calculate a composite central
tendency by averaging the median, mean, and weighted mean, as shown in
Attachment A (Exhibit 1). Finally, we compare this composite to the
change in PPI-FG over the same 2019-2024 period and set the index level
at PPI-FG minus this differential. Using these calculations, we
establish an index level of PPI-FG--0.55% for the five-year period
beginning July 1, 2026.

V. Information Collection Statement

85. The information collection requirements contained in this final
order are subject to review by the Office of Management and Budget
(OMB) under section 3507(d) of the Paperwork Reduction Act of
1995.\272\ OMB's regulations require approval of certain information
collection requirements imposed by agency rules.\273\
---------------------------------------------------------------------------

\272\ 44 U.S.C. 3507(d).
\273\ 5 CFR 1320.11.
---------------------------------------------------------------------------

86. This final order affects a currently approved information
collection. Changes described in this final order are non-substantive
and do not change any filing requirements; rather, this final order
adjusts an aspect of the calculation that is used in an annual tariff
filing that FERC-jurisdictional oil pipelines are required to submit to
the Commission. This aspect of the calculation is reviewed and updated
every five years.
Summary of Information Collection
Title: FERC-550, Oil Pipeline Tariff Filings & Depreciation
Studies.
Action: Non-substantive change adjusting an aspect of the
calculation that is used in annual oil pipeline tariff filings.
OMB Control Nos.: 1902-0089 (FERC-550).
Respondents: Oil Pipelines.
Frequency of Information Collection: On occasion in compliance with
requirements.
Necessity of Information: The reforms in this proposed rule are
necessary to ensure that the rates of oil pipelines are just and
reasonable.
Public Reporting Burden: The burden and cost related to filing an
oil pipeline tariff will not change due to this final order. The
currently approved hourly burden for submitting a tariff filing is 7
hours ($721).\274\
---------------------------------------------------------------------------

\274\ The hourly cost used in this calculation is based on the
estimated average annual cost per FERC FTE, including salary +
benefits of $103 per hour, or $214,093 per year.
---------------------------------------------------------------------------

VI. Executive Order 12866 (Regulatory Planning and Review), Executive
Order 13563 (Improving Regulation and Regulatory Review), and Executive
Order 14192 (Unleashing Prosperity Through Deregulation).

87. Executive Order 12866 (Regulatory Planning and Review), as
amended by Executive Order 14215 (Ensuring Accountability for All
Agencies) and supplemented by Executive Order 13563 (Improving
Regulation and Regulatory Review), directs agencies to assess the costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits.
Executive order 13563 emphasizes the importance of quantifying costs
and benefits, reducing costs, harmonizing rules, and promoting
flexibility. The Office of Information and Regulatory Affairs (OIRA)
has designated this final order a ``significant regulatory action''
that is economically significant under section 3(f)(1) of Executive
Order 12866. Accordingly, OMB has reviewed this final order. The
regulatory impact analysis (RIA) associated with this rulemaking can be
found in this docket on the Commission's eLibrary system. The following
represents a summary of the aforementioned regulatory impact analysis.
88. The index level established in this final order will influence
rates for interstate oil pipeline transportation service, which will
affect the interests of interstate oil pipelines and shippers on
interstate oil pipelines.\275\ The RIA considers the potential impacts
of the index level established herein relative to two baselines.\276\
The first baseline (Baseline 1) assumes that a final rule establishing
a new index level for the 2026-2031 time period is not issued and
assumes that the index level established for 2021-2025 would remain
effective for 2026-2031. The second baseline (Baseline 2) assumes that
a final rule establishing an index level for the 2026-2031 time period
is not issued, and that there is no effective index level and pipelines
are thus precluded from changing their rates pursuant to the
Commission's indexing regulations for the 2026-2031 period. The index
level established in this final order will reduce interstate oil
pipeline transportation revenues during the five-year period that the
index would be effective as compared to Baseline 1 and will increase
oil pipeline revenues during the five-year period that the index would
be effective as compared to Baseline 2.\277\
---------------------------------------------------------------------------

\275\ Approximately 350 pipelines file tariff rates with the
Commission for interstate transportation of crude oil and petroleum
products, and approximately 86% of rates are set under the indexing
method. For more information about who is affected by the NOPR, see
section II.C of the RIA.
\276\ See RIA, section II.E.
\277\ For more information about the effects of the NOPR as
compared to Baseline 1 and Baseline 2, see RIA, section II.F. See
also RIA, Appendix.
---------------------------------------------------------------------------

89. As discussed in the RIA, this final order will not create any
measurable costs or benefits outside of these effects experienced by
pipelines and shippers. While there are circumstances in which pipeline
transportation rates can indirectly affect financial interests outside
of pipelines and shippers (for example, lower pipeline transportation
rates could affect commodity prices for refineries, prices of
petroleum, or pipeline infrastructure investment), these impacts are
sufficiently attenuated or otherwise so minimal as to not result in
significant costs.\278\
---------------------------------------------------------------------------

\278\ See id. section II.G.
---------------------------------------------------------------------------

90. The RIA also describes the regulatory alternatives that the
Commission considered and the estimated effects of alternative index
levels on annual interstate oil pipeline transportation revenues as
compared to the baselines. The alternative index levels reflect
different combinations of regulatory alternatives proposed by
commenters, including different approaches to the three issues on which
the Commission requested comment in the NOPR.\279\ Two index levels
that result from regulatory alternatives considered in the RIA are
higher compared to the index level established herein, and two index
levels that result from regulatory alternatives are lower than the
index level established herein.
---------------------------------------------------------------------------

\279\ For further details about the regulatory alternatives
considered by the Commission and their estimated effects on annual
interstate oil pipeline transportation revenues, see RIA, section
II.H & Appendix.
---------------------------------------------------------------------------

91. This final order is considered to be a de minimis regulatory
action under Executive Order 14192.

VII. Executive Order 13132 (Federalism)

92. Executive Order 13132 (Federalism) imposes certain requirements
on Federal agencies formulating and implementing policies or
regulations that preempt State law or that have federalism
implications. The Executive Order requires agencies to

[[Page 22938]]

examine the constitutional and statutory authority supporting any
action that would limit the policymaking discretion of the States and
to carefully assess the necessity for such actions.
93. The Commission has examined the final rule and determined that
it would not have a substantial direct effect on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. Therefore, the Commission has not prepared a federalism
assessment.

VIII. Executive Order 13211 (Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use)

94. Executive Order 13211 (Actions Concerning Regulations that
Significantly Affect Energy Supply, Distribution, or Use) requires
Federal agencies to prepare and submit to OIRA at OMB, a Statement of
Energy Effects for any significant energy action. A ``significant
energy action'' is defined as any action that promulgates or is
expected to lead to promulgation of a final rule, and that: (a) is a
significant regulatory action under Executive Order 12866, or any
successor order, and is likely to have a significant adverse effect on
the supply, distribution, or use of energy; or (b) is designated by the
Administrator of OIRA as a significant energy action. For any
significant energy action, the agency must give a detailed statement of
any adverse effects on energy supply, distribution, or use and of
reasonable alternatives to the action and their expected benefits on
energy supply, distribution, and use.
95. The Commission has determined that this final order would not
have a significant adverse effect on the supply, distribution, or use
of energy. Accordingly, the Commission has not prepared a Statement of
Energy Effects.

IX. Environmental Analysis

96. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\280\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in this exclusion are final rules that are
clarifying, corrective, or procedural or that do not substantially
change the effect of the regulations being amended.\281\ The action
taken herein falls within this categorical exclusion in the
Commission's regulations.
---------------------------------------------------------------------------

\280\ Reguls. Implementing the Nat'l Env't Pol'y Act, Order No.
486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ] 30,783
(1987) (cross-referenced at 41 FERC ] 61,284).
\281\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

X. Regulatory Flexibility Act

97. The Regulatory Flexibility Act of 1980 (RFA) \282\ generally
requires a description and analysis of final rules that will have
significant economic impact on a substantial number of small entities.
The Small Business Administration's (SBA) Office of Size Standards
develops the numerical definition of a small business.\283\ The SBA
defines a small oil pipeline company as one with less than 1,500
employees.\284\ Based on this definition, the Commission identified 43
small entities that the final rule will affect. As discussed above, the
burdens and costs associated with filing oil pipeline tariffs will not
change as a result of the final rule. The currently approved hourly
burden for submitting a tariff filing is 7 hours ($721). We view this
as a minimal economic impact for each entity. Accordingly, we certify
that the final rule will not have a significant economic impact on a
substantial number of small entities. Thus, no regulatory flexibility
analysis is required.
---------------------------------------------------------------------------

\282\ 5 U.S.C. 601-612.
\283\ 13 CFR 121.101.
\284\ Id. 121.201, Subsector 486 (Pipeline Transportation).
---------------------------------------------------------------------------

XI. Document Availability

98. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (<a href="http://www.ferc.gov">http://www.ferc.gov</a>).
99. From the Commission's Home Page on the internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
100. User assistance is available for eLibrary and the Commission's
website during normal business hours from FERC Online Support at 202-
502-6652 (toll free at 1-866-208-3676) or email at
<a href="/cdn-cgi/l/email-protection#badcdfc8d9d5d4d6d3d4dfc9cfcacad5c8cefadcdfc8d994ddd5cc">[email&#160;protected]</a>, or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
<a href="/cdn-cgi/l/email-protection#572722353b3e34792532313225323934322538383a173132253479303821">[email&#160;protected]</a>.

XII. Effective Date and Congressional Notification

101. This final order is effective June 29, 2026. The Commission
has determined, with the concurrence of the Office of Information and
Regulatory Affairs of OMB, that this rule is a ``major rule'' as
defined in Subtitle E of the Small Business Regulatory Enforcement
Fairness Act of 1996, 5 U.S.C. 804(2).

The Commission Orders

Consistent with the discussion in this order, the appropriate oil
pipeline index level for the five-year period from July 1, 2026,
through June 30, 2031 is PPI-FG-0.55%.

By the Commission. Chairman Swett is concurring with a separate
statement attached.
Commissioner Rosner is concurring with a separate statement
attached.
Commissioner See is concurring with a separate statement
attached.
Commissioner Chang is dissenting with a separate statement
attached.
Commissioner LaCerte is concurring with a separate statement
attached.
Issued: April 24, 2026.
Debbie-Anne A. Reese,
Secretary.

UNITED STATES OF AMERICA

Federal Energy Regulatory Commission

Five-Year Review of the Oil Pipeline Index

Docket No. RM26-6-000
(Issued April 24, 2026)

SWETT, Chairman, concurring:

1. Today's order should not raise gas prices at the pump, or the
price of airfare for ordinary Americans. The reality is that pipeline
transportation costs represent a tiny fraction of the total price of
fuel from an end-use consumer's perspective.\1\
---------------------------------------------------------------------------

\1\ Moreover, this proceeding concerns only marginal adjustments
to the rate at which pipelines may raise their rates under indexing
(itself just one of multiple methods oil pipelines may use when
changing rates). Thus, from an end-use consumer's perspective, the
contested issues here would at most implicate small differences to
an already minuscule cost component (i.e., pipeline transportation).
---------------------------------------------------------------------------

2. This order is no windfall for the pipelines, but rather a
routine mechanism to make them whole by ensuring that the rates they
receive for a critical national service reflect industry cost
increases. Consistent with our well-established practice in conducting
five-year index reviews, our task is to ensure that the index continues
to ``accurately track cost changes in the pipeline industry''--using
PPI-FG as a baseline measure for inflation, appropriately ``adjusted to

[[Page 22939]]

account for actual cost changes experienced by the oil pipeline
industry.'' \2\
---------------------------------------------------------------------------

\2\ Ass'n of Oil Pipe Lines v. FERC, 876 F.3d 336, 340 (D.C.
Cir. 2017) (cleaned up).
---------------------------------------------------------------------------

3. That is a largely technical and data-driven exercise. In this
instance, the primary points of contention revolve around (1) whether
to adjust the data used to calculate the index level to account for the
2020 change in Commission policy for determining oil pipelines' allowed
rate of return on equity, (2) whether the index calculation should
incorporate resubmitted 2019 cost data, and (3) whether ``trimming''
the data set to the middle 80%, or instead the middle 50%, provides a
more representative picture of industry cost experience.
4. I will not reprise in detail the reasons for our resolution of
those issues here, which are fully explained in the order. Suffice to
say that our decision on each of those points is consistent with
Commission precedent, amply supported by the record, and--most
importantly--advances the index's basic cost-tracking purpose. But
because the bottom-line result of our index review is likely to loom
larger than the technical details of how we reached that result, I
write separately to contextualize today's order in the bigger picture
of our rate regulation under the Interstate Commerce Act (ICA).
5. Our important but limited charge under the ICA is to ensure that
interstate oil pipeline rates are just and reasonable.\3\ At the
broadest level, carrying out that statutory responsibility entails
balancing the need to protect shippers from excessive rates--
particularly rates that may reflect abuses of market power--and the
need to ensure that pipelines receive fair returns, which is in turn a
prerequisite to the long-term health of (and adequate future investment
in) the nation's oil pipeline infrastructure. We have sought to strike
that balance, consistent with our other statutory obligations,\4\
through the detailed ratemaking system established under our
regulations--including the indexing methodology introduced in Order No.
561.
---------------------------------------------------------------------------

\3\ 49 U.S.C. app. 1(5).
\4\ Notably, the Energy Policy Act of 1992's mandate to develop
a ``simplified and generally applicable'' ratemaking methodology.
Public Law 102-86, 1801(a), 106 Stat. 3010 (Oct. 24, 1992), codified
at 42 U.S.C. 7172 note.
---------------------------------------------------------------------------

6. The purpose of our five-year index reviews is not to revisit
that balance. We are simply making incremental adjustments to the index
level to reflect cost changes in the industry. While that inevitably
involves some judgment calls, those judgment calls are guided by a
concern for empirical and economic accuracy. In short, our narrow task
in this proceeding is to faithfully advance the cost-tracking purpose
of our index review, not to pick economic winners or losers.
7. Finally, it bears keeping in mind that, insofar as end-use
consumers have a stake in the outcome of our index reviews, it is by no
means a one-sided equation. Although the benefits of lower-priced
services are self-explanatory, ordinary Americans' interests are not
served by excessively low pipeline rates. That would risk
disincentivizing investment in the infrastructure that provides the
least expensive and safest method of transporting the energy products
our day-to-day lives and economy depend on.\5\
---------------------------------------------------------------------------

\5\ See, e.g., Kenneth P. Green & Taylor Jackson, Pipelines Are
Safer Than Rail in the Transportation of Oil and Gas, Manhattan
Institute (Aug. 12, 2015), <a href="https://manhattan.institute/article/pipelines-are-safer-than-rail-in-the-transportation-of-oil-and-gas">https://manhattan.institute/article/pipelines-are-safer-than-rail-in-the-transportation-of-oil-and-gas</a>;
Tracy Johnson, Pipelines vs. Trains: Which Is Better for Moving
Oil?, CBC News (Mar. 10, 2015), <a href="https://www.cbc.ca/news/business/pipelines-vs-trains-which-is-better-for-moving-oil-1.2988407">https://www.cbc.ca/news/business/pipelines-vs-trains-which-is-better-for-moving-oil-1.2988407</a>.
---------------------------------------------------------------------------

8. Today's order faithfully holds the line we established when we
created the indexing system, ensuring--as promised in Order No. 561--
that the index keeps apace with industry cost trends. Broader policy
questions about whether our approach to oil pipeline rates under the
ICA is well-adapted to today's economic realities, and whether that
overall approach best balances and serves the competing interests at
stake, are for another day.
For these reasons, I respectfully concur.

Laura V. Swett,
Chairman.

UNITED STATES OF AMERICA

Federal Energy Regulatory Commission

Five-Year Review of the Oil Pipeline Index

Docket No. RM26-6-000

(Issued April 24, 2026)

ROSNER, Commissioner, concurring:

1. I concur with today's order because, while I may have preferred
different decisions on some of the inputs to the index, I believe the
oil index finalized today meets the Commission's obligation under the
Interstate Commerce Act (ICA): to create and apply a ``simplified and
generally applicable ratemaking methodology for oil pipelines.'' \1\
And while I applaud the thorough and comprehensive statement from my
colleague Commissioner Chang and am sympathetic to her well-made
points, I believe we have met the ICA's standard. I write separately
because the Commission is at its strongest, particularly in complex,
historically controversial rulemakings like this one, when our five-
member Commission is able to meet in the middle to accommodate
differing perspectives, and we are able to act by consensus.
---------------------------------------------------------------------------

\1\ Pursuant to authority granted to it under the ICA, see 49
U.S.C. app. Sec. 15(1) (1988), and the Energy Policy Act of 1992,
see Public Law 102-486, 1801(a), 106 Stat. 2776, 3010 (codified at
42 U.S.C. 7172 note (2006)), the Commission employs an indexed
ratemaking system to govern oil pipeline rates.
---------------------------------------------------------------------------

2. My concurrence is informed by the recent history of the
Commission's prior oil index. The divided Commission's fracture in that
proceeding produced tremendous uncertainty for both oil pipelines and
their customers, and ultimately resulted in a D.C. Circuit remand,
vacatur, scores of refund applications, and overall volatility
associated with the Commission's oil ratemaking regime. This did not
yield the clarity and dependability of a Commission work product that
unlocks certainty and investment for the oil industry, or for anyone--
whether associated with downstream economic sectors, or everyday
American consumers.
3. The outcome of this proceeding matters, and in my view, would be
best served with the strength and clarity that comes from a unanimous,
compromise outcome. We are engaged here in far more than a mathematical
exercise, and we do so during a moment when energy prices, particularly
gasoline prices, are high across the country, with material impacts to
oil pipeline customers, including airlines, small refiners, independent
gas stations, and end use customers. On an annual basis, the index
adopted here allows oil pipeline revenues to increase by a maximum of
about 4 percent per year, a value that is largely based on actual
inflation over the prior 5 years. The specific changes we have made
since the unanimous NOPR proposal cost an additional $4.5 billion,
cumulatively, about 2.5% of estimated industry-wide revenue of $176.6
billion over the next 5 years.
4. The Commission embarked on this new oil index rulemaking intent
on leaving the chaos of the prior index behind us. Our unanimous vote
on the underlying NOPR proves that we are capable of doing so. I
continue to believe that our deliberative panel could have found a way
to reach a compromise, and achieve a final rule with five votes, and
with it unlock the benefits of unanimity for all who

[[Page 22940]]

depend on a durable oil index. However, I support the order as meeting
both our statutory mandate and the need to provide rate clarity for the
next five years to America's oil industry.
For these reasons, I respectfully concur.

David Rosner,
Commissioner.

UNITED STATES OF AMERICA

Federal Energy Regulatory Commission

Five-Year Review of the Oil Pipeline Index

Docket No. RM26-6-000
(Issued April 24, 2026)

SEE, Commissioner, concurring:

1. Today's order exists because Congress directed the Commission to
implement a ``simplified and generally applicable ratemaking
methodology'' for oil pipelines as an efficient way to uphold the
Interstate Commerce Act's just and reasonable standard.\1\ So every
five years we undertake a rigorous and data-driven analysis of the
industry-wide cost changes that pipelines experience in an effort to
recalibrate the index to current market conditions. Our aim is to
reasonably align pipeline ceiling rates with the oil sector's economic
realities in an administratively streamlined fashion, as an alternative
to case-by-case rate cases. This practice supports fair compensation
for carriers, promotes incentives for investing in critical
infrastructure, and maintains reliable price signals for oil
transportation. The results of the index itself are a small part of
overall consumer rates, but our regular indexing effort is an important
tool within the sector. Indexing works in practice because it is
transparent, repeatable, and predictable, all of which ultimately
supports fair compensation for carriers and reliable price signals for
shippers and investors.
---------------------------------------------------------------------------

\1\ 49 U.S.C. app. Sec. 1 et seq. (1988).
---------------------------------------------------------------------------

2. It's easy to agree on those goals behind periodic indexing. But
in practice, applying a transparent indexing process is still a
technical and highly record-driven task. Reasonable minds can draw
potentially different outcomes from the data before us within a given
cycle, and reasonable minds can take different approaches within the
Commission's overall methodology across cycles, too. I leave to the
Final Rule to explain in detail why the Commission landed on the
specifical technical judgments in this index iteration. I write here
briefly to underscore that some variation across index cycles can be a
feature, not a bug, when it comes to applying Commission expertise to a
record that's grounded in the unique circumstances and policies
inherent to any five-year stretch of time.
3. Focusing on our decision to trim to the middle 80%: The
Commission has long recognized that we must do some statistical
trimming to keep outliers from distorting industry cost trends. The
decision where to trim oil pipeline cost data is record driven.\2\ It
may not always be true that more data is better than less, but in this
cycle it is. Here, using the middle 80% provides a robust and
representative sample of pipeline cost experience, avoids prematurely
discarding relevant observations, and better reflects the diversity of
operations and barrel-mile coverage than narrower bands would. The
middle 80% of the data set comprises 94% of industry-wide barrel miles,
which helps give confidence that the index is representative while
omitting true outlying data that would distort the calculation. This
approach also aligns with Commission practice in the most recent five-
year review cycle.
---------------------------------------------------------------------------

\2\ See, e.g., Five-Year Review of Oil Pipeline Index, 133 FERC
] 61,228, at PP 61-63 (2010) (explaining that data trimming to the
middle 50 percent of pipelines is appropriate based on the record);
Five-Year Rev. of the Oil Pipeline Index, 173 FERC ] 61,245, at PP
25-32 (2020) (explaining that it is preferable to consider
additional data and trim to the middle 80 percent of pipelines
because it more fully reflects the diversity of cost experiences
based on the record).
---------------------------------------------------------------------------

4. True, the Commission has not always trimmed to 80%. But data
trimming is as much a record-grounded art as a math equation. Different
trimming bands (50%, 80%, or otherwise) could be reasonable in
different cycles depending on the nature of industry activity during
the measurement period that bears on how reported cost changes are
distributed. Our choice of an 80% trimming band here reflects our
judgment that this record warrants broader representativeness; it
doesn't imply that narrower trimming would be unreasonable in future
cycles. For example, if we see more pipeline construction and targeted
expansions of existing systems in the next five years--and given our
nation's infrastructure needs, I hope that we do--those operational-
and market-driven changes would likely bring more outlier pipelines to
our cost change analysis. Faced with a record like that, a narrower
trimming band might end up better capturing the ``normal'' industry
experience by eliminating any non-representative cost spikes.
5. What matters most to my mind is consistency in methodology, not
necessarily in outcome. Our goal in applying the Commission's
methodology is to fairly collect and validate cost experience, then
remove outliers to avoid distortion, and finally set an index that
credibly tracks central tendencies over the last five years. As
industry conditions change, the precise trimming band the method yields
can change, too. And in cases where the record could potentially
support multiple outcomes, we're called to apply our judgment in
choosing where best to draw the line given the record before us. In
this proceeding, trimming to the middle 80% meets that responsibility.
Given the facts of this case, I respectfully concur with today's
order.

Lindsay S. See,
Commissioner.

UNITED STATES OF AMERICA

Federal Energy Regulatory Commission

Five-Year Review of the Oil Pipeline Index

Docket No. RM26-6-000
(Issued April 24, 2026)

CHANG, Commissioner, dissenting:

1. In today's order,\1\ the Commission establishes the five-year
oil pipeline index as (PPI-FG)--0.55%. I dissent from that result
because I disagree with the order's decision to (1) apply a uniform
return on equity (ROE) modification to account for changes in the
Commission's ROE policy, and (2) adopt a data set trimmed to the middle
80% of cost changes rather than the middle 50%. Instead, I would
establish the five-year index value as (PPI-FG)--1.68%, which is
consistent with relevant precedent and supported by the record.
---------------------------------------------------------------------------

\1\ Five-Year Rev. of the Oil Pipeline Index, 195 FERC ] 61,062
(2026) (Final Rule).
---------------------------------------------------------------------------

I. Background

2. The Commission's oil pipeline indexing methodology is a
ratemaking construct unique to its regulation of transportation rates
under the Interstate Commerce Act (ICA). Developed in response to
Congress' directive in the Energy Policy Act of 1992 to establish a
``simplified and generally applicable'' ratemaking methodology,\2\ the
index allows pipelines to annually adjust their rates subject to a cap
rather than relying on lengthy, complex cost-of-service proceedings.\3\
While the index is the

[[Page 22941]]

predominant method used to set rates under the ICA, pipelines have
multiple options for establishing and updating their rates, including
cost-of-service filings, qualifying for market-based rates, and the use
of negotiated or settlement rates, particularly for the development of
new infrastructure.\4\
---------------------------------------------------------------------------

\2\ Public Law 102-486, 1801(a), 106 Stat. 2776, 3010 (Oct. 24,
1992), codified at 42 U.S.C. 7172 note.
\3\ Revisions to Oil Pipeline Regulations Pursuant to Energy
Pol'y Act of 1992, Order No. 561, FERC Stats. & Regs. ] 30,985, at
30,947 (1993) (cross-referenced 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).
\4\ E.g., 18 CFR 342.4 (specifying cost-of-service rates,
market-based rates, and settlement rates as alternative rate
methodologies to indexing); see also Order 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].''); Saddlehorn
Pipeline Co., LLC, 169 FERC ] 61,118 (2019) (approving rates, terms,
and conditions established through an open season for a system
expansion).
---------------------------------------------------------------------------

3. In 1993, Order No. 561 set the ``Kahn Methodology'' as the
approach that the Commission uses to collect and trim cost data
provided by the pipelines \5\ and to compare their cost changes against
an inflation rate in the economy, as measured by the Producer Price
Index--Finished Goods (PPI-FG) set by the Bureau of Labor Statistics.
The Commission updates the resulting oil pipeline index every five
years through a review of industry-wide cost changes over the preceding
five-year period. The Final Rule succinctly summarizes how the
calculation works:
---------------------------------------------------------------------------

\5\ Since 2015, the Commission has relied upon data submitted by
pipelines via page 700 of Form 6 to calculate the industry-wide cost
changes used to establish the index. Five-Year Rev. of Oil Pipeline
Index, 153 FERC ] 61,312, at PP 12-18 (2015) (2015 Final Rule),
aff'd sub nom. Ass'n of Oil Pipe Lines v. FERC, 876 F.3d 336 (D.C.
Cir. 2017) (AOPL III).

Each pipeline's cost change is calculated on a per-barrel-mile
basis over the previous five-year period (e.g., the years 2019-2024
in this proceeding). To remove statistical outliers and potentially
spurious data, the resulting data set is trimmed (e.g., to the
middle 80% or middle 50%) by removing an equal number of pipelines
from the top or bottom of the distribution. The Kahn Methodology
then calculates three measures of the trimmed dataset's central
tendency: median, mean, and weighted mean.[ ] The Kahn Methodology
calculates (a) a composite central tendency by averaging the median,
mean, and weighted mean and (b) the difference between the composite
central tendency of per-barrel-mile cost changes and the percentage
---------------------------------------------------------------------------
change in PPI-FG over the prior five-year period.[ ]

4. This measurement, the difference between observed pipeline cost
changes and PPI-FG, generates an index that the Commission applies for
the prospective five-year period, that is PPI-FG plus or minus a
percentage.\6\ This means that if PPI-FG were 3% in a particular future
year, the pipelines' rates are allowed to increase by 3% plus or minus
the amount set by the 5-year oil pipeline index.\7\ Each year,
effective July 1, pipelines are allowed to adjust their ceiling rate
using that index,\8\ which sets the maximum rate that a pipeline can
charge for transportation services if it is using the indexing
methodology.
---------------------------------------------------------------------------

\6\ If pipelines' observed cost changes are lower than inflation
as measured by PPI-FG, then the index will be a negative number. If
pipelines' observed cost changes are higher than inflation as
measured by PPI-FG, then the index will be a positive number.
\7\ These multipliers are posted each year by the Commission.
FERC, Oil Pipeline Index Indexing Methodology--Indices to be Used,
<a href="https://www.ferc.gov/general-information-1/oil-pipeline-index">https://www.ferc.gov/general-information-1/oil-pipeline-index</a>. The
posted multiplier can vary significantly, largely driven by whether
inflation (as measured via PPI-FG) is higher or lower. For example,
the multiplier for July 1, 2021-June 30, 2022 (derived during the
first year of the COVID pandemic, when inflation was very low) was
0.994188, i.e., a reduction in the pipelines' ceiling rates. By
comparison, the multiplier for July 1, 2022-June 20, 2023 (i.e.,
derived as the economy emerged from the COVID pandemic, when
inflation was high) was 1.097007, i.e., a nearly 10% increase in the
pipelines' ceiling rates.
\8\ So, for example, assume the Commission adopted an index of
+1%. If the PPI-FG inflation measure for year one of the five-year
cycle was 2%, then the annual multiplier would be 1.03, i.e., a 3%
increase in pipelines' ceiling rates. If the PPI-FG measure for year
two was 3%, then the multiplier for that year would be 1.04%, and
the net increase of pipelines' ceiling rates across both years would
be 7.12% (i.e., 1.03 * 1.04).
---------------------------------------------------------------------------

5. This proceeding addresses the index for the upcoming five-year
period (July 1, 2026-June 30, 2031), relying on data submitted by
jurisdictional pipelines for the 2019-2024 period. Among the issues
raised in the record are: (1) whether the Commission should adopt
changes to pipelines' filed 2019 ROEs to account for a change in the
Commission's oil pipeline ROE policy; and (2) a standing question in
each five-year cycle, of what data trimming the Commission should
apply.\9\
---------------------------------------------------------------------------

\9\ Before turning to the merits of these issues, I have one
point of clarification. My assessment of this proceeding is informed
and bound by the Commission's adoption of the Kahn Methodology,
applied to pipelines' filed page 700 data, as its chosen means of
satisfying Congress' mandate for a ``simplified and generally
applicable'' ratemaking methodology. I am under no illusion that
this methodology or data set are perfect, and both contain
analytical or evidentiary shortcomings. I am open to future
refinements to the methodology and data set to ensure that
subsequent index cycles are as analytically sound as possible.
---------------------------------------------------------------------------

II. The Order Errs by Adopting a Uniform ROE Modification To Diverse
Pipelines' Reported 2019 ROEs

6. As discussed below, I disagree with the order's adoption of a
proposal by the Liquid Energy Pipeline Association (LEPA) to apply a
uniform ROE modification to the wide ranging and diverse pipelines'
2019 reported cost data. LEPA's proposal is conceptually flawed,
conflicts with relevant Commission precedent, and is inconsistent with
the pipelines' independent derivation of their own reported ROEs. As a
result, LEPA's proposal does not yield a credible ROE value to be
included in the 2026-2031 oil pipeline index.

A. Background

7. Beginning with the 2015 index cycle, the Commission has used
data from page 700 of Form No. 6 as the basis for its index
calculation. Whereas the Commission's prior calculations relied on
alternative proxies for each pipeline's cost of capital (including
ROE),\10\ the data includes a calculated cost-of-service for each oil
pipeline based on inputs including expenses, depreciation, and return
based on the rate base of investments net of depreciation and the rate
of return, which itself includes each pipeline's reported ROE. This
cost-of-service rate is then divided by the pipeline's total barrel-
miles to determine the cost per barrel-mile. The Commission then
compares that cost per barrel-mile of the two end points of the study
period (here 2019 and 2024) to calculate the cost growth rates for each
pipeline. After trimming the data set, the Commission calculates the
average of the mean, weighted mean, and median growth rates in cost per
barrel-mile of all applicable pipelines minus the then relevant PPI-FG
to determine the index level to be applied to the next five years.
These steps were specified in the Kahn Methodology.
---------------------------------------------------------------------------

\10\ 2015 Final Rule, 153 FERC ] 61,312 at P 14 (noting that the
Commission previously ``used net carrier property as a proxy for
capital costs and income taxes'').
---------------------------------------------------------------------------

8. In 2019, the Commission revised its ROE policy for electric
utilities to, among other revisions, combine use of its existing
Discounted Cash Flow (DCF) methodology with the Capital Asset Pricing
Model (CAPM) methodology.\11\ In 2020, it extended that methodology to
oil pipeline and natural gas rates, which previously relied only on the
DCF methodology.\12\ As a result, following issuance of the ROE Policy
Statement, each oil pipeline is required to annually derive and report
its ROE on page 700 using the average of ROEs calculated using the DCF
and CAPM methodologies (ROE Policy Change).
---------------------------------------------------------------------------

\11\ Ass'n of Bus. Advocating Tariff Equity v. Midcontinent
Indep. Sys. Operator, Inc., Opinion No. 569, 169 FERC ] 61,129
(2019).
\12\ Inquiry Regarding the Comm'n's Pol'y of Determining Return
on Equity, 171 FERC ] 61,155 (2020) (ROE Policy Statement).
---------------------------------------------------------------------------

9. In the ROE Policy Statement, the Commission recognized that the
ROE

[[Page 22942]]

Policy Change could have implications for the upcoming 2020 index
cycle, which was based on filed page 700 data from 2014-2019.\13\ The
Commission expressly ``encourage[d] oil pipelines to file updated FERC
Form No. 6, page 700 data for 2019 reflecting the revised ROE
methodology established herein,'' and noted that ``[a]lthough the
Commission will address this issue further in the five-year review,
reflecting the revised methodology in page 700 data for 2019 may help
the Commission better estimate industry-wide cost changes for purposes
of the five-year review.'' \14\ The Commission subsequently issued a
notice, establishing July 21, 2020 as the deadline for pipelines to
voluntarily submit updated 2019 data reflecting the ROE Policy Change
and clarify how they derived their filed 2019 ROEs.\15\ Only two
pipelines submitted updated 2019 data in response to this invitation,
and as a result, the vast majority of pipelines did not revise their
2019 data to incorporate the ROE Policy Change. However, pipelines
presumably began calculating and reporting their ROEs prospectively to
reflect the ROE Policy Change (i.e., reporting ROEs that averaged
values derived using both the DCF and CAPM methodologies, including for
the year 2024, the end point of the period under consideration in this
index cycle).
---------------------------------------------------------------------------

\13\ Pursuant to the schedule provided in the section
357.2(b)(2) of the Commission's regulations, oil pipelines submitted
their 2019 page 700 data in April 2020, one month prior to the
Commission's announcement of the ROE Policy Change.
\14\ ROE Policy Statement, 171 FERC ] 61,155 at P 92.
\15\ Inquiry Re: the Commission's Policy for Determining Return
on Equity; Five-Year Review of the Oil Pipeline Index, Docket Nos.
PL19-4-000 and RM20-14-000 (July 7, 2020).
---------------------------------------------------------------------------

10. The current five-year index cycle relies on the pipelines' cost
data from 2019-2024. In the NOPR,\16\ the Commission proposed to
calculate the index level with the pipelines' reported 2019 data,
without having the Commission adjust the 2019 data to reflect the ROE
Policy Change. The NOPR recognized that the ``Commission has never
adjusted ROE in a prior index proceeding,'' and stated its ``concern[]
that adjusting the data in light of the ROE Policy Change would be a
complex and difficult endeavor that would be inconsistent with index's
purpose as a simplified and streamlined process.'' \17\
---------------------------------------------------------------------------

\16\ Five-Year Rev. of the Oil Pipeline Index, 193 FERC ]
61,145, at P 6 (2025) (NOPR).
\17\ Id. P 13.
---------------------------------------------------------------------------

11. In response, LEPA submitted a proposal specifically designed to
account for the ROE Policy Change, i.e., that each oil pipeline's ROE
will be determined by averaging ROEs derived using the CAPM and DCF
methodologies. LEPA proposes a modification to each pipeline's FERC
Form No. 6, page 700, filed ROE for 2019 for purposes of calculating
the index. Specifically, instead of using each applicable pipeline's
2019 filed ROE, LEPA proposes to average each pipeline's originally-
filed ROE, which varies by pipeline, with a single CAPM-derived ROE of
8.3% (ROE Modification). This value resulted from the methodology and
proxy group from a litigated proceeding involving a single pipeline,
Colonial, with adjustments for different financial conditions for the
test year of that proceeding and the 2019 Form No. 6 data.\18\ The
effect of the ROE Modification would be to blend a uniform, industry-
wide ROE value with each pipeline's reported ROE for 2019, and to then
use that blended value and compare it to the pipeli

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