h. 2012 and 2013 Indexing Complaints (Docket Nos. OR14-35 and OR14-36)
As noted in prior reports, on June 27 and 30, 2014, HollyFrontier Refining & Marketing LLC, Southwest Airlines Co., Tesoro Refining and Marketing Company, US Airways, Inc., Valero Marketing and Supply Company, Chevron Products Company, and Western Refining Company, L.P. (collectively, “Joint Complainants”) filed complaints challenging the justness and reasonableness of SFPP, L.P.’s (“SFPP”) West and East Line 2012 index rate increases and the justness and reasonableness of SFPP’s West, East, Oregon , North, and Sepulveda Line 2013 index rate increases. SFPP filed its answer on July 28, 2014, arguing that the Joint Complainants failed to show a reasonable basis for the Commission to reject the 2012 and 2013 index rate changes. On October 31, 2014, the Commission held the complaint proceedings in abeyance pending the resolution of other ongoing proceedings affecting SFPP’s rates, including Docket Nos. IS08-390, IS09-437, and IS11-444. On November 26, 2014, Joint Complainants filed a request for rehearing, asserting that FERC’s decision to hold the complaint in abeyance was in direct contradiction to its policy of streamlining index rate challenges and basing such decisions solely on the pipeline’s Form No. 6 Page 700 data.
On December 8, 2016, the Commission issued its Order on Rehearing and Dismissing Complaints. The Order stated that the Joint Complainants failed to satisfy the second part of the “substantially exacerbate” test: showing reasonable grounds that the pipeline’s index increase substantially exacerbates the carrier’s existing over-recovery. The Commission stated that the difference between SFPP’s costs and revenues (i.e., over-recovery) declined from 2011 to 2013, based on end-of-year cost and revenue data from the carrier’s 2013 Form 6 post-dating the index rate increases at issue. As a result, the Commission concluded that the Joint Complainants did not show that the 2012 and 2013 index rate increases substantially exacerbated the pipeline’s existing over-recovery.
On January 9, 2017, Joint Complainants filed a request for rehearing concerning the Commission’s December 8 Rehearing Order. The Joint Complainants claimed that the December 8 Rehearing Order’s failure to rely on specifically the cost and revenue data from the two years prior to the subject index rate change unreasonably alters FERC’s established test for determining whether an index rate increase “substantially exacerbates” the over-recovery of a pipeline’s cost of service without reasoned basis and contrary to precedent. SFPP filed, on January 24, 2017, a Motion for Leave to Answer and Answer to Joint Complainants rehearing request disputing the arguments made in opposition to the December 8 Rehearing Order.
On March 15, 2018, the Commission issued its order denying rehearing. The Commission found that, contrary to Joint Complainants contentions, it had not altered the “substantially exacerbate” test since different situations call for different analysis. The Commission determined that notwithstanding its prior orders indicating that index-based rate increases should be evaluated based on the change in costs between the previous two years, given the timing of the complaint (i.e., near the end of the ICA’s two-year statute of limitations), the carrier’s Form No. 6 Page 700s showed a declining over-recovery from 2011 to 2013 and this “continuing decline is inconsistent with the claim that the index increase substantially increased any pre-existing over-recovery.” In this connection, the Commission, for the first time, identified that when an index complaint is filed can dictate what cost and revenue information can be relied on to evaluate the reasonableness of the challenged index rate increases.
The Joint Complainants filed Petitions for Review with the Court of Appeals for the D.C. Circuit on May 14, 2018. And SFPP moved to intervene in the consolidated dockets on June 7, 2018.
The Joint Complainants (now “Petitioners”) filed their Initial Brief on October 26, 2018, requesting the Court to vacate FERC’s orders with instructions to reconsider the complaints. Petitioners argued that FERC policy is clear that an index rate increase is intended to compensate a pipeline for the cost changes occurring between the two preceding years. And that therefore, when evaluating an index rate increase, FERC has consistently held that only the pipeline’s cost and revenue data between the two preceding years is relevant. Petitioners thus argue that FERC’s dispositive reliance on data after the effective date of the increase constitutes an unjustified departure from the agency’s established methodology and past precedent without any explanation, rendering the Order arbitrary and capricious.
Petitioners also argued that applying different standards based on when complaints are filed within the applicable statute of limitations is arbitrary and invites gamesmanship and undermines the policy goal of simplified ratemaking for indexed rates. Petitioners further claimed the Rehearing Order relied on data FERC knew to be incorrect by relying on SFPP’s Form No. 6, Page 700 data that included an income tax allowance (“ITA”) despite a Commission policy no longer allowing that allowance in a cost of service for entities such as SFPP. Petitioners point to orders issued by the Commission the same day, including in another SFPP index dispute, which inconsistently took account of and directed the removal of any ITA from the carrier’ s cost of service before evaluating the reasonableness of the index-based rate change.
Respondent FERC filed its Brief on December 21, 2018 and SFPP filed its Intervenor Brief in Support of Respondents on January 10, 2019. FERC defends its reliance on data significantly post-dating the increase on the grounds that the shippers filed their complaints more than a year later and the Commission had not necessarily committed itself to reviewing only the data from the prior two years. Respondent FERC argued it had not yet clarified whether its indexing policy was forward-looking or backwards-looking, leaving it with the purported discretion to decide in specific cases. FERC argued the Rehearing Order did acknowledge the departure from “generally” using data and adequately justified the broader approach as yielding a sounder and more equitable result. Respondent also claimed Petitioners should not be allowed to cite prior FERC orders where the Commission had refused to consider new data when available on the grounds that Petitioners did not specifically cite those cases to the agency. SFPP argued that the substantially exacerbate test is inherently forward-looking because exacerbation occurs in the future. FERC asserts there is little concern of gamesmanship because complainants choose the timing of their complaints. Respondent FERC also argued that applying the Commission’s ITA policy here would contravene the goal of simplicity inherent in index proceedings.
Regarding the reliance on incorrect data, FERC argued that Petitioners cannot raise that argument before the Court because they had not raised it before the agency. FERC further argued that under simplified indexing procedures, the Commission does not examine assumptions underlying the annual cost data included in the Form No. 6, Page 700. SFPP also argued that Petitioners had not exhausted their administrative remedies. SFPP further argued that Petitioners invited the alleged income tax allowance-related error because by filing their Request for Rehearing of FERC’s order originally holding the case in abeyance, they urged the Commission not to wait to consider the outcome of the proceedings which ultimately required SFPP to remove its income tax allowance. Therefore, SFPP argues, the Petitioners should not now have the benefit of those rulings because it allegedly induced the Commission to ignore them.
Petitioners filed their Reply Brief on February 11, 2019. Petitioners asserted Respondents had not rebutted arguments that past Commission precedent considered post-index rate increase data entirely irrelevant. They took issue with FERC’s claims that its own precedent was unclear as to whether its indexing mechanism is retrospective or prospective. Petitioners contend the agency’s precedent is clear that it is retrospective and FERC could not cite to any authority supporting its contrary theory. Petitioners claim they are not precluded from citing FERC precedent not cited before the agency because they had fully raised the issue of inconsistency there and were not required to cite each and every case FERC has issued finding that index-based rate increases are only retrospective especially where FERC has never before permitted cost and revenue data post-dating the index-based increase to influence an evaluation of the reasonableness of index-based rate increase. Petitioners also assert they were not required to request rehearing regarding FERC’s reliance on incorrect data because they could not have raised that issue prior to issuance of the final order. Petitioners assert that applying the ITA policy will not impair the simplicity of the proceedings as the issue is resolved and the application would be straightforward. Petitioners also dispute that they invited FERC’s error.
Oral argument was held on April 12, 2019. On June 14, 2019, the D.C. Circuit vacated and remanded the orders in an opinion written by Judge Tatel. The Court ruled, consistent with Petitioner shippers’ arguments, that the Commission had departed from its prior policy without an adequate explanation. The Commission’s proffered explanation—that the new data was now available—assumed without explanation that the information is relevant, which, according to the Court, “calls into question the purpose of indexing itself.” The Court also questioned whether the Commission could allow the question of “the purpose of indexing . . . to go unanswered” and still engage in reasoned decisionmaking. The Court directed the Commission to “explain its actions in a way that coheres with the rest of its indexing scheme” on remand.
As of publication of this Report, the Commission has not yet acted on the D.C. Circuit’s remand.
i. Aircraft Service International Group, Inc., et al. v. Central Florida Pipeline LLC, et al. (Docket No. OR16-26)
As noted in prior reports, Aircraft Service International Group, Inc. (“ASIG”), American Airlines, Inc., Delta Air Lines, Inc., Hookers Point Fuel Facilities LLC, Southwest Airlines Co., United Aviation Fuels Corporation, and United Parcel Service, Inc. (collectively, “Joint Complainants”) filed a joint complaint against Central Florida Pipeline LLC (“CFPL”) and Kinder Morgan Liquid Terminals LLC (“KMLT”) on September 20, 2016. The complaint alleged that CFPL has unlawfully provided for physical transportation of jet fuel in interstate commerce on its pipeline from a KMLT terminal in Tampa, Florida (“KMLT Terminal”) to CFPL delivery points at a liquids terminal in Taft, Florida and the ASIG terminal at Orlando International Airport without filing a tariff with the Commission. The joint complaint also alleged that KMLT has unlawfully provided un-tariffed FERC-jurisdictional break-out tankage service at its liquids terminal in Tampa, Florida. Finally, based on public filings related to CFPL costs, the joint complaint alleged that the rates charged by CFPL for the transportation of jet fuel are not just and reasonable. Joint Complainants requested that the Commission order an evidentiary hearing to determine just and reasonable rates for jet fuel transportation on CFPL’s pipeline, as well as direct CFPL to file an appropriate FERC-related tariff in recognition that CFPL is providing interstate transportation of jet fuel.
CFPL and KMLT filed a joint answer on October 17, 2016. CFPL and KMLT argued that there is a “break” between the waterborne movement of jet fuel to the KMLT Terminal and the subsequent transportation of jet fuel to Orlando and other Florida airports. As a result of this alleged break in the chain of commerce, CFPL and KMLT argued that CFPL does not provide interstate transportation of jet fuel and, therefore, the Commission does not have jurisdiction over the pipeline. CFPL and KMLT also argued that KMLT does not provide un-tariffed FERC-jurisdictional break-out tankage service at its liquids terminal in Tampa, Florida because the tanks at the Tampa terminal are not necessary for the operation of the pipeline (i.e., there are other points at which product may originate). Finally, the defendants argued that the Joint Complainants’ over-recovery analysis is incorrect and should be disregarded.
The Commission issued an order on December 15, 2016 setting this matter for hearing, stating: “because of the need for an intensely factual inquiry and the need to examine closely the complex nature of the transactions and relationships between various entities on both sides of the complaint, it would not be appropriate to make a jurisdictional determination based upon the pleadings alone.” The Commission noted that the threshold question in this matter is whether the CFPL pipeline and the KMLT terminal facilities are providing interstate transportation service and therefore directed the ALJ “to establish appropriate hearing procedures, including whether a phased hearing is required.”
On January 5, 2017, the Presiding Judge requested briefs from the parties on whether a phased hearing is “required.” The Joint Complainants submitted comments arguing that a two-phase proceeding would be inefficient and result in a longer time frame for CFPL and KMLT to provide un-tariffed transportation and break-out storage services. CFPL and KMLT submitted joint comments stating that a two-phase proceeding was appropriate and most efficient. On January 25, 2017, the Presiding Judge issued an Order Phasing Case and Establishing Procedural Schedule. The Presiding Judge stated that the factors enumerated by the Commission in Trans-Alaska Pipeline System, 16 FERC ¶ 61,245 (1981), dictate that a two phase proceeding is appropriate in this matter. Phase 1 of the hearing would address whether the CFPL pipeline and the KMLT terminal facilities are providing interstate oil pipeline transportation service that is subject to the Commission’s jurisdiction under the ICA. Phase 2, if necessary, would address the remaining issues including the justness and reasonableness of CFPL’s rates. The Phase 1 hearing commenced on August 31, 2017 and concluded on September 21, 2017.
The Presiding Judge issued an Initial Decision on January 30, 2018, finding generally that KMLT/CFPL’s pipeline was providing intrastate service not subject to FERC’s jurisdiction. First, with respect to the issue of whether KMLT should be dismissed from the proceeding, the Presiding Judge denied KMLT/CFPL’s motion for summary disposition because material facts remained in dispute at the time of the filing of the motion regarding KMLT’s control over certain facilities and the intent/purpose of certain agreements.
Second, the Presiding Judge indicated that she gave significant weight to the jurisdictional test and related line of cases utilized in Guttman Energy, Inc. v. Buckeye Pipe Line Company, L.P., 161 FERC ¶ 61,180 (2017) (“Guttman”), to determine that transportation on CFPL is not jurisdictional (i.e. intrastate). The Presiding Judge stated that the appropriate test to determine the nature of transportation on CFPL is (i) whether the product comes to rest at a point of interruption and (ii) whether the point of interruption constitutes a “‘sufficient break’ in the continuity of the transportation, such that the foreign or interstate journey comes to an end and subsequent movements beyond the point of interruption constitute independent, intrastate transportation.” After determining that transported jet fuel comes to rest at the KMLT Terminal, the bulk of the Initial Decision weighed the multiple factors relevant to the inquiry regarding whether a sufficient break in the continuity of transportation had occurred at that point. The Presiding Judge determined that these factors weighed in favor of finding a sufficient break at the KMLT Terminal, such that subsequent transportation on the CFPL should be considered intrastate transportation.
Notably, in recognition of the Joint Complainants’ arguments and related precedent relied on, the Presiding Judge observed that “there is another line of cases that has revised” the jurisdictional test used in the Initial Decision – namely, cases related to the Interstate Commerce Commission’s (“ICC”) Policy Statement – Motor Carrier Interstate Transportation – From Out-of-State Through Warehouses to Points in Same State, 8 I.C.C. 2d 470 (1992) (“1992 Policy Statement”) and related case law. The Presiding Judge concluded the Initial Decision by stating that “[t]he Commission may want to review the 1992 Policy Statement” and subsequent case law and noting that application of this precedent “to the present proceeding might alter the outcome.”
The Presiding Judge determined that her decision regarding the intrastate nature of transportation on CFPL mooted the issue of whether the break-out tankage service at the KMLT Terminal is jurisdictional.
On March 1, 2018, opposing briefs on exception were filed by Joint Complainants and KMLT and CFPL. Complainants raised several exceptions. Chief among them was that the Initial Decision viewed the factors in an overly restricted and isolated manner, rather than in a broader or holistic context. Joint Complainants alleged this was a legal error which led to various factual errors on most key points in dispute. Joint Complainants also argued that the question of whether the KMLT Terminal was jurisdictional was not moot and that the Initial Decision erred by declining to adopt the methodology and analysis espoused in the ICC’s 1992 Policy Statement.
The two parties also took exception to the Initial Decision’s characterization of a product’s coming to rest as a “threshold” to be met before applying certain evaluation factors. On exceptions, KMPLT and CFPL argued that such a determination is the conclusion of the factor-driven inquiry, not a condition precedent to it.
On March 22, 2018, briefs opposing exception were filed by Joint Complainants, KMLT and CFPL, and Commission Trial Staff. Joint Complainants agreed with Respondents that the Initial Decision misapplied the law by treating the factual inquiry concerning the issue of whether a product has come to rest as a threshold question but differed from KMLT and CFPL by arguing that the Northville Dock factors are not a conclusive test.
In their Brief Opposing Exceptions, KMLT and CFPL argued that Joint Complainant’s analysis would be disruptive of the Commission’s jurisdictional treatment of oil pipelines and have negative policy ramifications. They also supported the conclusions reached by the Initial Decision and argued that Joint Complainant’s factual evidence and legal arguments had been adequately addressed. Commission Trial Staff agreed with KMLT and CFPL on all relevant points and took issue with Joint Complainants argument that Supreme Court precedent, as well as the Commission’s recent decision in Guttman, which applied the cases cited by Joint Complainants, required a different result.
On April 10, 2019, Joint Shipper filed a motion requesting that the Commission expeditiously issue an order in this proceeding and clarify the scope of the Commission’s jurisdiction. Joint Shippers argued that this treatment was necessary as CFPL recently added terms to its “Transportation Policy” which require that shippers warrant the product has “come to rest,” thereby precluding them from making arguments to the contrary before the Commission. On April 24, 2019 CFPL and KMLT submitted an Answer arguing that the Motion was really an attempt to submit new evidence after the close of the record.
As of publication of this Report the Commission has not yet acted on the Initial Decision and exceptions raised in relation thereto.
j. American Aviation Supply LLC, et. al v. Buckeye Pipe Line Company, L.P. (OR19-26)
On June 5, 2019, American Aviation Supply LLC, Delta Air Lines, Inc., JetBlue Airways Corporation, and United Airlines, Inc. (“Complainants” or “Airlines”) filed a complaint against Buckeye Pipeline Company, L.P. (“Buckeye”) challenging the lawfulness of rates charged by the pipeline for the transportation of jet and aviation turbine fuel from Linden, New Jersey, to the New York City market. The Airlines alleged Buckeye is substantially overrecovering its cost of service, rendering its rates not just and reasonable. The Airlines rely on Page 700 data from Buckeye’s Form No. 6 report for 2018 as well as cost-of-service data for 2017, provided pursuant to a settlement, which segments Buckeye’s Eastern Products System (“EPS”) from its Long Island System (“LIS”). The Complaint argues that Buckeye’s two systems should be treated as one (i.e., treated on a “company-wide basis”) in evaluating cost of service, since they share an origin point and many assets. The Complaint argued that Buckeye’s rates are not grandfathered, and even if they were, that recovery is not barred. The Airlines sought reparations for past payments and the establishment of just and reasonable rates going forward.
On July 5, 2019, Buckeye filed an Answer arguing that a hearing was not warranted. Buckeye argued that the LIS and EPS should be evaluated separately as they use different assets and serve different markets. But Buckeye claimed that its rates are just and reasonable when evaluated under either method and disputed the adjustments made in the Complaint. Buckeye also claimed that its rates were grandfathered and asserted that the Airlines had failed to make a showing that there had been a “substantial change” in economic circumstances, which is required to challenge grandfathered rates.
On July 22, 2019, the Airlines concurrently filed a Response to Buckeye’s Answer and an Amended Complaint. The Amended Complaint included a new section detailing the Airlines’ substantial change of economic circumstances analysis regarding Buckeye’s rates. The Amended Complaint otherwise restated the arguments from the original Complaint without any substantial changes. In their concurrently filed Response, the Airlines stated that the issues in the Complaint are largely those left unresolved from a previous dispute in Docket No. OR12-28. The Airlines disputed Buckeye’s assertion that they had not met their prima facie burden to set the matter for a hearing. The Airlines also asserted that the issue of whether or not Buckeye’s rates should be evaluated on a company-wide basis is a factual question that must be resolved through a hearing. The Airlines also reiterated that Buckeye’s rates were not grandfathered and that even if they were, the Airlines should be given an opportunity to demonstrate that there has been a substantial change in economic circumstances.
On August 13, 2019, Buckeye filed its Answer to the Airlines’ Amended Complaint and to the Response in one pleading. The Answer to the Amended Complaint incorporated by reference Buckeye’s previous answer to the original Complaint. Buckeye claimed that it was denied fair process to address the new claims because they were filed in an Amended Complaint. Buckeye claimed the Airlines violated Rule 206 in filing their original Complaint by not presenting all the information that the Airlines possessed and that the filing of the Amended Complaint wasted Commission resources. Buckeye requested that the Amended Complaint be rejected or in the alternative that the prospective relief date be tied to the filing of the Amended Complaint. On the merits, Buckeye criticized the changed circumstances analysis for incorporating adjustments to its cost of service. The Answer also criticized the changed circumstances for analysis including market-based rates as those rates were per se just and reasonable, according to Buckeye. Buckeye also criticized the analysis for relying on company-wide data.
On August 28, 2019, the Airlines filed a Response to Buckeye’s Answer to the Amended Complaint. The Airlines disputed that the Amended Complaint prejudiced Buckeye, stating that amending complaints is common, is allowed by the Rules, and does not require the discovery of new information. The Airlines defended the use of company-wide data as proper for the reasons stated in their Complaint and Amended Complaint and also because Buckeye files its cost-of-service data on a company-wide basis. The Response defended the use of market-based rates in the analysis of changed circumstances since those rates are not per se just and reasonable, rather they are only presumed to be just and reasonable. The Response also alleged that the portion of Buckeye’s August 28, 2019 filing that was in Answer to the Airlines’ July 22 Response was procedurally improper.
As of the publication of this Report, the Commission has not acted on the Airlines’ Complaint or Amended Complaint.
k. Enbridge Energy, Limited Partnership (Docket No. IS19-231)
On March 1, 2019, Enbridge Energy, Limited Partnership (Enbridge) filed FERC Tariff No. 43.29.0 in Docket No. IS19-231-000, to implement the annual change to its Facilities Surcharge. On March 18, 2019, the Canadian Association of Petroleum Producers (CAPP) filed a protest and motion to intervene in the facilities surcharge filing, chiefly objecting to Enbridge’s elimination of the Accumulated Deferred Income Tax (ADIT) balance. CAPP argued that the Commission policy guidance on which Enbridge based its elimination does not apply to Enbridge given several factors, including other tax allowances available to Enbridge during the 2018 annual period. CAPP also questioned the validity of the guidance itself, proposing two alternative treatments of ADIT balances for the Commission. On March 22, 2019, Enbridge filed a response to the March 18 protest, arguing that CAPP’s protest was directly contrary to Commission policy and precedent with respect to ADIT and should be dismissed.
On March 29, 2019, the Commission issued an order accepting and suspending Enbridge’s March 1 tariff filing, to become effective April 1, 2019, subject to refund and subject to conditions and further review. In particular, the Commission requested supplemental information from Enbridge regarding its treatment of the income tax allowance and ADIT within 15 days of the order, and allowed CAPP to respond within 30 days of the order. On April 5, 2019, Enbridge filed its response to the Commission request for additional information. On April 25, 2019, CAPP filed a timely reply to the Enbridge response. Further Commission action is pending.
E. Tariff Rules Issues
1. CHS Inc., et al. v. Enterprise TE Products Pipeline Company, LLC (Docket Nos. OR13-25 and OR13-26)
As noted in prior reports, in 2013 several parties filed complaints against Enterprise TE Products Pipeline Co., LLC (“Enterprise TE”) challenging the lawfulness of a tariff that abandoned service for jet fuel and distillates. According to the complainants, Enterprise TE violated a settlement agreement that required Enterprise TE to continue offering transportation for jet fuel and distillates. The complainants requested that the Commission prevent Enterprise TE from abandoning service and award damages. On October 17, 2013, the Commission granted the complaints in part. The Commission interpreted the settlement agreement as requiring Enterprise TE to maintain service for the duration of the settlement. However, because it lacked jurisdiction over oil pipeline abandonments, the Commission could not require Enterprise TE to continue jet fuel and distillate service. Instead, the Commission set a hearing to determine any damages from the termination of service. On November 18, 2013, the complainants filed a request for a limited rehearing of the Commission’s order, claiming that the Commission erred in determining that it lacked the authority to direct Enterprise TE to continue to transport distillates and jet fuel and failing to enforce the terms of the settlement. Ultimately, Enterprise TE reached a settlement with all parties regarding the issue of damages and the hearing proceedings were terminated. However, two of the complainants, United Airlines, Inc. (“United”) and UPS Fuel Services, Inc. (“UPS”), remained parties to the proceedings to pursue the request for rehearing.
On May 19, 2016, the Commission denied the request for rehearing. In the Order on Rehearing, the Commission held that Enterprise TE’s decision to discontinue transportation service for distillate and jet fuel did not violate the pipeline’s common carrier obligations or the requirements set forth in the ICA. Further, the Commission explained that its decision to establish a proceeding to determine monetary damages was the proper remedy for Enterprise TE’s violation of the settlement agreement. The Commission concluded once again that an equitable remedy of specific performance was not appropriate
The Commission analyzed five main issues in the Rehearing Order. First, the Commission affirmed its prior holding that the decision by a common carrier oil pipeline to no longer provide transportation of a distinct product is an abandonment and not merely a refusal to provide service. The Commission explained that the best analogy to the definition of an abandonment concerning an oil pipeline is found in the Commission’s definition for abandonment for gas pipelines, and not in the definition used by the Surface Transportation Board in the context of railroads. Second, the Commission emphasized that nothing in the ICA changed the common law rule that common carriers were only required to provide the services that they held themselves out as being willing and able to provide. In its analysis, the Commission reviewed various case law addressing the development of the common carriers’ ability to limit the type of service that it provides, both before and after the adoption of the ICA. The Commission pointed to the tariff as the definition of the types of service that a common carrier oil pipeline holds itself out as providing. The Commission held that Enterprise TE was involved in an abandonment of service that was beyond the Commission’s jurisdiction to regulate. Third, the Commission rejected the argument that Enterprise TE’s discontinuation of transportation service for distillate and jet fuel involved a classification, regulation, or practice. The Commission clarified that the rates at issue were not based on a classification, which would require similar rates for similar groupings of commodities, but instead were commodity rates, which removes the rates from the scope of section 1(6) of the ICA. Fourth, the Commission reiterated that where service is abandoned entirely, and all shippers receiving the service are subject to the abandonment, there is no issue of discrimination under the ICA. Fifth, the Commission held that there is no ICA provision that would grant the Commission equitable authority to obstruct the decision of an oil pipeline to abandon a particular service.
On July 18, 2016, United and UPS, filed a petition for review of the Commission’s October 13, 2013 and May 19, 2016 orders with the D.C. Circuit in case No. 16-1245. That case was consolidated with Enterprise TE’s petition for review of the Commission’s October 13, 2013 order in case No. 13-1305. On December 13, 2016, the court granted an unopposed motion to voluntarily dismiss Case No. 13-1305, leaving only Case No. 16-1245 pending before the court. In Case No. 16-1245, the Joint Petitioner Brief was filed on February 14, 2017. Respondents’ brief was filed on May 1, 2017. Intervenor for Respondents’ brief was filed on May 16, 2017. Petitioners’ reply brief was filed on June 15, 2017. Final briefs were filed on July 6, 2017. Oral arguments were held on February 13, 2018.
On July 17, 2018, the D.C. Circuit issued an unpublished Per Curiam order in Case No. 16-1245 dismissing the petition for review for lack of standing. The court rejected Petitioner’s challenge to the Commission’s policy that it lacks the authority to prevent the abandonment of services, reasoning that the possibility of future abandonment without Commission intervention does not satisfy the present injury requirement for standing.
2. BP Products North America v. Sunoco Pipeline, L.P. (Docket No. OR15-25)
As noted in past reports, BP Products North America Inc. (“BP”) filed, on April 30, 2015, a complaint against Sunoco Pipeline, L.P. (“Sunoco”) concerning throughput and deficiency (“T&D”) agreements Sunoco entered into with other shippers on its Marysville to Toledo pipeline segment and a revision of the carrier’s proration policy. BP contended that Sunoco’s actions and conduct resulted in an undue preference for certain shippers and unduly discriminated against BP contrary to the ICA. Sunoco answered the complaint on June 1, 2015 disputing BP’s complaint allegations. The Commission, on July 31, 2015, set the complaint for hearing.
BP, Sunoco, FERC Trial Staff, and Intervenors, Marathon Petroleum Company LP (“Marathon”), PBF Holding Company LLC and Toledo Refining Company LLC (together “PBF”), filed their respective testimonies throughout 2016 with the hearing being held November 17-22, 2016. Of note, on November 1, 2016, PBF and Marathon filed motions to strike certain portions of BP’s witness testimony. Administrative Law Judge Patricia E. Hurt denied these motions on November 14, 2016, finding that PBF and Marathon failed to carry their burden of proof in demonstrating that the challenged testimony provisions were “irrelevant, immaterial, or unduly repetitious” under 18 C.F.R. § 385.509(a).
On November 11, 2016, PBF filed a motion requesting that the Commission treat certain materials in the exhibits filed by the parties as protected from public disclosure. The ALJ denied this motion at a prehearing conference on November 15, 2016, and simultaneously denied PBF’s motion for permission to file an interlocutory appeal. PBF subsequently filed an interlocutory appeal to the Commission on November 18, 2016, arguing that the ALJ had applied an overly stringent standard for PBF to prevent public disclosure of the contested materials. On December 8, 2016, the Commission issued an order stating that the appropriate standard for protection of confidential materials is whether disclosure is “likely to cause substantial harm to the competitive position of the person from whom the information was obtained.” The Commission determined that the ALJ may have applied too strict of a standard (i.e., requiring PBF to show that disclosure would in fact cause competitive harm) and remanded the matter for further consideration in accordance with the appropriate standard. On December 16, 2016, after holding oral argument on the issue, the ALJ issued an order confirming her prior ruling on releasing the contested information based on her finding that PBF had failed to show that public release was likely to cause competitive harm.
The Presiding Judge issued her Initial Decision on May 26, 2017, finding that “Sunoco unduly discriminated against BP by its process of awarding [T&Ds], by granting an undue preference via the terms and treatment of a particular shipper’s [T&Ds], and by revising its proration policy to favor certain shippers over BP.” Relying primarily on Colonial Pipeline Co., 146 FERC ¶ 61,206 (2014) and White Cliffs Pipeline, L.L.C., 148 FERC ¶ 61,037 (2014), the Presiding Judge held that Sunoco’s T&Ds with PBF and Marathon should be voided.
Additionally, the Presiding Judge held that the capacity allocation of the Marysville pipeline should be re-calculated according to the three shippers’ actual shipment data for the 12-month period preceding the effective date of the first unlawful T&D at issue in the proceeding (i.e., September 30, 2010). The Presiding Judge also recommended that the Sunoco proration policy be investigated by the Commission. In response to the issue of whether BP’s claim was time barred, the Presiding Judge found that the complaint was timely filed within the requirements of the ICA. Finally, with regard to damages, the Presiding Judge adopted an alternative damage calculation of FERC Trial Staff amounting to approximately $13.1 million for BP, without interest and related updating. The parties filed briefs on exception on July 26, 2017 and briefs opposing exceptions on September 18, 2017.
On October 15, 2018, the parties filed a Joint Unopposed Motion to Defer Ruling on the Initial Decision Pending Completion of Settlement Discussion. In the motion, the parties represented that they were close to reaching an agreement and requested the Commission strike the matter from the Commissions upcoming October 18, 2018 meeting agenda. On November 8, 2018, the parties filed a Notice of Settlement Agreement in Principle. On December 11, 2018 the parties jointly submitted the Offer of Settlement to the Commission. The Settlement resolves all issues in the proceeding. Under the Settlement, Sunoco will revise its proration policy, as well as revise the parties’ Initial Base Period Histories and Initial Heavy Ratios. Further, Sunoco’s T&D agreements with Marathon and PBF are null and void under the Settlement and an Alternative Allocation Charge (allowing shippers to pay to maintain their shipping history on the Marysville Pipeline) will expire four years following the effective date of the Settlement Agreement. Sunoco will also make a settlement payment to BP, which will withdraw its Complaint. On December 20, 2018, Commission Trial Staff filed Initial Comments supporting Commission certification of the Settlement Agreement. On March 21, 2019, the Commission issued a Letter Order Approving the Settlement.
3. Colonial Pipeline Company (Docket Nos. OR18-7, OR18-12, OR18‑17, and OR18-21)
On November 22, 2017, Epsilon Trading, LLC (“Epsilon”), Chevron Products Company (“Chevron”), and Valero Marketing and Supply Company (“Valero”) (collectively, “Complainants”) filed a Complaint in Docket No. OR18-7 challenging the lawfulness of the rates charged by Colonial Pipeline Company (“Colonial”) for transportation of petroleum products from all origins to all destinations under FERC Tariff No. 99.30.0. The complaint alleged that Colonial’s rates are unjust and unreasonable and that Colonial is over recovering its cost of service. The complaint also challenged the pipeline’s market-based and grandfathered rates. In addition, it argued that Colonial’s transmix and product loss allocation accounting are not properly stated in the tariff. Complainants seek prospective relief and reparations. On December 22, 2017, Colonial answered the complaint and argued that it lacked merit and should be dismissed. On January 8, 2018, the Complainants filed an answer to Colonial’s answer.
On February 2, 2017, BP Products North America, Inc., Trafigura Trading LLC, and TCPU, Inc. (“Joint Complainants”) filed a complaint in Docket No. OR18-12 challenging the lawfulness of the rates charged by Colonial for transportation of petroleum products, including aviation kerosene, motor gasoline, diesel, and jet fuel, from all origins to all destinations in the FERC Tariff No. 99.30.0 and FERC Tariff No. 98.34.0, and predecessor tariffs to both tariffs, alleging that pipeline’s interstate revenue in 2016 exceeded the pipeline’s interstate cost of service by an estimated level of $339.3 million based on reasonable and conservative adjustments to account for the impact of non-recurring pipeline integrity incidents, including related impacts therefrom, and other appropriate adjustments to Colonial’s reported cost-of-service and revenue data. The complaint challenged colonial’s cost-based tariffs, its market-based and grandfathered rates, as well as its transmix allocation policy. The complaint also requested consolidation with the complaint filed in Docket No. OR18-7. On March 5, 2018, Colonial answered the complaint and argued that it lacked merit and should be dismissed, or if not dismissed, that any proceeding be conducted in two phases, where the first phase would address Colonial’s market power and its market-based rates and the second phase would address Colonial’s indexed rates and any outstanding issues. On March 20, 2018, the Joint Complainants filed an answer to Colonial’s answer.
On March 1, 2018, TransMontaigne Product Services LLC (“TransMontaigne”) filed a complaint in Docket No. OR18-17 challenging the justness and reasonableness of Colonial’s cost and market-based rates from all origins to all destinations on similar grounds to the complaints filed in Docket Nos. OR18-7 and OR18-12, including challenges to Colonial’s cost-based tariffs, its market-based and grandfathered rates, as well as its transmix allocation policy. The complaint also requested consolidation with the complaint filed in Docket No. OR18-7 and OR18-12. On April 2, 2018, Colonial answered the complaint and argued that it lacked merit and should be dismissed, or if not dismissed, that any proceeding be conducted in two phases, where the first phase would address Colonial’s market power and its market-based rates and the second phase would address Colonial’s indexed rates and any outstanding issues. On April 17, 2018, TransMontaigne filed an answer to Colonial’s answer.
On April 20, 2018, CITGO Petroleum Corporation (“CITGO”) filed a complaint in Docket No. OR18-21 challenging the justness and reasonableness of Colonial’s cost and market-based rates from all origins to all destinations on similar grounds to the complaints filed in Docket Nos. OR18-7, OR18-12, and OR18-17, including challenges to Colonial’s cost-based tariffs, its market-based and grandfathered rates, as well as its transmix allocation policy. The complaint also requested consolidation with the complaint filed in Docket No. OR18-7, OR18-12, and OR18-17. On April 20, 2018, Colonial answered the complaint and argued that it lacked merit and should be dismissed, or if not dismissed, that any proceeding be conducted in two phases, where the first phase would address Colonial’s market power and its market-based rates and the second phase would address Colonial’s indexed rates and any outstanding issues. On April 17, 2018, CITGO filed an answer to Colonial’s answer.
On September 20, 2018, the Commission established hearing and settlement judge procedures consolidated Docket Nos. OR18-7, OR18-12, OR18-17, and OR18-21. The Commission set dual-track, but contemporaneous proceedings, one regarding indexed rates, grandfathered rate, and transmix and product loss allocation practices and charges, and another to address market-based rates. The Commission rejected the argument that market-based rates which diverge from a pipeline’s cost of service are per se unjust and unreasonable. However, the Commission set for hearing the issue of whether there have been significant changes in the relevant markets since Colonial was granted market-based rate authority that resulted in Colonial possessing significant market power.
In addition, on October 9, 2018, Southwest Airlines Co. and United Aviation Fuels Corp. filed a complaint against Colonial in Docket No. OR19-1. On October 16, 2018, Phillips 66 Company filed a similar Complaint in Docket No. OR19-4. Colonial answered both of the complaints, and complainants in both dockets filed additional answers thereto. On February 5, 2019, the Commission issued an order consolidating Docket Nos. OR19-1 and OR19-4 with Docket Nos. OR18-7-000, et al. for purposes of hearing and settlement judge procedures. On March 25, 2019, the Commission issued an order consolidating the complaint filed by American Airlines, Inc. in Docket No. OR19-16 with Docket Nos. OR18-7-000, et al. On May 22, 2019, the Commission issued an order consolidating the complaint filed by Metroplex Energy Inc. in Docket No. OR19-20 with Docket Nos. OR18-7-000, et al. On August 19, 2019, the Commission issued an order consolidating the complaint filed by Gunvor USA LLC in Docket No. OR19-27 with Docket Nos. OR18-7-000, et al.
The Complainants’ direct cost-based rate testimony was filed on September 9, 2019. The Complainants’ direct market-based rate testimony was filed on October 1, 2019. Ultimately, a hearing on cost-based rates issues is scheduled to begin on June 16, 2020 and another hearing on market-based rates issues is scheduled to begin on July 16, 2020. An Initial Decision is due on February 26, 2021.
In addition, the ongoing proceedings in Docket Nos. OR18-7, et al., additional similar complaints were filed by BP Products North American, et al. (OR19-10), TransMontaigne Product Services, LLC (OR19-8), and CITGO Petroleum Corporation (OR19-7) (together, the “PLA Complaints”). However, on June 26, 2019, the Commission found that the issues raised by the PLA Complaints were already set for hearing in the consolidated complaint proceeding in Docket Nos. OR18-7, et al. and dismissed the PLA Complaints accordingly.
On September 25, 2019, Pilot Travel Centers, LLC also filed a complaint, which was docketed in Docket No. OR19-36, challenging Colonial’s cost-based and market-based rates, as well as charges related to product loss allocation and transmix. That complaint sought consolidation with the consolidated complaint proceeding in Docket Nos. OR18-7, et al. Answers to this complaint are due October 25, 2019.
4. Colonial Pipeline Company (Docket No. OR16-17)
On May 9, 2016, Tricon Energy Ltd. and Rockbriar Partners Inc. filed a complaint alleging that it is unlawful for Colonial Pipeline Company (“Colonial”) to enforce the tariff modifications filed in Docket No. IS16-259-000 (discussed in our Spring 2017 and Fall 2017 reports) prior to Commission review and acceptance of that modification. On September 13, 2016, the Commission issued an Order on Complaint in Docket No. OR16-17. The Commission explained that it “requires additional information before rendering a decision on the Complaint.” The Commission then directed Colonial and the three other parties to respond to data request and requests for production of documents within 30 days of the order. The Commission explained that it would “defer action on the complaint until it receives and reviews the responses to the data request and requests for production of documents.”
On September 29, 2016, Colonial submitted a motion for expedited clarification, protective order, and extension of time for submission of discovery responses concerning the data requests and requests for production of documents in the Commission’s September 13 Order (“Motion”). The Motion explained, among other things, that the due process protections to be afforded to Colonial must be clarified because the Commission’s September 13 Order expands the scope of the proceeding without specifying the issues the Commission ultimately intends to rule on. Colonial requested that the Commission clarify the issues and provide Colonial with a timely opportunity to address those issues substantively. Colonial also requested that the Commission enter a protective order to safeguard certain information to be submitted as part of the discovery responses. Additionally, Colonial requested additional time to respond to the discovery requests.
On October 5, 2016, the Commission issued a Notice of Extension of Time providing Colonial until November 14 to respond to the data requests and requests for production of documents in the Commission’s September 13 Order.
On October 13, 2016, Tricon Energy Ltd. and Rockbriar Partners Inc. responded to the Commission’s data request. On the same date, Flint Hills Resources LP also responded to the Commission’s data request. On November 14, 2016, Concept Petroleum Marketing, LLC filed comments in the docket, and Colonial later filed a motion to reject those comments. On December 5, 2016, Emert Enterprises, LLC filed comments, and Colonial filed a motion to reject those comments as well.
On November 14, 2016, the Commission issued an order entering the proposed protective order sought by Colonial. In that order, the Commission noted that Colonial did not allege that any due process violations have occurred, and therefore the issue was not ripe for review. However, the Commission stated that the proceeding will comport with any and all due process requirements, Colonial will have an opportunity to address the substance of issues that warrant further examination by the Commission, and any alleged violations of due process may be raised during the course of the proceeding.
On November 16, 2016, Colonial responded to the Commission’s data request. On January 23, 2017, Costco Wholesale Corporation (“Costco”) submitted an answer to Colonial’s response to the Commission’s data request. On February 13, 2017, Colonial submitted a reply to Costco’s answer. More recently, on September 23, 2019, the Commission issued further information requests to update the record in the proceeding. Answers to these are due on October 23, 2019.
5. Colonial Pipeline Company (Docket No. OR19-23)
On May 1, 2019, TransMontaigne Partners L.P. and Metroplex Energy, Inc. filed a complaint against Colonial Pipeline Company in Docket No. OR19-23 challenging the lawfulness of the rate structures associated with “in-transit storage” and alleging that they unreasonably advantage and provide an undue preference to Colonial’s proprietary and affiliated storage operations. On May 31, 2019, Colonial answered the complaint, rebutting the allegation that storage and blending services at issue are subject to the jurisdiction of the Commission, among other points. Further answers were submitted by TransMontaigne Partners L.P. on June 17, 2019 and by Colonial on July 5, 2019. Commission action is pending.
6. Challenge to Leveret Pipeline Co. LLC/Mid-America Pipeline Co., LLC Tariffs (Docket Nos. IS17-498, et al.)
As noted in prior reports, on June 12 and 16, 2017, Leveret Pipeline Company LLC (“LPC”) and Mid-America Pipeline Company, LLC (“MAPL”) filed various tariff amendments to (i) reflect the transfer of certain assets and facilities from MAPL to LPC (effective immediately) and (ii) increase general commodity and incentive rates on their respective pipelines (effective July 1, 2017).
INEOS USA LLC (“INEOS”), a chemical manufacturer with a fractionator connected to the MAPL system, filed a protest and motion to intervene on June 26, 2017, arguing that the proposed LPC and MAPL tariff amendments would improperly deny INEOS the ability to utilize portions of the MAPL system and are unreasonably designed to favor affiliates of LPC and MAPL. INEOS requested that the Commission reject the proposed tariff amendments or, in the alternative, set the matter for hearing. LPC and MAPL submitted a joint response to INEOS’ protest on July 3, 2017 and INEOS filed an answer on July 10, 2017.
On July 12, 2017, subject to the authority delegated in absence of a Commission quorum, the Acting Director of the Division of Pipeline Regulation issued a letter order stating that the tariff amendments “may be unjust, unreasonable, unduly discriminatory, or preferential or otherwise unlawful” and, therefore, stated that the tariff amendments were “accepted for filing, and suspended, to become effective as proposed in their individual filings, subject to refund, and further Commission order.”
INEOS filed a request for rehearing on August 4, 2017 stating that FERC Staff erred by failing to set the tariff amendments for hearing and settlement judge procedures (despite finding that the tariff amendments may be unjust, unreasonable, or otherwise unlawful) and for failing to suspend the tariff amendments for the maximum period allowed by statute (seven months). On September 5, 2017, the Commission granted the rehearing request solely for the purpose of affording additional time for consideration of the matters raised.
The Commission issued an order on January 18, 2018, accepting LPC’s and MAPL’s tariffs to be effective on the dates requested and denying INEOS’ request for rehearing. First, the Commission stated that rejection or further hearing on the filed tariffs was unwarranted because the filings dealt mainly with administrative aspects of the transfer of assets between LPC and MAPL. Second, the Commission rejected INEOS’ rehearing request because the request related to cancellations of service contained in the tariff filings. The Commission stated that cancellations of service amount to an “abandonment” under the Interstate Commerce Act and the Commission has no jurisdiction over oil pipeline “abandonments.” Accordingly, the Commission concluded that no hearing or further investigation was warranted.
On February 20, 2018, INEOS filed a Request for Rehearing arguing that the January 2018 Order erred in three ways. First, by finding no jurisdiction over the transfer at issue or the cancellation filing. Second, by not rejecting the tariffs or setting them for hearing and/or settlement judge procedures. And third, by not consolidating the cases. INEOS characterized a communication it made with MAPL before the tariff filing as a “Connection Request” and the subsequent tariff revisions as a de facto denial of that request.
On March 7, 2018, MAPL and LPC filed a Request for Leave to Answer and Joint Answer to the INEOS Rehearing Request. The answer asserted that the corporate form of MAPL and LPC should not be ignored and that no connection request had been denied so arguments that the denial was unreasonable are premature.
On March 19, 2018, INEOS submitted a Petition for Review in the Court of Appeals for the D.C. Circuit associated with the July 2017 Order and the January 2018 Order. On March 20, 2018, the Commission granted INEOS February 20, 2018 rehearing request for the limited purpose of further consideration.
On June 1, 2018, the Commission issued an Order Denying Rehearing. The Commission found that “rehearing does not lie” because the January 2018 Order did not modify the result of the July 2017 Order. To the extent the rehearing request concerns the January 2018 Order’s acceptance or the tariffs contemplated in the July 2017 Order, the Commission rejected those arguments on the grounds they had already been argued by INEOS twice before and rejected. The Commission also rejected the request on the merits, restating its position on jurisdiction over abandonments and connections, and distinguishing the cases cited by INEOS.
On July 30, 2018, INEOS submitted another Petition for Review to the Court of Appeals for the D.C. Circuit concerning the July 2017 Order, January 2018 Order, and June 2018 Orders.
On September 6, 2018, the D.C. Circuit issued a Per Curiam order consolidating INEOS’s two petitions for review and rejecting motions to hold in abeyance as moot. On September 11, 2018, a 60-day briefing schedule was established with Petitioners’ initial brief due October 22, 2018. Subsequent to the briefing schedule being established, the Commission filed motions to dismiss the appeal and suspend the briefing schedule. As a result, the Court issued an order, on September 18, 2018, suspending the briefing schedule.
In its motion to dismiss, the Commission argues that its rejection of a protest is a refusal to initiate an investigation, and therefore unreviewable. The Commission claimed that INEOS was not left without a remedy because it could file a complaint under section 13 of the ICA. On September 27, 2018, INEOS responded to FERC’s motion to dismiss. INEOS argues that it is not simply challenging the Commission’s decision not to investigate. Rather, it is challenging FERC’s disclaimer of jurisdiction over the tariff revisions at issue, so review is proper. On October 2, 2018, the Commission filed a reply in support of its motion, arguing that the precedent cited by INEOS was distinguishable. The Commission asserts that only a decision to investigate may be challenged on jurisdictional grounds and that decisions not to investigate are still not reviewable even when they are based on disclaimers of jurisdiction. On November 14, 2018, the Court issued a Per Curiam Order referring the motion to dismiss to the merits panel.
On January 29, 2019, INEOS filed its Initial Brief of Petitioner, which was updated on February 6, 2019 to comply with Court rules regarding the overuse of acronyms. In its brief, INEOS asserts that the Court has jurisdiction over the tariff revisions, and therefore dismissal is inappropriate. INEOS also claims the ambiguous nature of FERC’s January order required INEOS to file both a rehearing request and a petition for review to preserve its rights. INEOS urged the Court to direct FERC to exercise jurisdiction over the Enterprise tariff revisions. INEOS argues that FERC should have pierced the corporate veil of the two affiliated companies if it had properly applied Commission policy and based its decision on the substantial evidence. INEOS also argues that the transfers at issue here are not complete abandonments according to FERC precedent because the transportation service, facilities, and direction will all remain the same after the cancellation. According to INEOS this amounts to an unexplained departure from precedent.
Respondent FERC filed its Brief on March 29, 2019. The Commission argued that the Court lacked jurisdiction because the decision not to investigate a tariff is unreviewable, because INEOS had not established injury-in-fact, and because the initial petition was prematurely filed pending rehearing by the Commission. On the merits, Respondent argued that the Commission reasonably explained how the tariffs would not impact the services used by INEOS and reasonably concluded that it lacked jurisdiction over the dispute as it concerned an abandonment. The Commission also argued that the dispute at issue is not actually premised on the tariff filings, but rather they revolve around INEOS’s interconnection request. On April 5, 2019, LPC and MAPL filed a Joint Intervenor Brief in Support of Respondent. This Brief raised the additional arguments that INEOS did not suffer any harm by the tariffs because nothing changed substantively before and after their filing.
On April 18, 2019, INEOS filed its Reply Brief. INEOS stressed that its claims were limited to a request that the Commission exercise jurisdiction over the tariff revisions for purposes of determining whether the pipelines violated section 3(1) of the ICA by discriminating against INEOS. INEOS also asserted that it suffered injury in the form of affiliate abuse. In response to the argument that nothing changed before and after the filings, INEOS argued that the filings delayed INEOS’ receipt of interconnection, and that delay of service is a sufficient injury to establish standing.
Oral argument was held on September 10, 2019.
7. BridgeTex Pipeline Company, LLC (Docket Nos. IS18-102, OR18-6, and OR18-3)
On October 30, 2017, BridgeTex Pipeline Company, LLC (“BridgeTex”) filed a petition for declaratory order (“PDO”) in Docket No. OR18-3 related to the proposed BridgeTex II Expansion Capacity project. The PDO sought approval of: (1) a proposed version of a tariff (subsequently filed in IS18-102), and (2) an overall rate structure and terms of service for a proposed expansion of the existing BridgeTex pipeline system, including an earlier addition of a new origin in Midland, Texas for service to Houston, Texas, referred to as the BridgeTex Expansion Capacity project. In the PDO, BridgeTex also sought a ruling that the regulatory assurance provided by the Commission in two earlier declaratory orders approving the original BridgeTex pipeline system and the initial expansion are not be affected by the BridgeTex II Expansion Capacity project.
On November 21, 2017, Occidental Energy Marketing, Inc. (“Occidental”) filed a protest regarding the PDO. Occidental argued that it underwrote the construction of the BridgeTex system and the terms and rates in the PDO are unduly discriminatory as compared to those available in the original open season. Occidental also alleged that the prorationing policy in the PDO was unduly discriminatory. Occidental contended that its original Transportation Service Agreement (“TSA”) should continue to govern its transportation on “Carrier Facilities,” which were defined to include “associated facilities and improvements.” The original TSA, according to Occidental, did not contemplate different tranches of capacity on the BridgeTex System. Also on November 21, 2017, Occidental filed a complaint against BridgeTex. The complaint alleged that BridgeTex unlawfully refused to provide service to Occidental under two existing tariffs and also discriminated against it in violation of the ICA.
On December 21, 2017, BridgeTex filed a response to the protest and complaint. BridgeTex asserted that the Commission has held that committed shippers from different open seasons are differently situated and may be treated differently. BridgeTex argues that because Occidental had the opportunity but declined to participate in the BridgeTex II Expansion Capacity project, it cannot now deny other shippers that participated and signed TSAs the benefit of rates and terms of service offered. BridgeTex disputed that Occidental underwrote the system and argued that the term “improvement” in Occidental’s TSA is not the same as “expansion.” Also on December 21, 2017, BridgeTex filed FERC Tariff Nos. 6.0.0 and 7.0.0 in Docket No. IS18-102 setting forth rules and regulations, and uncommitted and committed rates for the BridgeTex II Expansion Capacity Project to be effective on January 1, 2018. On December 22, 2017, Occidental protested the tariff filing and argued that BridgeTex has attempted to carve up capacity on its system into tranches of capacity with different rates and terms and conditions of service.
On January 19, 2018, the Commission issued an order that accepted and suspended the tariffs filed in Docket No. IS18-102 subject to refund and established hearing and settlement judge procedures for the tariff and the complaint in Docket No. OR18-6. In the same order, the Commission held in abeyance the PDO filed in Docket No. OR18-3. The Commission found that there were material issues of fact related to the fundamental issue of contract interpretation concerning the existing BridgeTex tariff and the TSA signed by Occidental, and particularly whether the definition of “Carrier Facilities” applies to BridgeTex II Expansion Capacity project or only contemplates the facilities installed at the time of the initial construction of the BridgeTex system. The Commission explained that the language “associated facilities and improvements” contained in the definition of “Carrier Facilities” is not clear on its face and therefore, to resolve the conflict, extrinsic evidence needs to be examined to ascertain the intentions of the parties. The Commission stated that it will address the merits of the regulatory rulings sought in the PDO after the contractual rights of the respective parties are resolved at hearing.
On January 30, 2018, BridgeTex filed a tariff pertaining to a supplemental open season on expansion capacity from the Permian Basin to East Houston, Texas, which resulted in additional volume commitments pursuant to a supplemental TSA. On March 1, 2018, the Commission accepted and suspended the tariff, subject to refund, set the tariff for hearing, and consolidated the proceeding with the ongoing proceedings in Docket Nos. IS18-102 and OR18-6. The PDO in Docket No. OR18-3 remains held in abeyance subject to the outcome of the consolidated proceedings. BridgeTex filed requests for rehearing to both the Commission’s January Order and its March Order. On August 16, 2018, the Commission dismissed both requests for rehearing because they did not seek rehearing of final Commission action.
On February 13, 2018, the Chief Administrative Law Judge recognized that the Settlement Judge declared an impasse following the first settlement conference, terminated settlement judge procedures, designated a Presiding Judge for the hearing, and set the hearing on a Track III schedule, with an Initial Decision due by April 30, 2019.
On February 19, 2019, however, Occidental notified the Commission that it had reached a settlement with BridgeTex resolving the claims set forth in its complaint and protests, and it withdrew its complaint and protests. The Chief Administrative Law Judge accepted the withdrawal and ordered the hearing proceeding terminated on March 14, 2019.
On June 19, 2019, the Commission issued an order granting BridgeTex’s October 30, 2017 PDO and the specific rulings requested concerning previous regulatory assurances.
8. Andeavor Field Services, LLC v. Mid-America Pipeline Company, LLC (Docket No. OR18-15)
On February 27, 2018, Andeavor Field Services, LLC (“Andeavor”) filed a complaint against Mid-America Pipeline Company, LLC (“MAPL”) and Enterprise Products Operating LLC (“Enterprise”) (together “Joint Respondents”). The Complaint alleged that MAPL was improperly imposing a ship-or-pay obligation on uncommitted shippers for existing capacity in violation of the ICA. These alleged ship-or-pay obligations were said to come from a Transportation Service Agreement (“TSA”) which the Commission approved in August 2011 pursuant to a declaratory order request. Andeavor contended that MAPL had misrepresented that portion of the TSA and requested the Commission either rescind or modify the August 2011 Declaratory Order to prohibit the imposition of ship-or-pay obligations on uncommitted shippers for existing capacity. Andeavor also alleged that the penalty for failure to ship-or-pay—seizure of product—allowed Joint Respondents to take advantage of the volatile market by strategically choosing the time to seize the line fill to the benefit of MAPL’s affiliate Enterprise. Andeavor also alleged this maneuver raised the possibility that MAPL was sharing shipper information in violation of Section 15(13) of the ICA.
On March 29, 2018, MAPL and Enterprise filed a Joint Answer to the Complaint. Joint Respondents claim that the obligations in the TSA are clear. Joint Respondents also claimed that the central issue was the terms of the TSA, and that the proper forum was a state court. Joint Respondents applied the Commission’s Arkla factors used to determine when the Commission should assume jurisdiction over a matter of contract interpretation. Joint Respondents also contended that Andeavor had not provided any evidence to justify its accusation that seizure of the line fill had been timed strategically or information had been shared improperly.
On April 12, 2018, Andeavor filed an Answer to Joint Respondents’ Joint Answer. Andeavor argued that the Complaint does not involve a “contract dispute,” asserting the wrongs alleged would violate the ICA regardless of the terms of the contract. Andeavor further contended that the Commission should exercise jurisdiction because the seizure of line fill is governed by the tariff, not the TSA. Andeavor also claimed the facts would justify exercising jurisdiction under the Arkla test.
On June 21, 2018, the Commission issued its Order on Complaint. The Commission found that “the dispute in this case turns on the intent of Mid-America and Andeavor’s predecessor, QEP-FS, in the formation of the contract at issue.” It therefore considered the Complaint a contract dispute and applied the Arkla factors. Applying these factors, the Commission declined to exercise jurisdiction stating: (i) the Commission has no special expertise to interpret contracts beyond a state court, (ii) there was no need for uniformity of interpretation, and (iii) resolution did not implicate the Commission’s regulatory responsibilities. The Commission did not believe the use of the line fill seizure terms of the tariff warranted jurisdiction because “the application of the tariff provision in question is a result of the contract dispute at issue here,” i.e., if the dispute had not arisen, those terms would not be invoked. The Commission also found no evidence MAPL was improperly disclosing shipper information. The Commission therefore dismissed the Complaint in its entirety.
On July 17, 2018, Andeavor filed a Request for Rehearing of the June 21 Order. The request claims the Complaint never requested the Commission actually interpret the contract, it only requested that the Commission find MAPL’s practices illegal under the ICA. Andeavor claimed it was only the Commission’s intent in issuing the August 2011 Declaratory Order, not the parties intent in signing the TSA, which was relevant to the Complaint. Andeavor also disputed the Commission’s application of the Arkla factors. On August 16, 2018, the Commission granted the rehearing request for the limited purpose of further consideration.
On April 18, 2019 the Commission denied Andeavor’s Request for Rehearing. The Commission found again that “this matter turns on an interpretation of the Agreement, and an ongoing state court proceeding is currently addressing that issue.” The Commission addressed Andeavor’s arguments that the ship-or-pay obligation violates the ICA, stating that “this argument only may become relevant after the contract has been interpreted. This issue will not become ripe until the ongoing state court proceeding is completed, and may never become ripe at all.” FERC stressed that it had discretion whether or not to exercise jurisdiction over contracts on file with the Commission. The Commission also stated that it “did not rely on Mid-America’s factual assertions” regarding the diversion of product to an affiliate. Rather, the Commission found that the “threshold contractual issues should be resolved first in the pending state court matter.”
9. Mid-America Pipeline Company, LLC and Seminole Pipeline Company LLC (Docket Nos. IS18-766 and IS18-767)
On September 28, 2018, Mid-America Pipeline Company, LLC (“MAPL”) filed FERC Tariff No. 74.7.0 to cancel and replace FERC Tariff No. 74.6.0 (Docket No. IS18-766) and Seminole Pipeline Company LLC (“Seminole”) filed FERC Tariff No. 2.14.0 to cancel and replace FERC Tariff No. 2.13.0 (Docket No. IS18-767). The two tariffs (together, “Revised Tariffs”), proposed three changes to the current tariffs. First, the Revised Tariffs proposed to give the carriers a lien on the shippers’ product as collateral. Second, the Revised Tariffs required financial assurances as a condition of receiving transportation services under certain circumstances. And third, new shippers who are affiliates of existing shippers would no longer be allocated capacity during periods of prorationing. MAPL and Seminole contended these changes were needed in light of companies creating affiliates to secure capacity and an increased credit risk among their shippers.
Andeavor Field Services, LLC (“Andeavor”) filed a Protest and Motion to Intervene in Docket No. IS18-766 on October 12, 2018, and in Docket No. IS18-767 on October 15, 2018. In its protests, Andeavor claimed all three tariff provisions were unduly discriminatory in violation of the Interstate Commerce Act (“ICA”). Andeavor also asserted that the burden of proof to justify a tariff change is on a carrier and neither MAPL nor Seminole had met this burden in their tariff filings. Andeavor also discussed its ongoing dispute with MAPL (OR18-15, discussed infra). Andeavor claims that the proposed lien provisions are too broad and allow the carriers too much discretion and that they could refuse service to captive shippers based on payment disputes the shippers undertook in good faith. And Andeavor claims the financial assurance provisions are too broad and grant too much discretion to the carriers which could result in discrimination against similarly situated shippers. Andeavor argues that the Revised Tariffs did not sufficiently justify the limit on allocating capacity to new shippers (i.e., those without historical volumes) who are affiliates of existing shippers who have established historical capacity interests. Andeavor also asserts those terms are impermissibly discriminatory.
On October 17, 2018, MAPL filed a Response to Andeavor’s Protest and Seminole filed a similar Response on October 22, 2018. The carriers argued that the terms proposed in the Revised Tariffs were commercially needed, were common in the industry, and that Andeavor’s concerns were hypothetical and overblown. Regarding the lien provisions, the carriers argued that Andeavor’s grievances were directed at existing tariff provisions, beyond the scope of the protest proceeding. The carriers assert that other pipelines include financial assurances provisions similar to the ones proposed, including affiliates of Andeavor. The carriers further asserted that pipelines are typically allowed significant discretion in conducting their business and it is improper to automatically assume they will abuse it. The carriers claimed the terms which disallow capacity allocations to affiliates of existing shippers are common in the industry and justified in light of recent shipper practices.
On October 23, 2018, Andeavor filed a Motion for Leave to Answer and Answer to MAPL’s response and on October 24, 2018 Andeavor filed a Motion for Leave to Answer and Answer to Seminole’s response. In the Answers, Andeavor sought to distinguish the existing tariff provisions from those in the Revised Tariff and stressed that the burden of proof is on a carrier in proposing new tariff terms. On October 24, 2018 and October 25, 2018 similar Answers were filed by MAPL and Seminole respectively. These Answers claimed Andeavor repeated arguments, changed past arguments, and made hyperbolic inaccuracies in relation to its previous Answers.
On October 25, 2018, the Commission issued an Order Accepting and Suspending Tariffs Subject to a Technical Conference and Consolidating Proceedings. The Commission found there to be “a number of issues requir[ing] additional clarification that can best be addressed at a technical conference, after which a resolution may be reached or further process ordered if necessary.” The Commission therefore accepted the Revised Tariffs and suspended them for the full seven-month period allowed under the ICA.
A technical conference was held on March 26, 2019. On April 15, 2019, the parties submitted their Initial Post-Technical Conference Comments. On April 29, 2019, MAPL and Seminole withdrew the disputed tariffs.
F. TAPS Issues
1. TAPS Quality Bank Litigation
The Trans Alaska Pipeline System (TAPS) Quality Bank (QB) makes monetary adjustments among TAPS shippers to account for the pipeline’s commingling of multiple crude oils that have different qualities and, therefore, different market values. As discussed in prior reports, the QB’s valuation of the TAPS crude streams has been the subject of extensive litigation at FERC, the Regulatory Commission of Alaska (and predecessor agencies), and the U. S. Court of Appeals for the D.C. Circuit since the late 1980s.
The current chapter of that litigation (still in progress) began in August 2013, when Flint Hills Resources Alaska, LLC (FHR), a TAPS shipper, supported by Petro Star Inc.(PSI), challenged the Quality Bank’s valuation of the Resid cut, the heaviest of the nine cuts used in valuing each shipper’s crude stream. After a hearing and an Administrative Law Judge’s Initial Decision rejecting FHR/PSI’s challenge, the Commission affirmed the Initial Decision in an order issued in November 2014. PSI then filed a petition for review to the D.C. Circuit, which the court granted in an opinion issued in August 2016 and remanded the case back to FERC. On remand, the Commission again rejected PSI’s arguments and reaffirmed the lawfulness of the QB methodology used to value the Resid cut.
On April 20, 2018, PSI filed a petition for review of FERC’s order on remand. After PSI filed its initial brief with the court, and shortly before FERC’s brief was due, FERC requested that the court remand the case to the Commission. The D.C. Circuit granted the Voluntary Remand Motion on March 7, 2019. In the Voluntary Remand Motion, FERC invited the parties to provide their respective positions on two questions: (1) the scope of issues properly before the agency on voluntary remand; and (2) the procedures to be employed by the agency in addressing those issues. Initial comments were filed on May 6, 2019, by Petro Star, Joint Parties (comprised of Anadarko Petroleum Corp., BP Exploration (Alaska) Inc., ConocoPhillips Alaska, Inc., Exxon Mobil Corp. and Tesoro Alaska Co. LLC), the Indicated TAPS Carriers (BP Pipelines (Alaska) Inc., ConocoPhillips Transportation Alaska, Inc., and ExxonMobil Pipeline Company), and the State of Alaska. Reply comments were filed on June 5, 2019. The matter is currently pending before the FERC.
2. PTE Pipeline LLC, FERC Docket No. IS18-686/RCA Docket P-18-018
The Point Thomson Unit (“PTU”), which holds both natural gas and condensate (light liquid hydrocarbons), lies on the Alaska North Slope 60 miles east of Prudhoe Bay and the Trans Alaska Pipeline System (“TAPS”) and west of the Arctic National Wildlife Refuge. PTE Pipeline LLC (“PTE Pipeline”) owns and operates a liquids pipeline – the Point Thomson Export Pipeline (“PTEP”) – that transports PTU-produced condensate through 22 miles of 12-inch pipeline to an interconnection with the Badami Pipeline. The Badami Pipeline connects to Endicott Pipeline that connects to TAPS at Pump Station No. 1.
On July 30, 2018, PTE Pipeline filed proposed rate increases for interstate and intrastate service on PTEP at the FERC and the Regulatory Commission of Alaska (RCA), respectively. The State of Alaska protested the filings. Both agencies issued orders allowing the proposed rate increases to become effective, subject to refund, on September 1, 2018. Settlement conferences and a technical conference were held between December 2018 and June 2019. An uncontested settlement agreement was filed with both the FERC and the RCA on August 1, 2019. By order issued August 27, 2019, the RCA accepted the settlement agreement and closed the docket. The agreement is pending approval before the FERC.
G. Petitions for Declaratory Orders
During 2018 and 2019, pipelines filed petitions for declaratory orders (“PDO”) requesting approval of various committed rate structures under Transportation Service Agreements (“TSA”) that support new pipeline projects and expansions. Many PDOs asked the Commission to waive its initial rate regulations at 18 C.F.R. § 342.2 (which require a pipeline to submit cost and revenue data, or a supporting affidavit, when filing to implement their rates for the first time) for the committed rates. In 2019, the Commission granted certain PDOs when the open season process was fair and transparent and the terms were consistent with prior Commission precedent and the Interstate Commerce Act. The Commission generally rejected the requests for waiver of the initial rate regulations, and made its orders contingent on the subject pipeline complying with 18 C.F.R. § 342.2 when filing its tariffs to implement the committed rates.
1. Buckeye Pipe Line Company, L.P. and Laurel Pipe Line Company, L.P. (Docket Nos. OR18-22, IS19-277, and IS19-278)
On April 30, 2018, Buckeye Pipe Line Company, L.P. (“Buckeye”) and Laurel Pipe Line Company, L.P. (“Laurel”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service under a joint tariff for a new petroleum products service from origin points in Michigan, Ohio, and Pennsylvania to destination points in Ohio and Pennsylvania.
Specifically, Buckeye and Laurel asked the Commission to approve: (1) a rate structure where the committed shippers pay a premium, relative to the uncommitted rate, in exchange for firm service; (2) committed rates that vary, based on the committed volumes; (3) a prorationing policy that reserves 90 percent of the new capacity for committed shippers, and 10 percent for uncommitted shippers; (4) a prorationing policy that uses historical volumes data to allocate volumes to uncommitted shippers; (5) committed shippers’ right to ship incremental barrels (i.e., barrels that exceed their committed volumes) on a firm basis, provided that there is no reduction in the capacity available for uncommitted shippers; (6) a proposal to place the committed rates into service in phases; and (7) additional rights for committed shippers, including the right to take committed service at new origin points that may be added to the system in the future.
On May 30, 2018, the Pennsylvania Public Utility Commission (“PaPUC”) filed a limited protest in Docket No. OR18-22, in light of the fact that the PDO would impact intrastate service (and thus, the PaPUC’s jurisdiction) on Laurel’s system. On June 12, 2018, Giant Eagle, Inc., Guttman Energy, Inc., Lucknow-Highspire Terminals LLC, Monroe Energy, LLC, Philadelphia Energy Solutions Refining & Marketing LLC, and Sheetz, Inc. (collectively, the “Indicated Parties”) filed a protest challenging Buckeye and Laurel’s PDO. The Indicated Parties argued that the proposed committed service would negatively impact shippers on Laurel’s existing intrastate system, and unreasonably interfere with an ongoing, related proceeding before the PaPUC. On July 12, 2018, the PaPUC rejected an application wherein Laurel proposed to reverse its intrastate pipeline system and begin providing the joint service at issue in the PDO.
On April 8, 2019, Laurel and Buckeye filed tariffs in Docket Nos. IS19-277 and IS19-278, respectively, to implement the committed rates that were the subject of their PDO (“Committed Rate Filings”). On April 23, 2019, the Indicated Parties filed a protest and argued that the Committed Rate Filings, if approved, would unreasonably circumvent the PaPUC’s order finding that Laurel was not authorized to reverse its intrastate pipeline system, and interfere with ongoing cases regarding bi-directional service on Laurel’s system. On May 1, 2019, the PaPUC filed a letter asking the Commission to allow the PaPUC to resolve the outstanding issues related to Laurel’s intrastate system before issuing a substantive ruling on the Committed Rate Filings.
On June 6, 2019, the Commission rejected Buckeye and Laurel’s Committed Rate Filings without prejudice. The Commission found that it was unclear whether Buckeye and Laurel could legally provide the services at issue in the Committed Rate Filings, given the ongoing disputes before the PaPUC and related court proceedings. The Commission also determined that the facts were not sufficiently clear to support a conclusion that the TSAs would be lawful under the Commission’s committed rate policies and the Interstate Commerce Act. Accordingly, the Commission rejected the Committed Rate Filings without prejudice to Buckeye and Laurel submitting new filings that addressed the Commission’s concerns.
On July 11, 2019, Buckeye, Laurel, and the Indicated Parties filed a Joint Offer of Settlement to resolve their disputes in Docket Nos. OR18-22, IS19-277, and IS19-278, as well as the related proceedings before the PaPUC. On September 26, 2019, the Commission approved the Joint Offer of Settlement as fair and reasonable and in the public interest.
2. Enterprise Crude Pipeline LLC (Docket No. OR18-27)
On June 27, 2018, Enterprise Crude Pipeline LLC (“Enterprise Crude”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new crude oil pipeline system from points in New Mexico to Midland, Texas.
Specifically, Enterprise Crude asked the Commission to approve: (1) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (2) TSA provisions establishing a minimum volume commitment of 100,000 barrels per day for a ten year term; (3) a prorationing policy that reserves 90 percent of the new capacity for committed shippers, and 10 percent for uncommitted shippers; (4) a prorationing policy that uses historical volumes data to allocate capacity to historical uncommitted shippers, and a pro rata or lottery mechanism to allocate capacity to uncommitted shippers that are not historical shippers; and (5) contract extension rights for committed shippers. On July 16, 2018, Enterprise Crude filed tariffs in Docket Nos. IS18-634 and IS18-646 to implement the committed rates that were the subject of its PDO.
On March 27, 2019, the Commission denied the PDO, finding that Enterprise Crude failed to demonstrate that its proposed 100,000 barrel per day minimum volume commitment was lawful. The Commission reasoned that an excessive minimum volume commitment (i.e., one that is not required for operational reasons) essentially reserves a pipeline system for large shippers, which is unduly discriminatory and inconsistent with the Interstate Commerce Act’s common carriage requirements. The order also noted that the committed rates took effect by operation of law when Enterprise Crude’s July 16, 2018 tariff filing implementing those rates was not protested or set for an investigation.
3. Targa NGL Pipeline Company LLC (Docket No. OR18-30)
On July 27, 2018, Targa NGL Pipeline Company LLC (“Targa NGL”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new natural gas liquids pipeline system from Oklahoma to Texas.
Specifically, Targa NGL asked the Commission to approve: (1) a committed rate structure where committed shippers can elect to either pay a premium rate for firm service, or a discounted rate for non-firm service, during prorationing; (2) a prorationing policy that reserves 90 percent of the capacity for firm committed shippers, and 10 percent for uncommitted shippers; and (3) a prorationing policy that uses committed volumes to allocate capacity to non-firm committed shippers, and historical volumes data to allocate capacity to uncommitted shippers.
Targa NGL also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSA, and requested a waiver of 18 C.F.R. § 342.2, which requires pipelines to support their initial rate filings with either cost and revenue data, or an affidavit stating that the proposed rates have been agreed to by an unaffiliated shipper who intends to take the new service.
On March 11, 2019, the Commission conditionally granted Targa NGL’s PDO, finding that Targa NGL’s TSA was consistent with the Interstate Commerce Act. The Commission denied Targa NGL’s request for waiver of 18 C.F.R. § 342.2, and held that committed rates are subject to the Commission’s initial rate regulations. The Commission made its order contingent on Targa NGL complying with the initial rate regulations when submitting its tariff filing to implement the committed rates. Because Targa NGL’s only committed shipper was an affiliate, the Commission explained that Targa NGL would need to file cost-of-service data to support its committed rates, or to secure the agreement of a non-affiliated shipper before filing to implement the new rates.
On April 10, 2019, Targa NGL filed a Request for Rehearing, and argued that the Commission’s March 11, 2019 order was inconsistent with its earlier orders finding that oil pipelines did not need to support their committed rates with cost-of-service data. The Commission has not taken further action in this proceeding.
4. Magellan Pipeline Company, L.P. (Docket No. OR18-31)
On August 8, 2018, Magellan Pipeline Company, L.P. (“Magellan”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a refined products pipeline system in Texas.
Specifically, Magellan asked the Commission to approve: (1) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (2) committed rates that vary, based on the contract term and committed volumes; (3) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (4) TSA provisions allowing Magellan to increase the committed rates or establish a surcharge to recover increased regulatory compliance costs; (5) a proposal to use new capacity and underutilized capacity to provide firm committed service; (6) committed shippers’ rights to increase their committed volumes over a specified time period; and (7) additional rights for committed shippers, including contract assignment rights, extension rights, and a right to take firm service at new origin and destination points that may be added to the system in the future. Magellan also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSAs, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On March 11, 2019, the Commission conditionally granted Magellan’s PDO, finding that Magellan’s TSAs were consistent with the Interstate Commerce Act. The Commission also granted Magellan’s request to treat the committed rates as settlement rates during the term of the TSA, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on Magellan complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
5. Cactus II Pipeline LLC (Docket No. OR18-32)
On August 9, 2018, Cactus II Pipeline, LLC (“Cactus II”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new crude oil pipeline system in Texas.
Specifically, Cactus II asked the Commission to approve: (1) a proposal to lease new capacity to provide the committed service; (2) a contract term that is tied to the aggregate volumes shipped, rather than a specific time period; (3) committed rates and in-kind deductions that vary, based on the open season, the type and level of volume commitment, and the actual volumes shipped; (4) a committed rate structure where the committed shippers pay a discount, relative to the uncommitted rate, in exchange for a volume commitment; (5) TSA provisions allowing Cactus II to establish a surcharge to recover increased regulatory compliance costs; (6) a most-favored nations clause that would require Cactus II to decrease the committed rate if it offers a lower rate to another shipper in the future; (7) a prorationing policy that allocates 90 percent of the capacity to committed shippers and historical uncommitted shippers, and allocates 10 percent of the capacity to new uncommitted shippers; (8) a proposal to hold a new open season for committed service on up to 90 percent of the available capacity, when the TSAs expire; and (9) additional rights for committed shippers, including the right to take committed service at origin and destination points that may be added to the system in the future, a limited right to convert an acreage dedication into additional committed volumes, and the right to assume committed volumes from expired or terminated TSAs. Cactus II also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSAs, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On June 3, 2019, the Commission conditionally granted part of Cactus II’s PDO, finding that Cactus II’s TSAs were consistent with the Interstate Commerce Act. The Commission granted Cactus II’s request to treat the committed rates as settlement rates during the term of the TSA, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on Cactus II complying with the initial rate regulations when submitting its tariff filing to implement the committed rates. The Commission also declined to approve Cactus II’s proposal to hold a new open season for up to 90 percent of the system capacity when the TSAs expire, reasoning that the proposal was premature, and not ripe for Commission review.
6. Enterprise TE Products Pipeline Company LLC (Docket No. OR18-34)
On August 18, 2019, Enterprise TE Products Pipeline Company LLC (“TEPPCO”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on an expansion of its refined products and liquefied petroleum gas pipeline system.
Specifically, TEPPCO asked the Commission to approve: (1) a committed rate structure where committed shippers can elect to either pay a premium rate for firm service, or a discounted rate for non-firm service, during prorationing; (2) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; and (3) a prorationing policy that uses committed volumes to allocate capacity to non-firm committed shippers, and historical volumes data to allocate capacity to uncommitted shippers. TEPPCO also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSA, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On March 11, 2019, the Commission issued an order granting TEPPCO’s PDO, finding that the TSAs were consistent with the Interstate Commerce Act. The Commission also found that TEPPCO’s request for waiver of the initial rate regulations in the PDO was moot, because TEPPCO subsequently submitted an initial rate filing that complied with 18 C.F.R. § 342.2.
7. White Cliffs Pipeline, L.L.C. (Docket No. OR18-35)
On August 16, 2018, White Cliffs Pipeline, L.L.C. (“White Cliffs”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service under a joint tariff for a new natural gas liquids service from Colorado to Texas.
Specifically, White Cliffs asked the Commission to approve: (1) a committed rate structure where the committed rates and certain terms of service vary, depending on the volume commitment; (2) a committed rate structure where the committed shippers pay a discount, relative to the uncommitted rate, in exchange for a volume commitment; (3) a proration policy that uses a pro rata method to allocate 5 percent of the capacity to uncommitted shippers who are not historical shippers; (4) a proration policy that allocates 95 percent of the capacity to historical uncommitted shippers and committed shippers, based on historical volumes and committed volumes, respectively; (5) TSA provisions allowing White Cliffs to increase the committed rates to recover increased regulatory compliance costs; and (6) additional rights for committed shippers, including rollover rights, and the right to take committed service on new capacity that may be added to the system in the future. White Cliffs also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSAs, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On August 13, 2019, the Commission conditionally granted part of White Cliffs’ PDO, finding that the majority of the TSA was consistent with the Interstate Commerce Act. However, the Commission found that White Cliffs’ proration policy failed to allocate at least 10 percent of the system capacity to uncommitted shippers, and was therefore inconsistent with the Commission’s committed rate policies. The Commission clarified that White Cliffs’ right to recover compliance costs pursuant to the TSA provisions extends only to committed shippers. The Commission also granted White Cliffs’ request to treat the committed rates as settlement rates during the term of the TSA, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on White Cliffs complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
8. Medallion Pipeline Company, LLC (Docket No. OR18-37)
On September 10, 2018, Medallion Pipeline Company, LLC (“Medallion”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on an expansion of its crude oil pipeline system in Texas.
Specifically, Medallion asked the Commission to approve: (1) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (2) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (3) committed rates that vary, depending on the contract term; (4) TSA provisions that allow committed shippers to increase their committed volumes over a specified time period; (5) a proposal to offer existing committed shippers a lower rate, in exchange for extending their initial TSAs; and (6) additional rights for committed shippers, including contract extension rights and assignment rights. Medallion also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSAs, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On June 26, 2019, the Commission conditionally granted Medallion’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission granted Medallion’s request to treat the committed rates as settlement rates during the term of the TSA, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on Medallion complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
9. EnLink Crude Pipeline, LLC (Docket No. OR18-38)
On September 12, 2018, EnLink Crude Pipeline, LLC (“EnLink”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on an expansion of its crude oil pipeline system in Texas.
Specifically, EnLink asked the Commission to approve: (1) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (2) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (3) TSA provisions allowing EnLink to recover increased regulatory compliance costs; and (4) additional rights for committed shippers, including contract extension rights, expansion capacity rights, and assignment rights. EnLink’s TSAs also state that the committed rates would be treated as settlement rates during the term of the TSAs, and would not be subject to the Commission’s initial rate regulations under 18 C.F.R. § 342.2.
On March 27, 2019, the Commission conditionally granted EnLink’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission clarified that EnLink’s right to recover compliance costs pursuant to the TSA extends only to committed shippers. The Commission granted EnLink’s request to treat the committed rates as settlement rates, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on EnLink complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
10. EPIC Crude Pipeline, LP (Docket No. OR19-2)
On October 10, 2018, EPIC Crude Pipeline, LP (“EPIC Crude”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new crude oil pipeline system in Texas.
Specifically, EPIC Crude asked the Commission to approve: (1) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (2) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (3) EPIC Crude’s right to recall and re-offer unutilized capacity from an acreage dedication committed shipper; and (4) additional rights for committed shippers, including contract extension rights. EPIC Crude also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSA, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On April 11, 2019, the Commission conditionally granted EPIC Crude’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission clarified that any open season re-offering acreage dedication capacity should be limited to the period of time remaining in the initial term and rates of the original TSA. The Commission granted EPIC Crude’s request to treat the committed rates as settlement rates, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on EPIC Crude complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
11. EnLink Delaware Crude Pipeline, LLC (Docket No. OR19-3)
On October 11, 2018, EnLink Delaware Crude Pipeline, LLC (“EnLink Delaware”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new crude oil pipeline system in Texas and New Mexico.
Specifically, EnLink Delaware asked the Commission to approve: (1) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (2) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (3) TSA provisions allowing EnLink Delaware to recover increased regulatory compliance costs; (4) EnLink Delaware’s ability to hold a supplemental open season; and (5) additional rights for committed shippers, including contract extension rights, expansion capacity rights, and assignment rights. EnLink Delaware’s TSAs also state that the committed rates would be treated as settlement rates during the term of the TSAs, and would not be subject to the Commission’s initial rate regulations under 18 C.F.R. § 342.2.
On March 27, 2019 the Commission conditionally granted EnLink Delaware’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission clarified that EnLink Delaware’s right to recover compliance costs pursuant to the TSA provisions extends only to committed shippers. The Commission granted EnLink Delaware’s request to treat the committed rates as settlement rates, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on EnLink Delaware complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
12. Iron Horse Pipeline, LLC (Docket No. OR19-9)
On November 16, 2018, Iron Horse Pipeline, LLC (“Iron Horse”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a new crude oil pipeline system in Wyoming.
Specifically, Iron Horse asked the Commission to approve: (1) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; and (2) a proration policy that allocates uses historical volumes data and committed volumes to allocate capacity to uncommitted shippers and committed shippers, respectively. Iron Horse also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSA. On April 11, 2019, the Commission granted Iron Horse’s PDO in its entirety.
13. EnLink NGL Pipeline, LP (Docket No. OR19-11)
On December 11, 2018, EnLink NGL Pipeline, LP (“EnLink NGL”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on an expansion of its natural gas liquids system in Texas and Louisiana.
Specifically, EnLink NGL asked the Commission to approve: (1) a prorationing policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (2) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service on the expansion; and (3) additional rights for committed shippers, including extension rights, expansion capacity rights, and a right to take committed service at new origin and destination points that may be added to the system in the future.
On April 11, 2019, the Commission conditionally granted EnLink NGL’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission also found that the expansion capacity constituted a new service, and conditioned its order on EnLink NGL complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
14. Plantation Pipe Line Company (Docket No. OR19-12)
On December 20, 2018, Plantation Pipe Line Company (“Plantation”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on an expansion of its refined petroleum products pipeline system.
Specifically, Plantation asked the Commission to approve: (1) a proration policy that allocated 20,000 barrels per day of the expansion capacity to committed shippers, and seventy percent of the total pipeline capacity to uncommitted shippers; (2) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service on the expansion; (3) the provision of interim service prior to the in-service date of the expansion; and (4) committed shippers’ ability to ship incremental barrels (i.e., barrels that exceed their committed volumes) on a non-firm basis. Plantation also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSA, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On April 11, 2019, the Commission conditionally granted Plantation’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission granted Plantation’s request to treat the committed rates as settlement rates, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on Plantation complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
15. ONEOK Elk Creek Pipeline, L.L.C. (Docket Nos. OR19-13, IS19-303, IS19-689)
On December 20, 2018, ONEOK Elk Creek Pipeline, L.L.C. (“Elk Creek”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a natural gas liquids pipeline from Wyoming to Kansas.
Specifically, Elk Creek asked the Commission to approve: (1) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (2) a proration policy that reserves 90 percent of the capacity for committed shippers, and 10 percent for uncommitted shippers; (3) a proration policy that uses historical volumes data to allocate capacity to uncommitted shippers; and (4) additional rights for committed shippers, including a right of first refusal on expansion capacity that may be added in the future, and contract extension rights. The Commission has not issued an order on Elk Creek’s PDO.
On April 30, 2019, Elk Creek submitted its tariff filing in Docket No. IS19-303 (“April Initial Rate Filing”) to establish its $2.0789 per barrel committed rate for natural gas liquids service from Wyoming to Kansas. Elk Creek also filed the cost and revenue data required under 18 C.F.R. § 342.2 to support its initial uncommitted rate of $2.0689 per barrel. On May 30, 2019, Elk Creek submitted a supplemental filing in Docket No. IS19-303 that: (1) set the committed rate at the cost-of-service rate of $2.0689 per barrel; (2) decreased the uncommitted rate to $2.0589 per barrel; and (3) clarified the shippers that only took service on one segment of Elk Creek’s system would pay a lower rate than shippers who took service on the entire system.
On June 28, 2019, the Commission rejected Elk Creek’s April Initial Rate Filing without prejudice. The Commission stated that while Elk Creek’s initial committed rate was supported by cost-of-service data, it appeared that the committed rate would not be subject to the Commission’s indexing or cost-of-service regulations for the duration of the TSA. The Commission therefore rejected Elk Creek’s committed rate as inconsistent with its cost-of-service ratemaking regulations.
On July 2, 2019, Elk Creek submitted a new tariff filing in Docket No. IS19-689 (“July Initial Rate Filing”) to establish the $2.0689 per barrel committed rate that the Commission previously rejected. Elk Creek explained that under the TSA, the committed rate will be $0.01 higher than the uncommitted rate for the same movement. Further, because the uncommitted rate would be subject to indexing and cost-of-service challenges, the committed rate (which would increase or decrease along with the uncommitted rate) would be subject to the same. Therefore, Elk Creek argued that the Commission’s June 28, 2019 order erred in concluding that its committed rates would not be subject to the Commission’s cost-of-service ratemaking regulations.
On August 1, 2019, Elk Creek’s July Initial Rate Filing took effect by operation of law when the Commission declined to issue an order rejecting the filing, or setting it for an investigation. On August 2, 2019, Commissioner Glick and Commissioner LaFleur issued a Joint Statement explaining that they would have rejected Elk Creek’s July Initial Rate Filing for failing to comply with the Commission’s cost-of-service ratemaking regulations. Conversely, Commissioner McNamee issued a statement concluding that Elk Creek’s July Initial Rate Filing satisfied the Commission’s committed rate policies. Chairman Chatterjee—the only other sitting Commissioner on August 2, 2019—did not provide a statement or otherwise address Elk Creek’s July Initial Rate Filing.
16. Sunoco Pipeline L.P. (Docket No. OR19-15)
On December 28, 2018, Sunoco Pipeline L.P. (“Sunoco”) filed a PDO requesting the Commission to approve the rate structure and terms for committed service on a natural gas liquids pipeline from Pennsylvania to Delaware.
Specifically, Sunoco asked the Commission to approve: (1) a committed rate structure where committed shippers pay a premium, relative to the uncommitted rate, for firm service during prorationing; (2) a proposal to offer firm service on capacity that was subject to an earlier TSA, which was cancelled before the pipeline began providing service; (3) TSA provisions allowing Sunoco to increase the committed rates to recover increased regulatory compliance costs; and (4) committed shippers’ rights to take committed service at origin and destination points that may be added to the system in the future. Sunoco also asked the Commission to find that the committed rates would be treated as settlement rates during the term of the TSAs, and to waive its regulations requiring a pipeline to submit a supporting affidavit or cost data to establish initial committed rates under 18 C.F.R. § 342.2.
On May 20, 2019, the Commission conditionally granted Sunoco’s PDO, finding that the TSA was consistent with the Interstate Commerce Act. The Commission granted Sunoco’s request to treat the committed rates as settlement rates during the term of the TSA, but denied the request for waiver of 18 C.F.R. § 342.2, and conditioned its order on Sunoco complying with the initial rate regulations when submitting its tariff filing to implement the committed rates.
The Committee acknowledges with great appreciation the primary contribution to the preparation of this report by Thomas C. Kirby of Steptoe & Johnson LLP; Keith Coyle, and Ashleigh Krick of Babst, Calland, Clements and Zomnir, P.C.; and Christopher M. Randall of Latham & Watkins LLP.
