[Federal Register Volume 59, Number 150 (Friday, August 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18872]


[[Page Unknown]]

[Federal Register: August 5, 1994]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 348

[Docket No. RM94-1-000]

 

Market-Based Ratemaking for Oil Pipelines; Notice of Proposed 
Rulemaking

July 28, 1994.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission is proposing to amend 
its regulations to adopt filing requirements and procedures with 
respect to an application by an oil pipeline for a determination that 
it lacks significant market power in the markets in which it proposes 
to charge market-based rates.

DATES: Comments are due no later than September 6, 1994.

ADDRESSES: An original and 14 copies of written comments must be filed. 
All filings should refer to Docket No. RM94-1-000 and should be 
addressed to Office of the Secretary, Federal Energy Regulatory 
Commission, 825 North Capitol Street, NE., Washington, DC 20426.

FOR FURTHER INFORMATION CONTACT: Jeffrey A. Braunstein, Office of the 
General Counsel, Federal Energy Regulatory Commission, 825 North 
Capitol Street, NE., Washington, DC 20426, (202) 208-2114.

SUPPLEMENTARY INFORMATION: In addition to publishing the full text of 
this document in the Federal Register, the Commission also provides all 
interested persons an opportunity to inspect or copy the contents of 
this document during normal business hours in Room 3104, 941 North 
Capitol Street, NE., Washington, DC 20426.
    The Commission Issuance Posting System (CIPS), an electronic 
bulletin board service, provides access to the texts of formal 
documents issued by the Commission. CIPS is available at no charge to 
the user and may be accessed using a personal computer with a modem by 
dialing (202) 208-1397. To access CIPS, set your communications 
software to use 300, 1200, or 2400 bps, full duplex, no parity, 8 data 
bits and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing 
(202) 208-1781. The full text of this proposed rule will be available 
on CIPS for 30 days from the date of issuance. The complete text on 
diskette in Wordperfect format may also be purchased from the 
Commission's copy contractor, La Dorn Systems Corporation, also located 
in Room 3104, 941 North Capitol Street, NE., Washington, DC 20426.

I. Introduction

    On October 22, 1993, the Federal Energy Regulatory Commission 
(Commission) issued Order No. 5611 in which the Commission 
promulgated regulations pertaining to its jurisdiction over oil 
pipelines under the Interstate Commerce Act (ICA)2 to fulfill the 
requirements of Title XVIII of the Energy Policy Act of 1992 (Act of 
1992).3
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    \1\Revisions to Oil Pipeline Regulations pursuant to Energy 
Policy Act, Order No. 561, 58 FR 58,753 (November 4, 1993), III FERC 
Stats. & Regs. 30,985 (1993), order on reh'g and clarification, 
Order No. 561-A, issued contemporaneously with this Notice of 
Proposed Rulemaking.
    \2\49 U.S.C. app. 1 (1988).
    \3\42 U.S.C.A. 7172 note (West Supp. 1993).
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    In Order No. 561, the Commission adopted a simplified and generally 
applicable ratemaking methodology for oil pipelines. This methodology 
is an indexing system to establish ceilings on oil pipeline rates. The 
Commission, however, will also permit, under defined circumstances, the 
use of two alternative methodologies. Those are the use of a cost-of-
service methodology and the use of settlement rates. In addition, in 
Order No. 561, the Commission continued its policy of allowing an oil 
pipeline ``to attempt to show that it lacks significant market power in 
the market in which it proposes to charge market-based rates.''4
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    \4\18 CFR 342.4(b), to be effective January 1, 1995.
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    Also, on October 22, 1993, the Commission issued a Notice of 
Inquiry (NOI) about market-based rates for oil pipelines.5 In the 
NOI, the Commission first inquired whether it should continue to permit 
oil pipelines to seek market-based rates on a showing that they do not 
have significant market power in the relevant markets. The Commission 
also inquired about how it should make a market power determination 
and, in that connection, raised a number of substantive and procedural 
issues. The Commission's intent was to adopt standards to be used in 
determining whether an oil pipeline lacks significant market power in 
the relevant markets, if consensus existed as to the standards. The 
Commission received comments from fifteen commenters listed in the 
Appendix.6 The present Notice of Proposed Rulemaking (NOPR) as set 
forth and discussed below is the Commission's response to the NOI. In 
brief, the Commission is proposing to adopt procedural rules governing 
an oil pipeline's application for a Commission finding that the oil 
pipeline lacks significant market power in the relevant markets. The 
Commission is not proposing to adopt any substantive rules governing 
the making of that finding.
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    \5\Market-Based Ratemaking for Oil Pipelines, Notice of Inquiry, 
58 FR 58,814 (November 4, 1993), IV FERC Stats. & Regs. Notices 
35,527 (October 22, 1993).
    \6\The motions to file comments and reply comments in the NOI 
out-of-time are granted.
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II. Public Reporting Requirement

    The Commission estimates the public reporting burden for this 
collection of information under the proposed rule will increase the 
existing reporting burden associated with FERC-550 by an estimated 500 
hours annually,--an average of 250 hours per response based on an 
estimated 2 responses. The information filed by the oil pipelines will 
be collected by the Commission under FERC-550 ``Oil Pipeline Rates: 
Tariff Filings''. FERC-550 is a designation covering oil pipeline 
tariff filings made to the Commission. The estimates include the time 
for reviewing instructions, researching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. The current annual reporting burden is 
5,350 hours based on an estimated 535 responses from approximately 140 
respondents.
    Interested persons may send comments regarding these burden 
estimates or any other aspect of this information collection, including 
suggestions for reducing this burden, to the Federal Energy Regulatory 
Commission, 941 North Capitol Street, N.E., Washington, D.C. 20426 
[Attention: Michael Miller, Information Services Division, (202) 208-
1415]; and to the Office of Information and Regulatory Affairs of OMB 
(Attention: Desk Officer for Federal Energy Regulatory Commission).

III. Conclusions From the NOI

    The oil pipeline industry commenters7 and the United States 
Department of Justice (Justice) maintain that the Commission should 
continue to allow market-based rates for oil pipelines without any 
constraints on prices or duration. Several shippers or shipper 
groups8 and the Alberta Petroleum Marketing Commission (Alberta) 
support or do not oppose the continuation of market-based rates for oil 
pipelines, but with qualifications, such as price constraints or limits 
on duration.9 Other shippers or shipper groups oppose the 
continuation of market-based rates for oil pipelines as inappropriate 
under the cost-based, just and reasonable standard or as unnecessary in 
light of Order No. 561's methodologies.10
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    \7\The Association of Oil Pipe Lines, Williams Pipe Line 
Company, Marathon Pipe Line Company, ARCO Pipe Line Company, Four 
Corners Pipeline Company, and Buckeye Pipe Line Company, L.P.
    \8\Total Petroleum, Inc. (Total), the Petrochemical Energy Group 
(PetroChemical), and The City of Long Beach (Long Beach).
    \9\Total, Long Beach, Petrochemical, and Alberta would subject 
the market based rates to price constraints and Petrochemical and 
Total would require that market-based rates exist for a limited 
duration. The Canadian Association of Petroleum Producers support 
market-based rates, but only if the ratepayer requests them or the 
pipeline requires the flexibility to lower the price of its services 
to meet competition.
    \1\0Sinclair Oil Corporation, Chevron U.S.A. Products Company, 
and the National Council of Farmer Cooperatives.
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    Upon consideration of the comments to the NOI, the Commission 
concludes that oil pipelines may continue to seek market-based rates on 
a showing that they do not have significant market power in the 
relevant markets. The Commission believes that this approach comports 
with the spirit of the Act of 1992 by retaining a light-handed 
regulatory method as a complement to the Commission's generally 
applicable indexing approach. In addition, as the Commission stated in 
Order No. 561, a market-based approach ``is clearly within the 
Commission's authority under the ICA, as the Commission held in 
Buckeye.''11 Further, market-based pricing has been found by the 
United States Court of Appeals for the District of Columbia Circuit to 
comport with the just and reasonable standard of the Natural Gas 
Act,12 which is the standard under the ICA.13 The Commission 
will consider the need for any constraints in individual cases.
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    \1\1Order No. 561, III FERC Stats. & Regs. 30,985 at p. 30,958, 
citing Buckeye Pipe Line Co., 44 FERC 61,068 (1988) (Order Granting 
Interluctory Appeals); 53 FERC 61,473 (1990) (opinion and Order on 
Initial Decision).
    \1\2Elizabethtown Gas Co. v. FERC, 10 F.3d 866 (D.C. Cir. 1993). 
(``[W]hen there is a competitive market the FERC may rely upon 
market-based prices in lieu of cost-of-service regulation to assure 
a `just and reasonable' result.'' Id. at 870).
    \1\349 U.S.C. 1(5) (``All charges ... shall be just and 
reasonable''); Farmers Union Central Exchange v. FERC, 734 F.2d 
1486, 1500 (D.C. Cir. 1984).
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    However, there is no consensus now on the substantive standards to 
be used in determining whether an oil pipeline lacks significant market 
power in the relevant markets. This lack of consensus is shown by the 
divergent views expressed by the commenters on key issues such as the 
appropriate geographic market and the use of screens and rebuttable 
presumptions. For example, the oil pipeline industry supports the use 
of BEAs (see infra) as the appropriate geographic markets, while some 
shippers14 oppose the use of BEAs, and Justice states that it can 
no longer recommend the use of BEAs. In addition, while there is a 
consensus in support of the use of the Herfindahl-Hirschman Index (HHI) 
(see infra) as an appropriate market concentration measure, there is no 
consensus with respect to details about the HHI15 or about the 
threshold for creating a rebuttable presumption.16 This lack of 
consensus about those and other issues has convinced the Commission 
that the appropriate course of action is to develop oil pipeline 
precedents on a case-by-case basis. Accordingly, the Commission 
concludes that it should not go forward with a rulemaking to establish 
substantive standards determining whether a pipeline lacks significant 
market power.
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    \1\4E.g., Alberta, Petrochemical, and Total.
    \1\5For example, whether the HHI should be based on capacity 
(the pipeline industry except for Marathon) or delivery shares of 
the market (Marathon, Total, and Sinclair).
    \1\6That is, the level at which the concentration screen for a 
rebuttable presumption should be set.
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    While the Commission believes it is not the time to propose 
substantive rules about market power determinations, it concludes that 
it is appropriate to propose procedural rules to govern applications by 
oil pipelines for market-based rates. The Commission's analysis of the 
comments to the NOI indicates that a sufficient consensus exists about 
the issues that are germane to a market-based rate proceeding. It is in 
the public interest to establish by rule the information that must be 
filed by an oil pipeline seeking a determination that it lacks 
significant market power, enabling it to charge market-based rates. 
This should streamline the process of resolving market power issues and 
thereby minimize unnecessary regulatory costs and delays as 
contemplated by Section 1802(a) the Act of 1992.

IV. The Proposed Rule--Summary

    The Commission is proposing to amend subchapter P of its 
regulations, Regulations Under the Interstate Commerce Act, by adding a 
new Part 348 to those regulations. In this new part, the Commission 
will establish the kind of information that an oil pipeline must 
include in its application for a market power determination, along with 
procedural requirements applicable to the filing of and responses to 
the application. In Parts V and VI below, the Commission will discuss 
the information requirements. In brief, an oil pipeline would be 
required to file a statement of position in support of its application 
for a market power determination, along with information that supports 
its statement of position, and additional information that will be 
desirable in a market power proceeding in order to minimize the need 
for discovery. In Part VII below, the Commission will discuss the 
procedural requirements applicable to applications for market power 
determinations.
    The Commission is not proposing at this time to implement generic 
proceedings or to make market determinations that would apply to 
pipelines other than the specific pipeline seeking such a 
determination. The necessity to examine both origin and destination 
markets in analyzing the market power of any given pipeline may make 
such generic determinations difficult. Also, some pipelines may lack 
market power in a specified market, whereas others may not. However, 
the Commission is still interested in ways it could more efficiently 
process market-power cases that may be filed. For example, should 
pipelines be able to join together to pursue market-power 
determinations in order to share the costs of such a proceeding? Should 
pipelines be able to unilaterally ``join'' a proceeding that is 
established by a competing pipeline in a given market? What would be 
the benefits and drawbacks to such joinder? Are there other ways in 
which the Commission could facilitate market power determinations in 
this regard?

V. The Statement of Position

    Section 348.1(a) of the proposed regulations requires the oil 
pipeline seeking a market power determination to include with its 
application a statement of position as to its market power. Section 
348.1(b) of the proposed regulations provides that the oil pipeline's 
statement of position must include a summary and a statement of 
material facts. The latter must include citation to the supporting 
statements, exhibits, affidavits, and prepared testimony. In its 
statement of position, the oil pipeline would be expected to present 
its arguments in favor of its position that it lacks significant market 
power in the relevant markets.

VI. The Supporting Statements

    Section 348.1(a) of the proposed regulations requires the oil 
pipeline seeking a market power determination to include with its 
application the information required by proposed section 348.1(c). 
Under that proposed regulation, the oil pipeline must include certain 
designated information. The information required is mostly factual and 
is relevant to measuring the oil pipeline's ability to exercise market 
power in the relevant markets. That measurement will enable the 
Commission to determine whether the oil pipeline can exercise 
significant market power by profitably maintaining its prices 
significantly above competitive levels for a significant period. If a 
record has been established in an oil pipeline proceeding, another oil 
pipeline may make use of all or part of that record in satisfying its 
burden to present information to the extent the other record contains 
relevant public information which is not out-of-date.17 The 
Commission is proposing the information to be provided in Statements A 
through I, which are discussed below.
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    \1\7See 18 CFR 385.508 (c).
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A. Statement A--Geographic Market

    In Statement A, the Commission is proposing that the oil pipeline 
describe the geographic markets in which it seeks to make a showing 
that it lacks significant market power. The oil pipeline would have to 
explain why its method for selecting the geographic markets is 
appropriate.
    The Commission is proposing to require the oil pipeline to include 
both relevant origin and destination markets in its evidentiary 
presentation. This will provide interested parties with complete 
information about competition at the supply and delivery ends of the 
pipeline system. The Commission is not requiring the oil pipeline to 
file a market analysis of each point-to-point corridor. In light of the 
significant point-to-point traffic in the oil pipeline industry, this 
would be too onerous a requirement at the filing stage.18 In 
addition, a point-to-point corridor analysis may exclude competitive 
alternatives to the relevant service and, in some instances, it could 
provide an inaccurate picture of market concentration.
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    \1\8A protestant may, as part of its response to the oil 
pipeline's application, seek to prove that in its circumstances a 
point-to-point corridor approach should be used to determine the 
appropriate geographic market.
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    The Commission is not proposing to require a pipeline to file 
pursuant to any particular geographic market definition. The Commission 
expects that oil pipelines will propose to use BEAs as their geographic 
markets.19 In the past, the Commission itself has used BEAs as the 
appropriate geographic markets.20 However, as indicated above, 
Justice stated that it could no longer recommend the use of arbitrary 
markets such as BEAs because there may not be a high degree of 
correlation between the size of the relevant markets and BEAs. The 
burden will be on the oil pipeline to explain why its use of BEAs or 
any other definition of the geographic market is appropriate. If a 
pipeline uses BEAs, it must show that each BEA represents an 
appropriate geographic market.
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    \1\9The term BEA refers to United States Department of Commerce, 
Bureau of Economic Analysis Economic Areas. BEAs are geographic 
regions surrounding major cities that are intended to represent 
areas of actual economic activity.
    \2\0See Buckeye Pipe Line Co., 53 FERC  61,473 (1990).
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    The information provided in the various statements should help the 
protestants assess whether a particular BEA does in fact represent an 
appropriate market. Of course, the oil pipeline may choose to define 
its relevant geographic markets at a sub-BEA level, such as by a given 
radius around its terminals. As with BEAs, the oil pipeline must 
explain why this geographic market definition is appropriate.

B. Statement B--Product Market

    In Statement B, the Commission is proposing that the oil pipeline 
identify the product market or markets for which it seeks to establish 
that it lacks significant market power. The oil pipeline would have to 
explain why the particular product definition is appropriate.
    Under the ICA, the Commission regulates the transportation of oil 
by pipeline.21 In a market power analysis, the Commission must 
determine the oil pipeline's ability to exercise market power over this 
transportation service. However, a market power analysis in general 
cannot be made solely in the context of transportation rates.22 
Where competing alternatives constrain the applicant's ability to raise 
transport prices, the effect of such constraints are ultimately 
reflected in the price of the commodity being transported. Hence, the 
delivered commodity price (relevant product price plus transportation 
charges) generally will be the relevant price to be analyzed for making 
a comparison of the alternatives to a pipeline's services.
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    \2\149 U.S.C. 1(1)(b).
    \2\2In some instances, such as for origin markets or crude oil 
pipelines, it may be appropriate to make a case based only on 
transportation rates. The pipeline may elect to file such a case.
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    The Commission is not proposing a specific way to define the 
product markets. The relevant product market first would be 
distinguished between the transportation of crude oil and the 
transportation of refined products. Crude oil transportation could 
further be divided to include transportation of natural gas liquids 
while products transportation could be delineated by type, such as 
motor gasoline, distillates, or jet fuel. The oil pipeline should, in 
the first instance, select its product market. The information provided 
in the various statements should help the protestants assess whether 
the oil pipeline's definition of the product market is appropriate. The 
burden is on the oil pipeline to justify its choice.

C. Statement C--The Oil Pipeline's Facilities and Services

    In Statement C, the Commission is proposing that the oil pipeline 
describe its own facilities and services in the relevant markets. 
Statement C would have to include all pertinent data about the 
pipeline's facilities and services in those markets. For example, 
without limitation, the oil pipeline would have to include data on the 
capacity of its facilities, on its throughput, on its receipts in its 
origin markets, on its deliveries in its destination markets and to its 
major consuming markets, and the mileage between its terminals and its 
major consuming markets. Data should be supplied for each commodity 
carried, such as jet fuel, gasoline, etc.

D. Statement D--Competitive Alternatives

    In Statement D, the Commission is proposing that the oil pipeline 
describe available transportation alternatives in competition with the 
oil pipeline in the relevant markets and other competition constraining 
the oil pipeline's rates in those markets. Statement D would have to 
include all pertinent data about transportation alternatives and other 
constraining competition.23 For example, without limitation, the 
oil pipeline would have to include data similar to that provided for 
its own facilities and services in Statement C, including cost and 
mileage data in specific reference to the oil pipeline's terminals and 
major consuming markets.
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    \2\3If the oil pipeline seeks to include competitive 
alternatives from outside a BEA, it would have to show that any such 
alternative is a competitive factor.
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    The NOI listed the following forms of transport and other 
competition that might be included in a market power 
calculation:24 other pipelines, including private pipelines and 
those passing through the geographic market but without terminals, 
pipelines passing near the geographic market, barges, trucks, and 
refineries within the geographic market.25 The Commission does not 
propose to exclude any alternative form of transport or other 
competition, including, for example, local consumption in origin 
markets. However, the burden is on the oil pipeline to justify its 
inclusion of transportation alternatives and other competition in its 
market power analysis.
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    \2\4E.g., in calculating its Herfindahl-Hirschman Index, 
discussed infra.
    \2\5Potential Competition included in the list is discussed 
infra.
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E. Statement E--Potential Competition

    In Statement E, the Commission is proposing that the oil pipeline 
describe potential competition in the relevant markets. Statement E 
would have to include data about the potential competitors such as a 
potential entrant's costs and mileage in reference to the oil 
pipeline's terminals and major consuming markets.

F. Statement F--Maps

    Statement F would consist of a map or maps showing the principal 
oil pipeline facilities and the points at which service is rendered 
under its tariff, the direction of flow of each line, the location of 
each of the oil pipeline's terminals, the location of each of its major 
consuming markets (cities, airports, and the like, as appropriate), and 
the location of alternatives to the oil pipeline, including their 
distance in miles from the oil pipeline's terminals and major consuming 
markets. The map may be on separate pages and must include a general 
system map and maps by geographic markets.

G. Statement G--Market Power Measures

    In Statement G, the Commission is proposing that the oil pipeline 
set forth the calculation of the HHI26 and its market share with 
respect to the relevant markets and the calculation of other market 
power measures relied on by the oil pipeline, along with complete 
particulars about those calculations.
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    \2\6The HHI calculates market concentration by summing the 
squares of individual market shares of all the firms included in the 
market. For example, if each of four firms has a 25 percent share of 
the market, the HHI for the market would be .2500 ((.25x.25)4) or 
2500 in 12 nontechnical terms.
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    The Commission believes that it is useful to obtain a showing of 
market concentration using the HHI. The HHI would include the oil 
pipeline and the competitive alternatives set forth in Statements D and 
E. The burden is on the oil pipeline to justify the individual market 
shares used in calculating the HHIs. In addition, the Commission is not 
proposing any particular HHI level, such as 1800 or 2500, as a screen 
or presumption, rebuttable or otherwise. All factors must be considered 
in determining whether an oil pipeline lacks significant market power.
    The Commission also is proposing to require the oil pipeline to 
submit a market share calculation based on its receipts in its origin 
markets and its deliveries in its destination markets, if the HHIs are 
not based on those factors. For example, if the destination HHIs are 
based on capacity determined market shares, the oil pipeline would have 
to submit a market share calculation for itself based on deliveries in 
the respective destination markets. The Commission is not proposing any 
screen or presumption, rebuttable or otherwise, about particular market 
share levels. All factors must be considered in determining whether an 
oil pipeline lacks significant market power.
    The oil pipeline may also include other indicators of the lack of 
significant market power. For example, it could present evidence about 
water transportation as an indication that the oil pipeline lacks 
significant market power.

H. Statement H--Other Factors

    In Statement H, the oil pipeline would describe any other factors 
that bear on the issue of whether it lacks significant market power in 
the relevant markets. The oil pipeline would have to explain why those 
other factors are pertinent.
    The NOI listed the following possible other factors: Exchanges, 
Excess Capacity, Competition with vertically integrated companies, 
buyer power, and profitability.\27\ The Commission is not excluding any 
factor. The Commission is not limiting the factors to those listed in 
the NOI. For example, an oil pipeline might want to show that it has 
been losing markets over a period of years or that the relevant market 
is expanding. However, the burden is on the oil pipeline to show the 
relevance of any factor to its lack of significant market power.
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    \27\Market share and potential entry included in the list are 
referred to supra.
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I. Statement I--Proposed Testimony

    In Statement I, the oil pipeline would present the proposed 
testimony in support of its application. This would serve as its case-
in-chief, if the Commission sets the application for hearing.

VII. Procedural Requirements

    The Commission is proposing in section 348.2 several procedural 
requirements in connection with applications for a market power 
determination. These new procedural requirements are necessary because 
the applications are not rate filings. Under Order No. 561, an oil 
pipeline must show that ``it lacks significant market power in the 
relevant market in which it proposes to charge market-based 
rates.''\28\ Only after the Commission concludes that the oil pipeline 
lacks significant market power in the relevant markets may the pipeline 
charge market-based rates. Until that time, the pipeline's rates are 
determined by the Commission's indexing or cost-of-service provisions.
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    \2\818 CFR 342.4(b), to be effective January 1, 1995.
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    The first proposal is that the oil pipeline would not have to 
initially provide its entire application to its shippers and 
subscribers. Rather, it would only have to provide its letter of 
transmittal to its shippers and subscribers. The letter of transmittal 
would describe the application for a market power determination and 
identify each rate that would be market-based, if the oil pipeline 
shows that it lacks significant market power in the relevant market. 
This will enable persons to determine if they want to examine the 
complete application. Under the proposed regulations, a person must 
make a written request to the pipeline for a copy of the complete 
application within 15 days after the filing of the application with the 
Commission. The oil pipeline would have to provide that person with a 
copy of its complete application within seven days after receipt of the 
written request. This will enable a person to determine if it wants to 
protest the oil pipeline's application for a market power 
determination. A protestant must file its protest to the application 
within 60 days after the filing of the application. At that time, the 
protestant must set forth in detail its grounds for opposing the oil 
pipeline's application, including responding to its statement of 
position and information, and, if the protestants desires, presenting 
information of its own pursuant to Statements A-I. The Commission, 
after examination of the oil pipeline's application and any protests, 
would issue an order in which it would rule summarily on the 
application or, if appropriate, establish future procedures and the 
scope of the investigation. Future procedures may or may not involve a 
hearing before an administrative law judge.
    The Commission is not proposing any regulations with respect to 
complaints against market-based rates under Section 13(1) of the ICA. 
However, the Commission would expect a complainant to allege and to 
present evidence that the pipeline has developed significant market 
power. In particular, the Commission would expect a complainant to 
describe any circumstances that have changed since the Commission made 
the determination that the oil pipeline lacks significant market power 
and could charge market-based rates.
    Last, the Commission is proposing to require the oil pipelines to 
file their applications with the Commission on an electronic medium in 
addition to the paper filing. The formats for the electronic filing and 
the paper copy will be obtainable at the Federal Energy Regulatory 
Commission, Public Reference and Files Maintenance Branch, 941 North 
Capitol Street, N.E., Washington, D.C. 20426. The Commission intends to 
establish the formats in cooperation with the oil pipeline industry.

VIII. Environmental Analysis

    The Commission is required to prepare an Environmental Assessment 
or an Environmental Impact Statement for any action that may have a 
significant adverse effect on the human environment.\29\ The Commission 
has categorically excluded certain actions from these requirements as 
not having a significant effect on the human environment.\30\ The 
action proposed here is procedural in nature and therefore falls within 
the categorical exclusions provided in the Commission's 
regulations.\31\ Therefore, neither an environmental impact statement 
nor an environmental assessment is necessary and will not be prepared 
in this rulemaking.
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    \29\Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47,897 (Dec. 17, 1987), FERC 
Statutes and Regulations, Regulations Preambles 1986-1990  30,783 
(1987).
    \30\18 CFR 380.4.
    \31\See 18 CFR 380.4(a)(2)(ii).
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IX. Reporting Flexibility Certification

    The Regulatory Flexibility Act (RFA)\32\ generally requires the 
Commission to describe the impact that a proposed rule would have on 
small entities or to certify that the rule will not have a significant 
economic impact on a substantial number of small entities. An analysis 
is not required if a proposed rule will not have such an impact.\33\ 
Most oil pipelines to whom the proposed rule would apply do not fall 
within the definition of small entity.\34\ Consequently, pursuant to 
section 605(b) of the RFA, the Commission certifies that the proposed 
regulations, if promulgated, will not have a significant impact on a 
substantial number of small entities.
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    \32\5 U.S.C. 601-612.
    \33\5 U.S.C. 605(b).
    \34\Section 601(c) of the RFA defines a ``small entity'' as a 
small business, a small not-for-profit enterprise, or a small 
governmental jurisdiction. A ``small business'' is defined by 
reference to section 3 of the Small Business Act as an enterprise 
which is ``independently owned and operated and which is not 
dominant in its field of operation.'' 15 U.S.C. 632(a).
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X. Information Collection Requirements

    The Office of Management and Budget's (OMB) regulations\35\ require 
that OMB approve certain information and recordkeeping requirements 
imposed by an agency. The information collection requirements in this 
proposed rule are contained in FERC-550 ``Oil Pipeline Rates: Tariff 
Filings'' (1902-0089).
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    \35\5 CFR 1320.14.
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    The Commission's Office of Pipeline Regulation uses the data 
collected in these information requirements to investigate the rates 
charged by oil pipeline companies subject to its jurisdiction, to 
determine the reasonableness of rates, and when appropriate prescribe 
just and reasonable rates. In addition, the information to be required 
by the proposed rule would allow the Commission to determine if an oil 
pipeline lacks significant power in the relevant markets when it 
proposes to charge market-based rates.
    Because the adoption of the proposed procedural rules would create 
an expected increase in the public reporting burden under FERC-550, the 
Commission is submitting a copy of the proposed rule to OMB for its 
review and approval. Interested persons may obtain information on these 
reporting requirements by contacting the Federal Energy Regulatory 
Commission, 941 North Capitol Street, N.E., Washington, D.C. 20426 
[Attention: Michael Miller, Information Services Division, (202) 208-
1415], Comments on the requirements of this rule can be sent to the 
Office of Information and Regulatory Affairs of OMB (Attention: Desk 
Officer for Federal Energy Regulatory Commission).

XI. Comment Procedures

    The Commission invites interested persons to submit written 
comments on the proposals of this NOPR. As much as possible, the 
comments should be keyed to the topic headings of this NOPR. An 
original and 14 copies of the written comments must be filed with the 
Commission no later than 30 days after the date of publication in the 
Federal Register. Comments should be submitted to the Office of the 
Secretary, Federal Energy Regulation Commission, 825 North Capitol 
Street, N.E., Washington, D.C., 20426, and should refer to Docket No. 
RM94-1-000.
    All written comments will be placed in the Commission's public 
files and will be available for inspection in the Commission's Public 
Reference Room at 941 North Capitol Street, N.E., Washington, D.C., 
20426, during regular business hours.

List of Subjects in 18 CFR Part 348

    Pipelines, Reporting and recordkeeping requirements.

    By direction of the Commission.
Lois D. Cashell,
Secretary.

    In consideration of the foregoing, the Commission proposes to add 
Part 348, Chapter I, Title 18, Code of Federal Regulations, as set 
forth below.

PART 348--OIL PIPELINE APPLICATIONS FOR MARKET POWER DETERMINATIONS

Sec.
348.1  Content of Application for a Market Power Determination
348.2  Procedures

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 1-27.


Sec. 348.1  Content of application for a market power determination.

    (a) If, under Sec. 342.4(b) of this chapter, a carrier seeks to 
establish that it lacks significant market power in the market in which 
it proposes to charge market-based rates, it must file and provide an 
application for such a determination. An application must include a 
statement of position and the information required by paragraph (c) of 
this section.
    (b) The carrier's statement of position required by paragraph (a) 
of this section must include a summary and a statement of material 
facts. The statement of material facts must include citation to the 
supporting statements, exhibits, affidavits, and prepared testimony.
    (c) The carrier must include with its application the following 
information:
    (1) Statement A--geographic market. This statement must describe 
the geographic markets in which the carrier seeks to establish that it 
lacks significant market power. The carrier must include the origin 
market and the destination market related to the service for which it 
proposes to charge market-based rates. The statement must explain why 
the carrier's method for selecting the geographic markets is 
appropriate.
    (2) Statement B--product market. This statement must identify the 
product market or markets for which the carrier seeks to establish that 
it lacks significant market power. The statement must explain why the 
particular product definition is appropriate.
    (3) Statement C--the carrier's facilities and services. This 
statement must describe the carrier's own facilities and services in 
the relevant markets. This statement must include all pertinent data 
about the pipeline's facilities and services.
    (4) Statement D--competitive alternatives. This statement must 
describe available transportation alternatives in competition with the 
carrier in the relevant markets and other competition constraining the 
carrier's rates in those markets. The statement must include all 
pertinent data about transportation alternatives and other constraining 
competition.
    (5) Statement E--potential competition. This statement must 
describe potential competition in the relevant markets. The statement 
must include data about the potential competitors, including costs, and 
mileage in reference to the carrier's terminals and to major consuming 
markets.
    (6) Statement F--maps. This statement must consist of a map or maps 
showing the carrier's principal carrier facilities, the points at which 
service is rendered under its tariff, the direction of flow of each 
line, the location of each of its terminals, the location of each of 
its major consuming markets, and the location of the alternatives to 
the carrier, including their distance in miles from the carrier's 
terminals and major consuming markets. The map may be on separate pages 
and must include a general system map and maps by geographic markets.
    (7) Statement G--market power measures. This statement must set 
forth for the relevant markets the calculation of the Herfindahl-
Hirschman Index; the carrier's market share based on receipts in its 
origin markets and deliveries in its destination markets, if the 
Herfindahl-Hirschman Index is not based on those factors; and the 
calculation of other market power measures relied on by the carrier; 
along with complete particulars about its calculations.
    (8) Statement H--other factors. This statement must describe any 
other factors that bear on the issue of whether the carrier lacks 
significant market power in the relevant markets. The description must 
explain why those other factors are pertinent.
    (9) Statement I--prepared testimony. This statement must include 
the proposed testimony in support of the application and will serve as 
the carrier's case-in-chief, if the Commission sets the application for 
hearing.


Sec. 348.2  Procedures.

    (a) A carrier must file, as provided in Sec. 341.1 of this chapter, 
fourteen copies of its application, including its statement of 
position, statements, and related material, and a letter of transmittal 
and must submit its application on an electronic medium. The formats 
for the electronic filing and the paper copy can be obtained at the 
Federal Energy Regulatory Commission, Division of Public Information, 
825 North Capitol Street, N.E., Washington, D.C. 20426.
    (b) A carrier must provide a copy of its letter of transmittal to 
each shipper and subscriber on or before the day the material is 
transmitted to the Commission for filing.
    (c) A letter of transmittal must describe the market-based rate 
filing, including an identification of each rate that would be market-
based, and the pertinent tariffs or supplement numbers, state if a 
waiver is being requested and specify the statute, section, subsection, 
regulation, policy or order requested to be waived. Letters of 
transmittal must be certified pursuant to Sec. 341.2(c)(2) of this 
chapter and acknowledgement must be requested pursuant to 
Sec. 341.2(c)(3) of this chapter.
    (d) A person must make a written request to the carrier for a copy 
of the carrier's complete application within 15 days after the filing 
of the application.
    (e) The carrier must provide a copy of the complete application to 
the requesting person within 7 days after receipt of the written 
request.
    (f) A carrier must provide copies as required by paragraph (b) and 
(e) by first-class mail or by other means of transmission agreed upon 
in writing.
    (g) Any intervention or protest to the application must be filed 
within 60 days after the filing of the application and must be filed 
pursuant to Secs. 343.2(a) and (b) of this chapter. A protest must also 
be telefaxed if required by Sec. 343.3(a) of this chapter.
    (h) A protest filed against an application for a market power 
determination must set forth in detail the grounds for opposing the 
carrier's application, including responding to its position and 
information and, if desired, presenting information pursuant to section 
348.1(c) of this part.

[FR Doc. 94-18872 Filed 8-4-94; 8:45 am]
BILLING CODE 6717-01-P