[Federal Register Volume 59, Number 220 (Wednesday, November 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27621]


[[Page Unknown]]

[Federal Register: November 16, 1994]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 342, 346, and 347

[Docket No. RM94-2-000]

 

Cost-of-Service Reporting and Filing Requirements for Oil 
Pipelines

Issued October 28, 1994.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission is amending its 
regulations to establish filing requirements for cost-of-service rate 
filings for oil pipelines; filing requirements for oil pipelines 
seeking to establish new or changed depreciation rates; and new and 
revised pages of FERC Form No. 6, Annual Report for Oil Pipelines. 
These requirements are adopted as companions to Order No. 561, 
Revisions to Oil Pipeline Regulations Pursuant to the Energy Policy Act 
of 1992, published in the Federal Register on November 4, 1993. That 
order established an indexing methodology which would establish 
ceilings on oil pipeline rates. The Commission provided the opportunity 
for oil pipelines to seek an exception to indexing through a cost-of-
service filing if the pipeline could show that, under indexing, it 
would substantially underrecover prudent costs.

EFFECTIVE DATE: This final rule is effective January 1, 1995.

FOR FURTHER INFORMATION CONTACT: Harris S. Wood, Office of the General 
Counsel, Federal Energy Regulatory Commission, 825 North Capitol 
Street, NE., Washington, DC 20426, (202) 208-0224.

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.

Order No. 571

    The Federal Energy Regulatory Commission (Commission) in this order 
revises the information reported by oil pipelines in their FERC Form 
No. 6, Annual Report of Oil Pipeline Companies (Form No. 6), and adopts 
filing requirements for cost-of-service rate filings by oil pipelines. 
The Commission also adopts rules for oil pipelines performing 
depreciation studies. Finally, the Commission is deferring at this time 
the requirement to file Form No. 6 on an electronic medium in addition 
to making a paper filing. These changes shall become effective January 
1, 1995, concurrently with the new regulations promulgated by Order No. 
561.\1\
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    \1\Revisions to Oil Pipeline Regulations pursuant to Energy 
Policy Act, Order No. 561, 58 FR 58785 (November 4, 1993), III 
Stats. & Regs.  30,985 (1993), order on reh'g and clarification, 
Order No. 561-A, 59 FR 40243 (August 8, 1994), III FERC Stats. & 
Regs.  31,000 (1994). Unless the context indicates otherwise, all 
references to Order No. 561 include Order No. 561-A.
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I. Introduction

    This proceeding is a companion to Order No. 561. In Order No. 561, 
the Commission established an indexing methodology, which would 
establish ceilings on oil pipeline rates, to be used by oil pipelines 
as the generally applicable and simplified ratemaking methodology for 
oil pipelines on or after January 1, 1995. The Commission provided the 
opportunity for oil pipelines to seek an exception to indexing through 
a cost-of-service filing if the pipeline could show that, under 
indexing, it would substantially underrecover prudent costs. Further, 
the Commission provided that rates for new services could be 
established either through settlement or by use of a cost-of-service 
methodology.\2\
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    \2\18 CFR 342.2. In Docket No. RM94-1-000, Market-Based 
Ratemaking for Oil Pipelines, the Commission elicited comments on 
its proposal to permit oil pipelines to seek market-based rates and 
the appropriate standards for making a determination that a pipeline 
lacks significant market power. This matter is the subject of a 
Final Rule in Docket No. RM94-1-000, issued contemporaneously.
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    In Order No. 561, the Commission recognized that cost-of-service 
rate filing information would be necessary for oil pipelines to justify 
seeking rate increases under the cost-of-service alternative, should 
they choose to use this methodology, and for interested parties to 
decide whether to challenge proposed cost-of-service rates. The 
Commission also recognized that Form No. 6 might need to be revised to 
enable review of the effectiveness of the index in tracking industry-
wide cost changes and for interested parties to decide whether to 
challenge indexed rates.
    The present rule adopts regulations specifying the information that 
must accompany oil pipelines' cost-of-service rate filings and 
requested changes in depreciation rates, and modifies and streamlines 
Form No. 6.

II. Public Reporting Requirement

    The Commission estimates the public reporting burden for the 
collections of information under the final rule will be reduced for 
Form No. 6 by approximately seven percent and will, in effect, remain 
unchanged for rate filings, since the Commission is here codifying the 
information to be provided which the Commission's staff in the past has 
requested from oil pipelines that have made cost-of-service rate 
filings. The information will be collected on Form No. 6, ``Annual 
Report of Oil Pipeline Companies'' and FERC-550, ``Oil Pipeline Rates: 
Tariff Filings.''\3\ These 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 
associated with these information collection requirements is as 
follows:
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    \3\FERC-550 is the designation covering oil pipeline tariff 
filings made to the Commission.

Form No. 6: 22,200 hours, 148 responses, and 148 respondents; and
FERC-550: 5,350 hours, 535 responses, and 140 respondents.

    The final rule will reduce the existing reporting burden associated 
with Form No. 6 by an estimated 1,628 hours annually, or an average of 
11 hours per response based on an estimated 148 responses. This 
estimate includes the addition of two new schedules, the elimination of 
several schedules, and increasing the reporting thresholds for which 
oil pipelines must analyze and report certain data.
    Comments regarding these burden estimates or any other aspect of 
these collections of information, including suggestions for reducing 
this burden, can be sent to the Federal Energy Regulatory Commission, 
941 North Capitol Street, N.E., Washington, DC 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), FAX: (202) 395-
5167.

III. Background

    On October 22, 1993, the Commission issued a Notice of Inquiry 
(NOI) concerning the information to be included by an oil pipeline in a 
cost-of-service rate filing, and on potential changes to Form No. 6.\4\ 
In the NOI, the Commission invited comment on what action would be 
appropriate to develop a final rule with respect to cost-of-service 
rate filings, whether and to what extent its Form No. 6 should be 
revised in light of Order No. 561, and whether and to what extent it 
should establish additional requirements with respect to an oil 
pipeline's depreciation studies.
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    \4\Cost-of-Service Filing and Reporting Requirements for Oil 
Pipelines, Notice of Inquiry, 58 FR 58817 (November 4, 1993), IV 
FERC Stats. & Regs. Notices  35,528 (October 22, 1993).
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    On July 28, 1994, the Commission issued a Notice of Proposed 
Rulemaking (NOPR).\5\ In the NOPR, the Commission proposed that oil 
pipelines seeking cost-of-service rates would be required to file 
specific data conforming to the Order No. 154-B methodology.\6\ The 
Commission also proposed to revise and streamline Form No. 6, and 
proposed that Form No. 6 data would be filed on an electronic medium. 
Finally, the Commission proposed certain rules for oil pipelines 
performing depreciation studies. The changes were proposed to be made 
effective January 1, 1995.\7\
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    \5\Cost-of-Service Filing and Reporting Requirements for Oil 
Pipelines, Notice of Proposed Rulemaking, 59 FR 40493 (August 9, 
1994), IV FERC Stats. & Regs. Proposed Regulations  32,509 (July 
28, 1994).
    \6\Opinion No. 154-B methodology is derived from the 
Commission's opinions in Williams Pipe Line Company, Opinion No. 
154-B, 31 FERCP  61,377 (1985), on rehearing, Opinion No. 154-C, 
Williams Pipeline Company, 33 FERC  61,327 (1985); and ARCO Pipe 
Line Company, Opinion No. 351, 52 FERC  61,055 (1990), on 
rehearing, Opinion No. 351-A, ARCO Pipe Line Company, 53 FERC  
61,398 (1990).
    \7\Electronic reporting of Form No. 6 was proposed to commence 
with the reporting year 1995 reports, due on or before March 31, 
1996.
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    The Commission received fourteen sets of comments.\8\ After 
analyzing those comments as discussed below, the Commission is adopting 
the rules proposed in the NOPR, except for the electronic reporting 
requirement for Form No. 6, with minor modifications and with 
clarifying statements. Although the Commission has procured the 
software development tool, the electronic version of the Form No. 6 
application has not yet been developed. Therefore, the Commission is 
deferring the electronic reporting requirement at this time, pending 
development and testing of the necessary electronic version of the Form 
No. 6 application. Once that process is complete, the Commission 
intends to issue a final rule providing for the electronic filing of 
Form No. 6.
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    \8\A list of commenters is contained in Appendix A to this 
order.
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IV. Cost-of-Service Filing Requirements

    The Commission is adding a new Part 346 to its regulations that 
sets forth the threshold filing requirements for oil pipelines seeking 
to establish initial rates on a cost-of-service basis, or to pursue a 
cost-of-service alternative to indexing as a means of establishing just 
and reasonable rates. The Commission is also amending sections 342.2 
and 342.4 to reflect the addition of Part 346.

A. Authority for Filing Requirements

    AOPL argues that the Commission's proposed cost-of-service rate 
filing requirements represents an improper attempt to modify the 
Interstate Commerce Act's (ICA)\9\ rate filing scheme, ignores the 
mandate of the Act of 1992 to reduce regulatory burdens and costs 
through streamlined procedures, and imposes undue burdens on pipelines 
proposing cost-based rates.\10\ AOPL asserts that a pipeline need only 
file a notice of a rate change, not the supporting documents underlying 
that rate change, unless its rates have been called into question.\11\
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    \9\49 App. U.S.C. 1 (1988).
    \10\AOPL, pp. 29-39.
    \11\AOPL, pp. 36-39.
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    The Commission's filing requirements for oil pipeline rate changes 
fully comport with the Act of 1992 and the ICA. The Act of 1992 
required the Commission to establish a simplified and generally 
applicable ratemaking methodology for oil pipelines in accordance with 
the just and reasonable standard of the ICA. Order No. 561 has done so 
by adopting an index method. Cost-based rates are a part of this scheme 
but are allowed a pipeline only as an alternative to indexing, and only 
if the pipeline can meet certain threshold conditions. Thus, the 
pipeline must demonstrate at the outset that it meets the substantial 
divergence test of Order No. 561--i.e., that there is a substantial 
divergence between the actual costs experienced by the pipeline and the 
rate resulting from application of the index such that rates at the 
indexed ceiling level would preclude the pipeline from charging a just 
and reasonable rate.\12\ The threshold filing requirements for cost-of-
service ratemaking adopted in this rule are the means that the 
Commission has decided are necessary for a pipeline to make a prima 
facia demonstration that it should be allowed to pursue the cost-of-
service alternative as a means of establishing just and reasonable 
rates. The materials required to be filed with a cost-of-service 
optional filing thus are designed to address the threshold issue of 
whether there is such a substantial divergence as to warrant a cost-of-
service filing. A mere notice of rate change alone would fail to show 
good cause for a pipeline's departure from indexing, or why it should 
be allowed to change its rates outside the basic indexing scheme. As to 
AOPL's claim that the cost-of-service filing requirements impose undue 
burdens,\13\ a pipeline can always choose not to pursue this 
alternative to indexing and stay with rate changes under indexing.
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    \12\18 CFR 342.4(a).
    \13\AOPL, p. 8.
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    Contrary to AOPL's assertion,\14\ the Commission is following the 
statutory scheme applicable to oil pipeline rate filings. If a pipeline 
desires to depart from the ordinary scheme of rate changes based on the 
index and seek rate changes based on its cost of service, it is up to 
the pipeline to meet the special circumstances of the rules, and it is 
reasonable for the Commission to require a threshold filing from the 
pipeline to demonstrate that it does.\15\
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    \14\AOPL, p. 36.
    \15\Section 12(1) of the ICA provides: ``The Commission is 
authorized and required to execute and enforce the provisions of 
this chapter.''
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    AOPL claims that the pipeline should not be required to establish 
an initial case for cost-based rates at the initial filing stage.\16\ 
It claims that to require the pipeline to shoulder a burden of proof 
regarding cost-based rates prior to knowing whether the rate has been 
challenged is contrary to any notion of streamlining, and it argues 
that the pipeline should not be required to provide extensive threshold 
justification for each cost-based rate.\17\ Further, AOPL asserts that 
the pipeline may choose some method other than the Opinion No. 154-B 
method to justify its cost-based rates, such as a stand-alone cost 
showing.
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    \16\AOPL, pp. 36-39.
    \17\AOPL, p. 37.
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    The Commission's cost-of-service filing requirements are not 
designed to provide information in sufficient detail for a pipeline to 
shoulder its burden of proof regarding cost-based rates if they are 
challenged. Rather, the burden is on the pipeline to demonstrate only 
that its rates at the index ceiling would substantially diverge from 
its actual costs to such an extent that the indexed ceiling rates would 
not be just and reasonable. If a pipeline's rates are challenged, it 
must demonstrate that the challenged rate, if based on cost, is just 
and reasonable, which may include an appropriate rate design and cost 
allocation to justify the rate. Additional information can be supplied 
by the pipeline to justify its challenged rates, including, if it 
chooses, a stand-alone cost showing. This, however, does not negate the 
importance of the initial showing that is required of the pipeline in 
order to justify departure from indexing.

B. Cost-of-Service Methodology

    AOPL and Marathon argue that the Opinion No. 154-B methodology is 
inadequate for establishing rates. AOPL asserts that this methodology 
has never been used to set individual rates, and continues to argue for 
a stand-alone cost methodology.\18\ As explained in Order No. 561, the 
regulations providing for an Opinion No. 154-B submission are merely 
the filing requirements for the cost-of-service alternative to 
indexing. An oil pipeline seeking cost-of-service rate treatment for 
some or all of its rates will submit the information required by new 
Part 346. Absent challenge to the rates proposed, that is all that is 
required of the oil pipeline. Matters of rate design and cost 
allocation will be at issue only if the rates are protested and a 
hearing is conducted.\19\ As the Commission stated in Order No. 561-A, 
the issues of fully-allocated costs for oil pipelines have not been 
determined in a fully litigated case by this Commission under the 
ICA.\20\ The Commission also stated that proponents of costing 
methodologies other than fully-allocated costs will not be precluded 
from advocating such methodologies in individual cases.\21\ The 
Commission reaffirms that statement here.
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    \18\AOPL, pp. 25-28.
    \19\The Commission has never established individual rates for 
oil pipelines on a cost-of-service basis, since no contested case 
has come to the Commission for final decision on issues of cost 
allocation and rate design. However, nothing in the Opinion No. 154-
B costing methodology would limit the Commission in deciding how to 
allocate costs to establish individual rates.
    \20\Order No. 561-A, Regulations Preambles, III FERC Stats. & 
Regs.  31,000, at p. 31,107.
    \21\IV FERC Stats. and Regs.  31,000, at p. 31,107 (1994).
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    Chevron suggests that the filing requirements should include a 
requirement that the carrier provide cost allocation and rate design 
schedules with its rate filing.\22\ The Commission will not adopt this 
recommendation, since there will be no need for allocation and rate 
design information except at a hearing on a challenged cost-of-service 
rate filing. Thus, the Commission does not believe that a point-to-
point rate showing, for example, is necessary as a filing requirement. 
The burden that this requirement would impose is not justified, 
particularly since the cost-of-service methodology is an alternative to 
indexing, and the initial filing need only show that there is a 
substantial divergence between the costs of the pipeline, as reflected 
in Statement A, and the revenues that would be produced by the indexed 
ceiling rates, as reflected in Statement G.\23\
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    \22\Chevron, p. 7.
    \23\See 18 CFR 346.2(c) (1) and (7).
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    Similar requests are made by Alaska and Total.\24\ These commenters 
also request that the Form No. 6 data be provided in such a fashion. 
For the same reasons, the Commission will not adopt these suggestions.
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    \24\Alaska, pp. 1-2 and the appendices to its comments; Total, 
p. 1.
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    AOPL urges the Commission to discard Opinion No. 154-B, arguing 
that this must have been Congress' intent in passing the Act of 
1992.\25\ To the contrary, Congress mandated only that the Commission 
establish a simplified and generally applicable ratemaking methodology. 
It did not specify what methodology should be used. The Commission has 
given full weight to the Congressional intent by providing that 
indexing will be the simplified and generally applicable methodology 
for oil pipeline ratemaking. Under this scheme, cost of service 
continues only as an option that pipelines may choose to use if they 
meet the threshold requirement.\26\
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    \25\AOPL, p. 19.
    \26\See 18 CFR 342.4(a), adopted by Order No. 561-A.
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    AOPL further argues that pipelines should be allowed to use a 
variety of methods to justify individual rate changes.\27\ Buckeye also 
seeks alternatives to indexing for partly competitive pipelines to use 
in less competitive markets.\28\ These issues are beyond the scope of 
this rulemaking, but parties are free to make proposals in individual 
cases.
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    \27\AOPL, p. 28.
    \28\Buckeye, pp. 2-4.
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    ARCO seeks clarification of several items. It first asks that the 
Commission require that pipelines seeking to use a cost of service 
approach file a full system-wide cost of service. Protestants then 
would be required to be specific in their protests.\29\ The Commission 
has determined that the Opinion No. 154-B filing will be required for a 
cost-of-service filing, and that a cost allocation and rate design 
showing would only be required if the pipeline's rates are protested. 
This will reduce the burden on the pipeline and the Commission in those 
cases where there is no protest. The information required to be filed 
by Part 346 of the regulations adopted by this order will be sufficient 
for a cost-of-service showing if there are no protests.
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    \29\ARCO, p. 3.
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    ARCO further requests clarification that, if a pipeline can show 
that its total revenue requirement is not being met, it may charge 
cost-of-service rates above the index without any other showing, and 
that, in that case, no information on point-to-point rates would be 
filed except in an investigation.\30\ ARCO is generally correct. All a 
pipeline need show to make a prima facie case under the cost-of-service 
alternative is that the revenues to be produced by the indexed ceiling 
rates substantially diverge from its costs. Upon challenge, however, 
the pipeline must provide data supporting its proposed individual 
rates, including allocation and rate design. It will not be allowed to 
charge rates higher than its properly allocated costs would justify for 
any one service.
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    \30\ARCO, pp. 3-5.
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    ARCO further seeks clarification of when in the process a pipeline 
must demonstrate prudence of its costs.\31\ It asserts that a pipeline 
should be required to demonstrate prudence only when a serious doubt is 
raised. In this, too, ARCO is correct. A protestor must first raise a 
reasonable challenge as to the prudence of the pipeline's costs, and 
then the pipeline will have the burden of establishing the prudence of 
those costs.
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    \31\ARCO, pp. 8-9.
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    The Commission will continue to use the Opinion No. 154-B 
methodology for oil pipelines seeking to use a cost-of-service 
methodology.

C. Filing Requirements Adopted

    As required by Order No. 561, a pipeline seeking to change rates is 
required to file a transmittal letter containing the previous rate for 
the same movement or service, the applicable ceiling rate for the 
movement in question, and the new proposed rate.\32\ This is all that 
is required to justify a rate change within the index.
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    \32\18 CFR 342.3(b).
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    In this rule, the Commission requires a pipeline to file additional 
information if it is filing for a cost-of-service rate above the 
indexed rate ceiling, or as support for an initial rate. This 
information will permit a pipeline to establish an initial case for 
cost-of-service rates. The additional filing requirements provide 
sufficient information for a preliminary cost-of-service showing. If 
the Commission institutes an investigation into a pipeline's rates, 
additional information may be required of the pipeline. The new filing 
requirements are set forth in new Part 346 of the Commission's 
regulations.
    Part 346 also contains the definition of the terms ``base period'' 
and ``test period.'' The definitions of these terms are consistent with 
the definitions of similar terms in the Regulations under the Natural 
Gas Act,\33\ applicable to natural gas pipeline companies.
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    \33\See 18 CFR 154.63(e)(2)(i).
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    The oil pipeline must file the following statements and supporting 
work papers to support either an initial rate developed on a cost-of-
service basis or a change in rates using the cost-of-service 
methodology.
Statement A--Total Cost of Service
    This statement shows the calculation of the Total Cost of Service 
for a pipeline.
Statement B--Operation and Maintenance
    This statement shows the operation, maintenance, administrative and 
general expenses, and depreciation and amortization expenses.
Statement C--Overall Return on Rate Base
    This statement shows the derivation of the return on rate base 
consisting of deferred earnings, equity and debt ratios, weighted cost 
of capital, and costs of debt and equity.
Statement D--Income Taxes
    This statement shows the calculation of the Income Tax Allowance.
Statement E--Rate Base
    This statement shows the calculation of the return rate base 
required by the Opinion No. 154-B methodology to derive the cost of 
service.
Statement F--Allowance for Funds Used During Construction
    This statement shows the calculation of the Allowance for Funds 
Used During Construction (AFUDC).
Statement G--Revenues
    This statement shows the revenues at the effective, proposed, and 
indexed ceiling rates.
    Details of the various statements and supporting schedules are 
found in new Part 346 of the regulations.

V. Form No. 6 Revisions

    In the NOPR, the Commission proposed several changes to Form No. 6, 
the Annual Report for Oil Pipelines. These changes were proposed to 
provide information that would be necessary for the implementation of 
Order No. 561, and to update and streamline the information required of 
oil pipelines.

A. New Schedule

    A new schedule, page 700, Annual Cost of Service Based Analysis 
Schedule, was proposed to be added to Form No. 6 showing basic 
information needed for a review of rate filings made within the index 
cap. The new schedule would require each pipeline company to report, as 
of the end of the reporting year and the immediately preceding year, 
its Total Annual Cost of Service (as calculated under the Order No. 
154-B methodology), operating revenues, and throughput in barrels and 
barrel-miles. This schedule would permit a shipper to compare proposed 
changes in rates against the change in the level of a pipeline's cost 
of service. It would also permit a shipper to compare the change in a 
shipper's individual rate with the change in the pipeline's average 
company-wide barrel-mile rate. Underlying calculations of and 
supporting data for these figures need not be reported in Form No. 6. 
Of course, the oil pipeline will be expected to be consistent in its 
application of the Opinion No. 154-B methodology from year to year to 
permit valid comparisons of data from one year to the next. If it makes 
major changes in its application of the methodology, it must report 
that it has done so, and recalculate the prior year's cost of service 
to reflect such a change. While the Commission believes that the 
Opinion No. 154-B methodology is well-defined and for the most part 
generally understood in the industry, it is modifying the instructions 
for page 700 to require that the pipeline describe any change in 
application of Opinion No. 154-B made from past years in its 
calculation of total cost of service, and to require that the changed 
application be reflected on page 700 for the calculation of the total 
cost of service for the prior reporting year as well.
    The commenters supporting the use of page 700 recommended that the 
pipeline be required to report its cost of service on each separate 
system operated by the pipeline.\34\ Moreover, some commenters 
recommended that substantial additional information be required on page 
700, setting forth in detail additional information and the assumptions 
used in the calculations.\35\ Alberta recommended that the cost-of-
service reporting requirements be implemented for Form No. 6 expense 
and income statements to streamline shipper review of the individual 
cost components, thereby making the information contained in page 700 
consistent, from an accounting standpoint, with the other information 
contained in Form No. 6.\36\
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    \34\Total, pp. 1-2, Alaska, p. 2, Chevron, pp. 3-5.
    \35\Chevron, p. 5, Alaska, pp. 1-2, Alberta, pp. 2-3.
    \36\Alberta, p. 2.
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    The pipelines, on the other hand, strenuously objected to the use 
of page 700 as a rate review tool and as a monitoring tool, asserting 
that it is misleading, burdensome, and duplicative.\37\
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    \37\AOPL, pp. 8-15, ARCO, pp. 9-14, Marathon, pp. 1-4.
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    Contrary to what appears to be the assumption by most commenters, 
page 700 is designed to be a preliminary screening tool for pipeline 
rate filings. It is not intended to be the information which, in 
itself, either forms the basis of a Commission decision on the merits 
of a pipeline filing, or demonstrates that the pipeline's proposed or 
existing rates are just and reasonable. Rather, it should provide a 
means whereby a shipper can determine whether a pipeline's cost of 
service or per-barrel/mile cost is so substantially divergent from the 
revenues produced by its rates to warrant a challenge that requires the 
pipeline to justify its rates. Therefore, the additional information 
suggested by the commenters--e.g., specifying the achieved rate of 
return, rate of return assumptions, and the debt and equity 
components--will not be required.
    Moreover, the Commission is not here attempting to require a 
pipeline to demonstrate with precision its cost-of-service attributable 
to each individual pipeline system it operates. If the pipeline seeks a 
cost-of-service rate for some or all of its rates, it will be required 
at that time to demonstrate that its properly allocated costs justify 
such rate treatment. This, however, will be left to individual cost-of-
service rate filings, not required as a part of Form No. 6, which is 
and shall remain primarily a financial report.
    Requests that the pipelines be required to file separate cost-of-
service information for each individual system are denied. Likewise, 
the recommendations of the pipelines that page 700 be discarded will be 
denied. The Commission finds that the information contained in a single 
place in Form No. 6 will be useful in its monitoring of the performance 
of the index, and that the information may indeed be useful as a 
``substantial divergence'' screen, as suggested by TE Products 
Pipeline.\38\ Any additional burden should be minimal on the pipelines 
in deriving an Opinion No. 154-B cost of service on an annual basis, 
since much of the basic information is available in its Form No. 6. As 
explained above, the use of the page 700 should be limited and should 
not be misleading. As Marathon and AOPL point out, some of the 
information is already included in other schedules in Form No. 6. 
However, the Commission finds that having the information displayed on 
a single page 700 will make it easier for the Commission and other 
interested parties to analyze.
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    \38\TE Products, p. 1.
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    Davis\39\ suggests that the Commission define ``substantial 
divergence as being a percentage [variation] * * *.'' The Commission 
will not adopt this suggestion, inasmuch as what constitutes a 
``substantial divergence'' may depend on factors other than a simple 
percentage variation in costs and revenues. Therefore, the Commission 
concludes that whether a substantial divergence exists should be 
determined on the facts of individual cases, not generically.
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    \39\Davis, p. 2.
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    Chevron suggests that use of page 700 is likely to be meaningless 
as a monitoring tool, since the Commission is likely to get numerous 
interpretations of how the Opinion No. 154-B methodology should be 
implemented, thereby resulting in a compilation that does not reflect 
actual changes in costs on an industry-wide basis.\40\ As previously 
stated, the Commission will require that any change in application of 
the Opinion No. 154-B methodology from one year to the next be 
described and reflected in the total cost of service calculations 
appearing on page 700. Moreover, the compilation of data from page 700 
will be only a part of the evidence used by the Commission for 
monitoring how the index tracks industry cost changes.
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    \40\Chevron, p. 5.
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    Upon consideration of the comments, the Commission has determined 
that Form No. 6 should contain information that will permit its use for 
a number of purposes: Reviewing changes in rates made by use of the 
index, monitoring existing rates, and analyzing and auditing finances. 
At present, the primary focus of Form No. 6 is on financial accounting 
information that is gathered based on accounting principles which are 
different in some respects from the ratemaking principles used to 
establish rates for oil pipelines. To serve as a tool to evaluate the 
performance of the index and future changes in oil pipeline rates using 
the index methodology, Form No. 6 will be revised to include additional 
information.
    Revisions to Form No. 6 are needed to provide at least a 
preliminary basis for shipper assessments of filed rate changes under 
Order No. 561. Form No. 6 data should be complete enough to enable an 
evaluation of whether a proposed rate change under indexing 
substantially exceeds the pipeline's changes in costs. As currently 
structured, Form No. 6 does not provide sufficient information to do 
this.
    Only limited additional information is needed in Form No. 6 to 
permit adequate preliminary review of a pipeline's cost-of-service 
showings, and to permit shipper comparison of indexed rate changes with 
changes in costs incurred. Thus, the single new schedule will be added 
to Form No. 6.
    The use of trended original cost to establish a rate base for oil 
pipelines, as required by the Opinion No. 154-B methodology, entails 
complex calculations to derive annual figures for equity and equity 
returns for ratemaking purposes. This calculation will differ from the 
book equity figures contained in Form No. 6, which are required for 
financial reporting purposes. To require the display of these 
calculations in Form No. 6 would be cumbersome and not be of 
significant benefit in a shipper's determination of whether to protest 
a pipeline's indexed rate filing.\41\ In any event, if a shipper 
protest results in a cost-of-service justification by the pipeline, the 
underlying calculations would be available.
---------------------------------------------------------------------------

    \41\For a discussion of the differences in the equity and equity 
return figures contained in Form No. 6 and the use of those figures 
for ratemaking purposes under the Opinion No. 154-B methodology, see 
Supplemental Brief of AOPL filed in Docket No. RM93-11-000 on 
January 21, 1994, at 11-12.
---------------------------------------------------------------------------

    The changes to Form No. 6 will be effective for reporting year 
1995. The 1995 Form No. 6 must be filed on or before March 31, 1996. 
The new schedule appearing on page 700 therefore would not be required 
for Form No. 6 filings until March 31, 1996, for reporting year 1995. 
In the interim, a verified copy of this new schedule for calendar years 
1993 and 1994 is required to be prepared separately and filed 
concurrently with the first indexed rate change filing made by a 
pipeline after January 1, 1995, or by March 31, 1995, whichever is 
earlier. For index rate change filings made early in 1995, complete 
data may not be available. In this instance, a 1994 schedule shall be 
prepared utilizing the most recently available data annualized for 
1994. By March 31, 1995, a new 1994 schedule must be submitted, using 
the actual 1994 data.
    This will provide shippers with the necessary information for an 
analysis of proposed indexed rate changes after January 1, 1995, the 
effective date of the regulations in Order No. 561. In addition, as 
discussed below, the information on this page will become part of the 
Commission's evaluation of the effectiveness of the index. Accordingly, 
the Commission will amend Sec. 342.3(b) of the regulations to require a 
verified copy of a schedule containing the information contained on 
page 700 for calendar years 1993 and 1994 to be filed with the first 
indexed rate change filing made after January 1, 1995, or by March 31, 
1995, whichever is earlier.
    In Order No. 561, the Commission stated it would monitor the 
effectiveness of the index in tracking industry costs. These reviews 
will occur every five years, commencing July 1, 2000.\42\ Page 700, 
together with other information contained in Form No. 6, will permit 
the Commission to use the Form No. 6 data to help fulfill this 
commitment. Since the Total Cost of Service, for example, is derived 
from all of the components of a pipeline's costs and capital 
properties, this figure, when used in conjunction with other Form No. 6 
information, will provide details on general trends affecting each 
company.
---------------------------------------------------------------------------

    \42\III FERC Stats. & Regs.  30,985 (1993), at 30,947.
---------------------------------------------------------------------------

B. Other Revisions to Form No. 6

    Since the regulatory responsibility for oil pipelines was 
transferred to this Commission from the Interstate Commerce Commission 
in 1977, only cosmetic changes have been made to Form No. 6, other than 
the addition of a Statement of Cash Flows. In addition to the addition 
of Page 700, which is primarily designed to conform with Order No. 561, 
the Commission proposed in the NOPR other changes to make Form No. 6 a 
more useful report. As discussed below, some of the information 
proposed in the NOPR will not be required by this final rule.
    AOPL and Marathon\43\ argue that the information to be contained on 
pages 102-103, Corporate Control, is of no value to the Commission. 
However, in the Commission's view, it is necessary to have information 
about vertical control of the pipelines for proper rate regulation to 
ensure against improper cost shifting and for the purpose of analyzing 
property transactions between affiliates. The suggestion to delete this 
information is denied.
---------------------------------------------------------------------------

    \43\AOPL, p. 18; Marathon, p. 3.
---------------------------------------------------------------------------

    AOPL and ARCO\44\ argue that the information regarding officer 
salaries requested on page 104, Principal General Officers, is not 
needed by the Commission. On further reflection, the Commission agrees, 
and the changes proposed to page 104 will not be adopted.
---------------------------------------------------------------------------

    \44\AOPL, pp. 18-19; ARCO, pp. 14-15.
---------------------------------------------------------------------------

    AOPL and Marathon\45\ recommend that the information proposed on 
pages 230-231, Analysis of Federal Income & Other Taxes Deferred, and 
pages 108-109, Important Changes During the Year, be combined with 
pages 122-123, Notes to Financial Statements. AOPL also suggests that 
the information proposed for collection by the NOPR on pages 230-231 
should be limited to present GAAP reporting requirements. The 
Commission does not agree. As to AOPL's suggestion that the information 
required on pages 230-231 be presented in accordance with GAAP 
reporting requirements and combined with the Notes to Financial 
Statements, the Commission considers the deferred tax schedule on pages 
230-231 to be a necessary supporting schedule to the financial 
statements. Although the notes to financial statements are the 
appropriate place to disclose significant financial effects on a 
company of recently enacted income tax laws and regulatory actions, the 
deferred tax schedule is designed to present details, using a uniform 
format, on each significant item which causes a temporary difference 
between taxable income and pretax accounting income. This schedule, 
like the Form No. 6 carrier property and operating expense account 
schedules, permits a detailed analysis of the various charges and 
credits which comprise the balances of the current and noncurrent 
deferred income tax assets and liabilities. The latter are presented in 
the financial statements only as a single asset or liability balance 
for current and noncurrent deferred income taxes. Moreover, the 
information contained on pages 108-109 may not be appropriate for notes 
to financial statements, such as properties added or changes to 
franchise rights. These pages are for reporting of different types of 
information than changes to the financial condition of the pipeline, 
even though they may impact the financial condition.
---------------------------------------------------------------------------

    \45\AOPL, pp. 18-19; Marathon, p. 3.
---------------------------------------------------------------------------

    AOPL and Marathon\46\ recommend that page 350, Employees and Their 
Compensation, be deleted. The Commission agrees, since the information 
as to salary expense is available in a different format elsewhere in 
Form No. 6.
---------------------------------------------------------------------------

    \46\AOPL, p. 19; Marathon, p. 3.
---------------------------------------------------------------------------

    Based on the comments received on the NOPR and review of the 
current schedules in Form No. 6, the Commission will make several 
changes to the annual report for oil pipelines. To simplify the Form 
No. 6 data, the Commission will delete information not relevant to the 
Commission's regulatory responsibilities under the ICA. The Commission 
will also modify certain Form No. 6 financial statements to a 
comparative format by requiring two years of data to enhance their 
usefulness and to conform the Form No. 6 data formats to the formats of 
FERC Form Nos. 1\47\ and 2\48\ (Form Nos. 1 and 2) for electric 
utilities and natural gas pipeline companies, respectively.
---------------------------------------------------------------------------

    \47\Annual Report of Major Electric Utilities, Licensees, and 
Others.
    \48\Annual Report of Natural Gas Companies.
---------------------------------------------------------------------------

    The Commission will change the format of several schedules to 
accommodate electronic filing and reporting requirements for Form No. 6 
similar to that used for Form No. 1. When a rule adopting an electronic 
filing requirement is issued, electronic filing of Form No. 6 
information, similar to that for Form No. 1, should reduce the 
reporting burden for both large and small pipelines. Financial 
information reported electronically should also aid the Commission in 
conducting reviews of the pipeline companies and the rates charged.
    The Commission will eliminate unneeded schedules or individual data 
elements, and will modify certain schedules so they will contain more 
useful and relevant data. A sample copy of the revised pages in Form 
No. 6 are attached as Appendix B.
    Other than as discussed above, the Commission is adopting the 
changes to Form No. 6 as proposed in the NOPR. The specific changes the 
Commission adopts are:
Page 102--Corporate Control Over Respondent
    Some format modifications are made for electronic reporting 
purposes to better report vertical control of respondent from the 
immediate parent to ultimate controlling parent company.
Page 103--Companies Controlled by Respondent
    This is a new schedule added as new page 103, similar to the 
schedules currently in Form Nos. 1 and 2, to report all subsidiaries 
directly controlled by a respondent.
Page 105--Directors
    This schedule is modified to delete the instructions at the top of 
the page and information required at lines 21 through 23. The deleted 
material is replaced with similar instructions at the top of the 
schedule and ``Title'' is inserted in addition to ``Name of Director'' 
in column (a). This will make the format the same as Form Nos. 1 and 2.
Pages 106 and 107--Voting Powers of Security Holders
    This schedule is deleted because it is not needed for Commission 
regulatory purposes.
Pages 108 and 109--Important Changes During the Year
    The current format is replaced with instructions similar to Form 
Nos. 1 and 2.
Pages 110, 111 and 113--Comparative Balance Sheet Statement
Page 114--Income Statement
Page 118--Appropriated Retained Income
Page 119--Unappropriated Retained Income Statement
Pages 120 and 121--Statement of Cash Flows
    The Commission has modified these financial statements to require 
that data be presented on a comparative basis (i.e., for two years) to 
enhance the usefulness of these financial statements. The Commission 
has deleted from page 119 the schedule showing Dividend Appropriations 
of Retained Income, because it is not needed for Commission regulatory 
purposes.
Page 117--Working Capital
    This schedule is deleted because it is not needed for Commission 
regulatory purposes.
Pages 122 and 123--Notes to Financial Statements
    The Commission has added new instructions which will require 
statements of a company's accounting practices and policies (with 
specific reference to such matters as income taxes, pensions, and post-
retirement benefits); and significant matters concerning acquisitions 
and sales, significant contingencies, and liabilities existing at the 
end of the year, and other matters that will materially affect company 
operations.
Page 200--Receivables From Affiliated Companies
    The reporting thresholds in Instruction No. 2 are raised from 
$100,000 to $500,000.
Page 201--General Instructions Concerning Schedules 202-205
    The Commission has modified these instructions to conform with Form 
Nos. 1 and 2 by deleting the subclassifications presently required.
Pages 206 and 207--Other Investments
Pages 208 and 209--Securities, Advances and Other Intangibles Owned or 
Controlled Through Nonreporting Carrier and Noncarrier Subsidiaries
    These schedules are deleted because they are not needed for 
Commission regulatory purposes.
Page 211--Instructions for Schedule 212-213
    The Commission has modified the footnote to Instruction No. 3 to 
require that a respondent identify the original cost of property 
purchased or sold. This information is useful in the analysis of 
carrier property transactions between oil pipeline companies. In 
addition, the reporting thresholds in Instruction Nos. 3 and 5 are 
raised from $50,000 and $100,000 to $250,000 and $500,000, 
respectively.
Pages 218 and 219--Amortization Base and Reserve
    The reporting thresholds in Instruction No. 4 are raised from 
$10,000 to $100,000.
Page 220--Noncarrier Property
    The reporting thresholds in Instruction No. 2 are raised from 
$100,000 to $250,000.
Page 221--Other Deferred Charges
    The reporting thresholds in the instruction are raised from 
$100,000 to $250,000.
Page 225--Payables to Affiliated Companies
    The reporting thresholds in Instruction Nos. 2 and 3 are raised 
from $100,000 to $250,000.
Pages 230 and 231--Analysis of Federal Income and Other Taxes Deferred
    The Commission has replaced the current reporting format with 
instructions that require an analysis of the respondent's current and 
non-current deferred income tax assets and liabilities.
Pages 250 and 251--Capital Stock
    The current schedules are replaced with schedules and instructions 
similar to Form No. 2.
Pages 302 through 304--Operating Expense Accounts
    ``Operating Ratio'' at line 23 is deleted because it is not needed 
for Commission regulatory purposes.
Page 336--Interest and Dividend Income
    The reference to Schedule pages 206 to 207 at line 2 is deleted 
because these pages are eliminated.
Page 337--Miscellaneous Items in Income and Retained Income Accounts 
for the Year
    The reporting thresholds in Instruction No. 2 are raised from 
$100,000 to $250,000.
Page 351--Payments for Services Rendered by Other Than Employees
    The reporting thresholds in Instruction No. 1 are raised from 
$30,000 to $100,000.
    Finally, since the Commission has deferred the requirement that oil 
pipelines file Form No. 6 on an electronic medium, in addition to paper 
filing, Sec. 385.2011 of Part 385 of Title 18 of the Code of Federal 
Regulations will not be changed as proposed in the NOPR at this time. 
The Commission will issue a final rule on this subject at an 
appropriate time.

VI. Depreciation

A. Discussion of Comments

    In Order No. 561, the Commission stated that it would be the 
pipelines' responsibility in the future to perform depreciation studies 
to establish revised depreciation rates for oil pipelines. The 
Commission further stated that the specific requirements for such 
studies would be developed in this proceeding.\49\ In the NOPR, the 
Commission proposed a new Part 347 to its regulations, encompassing the 
information required to be submitted by oil pipeline companies to 
establish revised depreciation rates.
---------------------------------------------------------------------------

    \49\III FERC Stats. & Regs,  30,985 (1993), at 30,967-8.
---------------------------------------------------------------------------

    Several commentors provided comments concerning the process for the 
establishment and/or changing of depreciation rates for common carrier 
property. Based upon a review of these comments, several modifications 
will be made to the regulations as proposed in the NOPR.
    One commentor\50\ suggested that the transmittal letter, which 
submits a request for new or changed depreciation rates, only be filed 
with the Commission and not sent to all shippers and subscribers. The 
Commission disagrees. It will continue to require the transmittal 
letter to be sent to all shippers and subscribers. Depreciation rates 
as set or as subsequently modified can have a considerable effect on a 
pipeline's rates; and as such, shippers need to be kept informed as to 
when the rates are being requested to be established or changed. As 
Davis states, ``To apprise shippers and subscribers of the change in 
the depreciation rate is alerting them that a forthcoming rate change 
could be challenged on the basis of the rate of depreciation.''\51\ If 
a change in the tariff rate is requested resulting from an approved 
change in the underlying depreciation rates, then protests filed 
because of a lack of adequate information about the change in 
depreciation rates could be prevented.
---------------------------------------------------------------------------

    \50\Davis, p. 2.
    \51\Id.
---------------------------------------------------------------------------

    Modifications to the proposed regulations (18 CFR 347.1) which 
delineate the information which should be filed when seeking to 
establish or change depreciation rates have been requested by several 
commentors.\52\ As to those claims that certain data are not available, 
the Commission has provided in Sec. 347.1(e) for consideration of 
individual circumstances. Section 347.1(e) states, in part:
---------------------------------------------------------------------------

    \52\Davis, Marathon, and AOPL.

    Modifications, additions, and deletions to these data elements 
should be made to reflect the individual circumstances of the 
---------------------------------------------------------------------------
carrier's properties and operations. [emphasis added]

    This statement allows for the modification of the data elements for 
individual pipelines to account for, among other things, information 
which is not available to the pipeline. Therefore, a pipeline which 
does not have up-to-date engineering maps\53\ could submit ``simplified 
maps or drawings that contain such information * * *.'' Where 
information is not available, that data element may be omitted by 
simply stating that the information is not available.
---------------------------------------------------------------------------

    \53\See Davis, pp. 3-4.
---------------------------------------------------------------------------

    The comments concerning oil field reserve and production 
information\54\ are well taken and that portion of the regulations [18 
CFR 347.1(e)(5)(ix)] is modified from that previously proposed to 
require only that the pipeline disclose the fields or areas from which 
crude oil is obtained.
---------------------------------------------------------------------------

    \54\Davis, pp. 4-5, Marathon, pp. 5-6, and AOPL, pp. 40-41.
---------------------------------------------------------------------------

    Similarly, the comments concerning the proprietary nature of 
individual shipper information are also well taken.\55\ The portion of 
the proposed regulations in 18 CFR 347.1(e)(vi) is modified to require 
that pipelines supply only a list of shipments and their associated 
receipt points, delivery points, and volumes for the most current year. 
Such information shall be provided in such a format to prevent 
disclosure of information which would violate the ICA.
---------------------------------------------------------------------------

    \55\Davis, p. 4; AOPL, pp. 41-42.
---------------------------------------------------------------------------

    Further, as requested by AOPL,\56\ all information submitted 
pursuant to 18 CFR 347.1 will be publicly available unless specific 
confidential treatment is sought by the filing carrier.
---------------------------------------------------------------------------

    \56\AOPL, p. 40, n. 69.
---------------------------------------------------------------------------

B. Depreciation Regulations Adopted

    Other than as discussed above, the Commission is adopting 
depreciation regulations as proposed in the NOPR. The Commission adopts 
the following regulations as new Part 347 of the Commission's 
regulations, which requires the following information to be filed by 
oil pipeline companies to justify a request for either new or changed 
carrier account depreciation rates:
    a. A brief summary of the general principles on which the proposed 
depreciation rates are based (e.g., why the economic life of the 
pipeline section is less than the physical life).
    b. An explanation of the organization, ownership, and operation of 
the pipeline.
    c. A table of the proposed depreciation rates by primary carrier 
account.
    d. An explanation of the average remaining life on a physical basis 
and on an economic basis.
    e. The following specific background data would be submitted 
concurrently with any request for new or changed property account 
depreciation rates for oil pipelines:\57\
---------------------------------------------------------------------------

    \57\All of the information listed here may not be appropriate 
and thus could be omitted from the filing. For example, if the 
pipeline carries only crude oil, information requested concerning 
petroleum products would not be needed.
---------------------------------------------------------------------------

    (1) Up-to-date engineering maps of the pipeline including the 
location of all gathering facilities, trunkline facilities, terminals, 
interconnections with other pipeline systems, and interconnections with 
refineries/plants. These maps must indicate the direction of flow.
    (2) A brief description of the pipeline's operations and an 
estimate of any major near-term additions or retirements including the 
estimated costs, location, reason, and probable year of transaction.
    (3) The present depreciation rates being used, by account.
    (4) For the most current year available and for the two prior 
years, a breakdown of the throughput (by type of product, if 
applicable) received from each source (e.g., name of well, pipeline 
company) at each receipt point and throughput delivered at each 
delivery point.
    (5) The daily average throughput (in barrels per day) and the 
actual average capacity (in barrels per day) for the most current year, 
by line section.
    (6) A list of shipments and their associated receipt points, 
delivery points, and volumes (in barrels) by type of product (where 
applicable) for the most current year.
    (7) For each primary carrier account, the latest month's book 
balances for gross plant and accumulated reserve for depreciation.
    (8) An estimate of the remaining life of the system (both gathering 
and trunk lines) including the basis for the estimate.
    (9) For crude oil, a list of the fields or areas from which crude 
oil is obtained.
    (10) If the proposed depreciation rate adjustment is based on the 
remaining physical life of the properties, the Service Life Data Form 
(FERC Form No. 73) through the most current year. This may only require 
an updating from the last year for which information was filed with the 
Commission.
    (11) Estimated salvage value of properties by primary carrier 
account.
    An oil pipeline company is required to provide this, and any other 
information it deems pertinent, in sufficient detail to fully explain 
and justify its proposed rates. Any modifications, additions, and 
deletions to these data elements should only be made to reflect the 
individual circumstances of the pipeline's properties and operations, 
and must be accompanied by a full explanation of why the modifications, 
additions, or deletions are being made.

VII. Other Issues

    In addition to the issues discussed above, certain other issues 
were raised by the commenters. The TAPS Carriers seek clarification on 
whether they must file page 700 of Form No. 6 in their annual reports. 
For consistency, the Commission will require that page 700 be included 
in the Form No. 6 filing, but the information required need not be 
submitted by those entities excluded, for ratemaking purposes, from the 
Act of 1992.58 Page 700, as indicated above, is a tool to assist 
in the analysis of rate changes and cost changes brought about by the 
rate methodologies of Order No. 561, which was issued to conform with 
the Act of 1992. Since certain entities, such as the TAPS Carriers, are 
excluded from its provisions, no useful purpose would be served by 
having the exempted entities submit the information required on page 
700.
---------------------------------------------------------------------------

    \5\8Section 1804(2)(B) of the Act of 1992 excludes from the 
provisions of the Act, for ratemaking purposes, TAPS and any 
pipeline delivering oil directly or indirectly to TAPS.
---------------------------------------------------------------------------

    Chevron objects to the use of a test year comprised of nine months 
of known and measurable changes after the last month of available 
actual experience utilized in a cost-of-service rate filing. It argues 
that the Commission's natural gas regulations, which have the same 
nine-month period ``factors into the nine-month adjustment period the 
fact that the gas pipeline's rate filing will be protested by its 
customers and suspended by the Commission for the statutory five-month 
period.'' It asserts that oil pipeline rates are typically suspended 
for only one day, and by allowing the full nine-month period, the 
pipeline may recover costs five months before the costs are 
incurred.59 Chevron suggests that the Commission not allow changes 
that occur outside a three-month period, or which do not take place 
before the rate goes into effect, whichever is later.60 The 
Commission will not adopt this proposed change. The nine months of 
known and measurable changes applied to the base period to arrive at 
the test period is a method long established and utilized in natural 
gas pipeline regulation. The nine-month period is appropriate in 
establishing rates which are prospective in nature and which will be in 
effect into the future. Only ``known and measurable'' changes are 
properly allowed to be included. By including these changes, the 
resulting test period correctly reflects the best projection of the 
actual circumstances which will be in effect under which the proposed 
rates of the pipeline are filed. Moreover, there is no basis for 
Chevron's suggestion that the nine-month period factors into account a 
five-month suspension period, especially as Sec. 154.63(e)(2)(i) 
provides for a test period up to nine months beyond the date of filing.
---------------------------------------------------------------------------

    \5\9Chevron, p. 6.
    \6\0Chevron, p. 7.
---------------------------------------------------------------------------

VIII. Environmental Analysis

    Commission regulations require that an environmental assessment or 
an environmental impact statement be prepared for Commission action 
that may have a significant adverse effect on the human 
environment.61 The Commission categorically excludes certain 
actions from this requirement as not having a significant effect on the 
human environment.62 No environmental consideration is necessary 
for the promulgation of a rule that does not substantially change the 
effect of the regulation being amended, or that involves the gathering, 
analysis, and dissemination of information, or the review of oil 
pipeline rate filings.63 Because this final rule involves only 
these matters, no environmental consideration is necessary.
---------------------------------------------------------------------------

    \6\1Regulations Implementing the National Environmental Policy 
Act, 52 FR 47897 (Dec. 17, 1987); FERC Stats. and Regs., Regulations 
Preambles 1986-1990, 30,783 (1987).
    \6\218 CFR 380.4.
    \6\318 CFR 380.4(a).
---------------------------------------------------------------------------

IX. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act64 generally requires the 
Commission to describe the impact that a 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 rule will not have such an impact.65
---------------------------------------------------------------------------

    \6\45 U.S.C. 601-612.
    \6\55 U.S.C. 605(b).
---------------------------------------------------------------------------

    Pursuant to section 605(b), the Commission certifies that the rules 
and amendments will not have a significant impact on a substantial 
number of small entities. The pipelines subject to this rule are not 
small entities.

X. Information Collection Requirements

    The Office of Management and Budget's (OMB) regulations at 5 CFR 
1320.14 (footnote) require that OMB approve certain information and 
recordkeeping requirements imposed by an agency. The information 
collection requirements in this final rule are contained in FERC-6 
``Annual Report of Oil Pipeline Companies'' (1902-0022) and FERC-550 
``Oil Pipeline Rates: Tariff Filings'' (1902-0089).
    The Commission uses the data collected in these information 
requirements to carry out its regulatory responsibilities pursuant to 
the Interstate Commerce Act (ICA), the Act of 1992, and delegations to 
the Commission from the Secretary of Energy. The Commission's Office of 
Pipeline Regulation uses the data for the analysis of all rates, fares, 
or charges demanded, charged, or collected by any pipeline common 
carrier in connection with the transportation of petroleum and 
petroleum products and also as a basis for determining just and 
reasonable rates that should be charged by the regulated pipeline 
company.
    The Office of Economic Policy uses the data in its functions 
relating to the administration of the ICA and the Act of 1992. The 
Commission's Office of Chief Accountant uses the data collected in Form 
No. 6 to carry out its compliance audits and for continuous review of 
the financial conditions of regulated companies.
    Because of the proposed revisions to both FERC-550 and Form No. 6, 
and the expected reduction in public reporting burden of the latter, 
the Commission is submitting a copy of the final 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, NE, Washington, DC 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), Washington, DC 
20503, FAX: (202) 395-5167.

IX. Effective Dates

    This final rule will be effective January 1, 1995.

List of Subjects in 18 CFR Parts 342, 346, and 347

    Pipelines, Reporting and recordkeeping requirements.

    By the Commission.
Lois D. Cashell,
Secretary.
    In consideration of the foregoing, Chapter I, Title 18, Code of 
Federal Regulations, is amended as set forth below.

PART 342--OIL PIPELINE RATE METHODOLOGIES AND PROCEDURES

    1. The authority citation for Part 342 is revised to read as 
follows:

    Authority: 5 U.S.C. 571-83; 42 U.S.C. 7101-7532; 49 U.S.C. 
60502; 49 App. U.S.C. 1-85.

    2. Section 342.2 is amended by revising paragraph (a) to read as 
follows:


Sec. 342.2  Establishing initial rates.

* * * * *
    (a) Filing cost, revenue, and throughput data supporting such rate 
as required by Part 346 of this chapter; or
* * * * *
    3. Section 342.3 is amended by revising paragraph (b) to read as 
follows:


Sec. 342.3  Indexing.

* * * * *
    (b) Information required to be filed with rate changes. The carrier 
must comply with Part 341 of this chapter.
    (1) Carriers must specify in their letters of transmittal required 
in Sec. 341.2(c) of this chapter the rate schedule to be changed, the 
proposed new rate, the prior rate, and the applicable ceiling level for 
the movement. No other rate information is required to accompany the 
proposed rate change.
    (2) On March 31, 1995, or concurrently with its first indexed rate 
change filing made on or after January 1, 1995, whichever first occurs, 
carriers must file a verified copy of a schedule for calendar years 
1993 and 1994 containing the information required by page 700 of the 
1995 edition of FERC Form No. 6. If actual data are not available for 
calendar year 1994 when the rate change filing is made, the information 
for calendar year 1994 must be comprised of the most recently available 
actual data annualized for the year 1994. A schedule containing the 
information comprised of actual data for calendar year 1994 must be 
filed not later than March 31, 1995. Thereafter, carriers must file 
page 700 as a part of their annual Form No. 6 filing.
* * * * *
    4. Section 342.4 is amended by revising paragraph (a) to read as 
follows:


Sec. 342.4  Other rate changing methodologies.

    (a) Cost-of-service rates. A carrier may change a rate pursuant to 
this section if it shows that there is a substantial divergence between 
the actual costs experienced by the carrier and the rate resulting from 
application of the index such that the rate at the ceiling level would 
preclude the carrier from being able to charge a just and reasonable 
rate within the meaning of the Interstate Commerce Act. A carrier must 
substantiate the costs incurred by filing the data required by Part 346 
of this chapter. A carrier that makes such a showing may change the 
rate in question, based upon the cost of providing the service covered 
by the rate, without regard to the applicable ceiling level under 
Sec. 342.3.
* * * * *
    5. Part 346 is added to subchapter P to read as follows:

PART 346--OIL PIPELINE COST-OF-SERVICE FILING REQUIREMENTS

Sec.
346.1  Content of filing for cost-of-service rates.
346.2  Material in support of initial rates or change in rates.

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85.


Sec. 346.1  Content of filing for cost-of-service rates.

    A carrier that seeks to establish rates pursuant to Sec. 342.2(a) 
of this chapter, or a carrier that seeks to change rates pursuant to 
Sec. 342.4(a) of this chapter, must file:
    (a) A letter of transmittal which conforms to Secs. 341.2(c) and 
342.4(a) of this chapter;
    (b) The proposed tariff; and
    (c) The statements and supporting workpapers set forth in 
Sec. 346.2.


Sec. 346.2  Material in support of initial rates or change in rates.

    A carrier that files for rates pursuant to Sec. 342.2(a) or 
Sec. 342.4(a) of this chapter must file the following statements, 
schedules, and supporting workpapers. The statements, schedules, and 
workpapers must be based upon an appropriate test period.
    (a) Base and test periods defined. (1) For a carrier which has been 
in operation for at least 12 months:
    (i) A base period must consist of 12 consecutive months of actual 
experience. The 12 months of experience must be adjusted to eliminate 
nonrecurring items (except minor accounts). The filing carrier may 
include appropriate normalizing adjustments in lieu of nonrecurring 
items.
    (ii) A test period must consist of a base period adjusted for 
changes in revenues and costs which are known and are measurable with 
reasonable accuracy at the time of filing and which will become 
effective within nine months after the last month of available actual 
experience utilized in the filing. For good cause shown, the Commission 
may allow reasonable deviation from the prescribed test period.
    (2) For a carrier which has less than 12 months' experience, the 
test period may consist of 12 consecutive months ending not more than 
one year from the filing date. For good cause shown, the Commission may 
allow reasonable deviation from the prescribed test period.
    (3) For a carrier which is establishing rates for new service, the 
test period will be based on a 12-month projection of costs and 
revenues.
    (b) Cost-of-service summary schedule. This schedule must contain 
the following information:
    (1) Total carrier cost of service for the test period.
    (2) Throughput for the test period in both barrels and barrel-
miles.
    (3) For filings pursuant to Sec. 342.4(a) of this chapter, the 
schedule must include the proposed rates, the rates which would be 
permitted under Sec. 342.3 of this chapter, and the revenues to be 
realized from both sets of rates.
    (c) Content of statements. Any cost-of-service rate filing must 
include supporting statements containing the following information for 
the test period.
    (1) Statement A--total cost of service. This statement must 
summarize the total cost of service for a carrier (operating and 
maintenance expense, depreciation and amortization, return, and taxes) 
developed from Statements B through G described in paragraphs (c) (2) 
through (7) of this section.
    (2) Statement B--operation and maintenance expense. This statement 
must set forth the operation, maintenance, administration and general, 
and depreciation expenses for the test period. Items used in the 
computations or derived on this statement must consist of operations, 
including salaries and wages, supplies and expenses, outside services, 
operating fuel and power, and oil losses and shortages; maintenance, 
including salaries and wages, supplies and expenses, outside services, 
and maintenance and materials; administrative and general, including 
salaries and wages, supplies and expenses, outside services, rentals, 
pensions and benefits, insurance, casualty and other losses, and 
pipeline taxes; and depreciation and amortization.
    (3) Statement C--overall return on rate base. This statement must 
set forth the rate base for return purposes from Statement E in 
paragraph (c)(5) of this section and must also state the claimed rate 
of return and the application of the claimed rate of return to the 
overall rate base. The claimed rate of return must consist of a 
weighted cost of capital, combining the rate of return on debt capital 
and the real rate of return on equity capital. Items used in the 
computations or derived on this statement must include deferred 
earnings, equity ratio, debt ratio, weighted cost of capital, and costs 
of debt and equity.
    (4) Statement D--income taxes. This statement must set forth the 
income tax computation. Items used in the computations or derived on 
this statement must show: return allowance, interest expense, equity 
return, annual amortization of deferred earnings, depreciation on 
equity AFUDC, underfunded or overfunded ADIT amortization amount, 
taxable income, tax factor, and income tax allowance.
    (5) Statement E--rate base. This statement must set forth the 
return rate base. Items used in the computations or derived on this 
statement must include beginning balances of the rate base at December 
31, 1983, working capital (including materials and supplies, 
prepayments, and oil inventory), accrued depreciation on carrier plant, 
accrued depreciation on rights of way, and accumulated deferred income 
taxes; and adjustments and end balances for original cost of 
retirements, interest during construction, AFUDC adjustments, original 
cost of net additions and retirements from land, original cost of net 
additions and retirements from rights of way, original cost of plant 
additions, original cost accruals for depreciation, AFUDC accrued 
depreciation adjustment, original cost depreciation accruals added to 
rights of way, net charge for retirements from accrued depreciation, 
accumulated deferred income taxes, changes in working capital 
(including materials and supplies, prepayments, and oil inventory), 
accrued deferred earnings, annual amortization of accrued deferred 
earnings, and amortization of starting rate base write-up.
    (6) Statement F--allowance for funds used during construction. This 
statement must set forth the computation of allowances for funds used 
during construction (AFUDC) including the AFUDC for each year 
commencing in 1984 and a summary of AFUDC and AFUDC depreciation for 
the years 1984 through the test year.
    (7) Statement G--revenues. This statement must set forth the gross 
revenues for the actual 12 months of experience as computed under both 
the presently effective rates and the proposed rates. If the presently 
effective rates are not at the maximum ceiling rate established under 
Sec. 342.4(a) of this chapter, then gross revenues must also be 
computed and set forth as if the ceiling rates were effective for the 
12 month period.
    6. Part 347 is added to subchapter P to read as follows:

PART 347--OIL PIPELINE DEPRECIATION STUDIES

Sec.
347.1  Material to support request for newly established or changed 
property account depreciation studies.

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85.


Sec. 347.1  Material to support request for newly established or 
changed property account depreciation studies.

    (a) Means of filing. Filing of a request for new or changed 
property account depreciation rates must be made with the Secretary of 
the Commission. Filings made by mail must be addressed to the Federal 
Energy Regulatory Commission with the envelope clearly marked as 
containing ``Oil Pipeline Depreciation Rates.''
    (b) Number of copies. Carriers must file three paper copies of each 
request with attendant information identified in paragraphs (c) through 
(e) of this section.
    (c) Transmittal letter. Letters of transmittal must give a general 
description of the change in depreciation rates being proposed in the 
filing. Letters of transmittal must also certify that the letter of 
transmittal (not including the information to be provided, as 
identified in paragraphs (d) and (e) of this section) has been sent to 
each shipper and to each subscriber. If there are no subscribers, 
letters of transmittal must so state. Carriers requesting 
acknowledgement of the receipt of a filing by mail must submit a 
duplicate copy of the letter of transmittal marked ``Receipt 
requested.'' The request must include a postage paid, self-addressed 
return envelope.
    (d) Effectiveness of property account depreciation rates.  (1) The 
proposed depreciation rates being established in the first instance 
must be used until they are either accepted or modified by the 
Commission. Rates in effect at the time of the proposed revision must 
continue to be used until the proposed revised rates are approved or 
modified by the Commission.
    (2) When filing for approval of either new or changed property 
account depreciation rates, a carrier must provide information in 
sufficient detail to fully explain and justify its proposed rates.
    (e) Information to be provided. The items delineated in paragraphs 
(e) (1) through (5) of this section are the data to be provided as 
justification for depreciation changes. Modifications, additions, and 
deletions to these data elements should be made to reflect the 
individual circumstances of the carrier's properties and operations.
    (1) A brief summary relating to the general principles on which the 
proposed depreciation rates are based (e.g., why the economic life of 
the pipeline section is less then the physical life).
    (2) An explanation of the organization, ownership, and operation of 
the pipeline.
    (3) A table of the proposed depreciation rates by account.
    (4) An explanation of the average remaining life on a physical 
basis and on an economic basis.
    (5) The following specific background data must be submitted at the 
time of and concurrently with any request for the establishment of, or 
modification to, depreciation rates for carriers. If the information 
listed is not applicable, it may be omitted from the filing:
    (i) Up-to-date engineering maps of the pipeline including the 
location of all gathering facilities, trunkline facilities, terminals, 
interconnections with other pipeline systems, and interconnections with 
refineries/plants. Maps must indicate the direction of flow.
    (ii) A brief description of the carrier's operations and an 
estimate of any major near-term additions or retirements including the 
estimated costs, location, reason, and probable year of transaction.
    (iii) The present depreciation rates being used by account.
    (iv) For the most current year available and for the two prior 
years, a breakdown of the throughput (by type of product, if 
applicable) received with source (e.g. name of well, pipeline company) 
at each receipt point and throughput delivered at each delivery point.
    (v) The daily average capacity (in barrels per day) and the actual 
average capacity (in barrels per day) for the most current year, by 
line section.
    (vi) A list of shipments and their associated receipt points, 
delivery points, and volumes (in barrels) by type of product (where 
applicable) for the most current year. The submitted data must be 
presented in a format which will protect any individual shipper 
information, the release of which would violate Section 15(13) of the 
Interstate Commerce Act (49 App. U.S.C. 15(13)).
    (vii) For each primary carrier account, the latest month's book 
balances for gross plant and for accumulated reserve for depreciation.
    (viii) An estimate of the remaining life of the system (both 
gathering and trunk lines) including the basis for the estimate.
    (ix) For crude oil, a list of the fields or areas from which crude 
oil is obtained.
    (x) If the proposed depreciation rate adjustment is based on the 
remaining physical life of the properties, a complete, or updated, if 
applicable, Service Life Data Form (FERC Form No. 73) through the most 
current year.
    (xi) Estimated salvage value of properties by account.

    Note: These Appendices will not appear in the Code of Federal 
Regulations.

Appendix A--Comments Received

Alaska, State of (Alaska)
Alberta Department of Energy (Alberta)
Association of Oil Pipelines (AOPL)
ARCO Pipe Line Company and Four Corners Pipe Line Company (ARCO)
Buckeye Pipe Line Company, L.P. (Buckeye)
Chevron U.S.A. Products Company (Chevron)
Davis, Glenn E. (Davis)
Indicated TAPS Carriers and Kuparuk Transportation Company (TAPS 
Carriers)
Lakehead Pipe Line Company (Lakehead)
Marathon Pipe Line Company (Marathon)
National Council of Farmer Cooperatives (NCFC)
Petrochemical Energy Group (PEG)
Texas Eastern Products Pipeline Company, L.P. (TEPPCO)
Total Petroleum, Inc. (Total)

Appendix B--Revised Sheets For Form No. 6: Annual Report of Oil 
Pipeline Companies

    This Appendix B contains the pages from Form No. 6 which are 
revised in the Commission's Final Rule, Docket No. RM94-2-000.

              Appendix B.--Form No. 6 Schedules Revised\1\              
------------------------------------------------------------------------
                            Title                              Page No. 
------------------------------------------------------------------------
Control Over Respondent.....................................         102
Companies Controlled by Respondent..........................         103
Directors...................................................         105
Important Changes During the Year...........................     108-109
Comparative Balance Sheet Statement.........................     110-113
Income Statement............................................         114
Appropriated Retained Income................................         118
Unappropriated Retained Income Statement....................         119
Statement of Cash Flows.....................................     120-121
Notes to Financial Statements...............................     122-123
Receivables From Affiliated Companies.......................         200
General Instructions Concerning Schedules 202 Through 205...         201
Instructions for Schedules 212-213..........................         211
Amortization Base and Reserve...............................     218-219
Noncarrier Property.........................................         220
Other Deferred Charges......................................         221
Payables to Affiliated Companies............................         225
Analysis of Federal Income and Other Taxes Deferred.........     230-231
Capital Stock...............................................     250-251
Operating Expense Accounts (Account 610)....................     302-304
Interest and Dividend Income................................         336
Miscellaneous Items in Income and Retained Income Accounts              
 for the Year...............................................         337
Payments for Services Rendered by Other Than Employees......         351
Annual Cost of Service Based Analysis Schedule..............        700 
------------------------------------------------------------------------
\1\Copies of these revised sheets are not being published in the Federal
  Register, but are available in copies of this order from the          
  Commission's Public Reference Room.                                   

[FR Doc. 94-27621 Filed 11-15-94; 8:45 am]
BILLING CODE 6717-01-P