[Federal Register Volume 60, Number 2 (Wednesday, January 4, 1995)]
[Rules and Regulations]
[Pages 356-358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-117]



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DEPARTMENT OF ENERGY
18 CFR Part 347
(Docket No. RM94-2-001)


Cost-of-Service Reporting and Filing Requirements for Oil 
Pipelines; Order on Rehearing and Clarification

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

ACTION: Final rule; Order on rehearing and clarification.

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SUMMARY: The Federal Energy Regulatory Commission in ruling on a 
request for rehearing is making a minor change to its regulations that 
provide revised filing requirements for oil pipelines seeking to 
establish new or changed depreciation rates, and clarifying Order No. 
571, issued October 26, 1994. The change is to ensure that the 
information provided is in a format that will protect individual 
shippers.

EFFECTIVE DATE: The amendment to the regulations 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 19200, 14400, 12000, 9600, 7200, 4800, 2400, 1200 or 300 
bps, full duplex, no parity, 8 data bits, and 1 stop bit. The full text 
of this document will be available on CIPS for 60 days from the date of 
issuance in ASCII and WordPerfect 5.1 format. After 60 days the 
document will be archived, but still accessible. 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.
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A. Bailey, 
James J. Hoecker, William L. Massey, and Donald F. Santa, Jr.

Order on Rehearing and Clarification

Issued December 28, 1994.
    On October 28, 1994, the Federal Energy Regulatory Commission 
(Commission) issued Order No. 571, in which it established 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.\1\ On November 28, 1994, the 
Association of Oil Pipe Lines (AOPL) filed a request for rehearing and 
clarification of Order No. 571. As discussed below, the Commission 
clarifies Order No. 571, and grants in part and denies in part AOPL's 
request for rehearing.

    \1\Cost-of-Service Reporting and Filing Requirements for Oil 
Pipelines, Order No. 571, 59 FR 59137 (November 16, 1994), III 
Stats. & Regs. 31,006 (1994).
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Discussion

    A. AOPL argues that the Commission cannot prescribe initial filing 
requirements for cost-of-service rates in excess of requirements 
specified in Section 6 of the Interstate Commerce Act (ICA).\2\ Section 
6(3) provides that a carrier must file a notice of rate change ``which 
shall plainly state the changes proposed to be made in the schedule 
then in force and the time when the changed rates * * * will go into 
effect; and the proposed changes shall be shown by printing new 
schedules * * *'' These requirements of Section 6(3) are preserved 
intact in sections 346.1 (a) and (b) of the regulations adopted by the 
Commission in Order No. 571.\3\ Thus, AOPL's dispute is with section 
346.1(c), which requires that an oil pipeline file statements and 
supporting workpapers to make an Opinion No. 154-B cost-of-service 
showing as set forth in section 346.2, on the basis that these 
requirements go beyond the limiting provisions of section 6(3).

    \2\49 App. U.S.C. 1 (1988).
    \3\See 18 CFR 342.1 (a) and (b), to be effective January 1, 
1995.
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    As the Commission explained in Order No. 571, the requirement that 
a pipeline file these statements and workpapers is justified, not by 
the filing of information as a part of a notice of rate change, but by 
the requirement of Order No. 5614 that the oil pipeline meet the 
threshold test of demonstrating a substantial divergence between rates 
at the indexed ceiling level and the pipeline's cost of service. Rather 
than a ``filing requirement'' for a notice of rate change, the 
statements and workpapers must be filed to demonstrate that the 
pipeline is entitled to change rates on a cost-of-service basis as an 
exception to changing rates under the indexing methodology.

    \4\Revisions to Oil Pipeline Regulations Pursuant to the Energy 
Policy Act, Order No. 561, 58 FR 58785 November 4, 1993), III FERC 
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). These orders are jointly referred to as 
``Order No. 561,'' unless the text clearly specifies otherwise.
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    The Commission relied on section 12 of the ICA as the statutory 
authority for requiring a pipeline to demonstrate that it meets the 
threshold test specified in Order No. 561.5 AOPL argues, however, 
[[Page 357]] that section 6 establishes initial filing requirements for 
a rate change and thus bars the Commission from requiring the threshold 
filings at issue here. The Commission disagrees.

    \5\Section 12 provides, in material part, that ``The Commission 
may obtain from such carriers * * * such information as the 
Commission deems necessary to carry out the provisions of this 
chapter * * *. The Commission is authorized and required to execute 
the provisions of this chapter * * *''.
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    Contrary to AOPL's contention, section 6(3) of the ICA is not a 
limitation on the Commission's authority to establish initial filing 
requirements but is rather no more than a specification of the form 
that a notice of a proposed change in rates must take. Thus, the 
Commission's requirements in section 346.1(c) are not contrary to the 
ICA. Moreover, the Commission here affirms its view that section 12(1) 
confers on the Commission broad powers to regulate the transportation 
of oil by pipeline, including those that AOPL claims are precluded by 
section 6(3), and thus authorizes the Commission to establish 
reasonable filing requirements for a cost-of-service rate change 
proposal.6

    \6\Section 12(1) of the ICA as it existed on October 1, 1977, 
governs the authority and duties of the Commission. See also 49 
U.S.C. 10321(a) which by Public Law 95-473, Oct. 17, 1978, 92 Stat. 
1337, codified and restated in comprehensive form, without 
substantive change, the material part of section 12(1). Section 
10321(a) provides:

    The Interstate Commerce Commission shall carry out this 
subtitle. Enumeration of a power of the Commission in this subtitle 
does not exclude another power the Commission may have in carrying 
out this subtitle. The Commission may prescribe regulations in 
carrying out this subtitle.
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    Rehearing on this first specification error is therefore denied.
    B. AOPL's second specification of error, that the Commission 
imposed unduly burdensome initial filing requirements for cost-of-
service-based rates, is likewise without merit. AOPL claims that the 
Commission, by imposing any filing requirements, ignored its comments 
regarding the resulting burden that pipelines would have to bear. 
AOPL's position, however, is based on the premise, already rejected, 
that section 6(3) bars any initial filing requirements. Thus, the 
thrust of AOPL's argument is that any initial filing requirement other 
than a mere notice of the rate change proposed, regardless of what it 
might be, is too burdensome for pipelines to bear. The Commission 
disagrees.
    The Commission recognizes that there is a filing burden for 
pipelines that seek to opt out of indexing. However, because indexing 
is the Commission's prescribed, generally applicable ratemaking 
methodology, the Commission has concluded that a pipeline must as a 
threshold matter justify an exception to that methodology when it files 
for cost-of-service rates. As described earlier, it is well within the 
Commission's broad regulatory powers to determine how an oil pipeline 
is to secure permission to charge rates based on a method that deviates 
from the generally applicable method.
    Contrary to AOPL's claims, the Commission has required only that 
data necessary for a pipeline to show whether there is a substantial 
divergence between its cost of service and revenues at the index 
ceiling rate and thus whether it warrants an exception to indexing. In 
fact, the Commission chose not to require certain other additional 
data. For example, it did not require a filing of individual point-to-
point cost-of-service calculations in the initial filing of notices of 
rate change, recognizing that the burden of such a requirement would 
not be justified, particularly since 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.7 Thus, the Commission was not arbitrary in its assessment of 
minimum filing needs but rather carefully balanced the need for 
threshold information against the burden that filing requirements could 
impose on pipelines.

    \7\Order No. 571, mimeo at 11.
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    Rehearing on this second specification of error is therefore 
denied.
    C. AOPL's third specification of error, that the Commission erred 
in determining that new Page 700 of Form No. 6 would impose only a 
minimal burden on oil pipelines, is denied. In Order No. 571, the 
Commission explained in detail why it believed page 700 of Form No. 6 
is necessary for carrying out its regulatory responsibilities under the 
ICA and the Energy Policy Act of 1992.8 It described the benefits 
to the shippers of having this information available as an initial 
``substantial divergence'' screen for pipeline rate filings, and as a 
means of testing the performance of the index when compared to 
individual indexed rates.9 Nothing in AOPL's request for rehearing 
persuades the Commission to modify its requirements for page 700.

    \8\42 U.S.C. 7172 note (West Supp. 1993).
    \9\Order No. 571, mimeo at 16-24.
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    It is correct that if viewed in isolation, the inclusion of Page 
700 in the Form No. 6 would increase the reporting burden on oil 
pipelines. However, viewed as a whole, Order No. 571 will reduce the 
overall individual oil pipeline reporting burden, since it reduces or 
eliminates many of the other reporting requirements formerly in the 
Form No. 6.10 Further, with the overall reduction in regulatory 
burden to be accomplished by the use of the indexing methodology, the 
addition of Page 700 as a safeguard should cause minimal additional 
burden.11

    \10\The Commission found, in Order No. 571, that ``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.'' Order 
No. 571, mimeo at 4.
    \11\According to AOPL's own numbers, contained in Attachment A 
to AOPL's comments filed in this proceeding on September 8, 1994, 
the burden of producing page 700 shown by some companies is as small 
as four hours per year.
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    While the initial computation for some of the companies which have 
not performed the Opinion No. 154-B calculation may be somewhat lengthy 
and may result in an initial, one-time burden for these companies 
because of the need to bring the data forward from 1984 to the current 
year, any initial burden on making the calculations is outweighed by 
the benefits of having the information available to the Commission to 
carry out its regulatory responsibilities. In addition, for each year 
subsequent to the initial computation, it would only be necessary for a 
company to update the schedules for the most current year. Thus, the 
minimal burden imposed in preparing and filing new page 700 is entirely 
justified when compared to the benefits to shippers and the Commission 
of having the information called for by this new page.
    D. The Commission grants rehearing as to AOPL's allegation that the 
Commission erred in retaining depreciation study requirements that 
could result in the disclosure of confidential shipper information in 
contravention of the ICA. In Order No. 571, the Commission required 
that an oil pipeline that desires to establish initial depreciation 
rates or to change its existing depreciation rates file certain 
information supporting such a rate. The Commission, in response to 
comments on the Notice of Proposed Rulemaking (NOPR) in this docket, 
recognized that certain information which had been proposed in the NOPR 
might lead to such disclosure, and therefore modified the information 
originally proposed, providing that the information required by section 
347.1(e)(vi) of the regulations should be provided in a format that 
would prevent disclosure of information which would violate the ICA. It 
left to [[Page 358]] the pipeline the specifics of the format to be 
used to provide such information.12 Moreover, the Commission also 
suggested that the pipeline could request confidential treatment of the 
information it provides.13

    \12\Order No. 571, mimeo at 34.
    \13\Id.
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    It was the Commission's intent that the caveats expressed not be 
limited to section 347.1(e)(vi), but rather apply to all the Part 347 
information that would be provided by pipelines. Therefore, the 
regulations will be modified to reflect that information required by 
Part 347 of the regulations, release of which would violate Section 
15(13) of the ICA, must be provided in a format that will protect any 
individual shipper. Moreover, the general statement in Order No. 571 
that the information provided will be publicly available unless 
specific confidential treatment is sought by the carrier is still 
applicable.14

    \14\Order No. 571, mimeo at 34.
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    E. Finally, AOPL seeks clarification regarding the use of new Page 
700 of Form No. 6, in particular the significance of the statement that 
this schedule would ``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.''15 AOPL claims such a comparison 
appears to tell a shipper nothing concerning the justness and 
reasonableness of an individual rate.

    \15\Order No. 571, mimeo at 17.
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    The information reported on Page 700 will show how a pipeline's 
average barrel-mile rate changes from one year to the next. A shipper 
can then compare the yearly percentage change in the average barrel-
mile rate with the yearly percentage change in the rate it is charged 
to determine whether there is a substantial divergence between the rate 
of change in the two figures such as to warrant a challenge to an 
indexed rate. Thus, the Page 700 information alone is not intended to 
show what a just and reasonable rate should be.

The Commission Orders

    The request for rehearing and clarification is granted in part and 
denied in part, as reflected in the body of this order.

List of Subjects in 18 CFR part 347

    Pipelines, Reporting and recordkeeping requirements.

    By the Commission.
Lois D. Cashell,
Secretary.

    In consideration of the foregoing, Part 347, Chapter I, Title 18, 
Code of Federal Regulations, is amended, as set forth below.

PART 347--OIL PIPELINE DEPRECIATION STUDIES

    1. The authority citation for Part 347 continues to read as 
follows:

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

    2. In Sec. 347.1, paragraph (e) introductory text and paragraph 
(e)(5)(vi) are revised to read as follows:


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

* * * * *
    (e) Information to be provided. The information in paragraphs 
(e)(1) through (5) of this section must 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. Any 
information in paragraphs (e)(1) through (5) of this section, the 
release of which would violate Section 15(13) of the Interstate 
Commerce Act, must be provided in a format that will protect individual 
shippers.
* * * * *
    (5) * * *
    (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.
* * * * *

[FR Doc. 95-117 Filed 1-3-95; 8:45 am]
BILLING CODE 6717-01-P