Liquid Energy Pipeline Association Submits Document to Federal Energy Regulatory Commission

Strategic Insights -

The Liquid Energy Pipeline Association ("LEPA") submitted a document to the Federal Energy Regulatory Commission (FERC) in response to Shell Trading (US) Company's additional comments on the Supplemental Review of the Oil Pipeline Index Level. The document argues that the FERC should reject Shell Trading's requests to issue the Supplemental NOPR as drafted or to make tariff filings pursuant to the 2025 Index Order subject to refund.

Key Takeaways:

  • The LEPA argues that the FERC should terminate the Supplemental NOPR proceeding and confirm that the Initial Index, PPI-FG + 0.78%, is the appropriate index factor to apply throughout the current five-year period.
  • The LEPA also argues that the FERC should make clear that pipelines have the legal right to collect lost revenue for the period when the invalid PPI-FG-0.21% index was in effect, from March 1, 2022, through the date the pipeline's revised tariff rates reflecting the PPI-FG+0.78% index became effective.
  • The LEPA rejects Shell Trading's request that the Commission issue an order directing that all rates proposed by carriers taking effect pursuant to the 2025 Index Order are subject to refund and the outcome of the Supplemental Index review.
  • The LEPA argues that the Commission should rule in 2025 just as it did in 2024 and that the current index established by the Commission in the December 2020 Order applies throughout this entire five-year period.
  • The LEPA asserts that pipelines must be placed in the position they would have been absent the Commission's legal error that was judicially invalidated, and therefore, pipelines have the legal right to collect lost revenue for the period when the PPI-FG-0.21% index was in effect.
  • The LEPA's response to Shell Trading is consistent with 18 C.F.R. §385.213(a)(3), which provides that an answer may be made to any pleading, if not prohibited under paragraph (a)(2) of this section.
  • The LEPA's argument that the FERC should confirm that the index established by the Commission in the December 2020 Order applies throughout this entire five-year period is supported by the 2025 Index Order, which explains that PPI-FG + 0.78% is the appropriate oil pricing index factor for pipelines to use for the five-year period commencing July 1, 2021.

Statistics:

  • The current five-year period began on July 1, 2021, and ends on June 30, 2026.
  • The invalid PPI-FG-0.21% index was in effect from March 1, 2022, through the date the pipeline's revised tariff rates reflecting the PPI-FG+0.78% index became effective, which is September 17, 2024, or thereafter.
  • The Commission's legal error was judicially invalidated in LEPA v. FERC, and therefore, pipelines have the legal right to collect lost revenue for the period when the PPI-FG-0.21% index was in effect.
  • The Commission has previously found that the current index established by the Commission in the December 2020 Order is the appropriate index for the entire current five-year period.

Sources:

  • Supplemental Review of the Oil Pipeline Index Level, 189 FERC P 61,030 (2024)
  • Notice of Annual Change in the Producer Price Index for Finished Goods, 191 FERC P 61,134 (2025)
  • Five-Year Rev. of the Oil Pipeline Index, 173 FERC P 61,245, at P 63 (2020)
  • Liquid Energy Pipeline Ass'n v. FERC, 109 F.4th 543, 549 (D.C. Cir. 2024)
  • Revisions to Oil Pipeline Reguls. Pursuant to the Energy Pol'y Act of 1992 Five-Year Rev. of the Oil Pipeline Index, 188 FERC P 61,173, P 1 (2024)
  • Public Utils. Comm'n of Cal. v. FERC, 988 F.2d 154, 168 (D.C. Cir. 1993)