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Federal Register / Vol. 86, No. 29 / Tuesday, February 16, 2021 / Rules and Regulations
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increased transparency, CAPP urges the Commission to consider requiring pipelines to provide shippers with the workpapers underlying their page 700
calculations.113 AOPL contends CAPPs claims are unsupported and that the Commission has previously rejected this precise argument.114
2. Commission Determination 52. We find CAPPs arguments unpersuasive. First, as the Commission explained in the 2015 Index Review, to the extent that volume commitments in negotiated rate agreements have reduced the pipelines risk, the page 700 total cost of service would reflect this reduction in the embedded costs of equity and costs of debt. 115 These effects would tend to reduce pipeline costs and thereby produce a lower index level, rendering CAPPs concerns unfounded. Although CAPP questions whether the effects of reduced pipeline risk are reflected in the page 700 data, it provides no basis for the Commission to conclude that the reported data fails to adequately account for pipelines risks in measuring changes in cost of equity and costs of debt.
53. Second, to the extent that CAPP
requests that the Commission review individual pipeline data to evaluate the effects of contract rates upon the pipelines risks, this request is both unsupported and misplaced. CAPP has not presented any method for quantifying any disparity in the risks pipelines face when using contract rates versus non-contract rates. Although CAPP states that the Commission should consider requiring pipelines to provide shippers with the workpapers underlying their page 700 cost of service calculations, it has not explained how these workpapers would aid in identifying differences in risk between contract and non-contract rates.
Moreover, as CAPP itself acknowledges, the Commission recently declined to require pipelines to provide workpapers 116 and CAPP has not provided a sufficient basis for the Commission to revisit this decision here. More broadly, the Kahn Methodology measures changes in barrel-mile costs on a generic, industrywide basis. Thus, in calculating the index level, the Commission does not scrutinize the inputs underlying individual pipelines page 700 data.
Accordingly, the review that CAPP
113 Id.

at 5.
Reply Comments at 3337.
115 2015 Index Review, 153 FERC 61,312 at P
28.
116 Revisions to Indexing Policies and Page 700 of FERC Form No. 6, 170 FERC 61,134, at P 6 2020.
114 AOPL

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appears to seek would exceed the scope of the five-year index review and conflict with streamlined and simplified ratemaking.117
F. Pipeline Costs Resulting From Integrity Management Regulations and Other Developments 1. Comments 54. AOPL states that oil pipelines have experienced significant cost increases due to pipeline safety and integrity measures and that these costs are likely to increase in the future.118
AOPL submits a declaration from William R. Byrd identifying new and continuing regulatory obligations related to pipeline integrity as well as other factors affecting pipeline costs, such as expenditures related to security and cybersecurity, opposition to pipeline infrastructure, and the COVID
19 pandemic.119 Mr. Byrd also describes anticipated regulatory requirements that he states will increase pipelines obligations and compliance costs in the future.120 AOPL maintains that pipelines ability to undertake future expansions and adopt environmental, safety, and security measures in compliance with applicable regulatory requirements depends upon the Commission adopting an index level that allows pipelines to recover expected future cost increases.121
55. Other commenters make similar assertions. PST states that pipeline safety requirements have increased over the last five years and that setting the index level too low could reduce pipelines incentives to invest in safety measures.122 EIC echoes AOPLs statements regarding increasing costs and explains that pipelines ability to invest in building and operating facilities depends upon ready access to capital markets and a predictable regulatory environment that reduces investment risks. Thus, EIC asserts that the Commission should be mindful that an insufficiently high index level could impair pipelines ability to attract investment.123
56. PHMSA filed comments describing safety rules it has enacted 117 As discussed above, if a shipper determines that a particular pipelines page 700 inputs do not accord with the Commissions existing Opinion No.
154B methodology, it may file a complaint to that effect with the Commission. BP W. Coast Prods. LLC
v. SFPP, L.P., 121 FERC 61,243 at P 9.
118 AOPL Initial Comments at 3639; Declaration of William R. Byrd, P.E. at 21.
119 Byrd Declaration at 717.
120 Id. at 1720.
121 AOPL Initial Comments at 40 quoting 2005
Index Review, 114 FERC 61,293 at P 63.
122 PST Comments at 12.
123 EIC Comments at 7, 1116.

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since the 2015 Index Review as well as several pending rulemakings that, if adopted, would impose additional costs upon pipeline operators. Although it takes no position on the specific index level the Commission should adopt, PHMSA states that the index should reflect the costs that its existing and future regulations impose upon pipeline operators.124
57. Shippers reject these arguments and contend that the Commission has previously found that future costs are speculative and inappropriate for inclusion in the index calculation.125
Liquids Shippers argue that costs related to safety or integrity measures incurred during the 20142019 period should be reflected in the page 700
data.126 In addition, Joint Commenters and Liquids Shippers contend that if safety or integrity-related costs are not captured in this index calculation, they will be reflected in future index reviews and pipelines may seek to recover those costs in the interim through cost-ofservice rate filings, where appropriate.127
2. Commission Determination 58. We decline to alter our calculation of the index level based upon the arguments concerning safety or integrity-related costs. To the extent that new or continuing regulatory requirements caused pipelines barrelmile costs to increase during the 2014
2019 period, those cost changes would be reflected in the page 700 data.128 We also decline to adjust the index calculation based upon projections of future costs or other developments occurring after the conclusion of the 20142019 period. As the Commission has previously explained, future cost projections related to regulatory changes are speculative and inappropriate for inclusion in the index.129 Additionally, because the Kahn Methodology only considers cost changes incurred during 124 PHMSA

Reply Comments at 14.
Commenters Reply Comments at 1920
quoting 2010 Index Review, 133 FERC 61,312 at P 125; Liquids Shippers Reply Comments at 31
32 same; CAPP Initial Comments at 2.
126 Liquids Shippers Reply Comments at 33.
127 Joint Commenters Reply Comments at 20;
Liquids Shippers Reply Comments at 33.
128 If such obligations result in a substantial divergence between a pipelines actual costs and the rate resulting from application of the index, the pipeline may file to change its rate using the Commissions cost-of-service methodology pursuant to 18 CFR 342.4a of the Commissions regulations.
18 CFR 342.4a; see also Order No. 561, FERC
Stats. & Regs. 30,985 at 30,957 explaining that such circumstances as increased safety or environmental regulations may justify the use of a cost-of-service methodology.
129 2010 Index Review, 133 FERC 61,228 at P
125.
125 Joint
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