FERC today proposed to revise its policy for determining whether an affiliate-only committed service on an oil pipeline is just, reasonable and not unduly discriminatory.
The Commission is looking at the way it evaluates whether contractual committed transportation service for an oil pipeline complies with the Interstate Commerce Act (ICA) in instances where the only shipper to obtain the service is the oil pipeline’s affiliate.
Currently, the Commission relies on a pipeline’s public open season, followed by an arm’s length transaction to conclude that the resulting contractual committed service is just, reasonable and not unduly discriminatory. However, when the only shipper to agree to a committed transpcortation service is the pipeline’s affiliate, there is no arm’s length transaction to support a presumption of reasonableness and nondiscrimination. Instead, the contractual service offered in the open season may have been structured to unduly discriminate against nonaffiliates.
The proposed policy statement proposes to evaluate the rate and non-rate terms that a pipeline offered in its open season to ensure those terms were not structured in a manner favoring the pipeline’s affiliate, to the exclusion of nonaffiliates. Specifically, the proposed policy statement proposes:
- A safe-harbor mechanism pipelines may use to demonstrate that affiliate-only committed service rates are just, reasonable, and not unduly discriminatory; and
- Standards for evaluating whether affiliate-only committed service non-rate terms were structured to unduly discriminate against nonaffiliates. The proposed policy statement seeks comment on these proposals.
Initial comments are due on or before February 13, 2023, and reply comments are due on or before March 30, 2023.