Docket No. RM26-6-000
I concur with today’s order because, while I may have preferred different decisions on some of the inputs to the index, I believe the oil index finalized today meets the Commission’s obligation under the Interstate Commerce Act (ICA): to create and apply a “simplified and generally applicable ratemaking methodology for oil pipelines.”[1] And while I applaud the thorough and comprehensive statement from my colleague Commissioner Chang and am sympathetic to her well-made points, I believe we have met the ICA’s standard. I write separately because the Commission is at its strongest, particularly in complex, historically controversial rulemakings like this one, when our five-member Commission is able to meet in the middle to accommodate differing perspectives, and we are able to act by consensus.
My concurrence is informed by the recent history of the Commission’s prior oil index. The divided Commission’s fracture in that proceeding produced tremendous uncertainty for both oil pipelines and their customers, and ultimately resulted in a D.C. Circuit remand, vacatur, scores of refund applications, and overall volatility associated with the Commission’s oil ratemaking regime. This did not yield the clarity and dependability of a Commission work product that unlocks certainty and investment for the oil industry, or for anyone—whether associated with downstream economic sectors, or everyday American consumers.
The outcome of this proceeding matters, and in my view, would be best served with the strength and clarity that comes from a unanimous, compromise outcome. We are engaged here in far more than a mathematical exercise, and we do so during a moment when energy prices, particularly gasoline prices, are high across the country, with material impacts to oil pipeline customers, including airlines, small refiners, independent gas stations, and end use customers. On an annual basis, the index adopted here allows oil pipeline revenues to increase by a maximum of about 4 percent per year, a value that is largely based on actual inflation over the prior 5 years. The specific changes we have made since the unanimous NOPR proposal cost an additional $4.5 billion, cumulatively, about 2.5% of estimated industry-wide revenue of $176.6 billion over the next 5 years.
The Commission embarked on this new oil index rulemaking intent on leaving the chaos of the prior index behind us. Our unanimous vote on the underlying NOPR proves that we are capable of doing so. I continue to believe that our deliberative panel could have found a way to reach a compromise, and achieve a final rule with five votes, and with it unlock the benefits of unanimity for all who depend on a durable oil index. However, I support the order as meeting both our statutory mandate and the need to provide rate clarity for the next five years to America’s oil industry.
For these reasons, I respectfully concur.
[1] Pursuant to authority granted to it under the ICA, see 49 U.S.C. app. § 15(1) (1988), and the Energy Policy Act of 1992, see Pub. L. No. 102-486, § 1801(a), 106 Stat. 2776, 3010 (codified at 42 U.S.C. § 7172 note (2006)), the Commission employs an indexed ratemaking system to govern oil pipeline rates.