Commissioner James Danly Statement
November 16, 2023
Docket No. OR18-7-002, et al.
I concur in the Commission’s decision to affirm the Initial Decision’s[1] determination that Colonial Pipeline Company (Colonial) should retain market-based rate authority for the Gulf Coast origin market, and I also concur in the decision to reverse the Initial Decision’s holding that Colonial’s market-based rate authority should be revoked for the Alabama origin market.[2]
While I agree, in the main, with the foregoing determinations regarding Colonial’s market-based rate authority, there are certainly other parts of the order that I would have handled differently. I will not list every determination about which I have quibbles, but will instead focus on two parts of this order: (1) whether there was a violation of the Interstate Commerce Act (ICA); and (2) reparations.
The Commission states that it “reverse[s] the Initial Decision and hold[s] that Colonial’s tariff gives Colonial authority to assess a [product loss allocation (PLA)] charge.”[3] I would have instead found that Colonial violated the ICA by not filing its PLA charge. As today’s order explains, “Colonial incurs net costs arising from normal system operations associated with product loss, compatible interface which downgrades product, and incompatible interface which creates transmix (PLA costs).”[4] The fact of the matter is that the PLA is scarcely explained in Colonial’s tariff. The Initial Decision correctly observed that there is a “description in the tariff” of the PLA charge, and the PLA charge is “further detailed in the shipper manual, but the rate or charge to shippers is neither posted as a filed rate nor Commission-approved.”[5]
The ICA requires pipelines to file with the Commission all “rates, fares, and charges” for jurisdictional oil transportation service.[6] I recognize that Colonial argues that “the PLA charge is not a charge ‘for transportation’ in the same sense as a transportation rate.”[7] I disagree, however, with Colonial’s suggestion that this is not a “charge” for jurisdictional service that is thus required to be filed in the tariff. As the Commission recognizes, “[a] PLA charge is assessed on each barrel shipped in interstate service on Colonial’s system and thereby increases the cost of jurisdictional oil transportation service,”[8] “the management of product loss and interface results in costs and revenues to Colonial, and Colonial uses its PLA mechanism to recover its net costs from its shippers,”[9] and the Commission therefore finds that “Colonial uses its PLA mechanism to recover costs from a jurisdictional transportation service.”[10]
In addition, the filed rate doctrine requires that such charges should be included in the tariff:
Under the [I]nterstate [C]ommerce [A]ct, the rate of the carrier duly filed is the only lawful charge. Deviation from it is not permitted upon any pretext. Shippers and travelers are charged with notice, of it, and they as well as the carrier must abide by it, unless it is found by the Commission to be unreasonable. Ignorance or misquotation of rates is not an excuse for paying or charging either less or more than the rate filed. This rule is undeniably strict, and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination.[11]
“[T]he filed rate doctrine’s purpose is to ensure that the filed rates are the exclusive source of the terms and conditions by which the [regulated entity] provides . . . the services covered by the tariff.”[12] Moreover, the Commission’s regulations provide that pipelines “must publish in their tariffs . . . charges . . . which in any way increase or decrease the amount to be paid on any shipment or which increase or decrease the value of service to the shipper.”[13]
In today’s order, the Commission states “that Item 75 in Colonial’s tariff gives Colonial authority to assess a PLA charge” and my colleagues “find that Colonial acted in accordance with its tariff when Colonial assessed and administered the PLA charge” and then the Commission “reverse[s] the Initial Decision’s finding that Colonial’s tariff did not authorize the PLA charge merely because the exact PLA charge was not expressly stated.”[14] Item 75(c) of Colonial’s tariff states,
[a] product loss allocation charge (“PLA Charge”) based on origin and delivery shall be assessed on each delivered barrel. Carrier administers the PLA Charge to recover, but not over-recover, any loss amounts incurred by the carrier that are not otherwise mitigated by the activities described throughout this section. The PLA Charge shall be routinely evaluated to determine if it needs to be adjusted, upward or downward, to ensure the carrier’s ultimate collections reflect its actual experience. Any PLA Charge change, upward or downward, will be communicated to shippers through a bulletin issued thirty days prior to the change going into effect.[15]
Nothing in this tariff provision sufficiently informs shippers of the mechanism by which the PLA charge may be assessed to discern the method by which Colonial might derive the particular amount required.[16] Instead, I have come to understand that the PLA charges and other information pertaining to the charges are contained only in Section 2.9 of Colonial’s shipper manual. The tariff provision referenced above does not even make note of the shipper manual. Because the ICA requires charges such as these to be included in the tariff, I dissent from the Commission’s decision to not find a tariff violation.
Second, I want to address the question of reparations. The ICA has a few provisions regarding reparations.[17] In today’s order, my colleagues “reverse the Initial Decision and hold that reparations are not warranted regarding the PLA issues in this case.”[18] My colleagues state that “[t]he Commission has discretion as to the level of reparations to award, if any.”[19] I acknowledge that court and Commission precedent state that the Commission has discretion in awarding reparations.[20] There are two provisions of the ICA in particular that I consider to foreclose the “discretion” that the Commission has historically claimed in the face of ICA violations.[21] Specifically, section 16(1) of the ICA states,
If, after hearing on a complaint made as provided in section 13 of this Appendix, the Commission shall determine that any party complainant is entitled to an award of damages under the provisions of this chapter for a violation thereof, the Commission shall make an order directing the carrier to pay to the complainant the sum to which he is entitled on or before a day named.[22]
And ICA section 16(3) “allows reparations for up to two years prior to the date of the filing of a complaint if the rates paid in those two years exceed the just and reasonable rate established in the complaint proceeding.”[23] Another provision relevant to remedies is ICA section 8, which provides:
In case any common carrier subject to the provisions of this chapter shall do, cause to be done, or permit to be done any act, matter, or thing in this chapter prohibited or declared to be unlawful, or shall omit to do any act, matter, or thing in this chapter required to be done, such common carrier shall be liable to the person or persons injured thereby for the full amount of damages sustained in consequence of any such violation of the provisions of this chapter, together with a reasonable counsel or attorney’s fee, to be fixed by the court in every case of recovery, which attorney’s fee shall be taxed and collected as part of the costs in the case.[24]
ICA section 8 states that when a common carrier does something that is “prohibited” by the ICA, is “unlawful,” or if the common carrier “omit[s] to do any act, matter, or thing in this chapter required to be done . . . such common carrier shall be liable to the person or persons injured thereby for the full amount of damages sustained in consequence of any such violation of the provisions of this chapter.”[25] Section 16 of the ICA provides that if, after the necessary process following a complaint, “the Commission shall determine that any party complainant is entitled to an award of damages under the provisions of this chapter for a violation thereof, the Commission shall make an order directing the carrier to pay to the complainant the sum to which he is entitled on or before a day named.”[26] Reading both sections 8 and 16 together, it establishes that if there is a violation of the ICA, the common carrier is liable for the full amount of damages that result from that violation and that the Commission shall direct the common carrier to pay the amount that the complainant is entitled. The use of the word “shall” in those provisions drastically restricts any discretion that may be afforded the Commission in providing a remedy.[27]
While I do not believe that the Commission has unfettered discretion to fashion remedies in the face of ICA violations, and since there was a violation of the ICA because Colonial failed to file the PLA charges in its tariff, the Commission is required to award the full damages to which the complainants are entitled during the time period provided for in the ICA. However, the order correctly finds that complainants are entitled to none because “[t]he record . . . shows that, using its tracker and true-up mechanism, Colonial has returned over-collections to shippers over time and drawn the PLA account balance to zero by adjusting the PLA charges.”[28] This is because “[r]ecovery cannot be had unless it is shown, that as a result of [the common carrier’s] acts, damages in some amount susceptible of expression in figures resulted.”[29] Should I, or the Commission, be laboring under a misapprehension on this matter, it should be further brought to our attention on rehearing, should the complainants disagree and decide to seek rehearing.
Finally, I want to point out that today’s order states that “[t]he discussion in [the] order includes citations to nonpublic information, only to the extent necessary to identify where relevant nonpublic information may be found in the record.”[30] This order is long; the record is longer. And while it is my typical practice to check every citation in the orders to which my name is affixed in order to confirm whether privileged information has been disclosed, it was simply not possible given the amount of time available before the order was brought forth for the Commission’s consideration. To the extent to which this order may have inadvertently disclosed privileged information, I disagree with its inclusion and, indeed, object to its inclusion in any order. This concern is not new. While I did not take the opportunity to address this issue in a separate statement, my uncertainty as to whether privileged information was disclosed in a recent proceeding was one of the reasons that I concurred in the result in West Texas Gulf Pipe Line Co. LLC, 184 FERC ¶ 61,182 (2023)—I do not support any reasoning in any Commission order that amounts to a disclosure of privileged information.
For these reasons, I respectfully concur in part and dissent in part.
________________________
James P. Danly
Commissioner
[1] Epsilon Trading, LLC v. Colonial Pipeline Co., 177 FERC ¶ 63,017 (2021) (Initial Decision).
[2] See Epsilon Trading, LLC v. Colonial Pipeline Co., 185 FERC ¶ 61,125 (2023) (Order on Initial Decision).
[3] See id. P 11.
[4] Id. P 12 (footnotes omitted).
[5] Initial Decision, 177 FERC ¶ 63,017 at P 627; see also id. P 654 (“Colonial failed to abide by its obligations under the Interstate Commerce Act and the Commission's regulations, and persisted in charging its shippers an unfiled rate . . . .”).
[6] 49 U.S.C. app. § 6(1); see also id. § 6(7) (prohibiting pipelines from transporting oil in interstate commerce without filing the “rates, fares, and charges upon which the [oil is] transported”).
[7] Colonial January 27, 2022 Brief on Exceptions Regarding Partial Initial Decision at 82; see also id. at 82-83 (“Colonial’s PLA account incurs Settlement Costs because, in the process of balancing the gains and losses among shippers relating to various forms of interface (as well as product losses incurred in normal operation), the proceeds from shippers who incurred gains and sales of transmix do not typically equal the payments to shippers who incurred losses. . . . As noted above, Colonial maintains the PLA account to track the costs associated with ‘(i) product gains and losses, and (ii) the disposition of transmix that occurs in the daily operation of the pipeline.’ . . . In any given month, Colonial may have under-delivered or over-delivered to a shipper, and it is the pricing differential of different refined products shipped on Colonial that causes the PLA account to incur Settlement Costs, which it recovers through its PLA charges. . . . The PLA charge is a balancing mechanism to recover any product loss costs incurred by Colonial that are not otherwise mitigated. . . . The overall intent is to keep all shippers (and Colonial) whole rather than to charge the shipper for transportation itself. Thus, the requirement for ‘transportation rates’ to be set forth in the tariff is simply inapplicable here.”).
[8] See Order on Initial Decision, 185 FERC ¶ 61,125 at P 16 (citing Ex. CPC-00113 at 15 (Colonial FERC ICA Oil Pipeline tariff No. 98.37.0, Item 75(c)) (“A product loss allocation charge . . . based on origin and delivery shall be assessed on each delivered barrel.”)).
[9] Id. (citing Ex. CPC-00111 (Brock) at 6:16-9:14, 10:3-11(describing the accounting process for the PLA account)).
[10] Id.
[11] Louisville & N. R. Co. v. Maxwell, 237 U.S. 94, 97 (1915).
[12] Cal. ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 853 (9th Cir. 2004), opinion amended on denial of reh’g, 387 F.3d 966 (9th Cir. 2004) (internal quotation marks and citation omitted).
[13] 18 C.F.R. § 341.8 (2022).
[14] Order on Initial Decision, 185 FERC ¶ 61,125 at P 17..
[15] Id. P 17 n.27 (citing Ex. CPC-00113 at 15 (Colonial FERC ICA Oil Pipeline tariff No. 98.37.0)).
[16] The Commission acknowledges as much in its finding that the referenced tariff provision is not just and reasonable. Order on Initial Decision, 185 FERC ¶ 61,125 at P 23 (“We find that Colonial’s PLA mechanism is unjust and unreasonable because it (1) gives Colonial sole discretion over how and when Colonial adjusts the PLA charges, (2) allows Colonial to manage the PLA account with insufficient transparency or accountability to Colonial’s shippers and the Commission, and (3) assigns different charges for short- and long-haul movements without sufficient justification”) (footnote omitted).
[17] See I.C.C. v. Atl. Coast Line R. Co., 383 U.S. 576, 579-80 (1966) (explaining the provisions of the ICA that pertain to reparations).
[18] Order on Initial Decision, 185 FERC ¶ 61,125 at P 2.
[19] Id. P 56 (citing Chevron Prods. Co. v. SFPP, L.P., 127 FERC ¶ 63,024, at P 501 (2009); SFPP, L.P., Opinion No. 435, 86 FERC ¶ 61,022, at 61,112 (2000) (“Reparations have traditionally been considered an equitable remedy, and whether they are granted is a matter of Commission's discretion.”); SFPP, L.P. v. FERC, 592 F.3d 189, 195 (D.C. Cir. 2010) (rejecting argument that “FERC erroneously denied that it had equitable discretion to fashion a remedy” because “FERC acknowledged an award of reparations is an equitable remedy and that it was not compelled to award reparations.”)).
[20] See, e.g., SFPP, L.P. v. FERC, 592 F.3d at195 (recognizing FERC has acknowledged that “an award of reparations is an equitable remedy and that [the Commission] was not compelled to award reparations,” stating that “FERC not only acknowledged its discretion, but carefully exercised it, explaining that reparations were appropriate because the record suggested SFPP had abused its market power by ‘extract[ing] an economic rent based on the difference between its own costs for resolving the operating issues at Watson Station and the costs each of the shippers would have incurred on its own hook,’” and holding that “because FERC’s reasoned order of reparations falls within its discretion, SFPP fails to demonstrate that FERC was arbitrary or capricious, or abused its discretion”) (citations omitted); Chevron Prod. Co. v. SFPP, L.P., 127 FERC ¶ 63,024 at P 501 (“So long as rates are determined to be unjust and unreasonable, ‘[t]here is no dispute that reparations are available to some degree;’ however, it is within the Commission’s discretion whether to award reparations.”) (citation omitted). Nevertheless, despite the confusion caused by the terminology employed, and the courts’ and Commission’s muddling of different remedial regimes, I return to the plain terms of the statute.
[21] Before I begin, I pause to note that I may appear to conflate the terminology for remedies at law (e.g., damages) and equity (e.g., restitution) throughout this discussion, but such is the verbiage employed in both the statute and the Commission’s precedent—for now, I am stuck with it.
[22] 49 U.S.C. app. § 16(1) (emphasis added).
[23] BP W. Coast Prod., LLC v. FERC, 374 F.3d 1263, 1306 (D.C. Cir. 2004) (citing 49 U.S.C. app. § 16(3)(b)).
[24] 49 U.S.C. app. § 8 (emphasis added).
[25] Id. § 8.
[26] Id. § 16 (emphasis added).
[27] Compare SHALL, Black’s Law Dictionary (11th ed. 2019) (defining “shall” to mean “Has a duty to; more broadly, is required to”), with DISCRETION, Black’s Law Dictionary (11th ed. 2019) (defining “discretion” to mean “with Freedom in the exercise of judgment; the power of free decision-making”), and DISCRETION, Black’s Law Dictionary (11th ed. 2019) (defining “administrative discretion” to mean “[a] public official’s or agency’s power to exercise judgment in the discharge of its duties”).
[28] Order on Initial Decision, 185 FERC ¶ 61,125 at P 66.
[29] I.C.C. v. U.S. ex rel. Campbell, 289 U.S. 385, 390 (1933) (internal quotation marks & citation omitted).
[30] Id. P 3 n.2.