Five-Year Review of the Oil Pipeline Index

DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 342 [Docket No. RM26-6-000] Five-Year Review of the Oil Pipeline Index AGENCY: Federal Energy Regulatory Commission. ACTION: Order establishing index level. SUMMARY: The Federal Energy Regulatory Commission (Commission) issues this Final Order concluding its five-year review of the index level used to determine annual changes to oil pipeline rate ceilings. The Commission establishes an index level of Producer Price Index for Finished Goods minus 0.55% (PPI-FG-0.55%) for the five-year period beginning July 1, 2026. DATES: This order is effective June 29, 2026. FOR FURTHER INFORMATION CONTACT: Evan Steiner (Legal Information), Office of the General Counsel, 888 First Street NE, Washington, DC 20426, (202) 502-8792, Evan.Steiner@ferc.gov . Monil Patel (Technical Information), Office of Energy Market Regulation, 888 First Street NE, Washington, DC 20426, (202) 502-8296, Monil.Patel@ferc.gov . SUPPLEMENTARY INFORMATION: 1. On November 20, 2025, the Commission issued a Notice of Proposed Rulemaking initiating the five-year review to establish the oil pipeline index level for the July 1, 2026 to June 30, 2031 period. 1 The NOPR requested comment regarding its proposal to adopt an index level of Producer Price Index for Finished Goods minus 1.42% (PPI-FG-1.42%) and any alternative methodologies for calculating the index level. 2 1   Five-Year Rev. of the Oil Pipeline Index, 193 FERC ¶ 61,145, at P 6 (2025) (NOPR). 2   Id. PP 6-7. 2. For the reasons discussed below, we adopt an index level of PPI-FG-0.55%. The departure from the NOPR results from (a) adopting the Liquid Energy Pipeline Association (LEPA) proposal to adjust the data set to account for the Commission's 2020 policy change regarding the determination of the allowed rate of return on equity (ROE) for oil pipelines and (b) other minor corrections to the data set used to calculate the index level. As proposed in the NOPR, we continue to (a) exclude from the data set pipelines' resubmitted cost data for 2019 and (b) trim the data set to the middle 80% of cost changes. The Commission's indexing calculations and other data analysis are set forth in Attachment A to this order. As discussed below, we decline to adopt the other changes to the index calculation that commenters propose. I. Background A. Establishment of the Indexing Methodology 3. The Energy Policy Act of 1992 (EPAct 1992) required the Commission to establish a “simplified and generally applicable” ratemaking methodology  3 in accordance with the just-and-reasonable standard of the Interstate Commerce Act (ICA). 4 To implement this mandate, the Commission issued Order No. 561  5 and companion orders, 6 adopting an indexing methodology that allows oil pipelines to change their rates subject to certain ceiling levels as opposed to making cost-of-service filings and mandating annual reporting of summary cost and throughput data in pipeline annual reports (FERC Form No. 6, page 700). 7 3  Public Law 102-86, 1801(a), 106 Stat. 3010 (Oct. 24, 1992), codified at 42 U.S.C. 7172 note. The mandate to establish a simplified and generally applicable ratemaking methodology specifically excluded the Trans-Alaska Pipeline System (TAPS), or any pipeline delivering oil, directly or indirectly, into TAPS. Id. 1804(2)(B). 4  49 U.S.C. app. 1(5). 5   Revisions to Oil Pipeline Reguls. Pursuant to Energy Pol'y Act of 1992, Order No. 561, 58 FR 58753 (Nov. 4, 1993), FERC Stats. & Regs. ¶ 30,985 (1993) (cross-referenced at 65 FERC ¶ 61,109), order on reh'g, Order No. 561-A, 59 FR 40243 (Aug. 8, 1994), FERC Stats. & Regs. ¶ 31,000 (1994) (cross-referenced at 68 FERC ¶ 61,138), aff'd sub nom. Ass'n of Oil Pipe Lines v. FERC, 83 F.3d 1424 (D.C. Cir. 1996) ( AOPL I ). 6   Cost-of-Serv. Reporting & Filing Requirements for Oil Pipelines, Order No. 571, 59 FR 59137 (Nov. 16, 1994), FERC Stats. & Regs. ¶ 31,006 (cross-referenced at 69 FERC ¶ 61,102), order on reh'g and clarification, Order No. 571-A, 60 FR 356 (Jan. 4, 1995), FERC Stats. & Regs. ¶ 31,012 (1994) (cross-referenced at 69 FERC ¶ 61,411), aff'd sub nom. AOPL I, 83 F.3d 1424. 7  Under indexing, oil pipelines change their rate ceiling levels effective every July 1 by “multiplying the previous index year's ceiling level by the most recent index published by the Commission.” 18 CFR 342.3(d)(1). Pipelines may adjust their rates to a level that does not exceed the ceiling levels pursuant to the Commission's regulations so long as no protest or complaint demonstrates that the index rate change so substantially diverges from the pipeline's cost changes that the rate is unjust and unreasonable. Id. 343.2(c)(1). 4. In Order No. 561, the Commission committed to review the index level every five years to ensure that it adequately reflects changes to industry costs. 8 The Commission conducted five-year index reviews in 2000, 9 2005, 10 2010, 11 2015, 12 and 2020. 13 In the 2020 review, the Commission established an index level of PPI-FG + 0.78% for the five-year period beginning July 1, 2021. 14 The index level established herein results from the Commission's sixth five-year review of the index level. 8  Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,941, 30,947, 30,951; Order No. 561-A, FERC Stats. & Regs. ¶ 31,000 at 31,093, 31,099, 31,105. 9   Five-Year Rev. of Oil Pipeline Pricing Index, 93 FERC ¶ 61,266 (2000) (2000 Index Review), aff'd in part and remanded sub nom. Ass'n of Oil Pipe Lines v. FERC, 281 F.3d 239 (D.C. Cir. 2002) ( AOPL II ), order on remand, 102 FERC ¶ 61,195 (2003) (2000 Remand Order), aff'd sub nom. Flying J Inc. v. FERC, 363 F.3d 495 (D.C. Cir. 2004). 10   Five-Year Rev. of Oil Pipeline Pricing Index, 114 FERC ¶ 61,293 (2006) (2005 Index Review). 11   Five-Year Rev. of Oil Pipeline Pricing Index, 133 FERC ¶ 61,228 (2010) (2010 Index Review), reh'g denied, 135 FERC ¶ 61,172 (2011) (2010 Rehearing Order). 12   Five-Year Rev. of Oil Pipeline Index, 153 FERC ¶ 61,312 (2015) (2015 Index Review), aff'd sub nom. Ass'n of Oil Pipe Lines v. FERC, 876 F.3d 336 (D.C. Cir. 2017) ( AOPL III ). 13   Five-Year Rev. of Oil Pipeline Index, 173 FERC ¶ 61,245 (2020) (2020 Index Review), order on reh'g, 178 FERC ¶ 61,023 (January 2022 Rehearing Order), reh'g denied, 179 FERC ¶ 61,100 (2022), vacated sub nom. Liquid Energy Pipeline Ass'n v. FERC, 109 F.4th 543 (D.C. Cir. 2024) ( LEPA v. FERC ), order following vacatur, 188 FERC ¶ 61,173 (2024), order on reh'g, 193 FERC ¶ 61,137 (2025). 14  2020 Index Review, 173 FERC ¶ 61,245 at P 9. B. Kahn Methodology 5. In Order No. 561 and in each five-year review, the Commission has calculated the index level using a methodology developed by Dr. Alfred E. Kahn. 15 The Kahn Methodology uses summary Opinion No. 154-B cost-of-service data from Form No. 6, page 700, 16 from the prior five-year period to determine an appropriate adjustment to be applied to PPI-FG. The calculation is as follows. Each pipeline's cost change is calculated on a per-barrel-mile basis over the previous five-year period ( e.g., the years 2019-2024 in this proceeding). To remove statistical outliers and potentially spurious data, the resulting data set is trimmed ( e.g., to the middle 80% or middle 50%) by removing an equal number of pipelines from the top or bottom of the distribution. The Kahn Methodology then calculates three measures of the trimmed dataset's central tendency: median, mean, and weighted mean. 17 The Kahn Methodology calculates (a) a composite central tendency by averaging the median, mean, and weighted mean and (b) the difference between the composite central tendency of per-barrel-mile cost changes and the percentage change in PPI-FG over the prior five-year period. 18 The Commission then sets the index level for the next five index years at PPI-FG plus or minus this differential. 15  The United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) has affirmed the Commission's use of the Kahn Methodology. AOPL I, 83 F.3d at 1433-37; Flying J Inc. v. FERC, 363 F.3d at 497-500. 16  The Opinion No. 154-B methodology is the cost-of-service ratemaking methodology that the Commission uses for oil pipelines. Williams Pipe Line Co., Opinion No. 154-B, 31 FERC ¶ 61,377, order on reh'g, Opinion No. 154-C, 33 FERC ¶ 61,327 (1985). Every April 18, pipeline companies must file a summary Opinion No. 154-B cost-of-service on page 700 for each of the prior two years. 17  The weighted mean assigns a different weight to each pipeline's cost change based on the pipeline's total base-year barrel-miles ( e.g., 2019 barrel-miles). 18  The Kahn Methodology determines the prospective index level by comparing pipeline cost changes and changes in inflation (PPI-FG) over the prior five years. Thus, in this index review, we calculate the index level that will apply beginning July 1, 2026, based on the difference between (a) industry-wide cost changes from 2019-2024 and (b) changes in PPI-FG over the same period. To the extent that the index adopted herein does not reflect the actual future difference between changes in PPI-FG and oil pipeline costs during the 2026-2031 period, those differences will be reflected in future index reviews. C. 2025 Five-Year Review 6. On November 20, 2025, the Commission issued the NOPR initiating the five-year review to establish the index level for the July 1, 2026 to June 30, 2031 period. The NOPR proposed an index level of PPI-FG—1.42% and requested comment on this proposal and any alternative methodologies for calculating the index level. 19 The Commission explained that commenters could address issues including, but not limited to, different data trimming methodologies; whether, and if so how, the Commission should adjust the data set to address the effects of the 2020 change in Commission policy for determining oil pipelines' allowed rate of return on equity (ROE Policy Change);  20 and whether, and if so how, the index calculation should incorporate revised cost data for 2019 submitted by 61 pipelines in April-June 2025. 21 19  NOPR, 193 FERC ¶ 61,145 at PP 6-7. 20   Inquiry Regarding the Comm'n's Pol'y of Determining Return on Equity, 171 FERC ¶ 61,155 (2020) (ROE Policy Statement). 21  NOPR, 193 FERC ¶ 61,145 at P 7. II. Commenters 7. Initial comments in response to the NOPR were due on December 24, 2025, and reply comments were due on January 20, 2026. 22 Pipeline comments were filed by LEPA, Designated Carriers, 23 and Kinder Morgan, Inc. (collectively, Pipelines). Shipper comments were filed by Joint Commenters, 24 Liquids Shippers Group (Liquids Shippers), 25 EPR Shippers, 26 Shell Trading (US) Company (STUSCO), and the Canadian Association of Petroleum Producers (CAPP) (collectively, Shippers). Additional comments were filed by the Energy Infrastructure Council (EIC), Pipeline Safety Trust, and the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA). 22  Pursuant to the NOPR, reply comments were originally due on January 14, 2026. See id. P 29 (providing that reply comments were due 51 days after publication of the NOPR in the Federal Register , which occurred on November 24, 2025). By notice issued January 8, 2026, the Commission granted LEPA's unopposed request to extend the deadline for reply comments to January 20, 2026. 23  Designated Carriers include Buckeye Partners, L.P., Colonial Pipeline Company (Colonial), Energy Transfer LP (Energy Transfer), Enterprise Products Partners L.P. (Enterprise), and Plains All American Pipeline, L.P. (Plains). 24  Joint Commenters include Air Transport Association of America, Inc., d/b/a Airlines for America, Chevron Products Company, the National Propane Gas Association, and Valero Marketing and Supply Company. 25  Liquids Shippers include Apache Corporation, Cenovus Energy Marketing Services Ltd., ConocoPhillips Company, Devon Gas Services, L.P., Husky Marketing and Supply Company, Occidental Energy Marketing Inc., Ovintiv Marketing Inc., and Talos Energy Inc. 26  EPR Shippers include ExxonMobil Oil Corporation, PennEnergy Resources, LLC, and Range Resources—Appalachia, LLC. 8. Commenters discuss numerous issues related to the proposed index level, including data trimming, addressing the ROE Policy Change, incorporating resubmitted 2019 cost data, and treatment of pipeline cost changes attributable to regulatory obligations and other factors. In addition, to the extent the Commission trims the data set to the middle 80%, CAPP proposes to determine central tendency using the geometric mean, rather than the composite central tendency. Commenters propose varying index levels, including LEPA's proposal to adopt an index level of at least PPI-FG—0.04%, 27 Designated Carriers' proposal of PPI-FG + 0.83%, 28 Joint Commenters' and Liquids Shippers' proposals of PPI-FG—1.64%, 29 and CAPP's proposal of PPI-FG—1.85%. 30 27  LEPA Reply Comments at 1-2; see also Kinder Morgan Comments at 1, 5 (supporting LEPA's comments); EIC Comments at 2, 15-16 (same). 28  Designated Carriers Reply Comments at 2. 29  Joint Commenters Reply Comments at 1-2; Liquids Shippers Reply Comments at 2; see also EPR Shippers Reply Comments at 5-6 (supporting Joint Commenters' and CAPP's comments). 30  CAPP Reply Comments at 1. III. Discussion 9. We adopt an index level of PPI-FG—0.55% for the five-year period beginning July 1, 2026. As discussed below, we adopt the NOPR's proposal to calculate the index level using the middle 80% of cost changes and adopt LEPA's proposed adjustments to the cost data used to derive the index level to account for the ROE Policy Change . Consistent with the NOPR, we decline to incorporate resubmitted 2019 cost data filed by 61 pipelines in April-June 2025, and the index level adopted in this final order relies on pipelines' originally submitted 2019 cost data. 31 We decline to adopt CAPP's proposal to calculate the central tendency of the middle 80% using the geometric mean. We also address arguments regarding pipeline costs resulting from regulatory obligations and other proposed adjustments to the page 700 data set. 31  For ease of reference, this order refers to “originally submitted 2019 cost data” to distinguish from the more recently submitted 2019 cost data filed between April-June 2025. A. ROE Policy Change 1. NOPR Proposal 10. In the NOPR, the Commission proposed to calculate the index level without adjusting the 2019 data to reflect the ROE Policy Change that occurred during the 2019-2024 data period subject to this review. Whereas the Commission previously relied solely on the discounted cash flow (DCF) model for determining ROE for oil pipelines pursuant to the Opinion No. 154-B methodology, the Commission now averages the results of the DCF and Capital Asset Pricing Model (CAPM) analyses. 32 During the 2019-2024 data period at issue in this proceeding, the Commission adopted the ROE Policy Statement. 33 Although pipelines filed their 2019 cost data before the ROE Policy Change in 2020 and their 2024 cost data after the ROE Policy Change, in the NOPR the Commission proposed not to adjust the data to account for the ROE Policy Change. The Commission observed that it has never adjusted ROE data as part of a prior index review. In addition, the Commission expressed concern that adjusting the data to address the ROE Policy Change would be a complex endeavor that would conflict with indexing's purpose as a simplified and streamlined process. 34 The Commission encouraged commenters to address whether, and if so, how, it should address the ROE Policy Change in the index calculation. 35 32  The DCF and CAPM models are described in the ROE Policy Statement. ROE Policy Statement, 171 FERC ¶ 61,155 at PP 18, 28, 50. 33  ROE Policy Statement, 171 FERC ¶ 61,155. 34  NOPR, 193 FERC ¶ 61,145 at P 13. 35   Id. P 14. 2. Comments 11. Pipelines argue that the Commission should adjust the page 700 data to account for the ROE Policy Change. Pipelines contend that this adjustment is necessary to calculate an index level that accurately measures cost changes during the 2019-2024 period and predicts the likely rate of future cost changes. 36 Pipelines state that the ROE Policy Change did not affect pipelines' actual equity costs and instead only changed how pipelines report allowed equity costs on page 700. 37 Thus, Pipelines contend that the Commission should adjust the reported cost data to derive an “apples-to-apples” comparison of pipeline costs between 2019 and 2024 under consistent ratemaking policies. 38 36  LEPA Initial Comments at 13-15, 17-18; Kinder Morgan Comments at 3. 37  LEPA Initial Comments at 13-15 (citing id., Declaration of Ramsey D. Shehadeh, Ph.D., at 13 (Shehadeh Initial Decl.)); Designated Carriers Initial Comments at 10. 38  LEPA Initial Comments at 15; LEPA Reply Comments at 29; Designated Carriers Initial Comments at 6; Kinder Morgan Comments at 3. 12. To account for the ROE Policy Change, LEPA proposes to replace the ROEs that pipelines reported on page 700 for 2019 under the Commission's prior policy with revised ROEs that reflect the DCF/CAPM methodology adopted in the ROE Policy Statement. 39 Specifically, LEPA's experts Dr. Shehadeh and Dr. Webb derive a revised 2019 ROE by averaging the pipeline's originally filed DCF ROE for 2019 with an 8.30% CAPM return. 40 They calculate the 8.30% CAPM return using the proxy group that the Commission adopted in Opinion No. 586, modifying the calculation the Commission adopted in Opinion No. 586 to use financial data for the six-month period ending December 31, 2019, rather than the six-month period ending February 29, 2020. 41 LEPA's experts explain that the revised ROEs must be flowed through the remainder of each pipeline's page 700 summary cost of service in order to derive a total cost of service that can be used in the index calculation. Accordingly, LEPA's experts use each pipeline's revised 2019 ROE to adjust their originally reported page 700 allowed return on rate base and income tax allowances for 2019. LEPA's experts then use these adjusted figures to compute a revised 2019 total cost of service for use in the index calculation. 42 39  LEPA Initial Comments at 13-14. 40   Id. at 17; Shehadeh Initial Decl., App. A § II.C. 41  LEPA Initial Comments, Declaration of Dr. Michael J. Webb, at PP 13-14 (Webb LEPA Decl.). 42  Shehadeh Initial Decl., App. A § II.C. 13. LEPA contends that its proposed adjustments are consistent with Commission precedent and the purpose of indexing. LEPA states that the index aims to track actual changes in industry-wide recoverable costs, not changes to the costs that the Commission allows or deems recoverable under the Opinion No. 154-B methodology. 43 According to LEPA, its proposal would restore consistency to the page 700 ROE data using a straightforward adjustment that conforms with EPAct 1992's mandate for simplified ratemaking. 44 Pipelines observe that in the 2020 Index Review, the Commission similarly adjusted the page 700 data to account for the Commission's 2018 income tax policy change for Master Limited Partnership (MLP)-owned pipelines (Income Tax Policy Change). 45 Although the Commission rejected a proposal in the 2020 Index Review to replace pipelines' reported ROEs with standardized ROEs, 46 LEPA argues that its proposed adjustments are distinguishable because they ensure that the page 700 data reflects consistent policies following the ROE Policy Change. 47 43  LEPA Initial Comments at 18 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 17 n.31). 44   Id. at 17; LEPA Reply Comments at 26-27. 45  LEPA Initial Comments at 14; LEPA Reply Comments at 23-24 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 16); EIC Comments at 19-20. While the Commission issued a supplemental notice of proposed rulemaking (Supplemental NOPR) in October 2024 proposing to recalculate the index level using unadjusted data that reflected the effects of the Income Tax Policy Change, see Suppl. Rev. of Oil Pipeline Index Level, 189 FERC ¶ 61,030 (2024), LEPA argues that this proposal has no legal force because the Commission subsequently withdrew the Supplemental NOPR. LEPA Reply Comments at 23; see also Suppl. Rev. of Oil Pipeline Index Level, 193 FERC ¶ 61,136 (2025) (Supplemental NOPR Withdrawal) (withdrawing Supplemental NOPR). 46  2020 Index Review, 173 FERC ¶ 61,245 at PP 45-50. 47  LEPA Initial Comments at 17-18; LEPA Reply Comments at 23. 14. Shippers oppose LEPA's proposed adjustments and urge the Commission to adopt the NOPR's proposal to use unadjusted data that incorporates the effects of the ROE Policy Change. Shippers argue that the index aims to reflect changes in costs recoverable under the Commission's Opinion No. 154-B methodology. 48 Shippers contend that because the ROE Policy Change altered the equity costs that pipelines can recover under Opinion No. 154-B, the index should reflect the policy change's effects. 49 Shippers state that excluding the ROE Policy Change from the index calculation would cause pipelines' indexed rates to diverge from the costs recoverable under Opinion No. 154-B. 50 48  Joint Commenters Initial Comments at 44-45 (citing AOPL III, 876 F.3d at 345-46; 2015 Index Review, 153 FERC ¶ 61,312 at P 13); Liquids Shippers Reply Comments at 9. 49   E.g., Joint Commenters Initial Comments at 44-46; Joint Commenters Reply Comments at 17. Shippers contend that changes to costs recoverable under Opinion No. 154-B represent “actual” cost changes that should be captured in the index calculation. Joint Commenters Initial Comments at 45; Joint Commenters Reply Comments at 16. 50  Joint Commenters Reply Comments at 19; Liquids Shippers Reply Comments at 10 (citing Reply Aff. of Elizabeth H. Crowe at 6, 8 (Crowe Reply Aff.)). 15. Shippers further argue that LEPA's adjustments would distort the index calculation by overstating pipeline cost changes during the 2019-2024 period. CAPP states that LEPA's proposed CAPM ROE for 2019 is 20% lower than the DCF ROEs that 82% of pipelines reported for. 51 Thus, Shippers argue that using LEPA's ROE proposal would inflate the measure of industry-wide cost changes between 2019-2024 by establishing a lower cost baseline for 2019. 52 Joint Commenters contend that this outcome creates inconsistencies with the data used in the 2020 Index Review and undermines the index as a measure of historical cost changes. 53 51  CAPP Reply Comments, Christensen Associates Reply Report at 8-9 (Christensen Reply Report) (stating that 176 of 215 pipelines that filed page 700 data for 2019 reported ROEs above 10.3%). 52   See Joint Commenters Reply Comments at 24-25; CAPP Reply Comments, Christensen Reply Report at 8. 53  Joint Commenters Reply Comments at 24-25 (citing id., Brattle Group Reply Report at PP 85-87 (Brattle Reply Report)). Specifically, Joint Commenters state that when using unadjusted page 700 data and trimming to the middle 80%, industry-wide costs increased by 6.7% from 2014-2019 and by 18.1% from 2019-2024, for a cumulative increase of 24.8% between 2014-2024. Id. at 25 (citing Brattle Reply Report at P 87). However, Joint Commenters state that adopting LEPA's adjustments to the 2019 data in this proceeding would erroneously imply that industry-wide costs increased by 24.7% from 2019-2024, inflating the measure of cumulative cost changes from 2014-2024 to 33.1%. Id. (citing Brattle Reply Report at P 87). 16. In addition, Shippers contend that removing the effects of the ROE Policy Change would complicate the five-year review process in violation of EPAct 1992's mandates for simplified and streamlined ratemaking. 54 For instance, Liquids Shippers state that LEPA's proposal would involve both (a) replacing the pipeline's reported page 700 ROEs with a revised ROE and (b) using the revised ROE to determine an adjusted total cost of service for each pipeline. 55 Liquids Shippers state that these calculations are significantly more complex than the data adjustments adopted in the 2020 Index Review to address the Income Tax Policy Change. 56 Additionally, Joint Commenters state that if the Commission omits the effects of the ROE Policy Change from the index calculation, the only alternative method of reflecting the policy change in rates would be through burdensome cost-of-service litigation. 57 54  Joint Commenters Initial Comments at 48 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 50); EPR Shippers Initial Comments at 13-14 (same); STUSCO Initial Comments at 9; STUSCO Reply Comments at 8. 55  Liquids Shippers Reply Comments at 8 (citing Shehadeh Initial Decl. at 20). 56   Id. at 8-9 (citing Crowe Reply Aff. 5). 57  Joint Commenters Initial Comments at 48 (citing id., Brattle Group Report at P 162 (Brattle Initial Report)). 17. Shippers argue, moreover, that adopting LEPA's adjustments would depart from Commission precedent. Shippers emphasize that the Commission has never previously adjusted ROE data in an index review and specifically declined to replace pipelines' reported ROEs in the 2020 Index Review. 58 Although the Commission adjusted the data set in the 2020 Index Review to address the Income Tax Policy Change, Shippers argue that the Commission has since expressed concerns with this decision because it departed from the Commission's longstanding practice of using unadjusted data. 59 Joint Commenters state that adjusting the reported data to exclude the ROE Policy Change would conflict with the Commission's treatment of a 2005 accounting order in the 2010 Index Review. 60 Moreover, Joint Commenters contend that adjusting 2019 ROEs to reflect a 2020 policy change would conflict with the Commission's method for evaluating whether rates remain grandfathered under EPAct 1992, which measures cost of equity in prior periods using the methodology then in effect. 61 58   E.g., EPR Shippers Initial Comments at 13-14 (citing NOPR, 193 FERC ¶ 61,145 at P 13; 2020 Index Review, 173 FERC ¶ 61,245 at P 50); Joint Commenters Reply Comments at 20-21 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 49); CAPP Reply Comments at 3. 59  STUSCO Initial Comments at 10 (citing Supplemental NOPR, 189 FERC ¶ 61,030 at P 28). Shippers acknowledge that the Commission has withdrawn the Supplemental NOPR that proposed to recalculate the index level adopted in the 2020 Index Review using unadjusted data that incorporates the Income Tax Policy Change. However, STUSCO states that the Commission withdrew this proposal for prudential reasons without endorsing the 2020 Index Review's reasoning for adjusting the reported data. Id. (citing Supplemental NOPR Withdrawal, 193 FERC ¶ 61,136 at PP 31-33). 60  Joint Commenters state that although the Commission revised its policies governing the accounting treatment of integrity management costs in 2005, it calculated the index level in the 2010 Index Review using unadjusted Form No. 6 data that reflected both the previous and revised accounting policies. Joint Commenters Initial Comments at 47 (citing 2010 Index Review, 133 FERC ¶ 61,228 at PP 120, 125; Jurisdictional Pub. Utils. & Licensees, 111 FERC ¶ 61,501 (2005) (2005 Accounting Order)). 61   Id. at 45 (citing Tesoro Refin. & Mktg. Co. v. Calnev Pipe Line LLC, 134 FERC ¶ 61,214, at P 68 (2011)); Joint Commenters Reply Comments at 18 (same). 18. Furthermore, Shippers argue that LEPA's adjustments suffer from methodological flaws. Shippers contend that using a single CAPM result for all pipelines in the data sample is improper because pipelines' ROEs can vary based upon differences in risk. 62 Similarly, Shippers state that it is unclear whether LEPA's proposed CAPM ROE and the pipeline's originally filed DCF ROE reflect the same proxy group  63 or whether LEPA's proposed CAPM analysis conforms with the CAPM analyses that pipelines used in reporting their 2024 ROEs. 64 CAPP states that averaging LEPA's proposed CAPM return with pipelines' originally filed 2019 ROEs produces a weighted average cost of equity of 9.61%, which is less than the industry-wide cost of equity for every year since 2013. 65 CAPP further states that whereas LEPA's proposal implies that industry-wide ROEs increased from 2019-2024, a DCF analysis of LEPA's proxy group used to determine its ROEs shows that ROEs declined over this period. 66 62  Joint Commenters Reply Comments at 20-21 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 49); CAPP Reply Comments, Christensen Reply Report at 6-7 (citing ROE Policy Statement, 171 FERC ¶ 61,155 at P 6). 63  Joint Commenters Reply Comments at 20, 23 (citing ROE Policy Statement, 171 FERC ¶ 61,155 at PP 58-66) (arguing that the Commission's policy contemplates using a single proxy group to determine a pipeline's ROE). CAPP further argues that Dr. Webb improperly applies size premium adjustments to the members of his CAPM proxy group based upon their size relative to the companies in the S&P 500, rather than their size relative to other pipelines in the page 700 data set. CAPP Reply Comments, Christensen Reply Report at 7-8. 64  CAPP Reply Comments, Christensen Reply Report at 10. 65   Id. at 9. 66   Id. at 9-10 (stating that DCF ROEs declined from 12.53% in 2019 to 11.32% in 2024). 19. Shippers claim, moreover, that Dr. Shehadeh committed several errors in applying LEPA's proposed adjustments. 67 For example, Joint Commenters state that Dr. Shehadeh proposes to adjust the 2019 data for pipelines that reported identical ROEs throughout the 2019-2024 period, even though the ROE Policy Change did not affect those pipelines' page 700 reporting. 68 67  Joint Commenters Reply Comments at 23-24 (citing Brattle Reply Report at PP 110-111) (arguing that LEPA erred by (a) adjusting Mustang Pipe Line LLC's (Mustang) 2019 ROE, which was already revised to reflect the DCF/CAPM methodology, (b) averaging its 8.30% CAPM result, which reflects a full year of operations, with Enterprise Crude Pipeline LLC's (Enterprise Crude) reported 5.43% DCF ROE for 2019, which reflects only six months of operations, (c) applying its adjustments to Total Petrochemicals Pipeline USA, Inc. (Total), which reported a negative rate base in 2019, and (d) averaging its CAPM ROE with Bridger Pipeline LLC's (Bridger) original 2019 ROE, which a Commission audit report found was not determined using the DCF methodology). 68   Id. (citing Brattle Reply Report at PP 108-109) (observing that Dr. Shehadeh proposes to adjust Colonial Pipeline Company's and CITGO Pipeline Company's original page 700 ROEs for 2019 notwithstanding that those pipelines reported consistent ROEs for every year between 2019-2024). 3. Commission Determination 20. After consideration and upon review of the comments, we modify our proposal in the NOPR and find that it is reasonable to adjust the page 700 data set to account for the ROE Policy Change in 2020. 69 As such, in calculating the index level, we average each pipeline's originally reported ROE for 2019 with the 8.30% CAPM ROE proposed by LEPA. 70 As further explained below, however, for those pipelines that filed identical ROEs throughout the 2019-2024 period, we find it reasonable to use the ROE reported on page 700 for both 2019 and 2024 without adjustment given that the ROE Policy Change did not affect how the pipeline reported its ROE. In addition, we find it reasonable to apply LEPA's proposed corresponding adjustments to pipelines' original 2019 income tax allowance, return on rate base, and total cost of service in calculating the index level. 71 69   E.g., Vanda Pharms., Inc. v. Ctrs. for Medicare & Medicaid Servs., 98 F.4th 483, 498 (4th Cir. 2024) (“The notice-and-comment procedure is designed so that an agency can float a potential rule to the public without committing itself to enacting the proposed rule's content.”); see also FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). 70  As discussed in section III.B, we decline to use the resubmitted 2019 cost data that 61 pipelines filed in 2025 to calculate the index level. Accordingly, we apply the same adjustments to the data for those 61 pipelines as to the rest of the data set, as discussed in this section. 71  Shehadeh Initial Decl. at 49-50. 21. We find that adjusting the data used to calculate the index level to account for the ROE Policy Change is consistent with the Commission's findings addressing changes to the Opinion No. 154-B methodology in the most recent 2020 Index Review. 72 In that proceeding, the Commission adjusted pipelines' reported cost data for 2014 to account for the Income Tax Policy Change, 73 which altered the Opinion No. 154-B methodology by requiring MLP pipelines to eliminate the income tax allowance and previously accrued Accumulated Deferred Income Taxes balances from their page 700 summary costs of service. 74 Consistent with the NOPR, we have considered these issues anew, 75 and we continue to find the reasoning in the 2020 Index Review persuasive and applicable here. 72  When addressing this issue for the first time in the 2020 Index Review, the Commission adjusted the reported page 700 data for 2014 to account for the Income Tax Policy Change. 2020 Index Review, 173 FERC ¶ 61,245 at PP 16-20. 73  2020 Index Review, 173 FERC ¶ 61,245 at PP 16-20. 74   Inquiry Regarding the Comm'n's Pol'y for Recovery of Income Tax Costs, 162 FERC ¶ 61,227, at PP 8, 45-46 (2018). 75  NOPR, 193 FERC ¶ 61,145 at P 14 n.32. 22. First, we conclude that the adjustments to the data to account for the ROE Policy Change are necessary to calculate an index level that accurately tracks actual industry-wide cost changes. As the Commission explained in the 2020 Index Review, although the Commission calculates the index level using Opinion No. 154-B cost data reported on FERC Form No. 6, page 700, changes to the Opinion No. 154-B methodology are distinct from pipelines' actual annual cost changes. 76 Thus, where the Commission modifies an Opinion No. 154-B cost-of-service policy used to measure recoverable costs partway through the five-year review period, the Opinion No. 154-B costs of service reported on page 700 for the first and last years of the period will reflect different sets of policies. 77 Here, because the Commission adopted the ROE Policy Change in 2020, pipelines reported cost data for 2019 and 2024 using different ROE methodologies. Accordingly, adjusting the data set to account for the policy change enhances the index calculation by allowing an “apples-to-apples” comparison of pipeline cost data measured using a single set of Opinion No. 154-B cost-of-service policies. 78 By contrast, using data that reflect one set of Opinion No. 154-B policies for 2019 and another for 2024 provides a less accurate measure of pipelines' actual cost changes. 76  2020 Index Review, 173 FERC ¶ 61,245 at P 17. 77   Id. 78   Id. (“Just as a business must account for changes to its accounting policies when comparing its costs over two different periods, we must make a similar adjustment to the reported page 700 data . . . to derive an `apples-to-apples' comparison of pipeline cost changes.”). 23. Second, we conclude that it would be improper for the Commission to use unadjusted cost data that captures the downward effects of the ROE Policy Change on industry-wide page 700 costs. As the Commission stated in the 2020 Index Review, indexing allows for incremental rate adjustments to allow pipelines to recover normal cost changes in future years. 79 The index should not function as a vehicle for incorporating into rates cost-of-service policy changes that occurred during the prior five-year period. 80 Thus, we find that it is reasonable to calculate the index level using adjusted 2019 cost data that reflects the same ROE methodology as the 2024 cost data. 79   Id. P 18. 80   Id.; see also Order No. 561, FERC Stats. & Regs. ¶ 30,985 at 30,950 (explaining that indexing “merely preserves the value of just and reasonable rates in real economic terms” by allowing pipelines to implement inflation-based adjustments “to preserve [rates'] real value in real terms”). 24. We also find that LEPA's proposed approach for modifying the 2019 cost data to account for the ROE Policy Change is reasonable based on the record. LEPA's calculation of an 8.30% CAPM return is consistent with the Commission's application of the ROE Policy Statement in Opinion No. 586. In addition, averaging LEPA's calculated 8.30% CAPM return with pipelines' originally filed DCF-based ROEs produces cost data that is more consistent with the ROE Policy Statement for purposes of calculating the index level. Furthermore, because ROE is an input used to determine income tax allowance, return on rate base, and total cost of service, adjusting pipelines' 2019 ROE data necessitates corresponding adjustments to pipelines' originally reported income tax allowances, returns on rate base, and total costs of service for 2019 to fully address the effects of the ROE Policy Change in calculating the index level. 25. However, we decline to adopt LEPA's proposal to adjust the 2019 cost data for pipelines that reported an identical ROE for each year of the 2019-2024 period. 81 We agree with Joint Commenters that in these circumstances, the ROE Policy Change does not appear to have affected how the pipeline reported its ROE on page 700, and it is not clear that each of these pipeline's 2019 data reflect different Opinion No. 154-B policies than their 2024 data. Thus, because the ROE Policy Change did not render those pipelines' 2019 data inconsistent with their 2024 data, it is unnecessary to adjust their 2019 data to address the policy change's effects. 81   See Attach. A at Ex. 8 tab (listing 20 pipelines that filed a single ROE value for the full 2019-2024 period). 26. We are unpersuaded by Shippers' arguments against adjusting the 2019 cost data to account for the ROE Policy Change. We disagree with Shippers' claims that adjusting pipelines' 2019 page 700 ROEs using LEPA's CAPM result will inflate the index level. To the extent that pipelines' adjusted 2019 ROEs reflecting the updated combined DCF/CAPM methodology fall below their originally reported 2019 ROEs reflecting the prior DCF-only methodology, 82 this does not establish that adjusting 2019 cost data will distort the index calculation. To the contrary, as discussed above, this approach better accounts for actual industry-wide cost changes during the 2019-2024 period by measuring pipeline costs in 2019 and 2024 using the same set of ratemaking policies. We are likewise unconvinced by Joint Commenters' argument that using 2019 data in this index review that differs from the 2019 data used in the 2020 review will produce a distorted measure of pipeline cost changes from 2014-2024. 83 Our task in this proceeding is to calculate the index based upon pipeline cost changes from 2019-2024, 84 and following the ROE Policy Change, comparing pipelines' 2024 cost data (which reflects the updated ROE methodology) with the unadjusted 2019 data considered in the 2020 Index Review (which reflects the prior ROE methodology) would result in an inaccurate measure of industry cost changes. 82   See Joint Commenters Reply Comments at 24-25; CAPP Reply Comments, Christensen Reply Report at 8-9. 83  Joint Commenters Reply Comments at 24-25 (citing Brattle Reply Report at PP 85-87). The dissent refers to this concern as a “stitching problem.” We note that the Commission's prior index published in 2020 contained a similar “stitching problem” caused by the adjustments to account for the Income Tax Policy Change. The Commission treats each five-year period as an independent study period, and within this framework accounts for actual changes in costs, which in these cases required adjustments that lead to the effect noted here. 84  We adjust pipelines' previously reported 2019 cost data in this proceeding for the limited purpose of measuring industry-wide cost changes from 2019-2024 to calculate the index level that will apply beginning July 1, 2026. The data adjustments adopted herein do not apply for any purpose beyond the index calculation performed in this proceeding. 27. Similarly unavailing is Shippers' argument that adjusting the data set used to calculate the index level to address the ROE Policy Change would complicate the five-year review process in violation of EPAct 1992. To the contrary, the adjustments adopted herein provide a straightforward solution to the page 700 data inconsistencies resulting from the ROE Policy Change. We acknowledge Liquids Shippers' claim that these adjustments are more complex than the data adjustments addressing the Income Tax Policy Change in the 2020 Index Review. 85 However, any additional complexity relative to the Income Tax Policy Change that occurred during the 2020 Index Review period does not dissuade us from adjusting the data to reflect the ROE Policy Change. Although we recognize that any changes to the reported page 700 data introduce a degree of additional complexity, we conclude that the benefits of more accurately measuring actual industry cost changes during the five-year review period by using consistent ratemaking policies support adjusting the reported data notwithstanding these concerns. Along similar lines, while Joint Commenters contend that omitting the effects of the ROE Policy Change from the index will increase cost-of-service litigation, 86 this argument rests on speculation and, in any case, does not justify leaving the data inconsistencies resulting from the policy change unaddressed. 85  Liquids Shippers Reply Comments at 8-9 (citing Crowe Reply Aff. 5). 86  Joint Commenters Initial Comments at 48 (citing Brattle Initial Report at P 162). 28. We disagree with Shippers' claim that adjusting the reported data to address the ROE Policy Change conflicts with Commission precedent. As an initial matter, this approach conforms with the 2020 Index Review, where the Commission similarly adjusted the reported page 700 data to account for the Income Tax Policy Change. 87 Although the Commission has not previously revised ROE data in an index review, 88 this fact does not dissuade us from adjusting the ROE data here. 89 Furthermore, while the Commission declined to adjust pipelines' reported ROEs in the 2020 Index Review, 90 the adjustments rejected in that proceeding are distinguishable from those adopted here. In contrast to this proceeding, where the reported data for 2019 and 2024 reflect different ROE policies, the data considered in the 2020 Index Review reflected a single ROE policy. 91 As a result, because there was no intervening change to the Commission's ROE policy for oil pipelines during the 2014-2019 review period, the Commission reasonably declined to adopt the proposed adjustments to the pipeline cost data consistent with its general policy of calculating the index level using pipeline cost data as reported on FERC Form No. 6, page 700. 87  2020 Index Review, 173 FERC ¶ 61,245 at PP 16-20. Contrary to Shippers' suggestion that the Commission departed from the reasoning in the 2020 Index Review in the January 2022 Rehearing Order and the Supplemental NOPR, the 2020 Index Review remains valid precedent because the D.C. Circuit has vacated the January 2022 Rehearing Order and the Commission has withdrawn the Supplemental NOPR. LEPA v. FERC, 109 F.4th at 549 (vacating January 2022 Rehearing Order); Supplemental NOPR Withdrawal, 193 FERC ¶ 61,136 at P 21; see also, e.g., Keystone-Conemaugh Projects v. EPA, 100 F.4th 434, 446 (3d Cir. 2024) (citing Ala. Power Co. v. EPA, 40 F.3d 450, 456 (D.C. Cir. 1994)) (“[A] vacated agency action is a nullity that has no force and effect.”). 88  EPR Shippers Initial Comments at 13-14; CAPP Reply Comments at 3; see also NOPR, 193 FERC ¶ 61,145 at P 13 (observing that “[t]he Commission has never adjusted ROE in a prior index proceeding”). 89  Because this proceeding marks the first index review where the Commission revised its ROE policy for oil pipelines during the relevant review period, the need to adjust the Form No. 6 data to reflect consistent ROE policies did not arise in any prior review. 90  2020 Index Review, 173 FERC ¶ 61,245 at PP 45-50. 91   See id. P 46 (explaining that the Commission's policies required pipelines to determine their page 700 ROEs using the DCF-only method in both 2014 and 2019). 29. We likewise disagree with Joint Commenters' claim that removing the effects of the ROE Policy Change is inconsistent with the Commission's treatment of the 2005 Accounting Order. Unlike the ROE Policy Change, the 2005 Accounting Order did not modify the Commission's Opinion No. 154-B methodology and instead merely clarified how pipelines should report new integrity management costs using the Commission's existing policies. 92 Because the Commission's policies were the same before and after the 2005 Accounting Order, it was unnecessary to modify the Form No. 6 data used to calculate the index level in the 2010 Index Review. In any case, regardless of the Commission's determinations in the 2010 Index Review, our task in this proceeding is to calculate the index level based upon pipeline cost changes from 2019-2024, and for the reasons explained above, we find that adjusting the data to account for the ROE Policy Change provides a more accurate measure of actual industry-wide cost changes. 92  2005 Accounting Order, 111 FERC ¶ 61,501 at P 1 (explaining that the 2005 Accounting Order “interprets the Commission's existing accounting rules”). To the extent that some pipelines revised their accounting practices in response to the 2005 Accounting Order because they previously did not adhere to the Commission's preexisting policies, see id. PP 8, 19, a shift in accounting practices by only a subset of pipelines in the data set would not necessarily justify an adjustment to data used in the industry-wide index. See Supplemental NOPR Withdrawal, 193 FERC ¶ 61,136 at PP 32, 34. By contrast, because the ROE Policy Change revised the policies that all pipelines must follow in determining their page 700 ROE, an adjustment to the index level calculation is appropriate here. 30. Joint Commenters' argument that removing the effects of the ROE Policy Change conflicts with the Commission's grandfathering policies is similarly unavailing. Pursuant to EPAct 1992, the Commission determines whether rates are no longer subject to grandfathering protection by measuring changes in the pipeline's actual ROE to evaluate whether a “substantial change” has occurred in the “economic circumstances of the oil pipeline which were a basis for the rate.”  93 In applying this substantial-change analysis, the Commission has found that changes in the Commission's ratemaking policies contribute to changes in the “economic circumstances” that formed a basis for the grandfathered rate. 94 Accordingly, this policy arises from the specific language governing grandfathered rates in section 1803(b)(1)(A) of EPAct 1992 and is thus separate from the indexing methodology established pursuant to section 1801(a). 95 For the reasons discussed above, we conclude that using adjusted pipeline cost data based upon a consistent ROE methodology will produce a more accurate measure of actual industry-wide cost changes for purposes of calculating the index level in this proceeding. 93  EPAct 1992 1803(b)(1)(A); see also, e.g., Opinion No. 586, 185 FERC ¶ 61,126 at P 363 (citing Tesoro, 134 FERC ¶ 61,214 at PP 2, 59, 63). 94   See Opinion No. 586, 185 FERC ¶ 61,216 at P 416; Tesoro, 134 FERC ¶ 61,214 at P 68. 95   Compare EPAct 1992 1801(a) with id. 1803(b)(1)(A). 31. Furthermore, we are unpersuaded by Shippers' claims that LEPA's adjustments are flawed because they average pipelines' reported ROEs for 2019 with the single CAPM return proposed by LEPA. 96 We acknowledge that in the 2020 Index Review, the Commission expressed concerns with adopting a single ROE for all pipelines in the data sample. 97 It is also true that pipelines' ROEs can vary based upon differences in risk. 98 However, unlike the 2020 Index Review, the instant industry-wide index review involves distinct circumstances where pipelines' cost data for the first and last years of the review period reflect different ROE policies. To the extent that LEPA's proposed CAPM return does not precisely measure the cost of equity for all pipelines in the data set, this imprecision is justified by the need to resolve the data incongruities resulting from the ROE Policy Change. We find that averaging LEPA's proposed single CAPM return with pipelines' originally filed 2019 DCF ROEs provides a reasonable method of addressing the ROE Policy Change that coheres with EPAct 1992's mandates for simplified and streamlined ratemaking. 99 Shippers have not proposed a superior alternative adjustment. 100 96  Joint Commenters Reply Comments at 20-21 (citing 2020 Index Review, 173 FERC ¶ 61,245 at P 49); CAPP Reply Comments, Christensen Reply Report at 6-7 (citing ROE Policy Statement, 171 FERC ¶ 61,155 at P 6). 97  2020 Index Review, 173 FERC ¶ 61,245 at P 49 (finding that Liquids Shippers had not demonstrated that their proposed standardized ROE figure accurately measures the investor-required cost of equity for all pipelines in the data set). 98   Id. (“Given that oil pipelines have diverse business models and different risk levels, we cannot simply assume that any single ROE could reflect th