Details

Titel

REPORT OF THE OIL AND LIQUIDS COMMITTEE

Ist Teil von

• Energy law journal, 2019-07, Vol.40 (2), p.1-31

Ort / Verlag

Washington: Foundation of the Energy Law Journal

Erscheinungsjahr

2019

Link zum Volltext

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Nexis

Beschreibungen/Notizen

• In response to the D.C. Circuit Remand and the NOI, the Commission revised the 2005 income Tax Policy statement (Revised Policy statement (RPs)) and will no longer permit MLPs to recover an income tax allowance in their cost of service.3 Citing the United Airlines decision, the Commission found the DCF methodology "determines the pre-tax investor return required to attract investment." Given that the return is a pre-tax return, permitting MLP's to recover both an income tax allowance for the partner's tax costs and a discounted cash flow return on equity leads to a double recovery of income tax costs.4 The Commission clarified that the RPs would not apply to non-MLP partnerships and stated that potential double recovery for such entities would be addressed in subsequent proceedings.5 In addition, the RPS instructs oil pipelines organized as MLPs to reflect the Commission's elimination of the income tax allowance in their Form No. 6 page 700 reporting. in contrast to natural gas pipelines, the overwhelming majority of oil pipelines set their tariff rates using indexing, not cost-of-service ratemaking.6 Under indexing, oil pipelines may adjust their rates annually so long as those rates remain at or below the applicable ceiling levels published by FERC.7 The ceiling levels change every July 1 based on an index that tracks industry-wide cost changes.8 Currently, the index is based upon the Producer's Price Index for Finished Goods, plus 1.23.9 The index will be reassessed in 2020 based upon industry-wide oil pipeline cost changes between 2014 and 2019.10 The industry-wide data, filed in the latter years of the 2014-2019 period, should reflect the Commission's post-United Airlines policy changes as well as the Tax Cuts and Jobs Act of 2017 (TCJA).11 Beginning with the 2018 Form No. 6, oil pipelines were required to report in page 700 data an income tax allowance consistent with United Airlines and the Commission's subsequent holdings denying an MLP an income tax allowance.12 Based upon this data, the Commission will incorporate the effects of the post-United Airlines ' policy changes (as well as the TCJA) on industry-wide oil pipeline costs in the 2020 five-year review of the oil pipeline index level.13 The Commission stated that this will ensure that the industry-wide reduced costs are incorporated on an industry-wide basis as part of the index review. Int'l Group, Inc. v. Central Florida Pipeline LLC, 162 F.E.R.C. ¶ 63,012 (2018) On January 30, 2018, the presiding administrative law judge (ALJ) issued her initial decision in Aircraft Service International Group, Inc. v. Central Florida Pipeline LLC}4 In this proceeding, American Airlines, Inc., Delta Air Lines, Inc., Southwest Airlines Co., United Aviation Fuels, and United Parcel Service, Inc. (collectively, the Airlines), Hooker's Point Fuel Facilities, LLC (HKPT), and Aircraft Service International Group, Inc. (ASIG) (collectively, Complainants) brought a complaint against Central Florida Pipeline LLC (CFPL) and its affiliate Kinder Morgan Liquid Terminals LLC (KMLT) alleging that CFPL and KMLT are providing interstate transportation and break out tankage services without a tariff on file at the Commission in violation of the Interstate Commerce Act (ICA).15 KMLT owns and operates a terminal facility in Tampa, Florida (Tampa Terminal).16 CFPL owns and operates a pipeline that transports jet fuel from the Tampa Terminal to the Orlando Airport (CFPL Pipeline).17 The Airlines are jet fuel consumers operating out of the Orlando Airport and, in some cases, other regional airports.18 ASIG ships jet fuel on the CFPL Pipeline on behalf of the Airlines and manages the Airlines' jet fuel supplies at the Tampa Terminal and Orlando Airport.19 HKPT has contracted with KmLT to acquire exclusive rights to five jet fuel tanks at the Tampa Terminal for use by the Airlines (HKPT Tanks).20 All jet fuel shipped on the CFPL pipeline is sourced from out-of-state or foreign origins and arrives at the Tampa Terminal via marine vessel.21 The Airlines contract individually with jet fuel suppliers (i.e., Chevron, Valero, or both), who arrange for deliveries of jet fuel to the Tampa Terminal, where title transfers from the suppliers to the Airlines.22 The Airlines typically maintain a 10- to 12day supply of jet fuel in the HKPT Tanks.23 From the HKPT Tanks, jet fuel is delivered to the Orlando Airport via the CFPL Pipeline or transported to other regional airports via truck.24 ASIG and contractors working out of the regional airports, rather than the Airlines, determine the timing and quantity of jet fuel shipments over the CFPL Pipeline to the Orlando Airport and by truck to other regional airports, respectively.25 ASIG's nominations for transportation on the CFPL Pipeline are designed to keep the total jet fuel supply in the Orlando Tanks within a desired range,26 and ASIG generally allocates jet fuel among the Airlines only after it is delivered to the Orlando Airport.27 The ALJ found there was a sufficient break in the overall interstate and foreign movements at the Tampa Terminal, such that the transportation of jet fuel on the CFPL Pipeline is intrastate in character and not subject to the Commission's ICA jurisdiction.28 The ALJ first made a threshold determination that "the jet fuel 'comes to rest' at a point of interruption" (i.e, the Tampa Terminal).29 The ALJ then analyzed and weighed three criteria (Northville criteria)30 and twelve additional factors31 that the Commission and the Interstate Commerce Commission have historically considered in determining the "essential character" of the transportation (i.e., intrastate vs. interstate).32 The ALJ found that the transportation at issue satisfied all three Northville criteria.33 First, the ALJ determined, "neither Valero nor Chevron is filling specific orders for specific quantities of jet fuel to be moved through to any specific destination beyond the Tampa Terminal at the time of shipment. "38 "In sum," the ALJ concluded: an objective assessment of the criteria and factors, based upon all of the facts pertaining to the transportation at issue in this proceeding, indicates that a sufficient break in the continuity of the foreign and interstate transportation occurs when the jet fuel comes to rest in the [HKPT] Tanks, and that there is no fixed and persisting intent at the time of shipment to ship jet fuel through the Tampa Terminal to the Orlando Airport in a single, continuous movement.39 Having concluded that transportation of jet fuel on the CFPL Pipeline is intrastate in character, the ALJ found that whether the Tampa Terminal provides service subject to the Commission's ICA jurisdiction was moot.40 Accordingly, the ALJ recommended the Commission dismiss the complaint.41 2.Laurel Pipe Line Company, L.P., et al., 167 F.E.R.C. ¶ 61,210 (2019) On April 30, 2018, Buckeye Pipe Line Company, L.P. (Buckeye) and Laurel Pipe Line Company, L.P. (Laurel) (collectively, Buckeye/Laurel) filed a petition for declaratory order requesting approval of certain terms and rates associated with Transportation Service Agreements (TSAs) for the provision of firm