Regulatory Policy for Oil Pipelines

In proceedings before the US Federal Energy Regulatory Commission (FERC), Brattle consultants have performed analysis and presented evidence regarding policy issues related to the regulation of oil pipelines. In the context of FERC’s Five-Year Reviews of the Oil Pipeline Index in 2010, 2015, and 2020, we analyzed cost and operational data for FERC-jurisdictional pipelines to support the Commission’s determination of the “index differential” used to set the annual rate index. Brattle experts also recommended certain methodological improvements, which FERC adopted, resulting in more accurate measurements of industry-wide cost change being used to set the index. Brattle experts have also submitted reports and affidavits on the appropriate standard for evaluating shipper challenges to index-based rate increases, as well as regarding appropriate cost-of-service reporting requirements to permit FERC to evaluate pipeline rates.

We have also analyzed and opined on issues pertaining to the treatment of income tax costs in FERC’s cost-of-service methodology for oil pipelines. In particular, Brattle experts provided extensive testimony demonstrating that the provision of an income tax allowance (ITA) results in the double recovery of investor income tax costs included in the cost of service for pipelines owned by tax pass-through entities such as Master Limited Partnerships (MLPs). This testimony resulted in Federal Appeals Court and FERC decisions that eliminated this double-recovery by ceasing to grant ITAs to MLP-owned pipelines. Brattle experts have also offered testimony on the appropriate treatment of Accumulated Deferred Income Taxes (ADIT) associated with a disallowance of an ITA for MLP-owned pipelines.