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FERC Issues Notice of Inquiry on Oil Pipeline Capacity Allocation Issues and Anomalous Conditions

On February 17, 2022, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) requesting information concerning “anomalous conditions” that have affected demand for oil pipeline capacity and any changes to current policies FERC should consider to mitigate the impacts of those conditions. FERC specified one circumstance it seeks to investigate further—the recent impact of the COVID-19 pandemic on the transportation of jet fuel.

Under the Interstate Commerce Act, interstate oil pipelines must provide common carrier service upon reasonable request, and prorationing measures when demand exceeds capacity must be just and reasonable and non-discriminatory.  The NOI focuses on the significant reduction in fuel shipments by airlines due to the COVID-19 pandemic, which impacted their historically based allocation of pipeline space during future constrained periods. 

Yet, as Commissioner Danly noted in his concurrence, “All industries and shipper classes faced unprecedented demand destruction during the COVID-19 pandemic. All shippers faced challenges and choices to manage the downturn and prepare for the upcoming period when demand will return. 1 Commissioner Danly further noted that this issue was the subject of prior proceedings before the Chief Administrative Law Judge in Docket No. AD21-16-000.

The NOI includes a list of issues on which FERC seeks comment. In particular, FERC seeks other historical examples of anomalous conditions that affected pipeline capacity, with details about shipper nominations, duration of the event and its impact, and any alternative transportation available to shippers. The NOI also asks specific questions about whether current prorationing policies are sufficient to address allocation issues caused by anomalous conditions, and any actions FERC should consider to mitigate such issues. Concerning the COVID-19 pandemic and its effects on jet fuel shipments specifically, the NOI seeks information about whether airlines anticipate receiving capacity for jet fuel in 2022 and 2023 that is below pre-pandemic levels and below their fuel needs, historic and projected jet fuel demand at airport destinations, whether shipping jet fuel at 2019 levels would have triggered prorationing over the last twelve months, and whether expansion of pipeline capacity serving airports could address jet fuel demand, among other information.

Initial comments on the NOI are due April 25, 2022, and reply comments are due May 25, 2022.

  1. Oil Pipeline Capacity Allocation Issues and Anomalous Conditions, 178 FERC ¶ 61,105, concur op. (Commissioner Danly) at P 4 (2022) (citing Pilot Travel Centers LLC, Joint Motion to Intervene and Protest, Docket No. OR21-10-000, at 3 (July 27, 2021)). ↩︎