Following its December 17 open meeting, FERC issued an order withdrawing and terminating a proceeding that had been opened earlier this year to examine oil pipeline affiliate contracts. FERC initiated that proceeding on October 15, 2020, when it issued a proposed policy statement outlining how FERC would evaluate whether a contract between an oil pipeline carrier and its affiliate resulting from an open season process is just and reasonable and not unduly discriminatory under the Interstate Commerce Act (ICA).
FERC has historically taken a light-handed approach to oil pipeline regulation under the ICA, and has provided little guidance on what information is sufficient to support proposed rates and terms for oil pipeline affiliate contracts. With the proposed policy statement, FERC signaled its intention to tighten up its policy for evaluating affiliate contracts in recognition of the potential risk of anticompetitive practices in the industry. In particular, FERC seemed concerned that an affiliate contract could enable an oil pipeline carrier to grant its affiliate an undue preference for awarding capacity.
However, just days after receiving comments on the proposal from oil pipelines and shippers, FERC issued a terse order terminating the proceeding based on its apparent determination that further guidance “is not necessary for oil pipelines to demonstrate that Affiliate Contracts are just, reasonable, and not unduly discriminatory under the [ICA].”
FERC Commissioner Richard Glick issued a dissenting opinion criticizing FERC’s decision to terminate the proceeding and calling for a heightened level of scrutiny for affiliate contracts to ensure such transactions are free from affiliate abuse. Recently confirmed Commission Allison Clements did not participate in the order.