Federal Energy Regulatory Commission Issues Policy Statement on Commission Action to Address Effects of COVID-19 on Oil Pipelines

On Friday, May 8, 2020, the Federal Energy Regulatory Commission (FERC) issued a Policy Statement on its actions to address the effects of COVID-19 on oil pipelines. This is the second policy statement issued by FERC to address the COVID-19 National Emergency declared by President Donald Trump on March 13, 2020, and the first industrywide action explicitly directed toward the oil pipeline industry. The Policy Statement declares FERC’s commitment to remove regulatory hurdles that impede or delay the oil pipeline industry’s efforts to address COVID-19, including commitments to expeditiously review requests for extensions of time to comply with certain regulations. It also highlights FERC’s existing oil pipeline regulations and how they may be used to address the emergency circumstances and respond to changing market dynamics. To the extent existing regulations are insufficient, particularly with respect to rate relief, FERC commits to give proposals due consideration, provided they are for temporary measures, are fully supported and are consistent with the Interstate Commerce Act (ICA).

Examples of regulations FERC identified where it may consider requests for extensions of time include

• cost-of-service filing requirements (18 CFR § 342.2(a); Part 346)
• reporting requirements (Part 357)
• record-keeping requirements (Part 356)
• accounting regulations (Part 352)
• depreciation studies (18 CFR § 347.1)

Examples of filings FERC identified that may be necessary to address the economic fallout of the COVID-19 pandemic on the oil and refined products industry include

• revisions to tariff receipt and delivery points to temporarily alter routes
• revisions to tariff receipt and delivery points to reconfigure existing systems, or change flow direction to provide shippers with access to storage
• filings to permit intrastate pipelines to provide service in interstate commerce to respond to market conditions without meeting FERC’s regulatory requirements for initial interstate service
• requests for alternative dispute resolution services to resolve disagreements with shippers
• notices of temporary embargo to curtail jurisdictional transportation services
• tariff changes to lower rates below the ceiling index
• requests for a cost-of-service rate change if the pipeline’s costs substantially diverge from its index rates, or applications for market-based rate authority pursuant to Part 348

In addition, the Policy Statement highlights FERC’s existing regulation at 18 CFR § 341.14 that permits tariffs to take effect on less than 30 days’ notice otherwise required by the ICA. Pipelines already regularly use this regulation to file tariffs on short notice. FERC also states that it will act as expeditiously as possible in response to oil pipeline waiver requests based on the circumstances and justifications identified.

To date, there have been a handful of filings made by oil pipelines to address circumstances created by COVID-19, including requests to initiate new services to respond to shipper demands for access to new delivery points or to add in-transit storage provisions to respond to the unprecedented increase in demand for storage services. Several pipelines are now using breakout tankage to store product for longer terms. It is likely that a number of regulated oil pipelines will make tariff filings to address the impacts of COVID-19 in the near future.