On April 24, 2026, the Federal Energy Regulatory Commission (FERC or the Commission) issued a Final Rule establishing the oil pipeline rate index at the annual change in the Producer Price Index for Finished Goods minus 0.55 percent, for the five-year period commencing July 1, 2026.1
Procedural background
The Commission issued a Notice of Proposed Rulemaking (NOPR) on November 20, 2025 to adjust the oil pipeline rate index, under the simplified ratemaking mandate of the Energy Policy Act of 1992, for the five-year period commencing July 1, 2026.2 In the NOPR, the Commission initially proposed a lower index level of the annual change in the Producer Price Index for Finished Goods (PPI-FG) minus 1.42 percent. This preliminary calculation was achieved by trimming the cost data set to the middle 80 percent of all oil pipelines, utilizing the pipelines’ originally filed FERC Form No. 6, page 700 data for 2019, and leaving the data unadjusted for any subsequent shifts in ratemaking policies. In the ensuing months, the NOPR proposal drew extensive initial and reply comments from industry participants and stakeholders, including pipeline operators and shipper coalitions, advocating for competing methodologies.
Final rule
The return on equity policy adjustment
One of the primary disagreements in the NOPR proceeding stemmed from the FERC Policy Statement issued in 2020 regarding the allowed return on equity (ROE) for oil pipelines, under which the Commission now averages the results of the Discounted Cash Flow and Capital Asset Pricing Model analyses.3 In their initial comments, pipelines argued that comparing costs under a consistent ratemaking policy requires a statistical adjustment, given that pipelines reported 2019 cost data under the legacy methodology and 2024 data under the revised methodology.
The Commission adopted the proposal of the Liquid Energy Pipeline Association (LEPA), as submitted in its initial comments, to adjust the 2019 cost data through a uniform ROE adjustment. Specifically, the Commission averaged the originally reported ROE of each pipeline for 2019 with an 8.30 percent Capital Asset Pricing Model return, using the proxy group established in the Policy Statement.4 In the Final Rule, the Commission refined this approach by declining to adjust the 2019 cost data for pipelines reporting an identical ROE across the 2019 to 2024 period, reasoning that the policy change did not affect the reporting of these specific pipelines, therefore making an adjustment unnecessary.5
During the NOPR proceeding, shipper coalitions opposed this adjustment. A coalition of shippers, referred to as The Joint Commenters, argued that the Commission must use unadjusted data incorporating the effects of the policy change. These entities argued that adjusting the 2019 data artificially inflates the measure of industry cost changes and conflicts with the statutory mandate for simplified ratemaking. In the Final Rule, the Commission declined to follow these arguments, concluding that the adjustment creates an accurate comparison of pipeline cost data measured under a single set of policies.6
Rejection of resubmitted 2019 cost data
The Commission rejected a proposal to utilize resubmitted 2019 cost data, which 61 pipelines had filed in 2025. The Commission declined to incorporate the resubmitted data, finding that the pipelines submitted the filings five years after the original due date and lacked sufficient supporting calculations for changes to cost components unrelated to the ROE.7 The Final Rule relies strictly upon the originally submitted 2019 cost data, subject to the single 8.30 percent adjustment calculation described above.
Data trimming and the middle 80 percent
The Final Rule adopts the original proposal in the NOPR by trimming the data set to the middle 80 percent of cost changes,8 noting that the middle 80 percent provides a sample comprising 155 out of 195 pipelines and representing 94 percent of industry barrel miles.9
Several commenters opposed this proposal, advocating for the middle 50 percent metric utilized in the 2010 and 2015 index reviews. In the Final Rule, the Commission concluded that the middle 80 percent achieves a reasonable balance that incorporates diverse industry experience while removing distorting data from the extreme tails of the distribution.10
Rejection of industry-specific cost adders
The Commission declined to follow arguments from LEPA and the Designated Carriers that the index should be adjusted higher to encourage necessary infrastructure investment in response to significant cost increases. Specifically, operators pointed to rising costs related to electric power, labor, materials, and pipeline safety and integrity requirements. The Commission determined that costs incurred during the 2019 to 2024 review period are already reflected in the Form No. 6, page 700 data submissions.11 In the Final Rule, the Commission concluded that its methodology inherently captures these rising costs because they are embedded in the pipelines' total cost of service.12
Concurrences and dissent
Chairman Swett issued a concurrence accompanying the order emphasizing that, while the five-year adjustments represent a minor input into end-use consumer fuel prices, pipeline rates must accurately reflect cost changes to incentivize needed midstream infrastructure investment.13 Commissioner Rosner also concurred, highlighting the larger context of ongoing litigation over the Commission’s previous five-year index adjustment and a judicial remand stemming from challenges to that adjustment, and emphasizing that consensus among the Commissioners would have been the better approach this time around.14
Commissioner Chang dissented, characterizing the ROE policy adjustment as conceptually flawed and opposing the middle 80 percent data trimming.15 Relying on an unadjusted ROE and (a narrower) middle 50 percent metric, Commissioner Chang argued that the index should be set at PPI-FG minus 1.68 percent.
Appellate litigation
The new index is now juxtaposed against ongoing litigation regarding the prior indexing cycle. Specifically, the Commission's remedial actions in Docket No. RM20-14-000 remain subject to a second round of appellate litigation at the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit).16 This appeal challenges, among other things, the order on remand issued by the Commission in 2024 in response to the D.C. Circuit’s rejection of FERC’s index modifications the last time around,17 and the rehearing order issued by the Commission in November 2025 granting remedial true-up relief to pipeline operators for the 2021 to 2026 cycle.18
Following the initial court vacatur in Liquid Energy Pipeline Association v. FERC, the Commission reinstated the higher initial index of PPI-FG plus 0.78 percent and authorized pipelines to invoice shippers for the revenue difference during the period from March 1, 2022 to September 17, 2024, when a lower index formula temporarily took effect.19 Shipper coalitions, including the Liquids Shippers Group and the Joint Shippers, petitioned the D.C. Circuit to review these orders.
Implications and outlook
For market participants, the final index level of PPI-FG minus 0.55 percent establishes the maximum rate ceiling adjustments for oil pipelines utilizing index-based ratemaking through mid-2031. As the new, and lower, index level takes effect on July 1, 2026, pipeline operators must prepare to calculate their new rate ceilings and submit their annual tariff updates.
In the short-term, however, the new five-year price index is unlikely to resolve the outstanding issues in litigation. The disagreements among carriers, shippers, and FERC commissioners on the central methodological adjustments adopted in the Final Rule (i.e., the uniform ROE modification and the middle 80 percent trimming) may invite further challenges at FERC and at the D.C. Circuit, spelling more uncertainty for both pipelines and shippers.
1 Five-Year Review of the Oil Pipeline Index, Final Rule, 195 FERC ¶ 61,062 (Issued on April 24, 2026).
2 Five-Year Review of the Oil Pipeline Index, Notice of Proposed Rulemaking, 193 FERC ¶ 61,145 (Published on November 20, 2025).
3 Policy Statement on Determining Return on Equity for Natural Gas and Oil Pipelines, 171 FERC ¶ 61,155 (Issued on May 21, 2020).
4 Id. at P 4.
5 195 FERC ¶ 61,062 at P 25.
6 Id. at P 26.
7 Id. at P 40.
8 193 FERC ¶ 61,145 at P 32.
9 195 FERC ¶ 61,062 at P 50.
10 Id. at P 50.
The Commission rejected an alternative proposal from the initial comments of a coalition of pipeline companies, referred to as the Designated Carriers, which advocated for the use of a further statistical test to identify true outliers, retaining all cost changes between the 5th and 97th percentiles, and resulting in a proposed index of PPI-FG plus 0.70 percent. Id. at PP 62-63.
11 Id. at P 74.
12 Id. at P 75.
13 195 FERC ¶ 61,062 (Swett, Chairman, concurring).
14 195 FERC ¶ 61,062 (Rosner, Comm'r, concurring).
15 195 FERC ¶ 61,062 (Chang, Comm'r, dissenting).
16 Petition for Judicial Review, ExxonMobil Oil Corporation v. Federal Energy Regulatory Commission, United States Court of Appeals for the District of Columbia Circuit Case No. 26-1014 (Filed on Jan. 16, 2026).
17 Revisions to Oil Pipeline Regulations Pursuant to Energy Policy Act of 1992, 188 FERC ¶ 61,173 (2024).
18 Order Denying Rehearing, Denying Petition and Granting Remedies, 193 FERC ¶ 61,137 (2025).
19 Liquid Energy Pipeline Ass’n v. FERC, 109 F.4th 543 (D.C. Cir. 2024).
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