FERC Adopts PPI-FG Minus 0.55% Oil Pipeline Index for 2026-2031

On April 24, 2026, the Federal Energy Regulatory Commission (“FERC” or “Commission”) issued its final rule in Docket No. RM26-6-000 establishing the oil pipeline index level for the five-year period from July 1, 2026 through June 30, 2031 at Producer Price Index for Finished Goods (“PPI-FG”) minus 0.55%.¹ This level is significantly higher than the PPI-FG minus 1.42% proposed in the November 20, 2025 Notice of Proposed Rulemaking (“NOPR”).²

The Commission’s indexing process has been subject to challenge and the last five-year index was vacated on appeal and resulted in a supplemental rulemaking to manage the fallout. Although agreement around the Commission’s basic indexing framework was clear in this latest order, each Commissioner issued a separate statement, including a rare concurrence by the Chairman and one dissent. There are some policy level disagreements among the Commissioners, and each statement provides specific insights into each member’s thinking and rationale. They are important to read.

The order establishing the index level was voted out with solid reasoning and majority support. In addition, the order lacks the procedural issues that doomed the prior index rehearing order during the last five-year review.

Background

The five-year index is used to set the rates of 86% of all FERC-regulated oil pipelines nationwide. The oil pipeline index is FERC’s response to Congress’s mandate in the Energy Policy Act of 1992 (“EPAct 92”) to implement a “simplified and generally applicable” ratemaking methodology.³ The indexing system that FERC created ensures that the index keeps apace with industry cost trends.⁴

Each year, pipelines adjust their rate ceilings effective July 1 using an index multiplier that the Commission publishes in May, reflecting the past year’s changes in PPI-FG, a government-published index.⁵ Under the Commission’s regulations, pipelines may increase their transportation rates so long as those rates do not exceed their index ceiling levels.⁶ Shippers may challenge a pipeline’s proposed index increase if they can demonstrate that an index-based rate substantially diverges from the pipeline’s actual cost changes.⁷

Although the impact of the index is widespread across pipelines, oil pipeline rates do not have a meaningful impact on gasoline prices at the pump or airfares for ordinary Americans.⁸ In fact, as Chairman Swett recognized, “ordinary Americans’ interests are not served by excessively low pipeline rates” because that “would risk disincentivizing investment in the infrastructure that provides the least expensive and safest method of transporting the energy products our day-to-day lives and economy depend on.”⁹

Increased Index Level from NOPR

The increase in the index level from the NOPR to the final rule was driven by two departures from the NOPR. First, the Commission accepted the Liquid Energy Pipeline Association’s (“LEPA”) proposal to adjust pipelines’ originally reported 2019 return on equity (“ROE”) data to account for the Commission’s 2020 ROE Policy Change. The Commission found that “adjusting the data used to calculate the index level to account for the ROE Policy Change is consistent with the Commission’s findings addressing changes to the Opinion No. 154-B methodology in the most recent 2020 Index Review.”¹⁰ Specifically, LEPA’s experts derived a revised 2019 ROE by averaging each pipeline’s originally filed discounted cash flow (“DCF”) ROE for 2019 with an 8.30% CAPM return calculated by following the proxy group and methodology adopted in Opinion No. 586.¹¹ The Commission explained that this adjustment was necessary “to calculate an index level that accurately tracks actual industry-wide cost changes” because pipelines reported their 2019 and 2024 cost data using different ROE methodologies.¹² The Commission concluded that adjusting the data set “enhances the index calculation by allowing an ‘apples-to-apples’ comparison of pipeline cost data measured using a single set of Opinion No. 154-B cost-of-service policies.”¹³

The Commission recounted shipper objections but found that “the benefits of more accurately measuring actual industry cost changes during the five-year review period by using consistent ratemaking policies support adjusting the reported data.”¹⁴ However, the Commission declined to apply the adjustment to the 20 pipelines that reported an identical ROE for every year of 2019–2024, finding the policy change did not affect how those pipelines reported.

Second, the Commission incorporated certain unopposed minor corrections proposed by Joint Commenters and LEPA, like reflecting a pipeline merger and including certain pipelines in the data set used to calculate the index level.

In addition, the final rule followed the NOPR and continued to apply the Kahn Methodology for trimming the data set of pipeline costs reported on Form No. 6, page 700. In doing so, the Commission calculated each pipeline’s per-barrel-mile cost change, trimmed the data set to the middle 80% of cost changes, computed a composite central tendency (averaging the median, mean, and weighted mean), and compared that composite to the change in PPI-FG over the same period. The Commission found that “it is appropriate to consider more data in measuring industry-wide cost changes rather than less,” noting that “the middle 80% incorporates the cost experiences of 155 pipelines out of 195 pipelines in the full data set, representing 94% of industry-wide barrel-miles.”¹⁵ The Commission explained that the middle 80% “provides a highly robust sample of industry cost trends during the 2019-2024 period” and that using the more inclusive sample “allows the Commission to accurately identify the central tendency of industry-wide cost changes that represents the ‘normal’ cost changes recoverable through the index.”¹⁶ The Commission rejected shipper arguments to trim the data set to the middle 50%, favoring the broader sample, reflecting a “wide spectrum of industry experience while removing data that could distort the index calculation.”¹⁷ The Commission noted that “contrary to Shippers’ claims, using the middle 80% […] will not produce an index level that allows pipelines to recover extraordinary costs.”¹⁸ The Commission also declined to adopt Designated Carriers’ proposal to use the Ferguson Kurtosis test for trimming, finding that such an approach would risk incorporating data from the left and right tails of the distribution that could distort the index level.¹⁹

Concurrences and Dissent

The Chairman and Commissioners expressed varying degrees of comfort with the final rule’s technical determinations, process, and fulfillment of the Commission’s statutory obligations.

• Chairman Swett’s statement focused on statutory and economic considerations. The Chairman first explained that “pipeline transportation costs represent a tiny fraction of the total price of fuel from an end-use consumer’s perspective.”²⁰ Under the “important but limited” charge of the Interstate Commerce Act (“ICA”),²¹ FERC’s role is “to ensure that interstate oil pipeline rates are just and reasonable.”²² She characterized the indexing order as part of a “routine mechanism” to make pipelines whole “by ensuring that the rates they receive for a critical national service reflect industry cost increases.”²³ Chairman Swett also pointed out that FERC’s setting of the five-year index “is a largely technical and data-driven exercise,” guided by concern for “empirical and economic accuracy,” and is focused on the Commission’s charge to ensure that the index keeps apace with industry cost trends.²⁴ She concluded by noting that “[b]roader policy questions about whether our approach to oil pipeline rates under the ICA is well-adapted to today’s economic realities, and whether that overall approach best balances and serves the competing interests at stake, are for another day.”²⁵
• Commissioner Rosner acknowledged that he “may have preferred different decisions on some of the inputs to the index” and expressed that he was sympathetic to Commissioner Chang’s “well-made points.”²⁶ He lamented that the Commission could not achieve unanimity this time, but supported the order as “meeting both our statutory mandate and the need to provide rate clarity for the next five years.”²⁷
• Commissioner See’s concurrence focused on the data trimming issue, explaining that while the Commission has historically used both the middle 50% and middle 80%, the choice of trimming band is “record driven” and “different trimming bands […] could be reasonable in different cycles depending on the nature of industry activity.”²⁸ Commissioner See also noted that if future cycles involve more pipeline construction and expansions, “a narrower trimming band might end up better capturing the ‘normal’ industry experience.”²⁹
• Commissioner LaCerte offered a strong endorsement of the final rule, stating he “completely support[s]” the order.³⁰ He characterized the dissent’s objections as “a fundamental disagreement with the pillars of a periodic index itself”³¹ and argued that “inexactness is an inherent feature of the index, not a flaw.”³² Commissioner LaCerte emphasized that “[i]mprecision, uniformly applied, strikes an appropriate balance between ensuring the index reasonably reflects pipeline cost increases” while “maintaining a simple and generally applicable methodology.”³³
• Commissioner Chang’s lengthy dissent challenged the majority on two core issues: the ROE adjustment and data trimming. On the ROE modification, Commissioner Chang argued that applying a uniform 8.30% CAPM ROE to all pipelines is “conceptually flawed” because it “conflicts with the basic design of the Commission’s ROE policy,” which requires pipeline-specific risk assessments.³⁴ On data trimming, Commissioner Chang advocated for the middle 50%, arguing it “better aligns with the logic and purpose of the indexing methodology” because it removes anomalous data while still capturing 82% of all reported barrel miles.³⁵ She characterized the 2020 Index Review – which used the middle 80% – as an “unusually unstable exception” given that the Commission subsequently reverted to the middle 50% on rehearing (before that order was vacated on procedural grounds).³⁶

Next Steps

The oil pipelines will soon make their index ceiling filings with FERC to be effective July 1, 2026. We will be monitoring for any protests. The order is well-reasoned and supported by substantial evidence, but some entities may still seek rehearing or appellate court review.

¹Five-Year Rev. of the Oil Pipeline Index, 195 FERC ¶ 61,062 (2026).

²Five-Year Rev. of the Oil Pipeline Index, 193 FERC ¶ 61,145 (2025) (NOPR).

³Pub. L. No. 102-486, 1801(a), 106 Stat. 3010 (Oct. 24, 1992), codified at 42 U.S.C. 7172 note.

⁴See Five-Year Rev. of the Oil Pipeline Index, Docket No. RM26-6-000, Concurrence of Chairman Swett, at P 8 (issued Apr. 24, 2026) (“Swett Concurrence”), citing Revisions to Oil Pipeline Reguls. Pursuant to Energy Pol’y Act of 1992, Order No. 561, 58 FR 58753 (Nov. 4, 1993), FERC Stats. & Regs. ¶ 30,985 (1993) (cross-referenced at 65 FERC ¶ 61,109), order on reh’g, Order No. 561-A, 59 FR 40243 (Aug. 8, 1994), FERC Stats. & Regs. ¶ 31,000 (1994) (cross-referenced at 68 FERC ¶ 61,138), aff’d sub nom. Ass’n of Oil Pipe Lines v. FERC, 83 F.3d 1424 (D.C. Cir. 1996) (AOPL I).

⁵18 C.F.R. § 342.3(d)(1) (2025). 

⁶18 C.F.R. § 342.3(a).

⁷18 C.F.R. § 343.2(c).

⁸See Swett Concurrenceat P 1 (“Today’s order should not raise gas prices at the pump, or the price of airfare for ordinary Americans. The reality is that pipeline transportation costs represent a tiny fraction of the total price of fuel from an end-use consumer’s perspective.”).

⁹Id. at P 7 (emphasis in original).

¹⁰Order at P 21.

¹¹Epsilon Trading, LLC v. Colonial Pipeline Co., 185 FERC ¶ 61,126, at PP 125-126 (2023).

¹²Id. at P 22.

¹³Id.

¹⁴Id. at P 27.

¹⁵Id. at P 50.

¹⁶Id. at PP 50-51.

¹⁷Id. at P 52.

¹⁸Id. at P 53.

¹⁹Id. at PP 62-63. For more information on the Ferguson Kurtosis test, see id. at n.148.

²⁰Swett Concurrence at P 1.

²¹49 U.S.C. app. § 1 et seq. (1988).

²²Id. at P 5.

²³Id. at PP 2-3.

²⁴Id. at P 8.

²⁵Id.

²⁶See Five-Year Rev. of the Oil Pipeline Index, Docket No. RM26-6-000, Concurrence of Comm’r Rosner, at P 1 (issued Apr. 24, 2026) (“Rosner Concurrence”).

²⁷Id. at P 4.

²⁸See Five-Year Rev. of the Oil Pipeline Index, Docket No. RM26-6-000, Concurrence of Comm’r See, at PP 3-4 (issued Apr. 24, 2026) (“See Concurrence”).

²⁹Id.

³⁰See Five-Year Rev. of the Oil Pipeline Index, Docket No. RM26-6-000, Concurrence of Comm’r LaCerte, at P 1 (issued Apr. 24, 2026) (“LaCerte Concurrence”).

³¹Id. at P 5.

³²Id. at P 6.

³³Id.

³⁴See Five-Year Rev. of the Oil Pipeline Index, Docket No. RM26-6-000, Dissent of Comm’r Chang, at P 13 (issued Apr. 24, 2026) (“Chang Dissent”).

³⁵Id. at PP 37-38.

³⁶Id. at P 41.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.