Rapid Reaction: FERC Oil Pipeline Index Decision - Pipelines Secure Major Victory as +0.78% Rate Locked Through 2026
Orders End Five-Year Index Dispute – Retroactive Surcharges Authorized, No Mid-Cycle Cut
In a double order issued Thursday, FERC delivered a decisive win for liquids pipelines, closing the most turbulent indexing cycle in decades on terms overwhelmingly favorable to carriers.
No Change for the Final Year – Index Stays PPI-FG +0.78%
FERC formally withdrew the October 2024 Supplemental NOPR and terminated the proceeding. Key points include:
The higher PPI-FG +0.78% index remains in effect through June 30, 2026 and the proposed switch to PPI-FG –0.21% will not occur.
No retroactive reduction in tariff ceilings and no further disruption in the fifth year of the index.
FERC cited “de minimis” remaining impact and the overriding need for regulatory certainty.
All methodological debates (middle-50% vs 80% trimming, 2018 MLP tax-policy treatment) are explicitly preserved for the next scheduled review (2026).
Retroactive Relief Granted: Pipelines Can Recover Retroactive Tariff Difference for 2022–2024
FERC ruled that the D.C. Circuit’s vacatur of the 2022 Rehearing Order has full retroactive effect.
The +0.78% index legally applied during the entire “Locked-In Period” (March 1, 2022 – September 17, 2024).
Pipelines that charged the lower (vacated) rates can now invoice shippers the difference – a sanctioned surcharge on past shipments.
ICA two-year reparations clock does not apply: Shippers argued that pipelines can’t charge extra for most 2022–2024 shipments because the normal two-year statute of limitations has expired. FERC rejected that defense, holding that pipelines can bill for every barrel from that period, no matter how long ago it moved.
Bottom Line - PPI-FG +0.78% Governs 2021–2026; Next Review Starts in 2026
For the full 2021–2026 period, PPI-FG + 0.78% applies both forward and backward. Shippers who benefited from 30 months of lower rates under the vacated 2022 order now face material true-up payments. Barring a shipper challenge in federal court, the 2021–2026 cycle has finally concluded.
The next battlefield is already in sight: the regular five-year review using 2020–2024 data, which will set the index starting July 1, 2026. We crunched the numbers on the potential implications of the 2026 index in a video from September.