On April 24, 2026, the Federal Energy Regulatory Commission (FERC) issued its Final Rule in the Five-Year Review of the Oil Pipeline Index, establishing the rate-ceiling adjustment index at the Producer Price Index for Finished Goods minus 0.55 percent (PPI-FG − 0.55%) for the five-year period commencing July 1, 2026, and running through June 30, 2031. The order, Five-Year Review of the Oil Pipeline Index, 195 FERC ¶ 61,062, Docket No. RM26-6-000, was published in the Federal Register on April 28, 2026, and takes legal effect June 29, 2026.
The Final Rule departs from FERC's November 20, 2025 Notice of Proposed Rulemaking, which had proposed PPI-FG − 1.42%. The order was adopted on a 4-1 vote, with Commissioner Judy W. Chang dissenting in favor of PPI-FG − 1.68%. Chairman Laura V. Swett, and Commissioners David Rosner, Lindsay S. See, and David A. LaCerte each issued separate concurrences. No commenter in the docket — neither pipeline-aligned nor shipper-aligned — supported the index level FERC ultimately adopted.
Under the Energy Policy Act of 1992, FERC must establish a simplified and generally applicable ratemaking methodology for interstate oil pipelines subject to Interstate Commerce Act regulation, including pipelines transporting natural gas liquids and refined petroleum products. FERC implemented that mandate in 1993 through Order No. 561, 58 FR 58753 (Nov. 4, 1993), and codified the indexing methodology at 18 C.F.R. § 342.3. The index allows pipelines to adjust rate ceilings annually rather than file individual cost-of-service proceedings. Every five years, FERC reviews the index using the Kahn Methodology, comparing pipeline cost changes against PPI-FG over the prior five-year period.
The index governs approximately 86 percent of interstate oil pipeline rates. Many intrastate pipelines, terminal operators, and other participants in the oil pipeline value chain have embedded the FERC methodology into their commercial contracts to account for inflation, extending the rule's reach well beyond FERC-jurisdictional carriers.
The 2020 policy statement requiring a blend of the Discounted Cash Flow methodology with the Capital Asset Pricing Model for return on equity calculations created a discontinuity in the cost data underlying this review. The 2024 D.C. Circuit decision in Liquid Energy Pipeline Association v. FERC, 109 F.4th 543 (D.C. Cir. 2024) (LEPA v. FERC) vacated FERC's prior Rehearing Order on Administrative Procedure Act grounds, prompted FERC to reinstate the prior PPI-FG + 0.78% index, and set the procedural framework FERC now operates under.
The Final Rule resolves three contested issues that drove the index calculation.
First, FERC adopted the Liquid Energy Pipeline Association's proposal to adjust 2019 cost data to account for the 2020 ROE policy change. Pipelines filed 2019 data before the policy shift and 2024 data after, producing a methodological mismatch. The Commission applied a uniform 8.30 percent CAPM return, averaged with each pipeline's originally filed DCF return, to permit comparison across the review period. FERC characterized this as consistent with its 2020 Index Review treatment of the Income Tax Policy Change.
Second, FERC declined to incorporate resubmitted 2019 cost data filed by 61 pipelines in April through June 2025 — five years after the original filing deadline. The Commission found the late submissions lacked adequate supporting calculations, included unexplained changes to non-ROE cost components, and raised bias concerns because only a subset of pipelines refiled.
Third, FERC adopted the NOPR proposal to trim the data set to the middle 80 percent of cost changes rather than the middle 50 percent. The Commission reasoned that the broader sample captured 94 percent of industry barrel-miles compared to 84 percent under the narrower approach. The shipper community had argued for the middle 50 percent, which would have produced a lower index.
Commissioner Chang's dissent challenged each of these choices, arguing that applying a uniform CAPM-derived ROE across the industry conflicts with FERC's own 2020 rejection of a similar shipper proposal, and that the middle 50 percent is better supported by precedent and less susceptible to upward bias from the data set's right-skewed distribution.
Effective July 1, 2026, pipelines using the indexing methodology may adjust rate ceilings annually at PPI-FG − 0.55%. At 3 percent inflation, ceilings rise approximately 2.45 percent that year. The new index is lower than the expiring PPI-FG + 0.78% index, but materially higher than the NOPR proposal. Commissioner Rosner's concurrence quantified the difference between the NOPR and the Final Rule at approximately $4.5 billion in cumulative authorized pipeline revenues over the five-year period, or roughly 2.5 percent of estimated industry-wide revenue.
Pipelines with rates currently at the existing ceiling will face a rate reduction. Pipelines experiencing costs that substantially diverge from the index retain access to cost-of-service rate filings. Pipelines lacking sufficient market power may pursue market-based rate authority on an evidentiary showing, and pipelines whose system shippers all agree may charge settlement rates.
Appeals are likely. Litigants may challenge the uniform ROE adjustment, the data trimming decision, and the rejection of the resubmitted 2019 data, among other issues. The procedural posture, however, presents an unusual constraint.
In prior cycles, FERC issued the NOPR at least one year before the index effective date and the final rule at least six months in advance, leaving time for rehearing at the Commission and judicial review at the U.S. Court of Appeals for the District of Columbia Circuit. In this cycle, the NOPR issued in late November 2025 and the Final Rule issued on April 24, 2026 — the latest practicable date before the July 1, 2026 effective date once the customary week for Federal Register publication and the 60-day notice period are accounted for.
The Interstate Commerce Act does not require rehearing at the agency level before judicial review. Litigants may therefore forgo rehearing and petition the D.C. Circuit directly. In LEPA v. FERC, the D.C. Circuit explained that once the Oil Pipeline Index becomes final — when it takes legal effect on July 1, 2026 — any subsequent amendment must proceed through Administrative Procedure Act notice-and-comment. Even if FERC were inclined to revise the index in response to rehearing arguments, the inability to issue a unified rehearing order before July 1 would constrain the Commission from adjusting the index without a fresh rulemaking. The 4-1 split on the Final Rule itself makes a unified rehearing order improbable.
The Final Rule binds an industry that has been operating without methodological clarity since the 2024 LEPA decision. For refiners, shippers, terminal operators, and pipeline carriers, the immediate task is to model rate ceiling movement under the new index against current contract terms, particularly contracts that incorporate FERC's indexing methodology by reference. For carriers, the question is whether existing rates clear the new ceiling or require reduction. For shippers, the question is whether to mount an appellate challenge — and on what timeline.
Counsel coordinating regulatory exposure across outside general counsel engagements in energy and infrastructure should anticipate that the rule's contested methodological choices will generate litigation that extends beyond July 1, 2026. The pending ExxonMobil Oil Corporation v. FERC, No. 26-1014 (D.C. Cir. filed Jan. 16, 2026), challenging FERC's 2024 remand order and November 2025 rehearing order on the prior index cycle, demonstrates that the prior cycle's litigation has not concluded. The new cycle's litigation has not yet begun.
