[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Proposed Rules]
[Pages 12888-12901]
[FR Doc No: 2018-05669]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 154, 260, & 284

[Docket No. RM18-11-000]

Interstate and Intrastate Natural Gas Pipelines; Rate Changes
Relating to Federal Income Tax Rate

AGENCY:  Federal Energy Regulatory Commission, Department of Energy.

ACTION:  Notice of proposed rulemaking.

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SUMMARY:  The Federal Energy Regulatory Commission is proposing a
process that will allow it to determine which jurisdictional natural
gas pipelines may be collecting unjust and unreasonable rates in light
of the recent reduction in the corporate income tax rate in the Tax
Cuts and Jobs Act and changes to the Commission's income tax allowance
policies following the United Airlines, Inc. v. FERC decision.

DATES:  Comments are due April 25, 2018.

ADDRESSES:  Comments, identified by docket number, may be filed
electronically at http://www.ferc.gov in acceptable native applications
and print-to-PDF, but not in scanned or picture format. For those
unable to file electronically, comments may be filed by mail or hand-
delivery to: Federal Energy Regulatory Commission, Secretary of the
Commission, 888 First Street NE, Washington, DC 20426. The Comment
Procedures Section of this document contains more detailed filing
procedures.

FOR FURTHER INFORMATION CONTACT:
Adam Eldean (Legal Information), Office of the General Counsel, 888
First Street NE, Washington, DC 20426,<PHONE_NUMBER>,
[email protected].

Seong-Kook Berry (Technical Information), Office of Energy Market
Regulation, 888 First Street NE, Washington, DC 20426,<PHONE_NUMBER>,
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

                                                         Paragraph Nos.

I. Introduction......................................                  1
II. Background.......................................                  6
    A. Tax Cuts and Jobs Act.........................                  6
    B. United Airlines...............................                  9
    C. Overview of Natural Gas Rates.................                 11
        1. The Natural Gas Act.......................                 11
        2. The Natural Gas Policy Act of 1978........                 17
    D. Requests for Commission Action................                 20
III. Discussion......................................                 24
    A. Interstate Natural Gas Pipelines With Cost-                    26
     Based Rates.....................................
        1. One-Time Report on Rate Effect of the Tax                  32
         Cuts and Jobs Act...........................
        2. Additional Filing Options for Natural Gas                  41
         Pipelines...................................
        a. Limited NGA Section 4 Filing..............                 42
        b. Commitment To Make General NGA Section 4                   47
         Filing......................................
        c. Statement Explaining Why Adjustment in                     48
         Rates Is Not Needed.........................
        d. Take No Action............................                 51
    B. Initial Rates Under NGA Section 7.............                 52
    C. NGPA Section 311 and Hinshaw Pipelines........                 55
IV. Implementation...................................                 62
V. Regulatory Requirements...........................                 66
    A. Information Collection Statement..............                 66
    B. Environmental Analysis........................                 79
    C. Regulatory Flexibility Act Certification......                 80
    D. Comment Procedures............................                 83
    E. Document Availability.........................                 87

I. Introduction

    1. On December 22, 2017, the President signed into law the Tax Cuts
and Jobs Act.\1\ The Tax Cuts and Jobs Act, among other things, lowers
the federal corporate income tax rate from 35 percent to 21 percent,
effective January 1, 2018. This means that, beginning January 1, 2018,
companies subject to the Commission's jurisdiction will compute income
taxes owed to the Internal Revenue Service (IRS) based on a 21 percent
tax rate. The tax rate reduction will result in less corporate income
tax expense going forward.\2\
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    \1\ An Act to provide for reconciliation pursuant to titles II
and V of the concurrent resolution on the budget for fiscal year
2018, Public Law 115-97, 131 Stat. 2054 (2017) (Tax Cuts and Jobs
Act).
    \2\ See id. 11011, 131 Stat. at 2063.
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    2. Concurrently with the issuance of this Notice of Proposed
Rulemaking, the Commission is issuing a Revised Policy Statement on
Treatment of Income Taxes (Revised Policy Statement) \3\ and an Order
on Remand \4\ in response to the decision of the United States Court of
Appeals for the District of Columbia Circuit (D.C. Circuit) in United
Airlines.\5\ The Revised Policy Statement explains that a double
recovery results from granting a Master Limited Partnership (MLP) an
income tax allowance and a discounted cash flow (DCF) return on equity
(ROE), and accordingly establishes a policy that MLPs are not permitted
to recover an income tax allowance in their cost of service. The
Revised Policy Statement also explains that other partnership and pass-
through entities not organized as an MLP must, if claiming an income
tax allowance, address the D.C. Circuit's double-recovery concern.\6\
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    \3\ Inquiry Regarding the Commission's Policy for Recovery of
Income Tax Costs, 162 FERC ] 61,227 (2018) (Revised Policy
Statement).
    \4\ SFPP, L.P., Opinion No. 511-C, 162 FERC ] 61,228 (2018)
(Remand Order).
    \5\ United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir.
2016).
    \6\ Revised Policy Statement, 162 FERC ] 61,227.
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    3. In response to the Tax Cuts and Jobs Act and the Revised Policy
Statement following the United Airlines decision, the Commission
proposes to require interstate natural gas pipelines to file an
informational filing with the Commission pursuant to sections 10 and 14
of the Natural Gas Act (NGA) (One-time Report on Rate Effect of the Tax
Cuts and Jobs Act).\7\ The One-time Report is designed to collect
financial information to evaluate the impact of the Tax Cuts and Jobs
Act and the Revised Policy Statement on interstate natural gas
pipelines' revenue requirement. In addition to the One-time Report, the
Commission proposes to provide four options for each interstate natural
gas pipeline to voluntarily make a filing to address the changes to the
pipeline's recovery of tax costs, or explain why no action is needed:
(1) File a limited NGA section 4 filing to reduce the pipeline's rates
to reflect the decrease in the federal corporate income tax rate
pursuant to the Tax Cuts and Jobs Act and the elimination of the income
tax allowance for MLPs consistent with the Revised Policy Statement,
(2) make a commitment to file a general NGA section 4 rate case in the
near future, (3) file a statement explaining why an adjustment to its
rates is not needed, or (4) take no action other than filing the One-
time Report. If an interstate natural gas pipeline does not choose
either of the first two options, the Commission will consider, based on
the information in the One-time Report and comments by interested
parties, whether to issue an order to show cause under NGA section 5
requiring the pipeline either to reduce its rates to reflect the income
tax reduction or explain why it should not be required to do so.
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    \7\ The One-time Report on Rate Effect of the Tax Cuts and Jobs
Act is referred to interchangeably as ``One-time Report'' or ``FERC
Form No. 501-G'' in this Notice of Proposed Rulemaking.
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    4. The Commission proposes to establish a staggered schedule for
interstate natural gas pipelines to file the One-time Report and choose
one of the four options described above. The Commission anticipates
that the deadlines for these filings will be in the late summer and
early fall of this year. The Commission encourages each pipeline to
meet with its customers as soon as possible to discuss whether and how
its rates should be modified in light of the Tax Cuts and Jobs Act and
the

Revised Policy Statement, and whether settlement is possible.
Interstate natural gas pipelines that file general NGA section 4 rate
cases or pre-packaged uncontested rate settlements before the deadline
for their One-time Report will be exempted from making the One-time
Report.\8\
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    \8\ In addition, interstate pipelines whose rates are being
investigated under NGA section 5 need not file the One-time Report.
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    5. The Commission proposes to provide separate procedures for
intrastate natural gas pipelines performing interstate service pursuant
to section 311 of the Natural Gas Policy Act of 1978 (NGPA) and Hinshaw
pipelines performing interstate transportation pursuant to a limited
jurisdiction certificate under Sec.  284.224 of the Commission's
regulations. The Commission proposes to require these pipelines to file
a new rate election under Sec.  284.123(b) of the Commission's
regulations if their rates for intrastate service are reduced to
reflect the Tax Cuts and Jobs Act.

II. Background

A. Tax Cuts and Jobs Act

    6. On December 22, 2017, the President signed the Tax Cuts and Jobs
Act. The Tax Cuts and Jobs Act, among other things, lowers the federal
corporate income tax rate from 35 percent to 21 percent, effective
January 1, 2018. This means that, beginning January 1, 2018, companies
subject to the Commission's jurisdiction will compute income taxes owed
to the IRS based on a 21 percent tax rate. The tax rate reduction will
result in less corporate income tax expense going forward.
    7. The tax rate reduction will also result in a reduction in
accumulated deferred income taxes (ADIT) on the books of rate-regulated
companies. The amount of the reduction to ADIT that was collected from
customers but is no longer payable to the IRS is excess ADIT and should
be flowed back to ratepayers under general ratemaking principles. The
Tax Cuts and Jobs Act does not prevent such flow back, although it does
include rules on how quickly companies may reduce their excess ADIT.
Specifically, the Tax Cuts and Jobs Act indicates that rate-regulated
companies generally should use the average rate assumption method when
flowing excess ADIT back to customers.\9\ Rate-regulated companies must
follow this requirement to be considered in compliance with
normalization. This means that any flow back of ADIT faster than the
requirement imposed by the Tax Cuts and Jobs Act (e.g., a one-time
large credit to ratepayers or a flow-back method that is over a
relatively short period of time) would constitute a normalization
violation and may result in unfavorable tax consequences.\10\
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    \9\ See Tax Cuts and Jobs Act 13001, 131 Stat. at 2096.
    \10\ Id. 13001(b)(6)(A), 131 Stat. at 2100 (``If . . . the
taxpayer does not use a normalization method of accounting for the
corporate rate reductions provided in the amendments made by this
section . . . the taxpayer's tax for the taxable year shall be
increased by the amount by which it reduces its excess tax reserve
more rapidly than permitted under a normalization method of
accounting.'').
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    8. The Tax Cuts and Jobs Act also establishes a 20 percent
deduction, with several exceptions, of ``qualified business income''
from certain pass-through businesses (such as a partnership or S
corporation) for a taxpayer other than a corporation.\11\ The deduction
reduces taxable income, not adjusted gross income.
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    \11\ See id. 11011, 131 Stat. at 2063.
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B. United Airlines

    9. In United Airlines, the D.C. Circuit held that the Commission
failed to demonstrate that allowing SFPP, L.P. (SFPP), an MLP, to
recover both an income tax allowance and the DCF methodology rate of
return does not result in a double recovery of investors' tax costs.
Accordingly, the D.C. Circuit remanded the underlying rate proceeding
to the Commission for further consideration. While the D.C. Circuit's
decision directly addressed the rate case filed by SFPP, the United
Airlines double-recovery analysis referred to partnerships generally.
Recognizing the potentially industry-wide ramifications, the Commission
issued a Notice of Inquiry in Docket No. PL17-1-000, soliciting
comments on how to resolve any double recovery resulting from the rate
of return policies and the policy permitting an income tax allowance
for partnership entities.\12\
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    \12\ Inquiry Regarding the Commission's Policy for Recovery of
Income Tax Costs, Notice of Inquiry, 157 FERC ] 61,210 (2016).
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    10. Concurrently with the issuance of this Notice of Proposed
Rulemaking, the Commission is issuing both (a) an Order on Remand in
the SFPP rate case \13\ and (b) a Revised Policy Statement in Docket
No. PL17-1.\14\ The Revised Policy Statement explains that a double
recovery results from granting an MLP an income tax allowance and a DCF
ROE. Accordingly, the Commission will no longer permit MLPs to recover
an income tax allowance in their cost of service. The Revised Policy
Statement also explains that while all partnerships seeking to recover
an income tax allowance in a cost-of-service rate case will need to
address the United Airlines double-recovery concern, the Commission
will address the application of United Airlines to these non-MLP
partnership forms as those issues arise in subsequent proceedings.
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    \13\ Remand Order, 162 FERC ] 61,228.
    \14\ Revised Policy Statement, 162 FERC ] 61,227.
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C. Overview of Natural Gas Rates

1. The Natural Gas Act
    11. As required by Sec.  284.10 of the Commission's
regulations,\15\ interstate natural gas pipelines generally have stated
rates for their services, which are approved in a rate proceeding under
NGA sections 4 or 5 and remain in effect until changed in a subsequent
section 4 or 5 proceeding. The stated rates recover all components of
the pipeline's cost of service, including the pipeline's federal income
taxes, in a single, overall rate.\16\ When pipelines file under NGA
section 4 to change their rates, the Commission requires the pipeline
to provide detailed support for all the components of its cost of
service, including federal income taxes.\17\
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    \15\ 18 CFR 284.10 (2017).
    \16\ Most pipeline tariffs include tracking mechanisms for the
recovery of fuel and lost and unaccounted for gas, but generally
pipelines do not separately track any other cost.
    \17\ 18 CFR 154.312 and 154.313 (2017). The pipeline must show
the computation of its allowance for federal income taxes in
Schedule H-3.
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    12. The Commission generally does not permit pipelines to change
any single component of their cost of service outside of a general NGA
section 4 rate case.\18\ A primary reason for this policy is that,
while one component of the cost of service may have increased, others
may have declined. In a general NGA section 4 rate case, all components
of the cost of service may be considered and any decreases in an
individual component can be offset against increases in other cost
components.\19\ For the same reasons, the Commission reviews all of a
pipeline's costs and revenues when it investigates whether a pipeline's
existing rates are unjust and unreasonable under NGA section 5.\20\
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    \18\ See, e.g., Trunkline Gas Co., 142 FERC ] 61,133, at P 24
n.28 (2013).
    \19\ ANR Pipeline Co., 110 FERC ] 61,069, at P 18 (2005).
    \20\ Natural Gas Pipeline Co. of America LLC, 158 FERC ] 61,044
(2017); Wyoming Interstate Co., L.L.C., 158 FERC ] 61,040 (2017);
Tuscarora Gas Transmission Co., 154 FERC ] 61,030 (2016); Iroquois
Gas Transmission System, L.P., 154 FERC ] 61,028 (2016); Empire
Pipeline, Inc., 154 FERC ] 61,029 (2016); Columbia Gulf
Transmission, LLC, 54 FERC ] 61,027 (2016); Wyoming Interstate Co.,
L.L.C., 141 FERC ] 61,117 (2012); Viking Gas Transmission Co., 141
FERC ] 61,118 (2012); Bear Creek Storage Co., L.L.C., 137 FERC ]
61,134 (2011); MIGC LLC, 137 FERC ] 61,135 (2011); ANR Storage Co.,
137 FERC ] 61,136 (2011); Ozark Gas Transmission, L.L.C., 133 FERC ]
61,158 (2010); Kinder Morgan Interstate Gas Transmission LLC, 133
FERC ] 61,157 (2010); Northern Natural Gas Co., 129 FERC ] 61,159
(2009); Great Lakes Gas Transmission Ltd. P'ship, 129 FERC ] 61,160
(2009); Natural Gas Pipeline Co. of America LLC, 129 FERC ] 61,158
(2009).

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    13. NGA sections 4 and 5 proceedings are routinely resolved through
a settlement agreement between the pipeline and its customers. Most of
the agreements are ``black box'' settlements that do not provide
detailed cost-of-service information. In addition, in lieu of
submitting a general NGA section 4 rate case, a pipeline may submit a
pre-packaged settlement to the Commission. When pipelines file pre-
packaged settlements, they generally do not include any cost and
revenue data in the filing. The Commission will approve an uncontested
settlement offer upon finding that ``the settlement appears to be fair
and reasonable and in the public interest.'' \21\ Many settlements
include moratorium provisions that limit the ability of the pipeline to
file to revise its rates, or for the shippers to file a section 5
complaint, for a particular time period. In addition, many settlements
include ``come-back provisions,'' which require a pipeline to file a
NGA section 4 filing no later than a particular date.
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    \21\ 18 CFR 385.602(g)(3).
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    14. The Commission has granted most interstate natural gas
pipelines authority to negotiate rates with individual customers.\22\
Such rates are not bound by the maximum and minimum recourse rates in
the pipeline's tariff.\23\ In order to be granted negotiated rate
authority, a pipeline must have a cost-based recourse rate on file with
the Commission, so a customer always has the option of entering into a
contract at the cost-based recourse rate rather than a negotiated rate
if it chooses. The pipeline must file each negotiated rate agreement
with the Commission. In addition, pipelines are also permitted to
selectively discount their rates and the Commission approves the
maximum recourse rate. While negotiated rates may be above the maximum
recourse rate, discount rates must remain below the maximum rate. The
maximum recourse rate is the ceiling rate for all long-term capacity
releases, including capacity releases to replacement shippers by firm
customers with negotiated rates.
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    \22\ See Natural Gas Pipeline Negotiated Rate Policies and
Practices; Modification of Negotiated Rate Policy, 104 FERC ] 61,134
(2003), order on reh'g and clarification, 114 FERC ] 61,042,
dismissing reh'g and denying clarification, 114 FERC ] 61,304
(2006).
    \23\ Northern Natural Gas Co., 105 FERC ] 61,299, at PP 15-16
(2003).
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    15. Changes to a pipeline's recourse rates occurring under NGA
sections 4 and 5 do not affect a customer's negotiated rate, because
that rate is negotiated as an alternative to the customer taking
service under the recourse rate. However, a shipper receiving a
discounted rate may experience a reduction as a result of the outcome
of a rate proceeding if the recourse rate is reduced below the
discounted rate. The prevalence of negotiated and discount rates varies
among pipelines, depending upon the competitive situation.
    16. The Commission also grants interstate natural gas pipelines
market-based rate authority when the pipeline can show it lacks market
power for the specific services or when the applicant or the Commission
can mitigate the market power with specific conditions.\24\ A pipeline
that has been granted market-based rate authority will have an approved
tariff on file with the Commission but will not have a Commission
approved rate. Rather, all rates for services are negotiated by the
pipeline and its customers. Currently, 29 interstate natural gas
pipelines have market-based rate authority for storage and
interruptible hub services (such as wheeling and park and loan
services), and one pipeline (Rendezvous Pipeline Company, LLC) has
market-based rate authority for transportation services.
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    \24\ Alternatives to Traditional Cost of Service Ratemaking for
Natural Gas Pipelines and Regulation of Negotiated Transportation
Services of Natural Gas Pipelines, 74 FERC ] 61,076 (1996)
(Negotiated Rate Policy Statement); see also Rate Regulation of
Certain Natural Gas Storage Facilities, Order No. 678, FERC Stats. &
Regs. ] 31,220 (2006), reh'g denied, Order No. 678-A, 117 FERC ]
61,190 (2006).
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2. The Natural Gas Policy Act of 1978
    17. NGPA section 311 authorizes the Commission to allow intrastate
pipelines to transport natural gas ``on behalf of'' interstate
pipelines or local distribution companies served by interstate
pipelines.\25\ NGPA section 311(a)(2)(B) provides that the rates for
interstate transportation provided by intrastate pipelines shall be
``fair and equitable and may not exceed an amount which is reasonably
comparable to the rates and charges which interstate pipelines would be
permitted to charge for providing similar transportation service.''
\26\ In addition, NGPA section 311(c) provides that any authorization
by the Commission for an intrastate pipeline to provide interstate
service ``shall be under such terms and conditions as the Commission
may prescribe.'' \27\ Section 284.224 of the Commission's regulations
provides for the issuance of blanket certificates under section 7 of
the NGA to Hinshaw pipelines \28\ to provide open access transportation
service ``to the same extent that and in the same manner'' as
intrastate pipelines are authorized to perform such service.\29\ The
Commission regulates the rates for interstate service provided by
Hinshaw pipelines under NGA sections 4 and 5.
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    \25\ 15 U.S.C. 3371 (2012).
    \26\ 15 U.S.C. 3371(a)(2)(B) (2012).
    \27\ 15 U.S.C. 3371(c)(2012).
    \28\ Section 1(c) of the NGA, 15 U.S.C. 717(c), exempts from the
Commission's NGA jurisdiction those pipelines which transport gas in
interstate commerce if: (1) They receive natural gas at or within
the boundary of a state, (2) all the gas is consumed within that
state, and (3) the pipeline is regulated by a state Commission. This
is known as the Hinshaw exemption.
    \29\ See 18 CFR 284.224 (2017).
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    18. Section 284.123 of the Commission's regulations provides
procedures for section 311 and Hinshaw pipelines to establish fair and
equitable rates for their interstate services.\30\ Section 284.123(b)
allows intrastate pipelines an election of two different methodologies
upon which to base their rates for interstate services.\31\ First,
Sec.  284.123(b)(1) permits an intrastate pipeline to elect to base its
rates on the methodology or rate(s) approved by a state regulatory
agency included in an effective firm rate for city-gate service.
Second, Sec.  284.123(b)(2) provides that the pipeline may petition for
approval of rates and charges using its own data to show its proposed
rates are fair and equitable. The Commission has established a policy
of reviewing the rates of section 311 and Hinshaw pipelines every five
years.\32\ Section 311 pipelines not using state-approved rates must
file a new rate case every five years, and Hinshaw pipelines must file
a cost and revenue study every five years. Intrastate pipelines using
state-approved rates that have not changed since the previous five-year
filing are only required to make a filing certifying that those rates
continue to meet the requirements of Sec.  284.123(b)(1) on the same
basis on which they were approved. Conversely, if the state-approved
rate used for the election is changed at any time, the section 311 or
Hinshaw pipeline must file a new rate election pursuant to Sec.
284.123(b) for its interstate rates no later than 30 days after the
changed rate becomes effective.
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    \30\ 18 CFR 284.123 (2017).
    \31\ 18 CFR 284.123(b) (2017).
    \32\ Contract Reporting Requirements of Intrastate Natural Gas
Companies, Order No. 735, FERC Stats. & Regs. ] 31,310, at P 92,
order on reh'g, Order No. 735-A, FERC Stats. & Regs. ] 31,318
(2010); see also Hattiesburg Industrial Gas Sales, L.L.C., 134 FERC
] 61,236 (2011) (imposing a five-year rate review requirement on
Hattiesburg Industrial Gas Sales, L.L.C.).
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    19. An intrastate pipeline may file to request authorization to
charge market-

based rates under subpart M of part 284 of the Commission's
regulations. The same requirements for showing a lack of market power
apply to intrastate pipelines as for interstate pipelines. The
Commission has granted market-based rate authority for storage and hub
services to 19 of the 112 intrastate pipelines with subpart C of part
284 tariffs.

D. Requests for Commission Action

    20. Several entities \33\ have sent letters to the Commission
requesting that the Commission act to ensure that the economic benefits
related to the reduction in the federal corporate income tax rate are
passed through to customers. These entities request, among other
things, that the Commission institute investigations into the justness
and reasonableness of all applicable rates recovered by public
utilities and/or pipelines subject to the Commission's jurisdiction
with respect to the revenue requirement for federal corporate income
taxes and explore ways to implement voluntary rate reductions or
refunds. In response to several of these letters, the Interstate
Natural Gas Association of America sent a letter to Chairman McIntyre
arguing that suggestions for a generic order compelling pipelines to
adjust an individual component of their respective recourse rates will,
in many cases, not yield a just and reasonable result because of the
Commission's policy preference for complete rate reviews, the limits
the Mobile-Sierra doctrine places on the Commission's ability to reopen
rates resulting from freely negotiated agreements, the existence of
negotiated ``black-box'' settlements that do not specify a particular
tax allowance, and the Internal Revenue Code's normalization rules that
a pipeline would violate if excess ADIT was returned to ratepayers more
rapidly than allowed by the required amortization methods.\34\
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    \33\ These entities include State Advocates (States, state
agencies, and state consumer advocates), Organization of PJM States,
Inc., Organization of MISO States, American Public Gas Association,
Process Gas Consumers Group, Natural Gas Supply Association, Natural
Gas Indicated Shippers, Liquids Shippers Group, Oklahoma Attorney
General, Gordon Gooch (pro se consumer), Advanced Energy Buyers
Group, National Association of State Energy Officials, The R-Street
Institute, Office of the Ohio Consumers' Counsel, and the Governor
of Delaware.
    \34\ Letter to Chairman McIntyre by the Interstate Natural Gas
Association of America in response to letters by the American Public
Gas Association, FERC eLibrary Accession No. 20180130-4005 (filed
Jan. 30, 2018).
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    21. In addition, on January 31, 2018 in Docket No. RP18-415-000,
several trade associations and companies representing a coalition of
the natural gas industry that are dependent upon services provided by
interstate natural gas pipeline and storage companies (Petitioners)
\35\ filed a petition requesting that the Commission take immediate
action under sections 5(a), 10(a), and 14(a) and (c) of the NGA to
initiate show cause proceedings against all interstate natural gas
pipeline and storage companies (unless barred by a settlement
moratorium) and require each company to submit a cost and revenue study
to demonstrate that their existing jurisdictional rates continue to be
just and reasonable following the passage of the Tax Cuts and Jobs Act.
Several parties filed comments in support of the petition. Petitioners
argue that the following companies should be excluded from the show
cause proceedings: (1) Section 311 pipelines (which Petitioners argue
are otherwise required to file updated rate justifications on an
ongoing basis), and (2) natural gas pipeline and storage companies that
are obligated to file a NGA section 4 rate case in 2018.\36\
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    \35\ Petitioners include the following trade associations:
American Forest and Paper Association, American Public Gas
Association, Independent Petroleum Association of America, Natural
Gas Supply Association, and Process Gas Consumers Group. Petitioners
also include the following companies: Aera Energy LLC, Anadarko
Energy Services Company, Chevron U.S.A. Inc., ConocoPhillips
Company, Hess Corporation, Petrohawk Energy Corporation, WPX Energy
Marketing, LLC, and XTO Energy Inc.
    \36\ Petitioners, Filing, Docket No. RP18-415-000, at 3-4 (filed
Jan. 31, 2018).
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    22. Petitioners argue that the Commission should require an
immediate rate reduction, based upon the Commission's calculations, if
a filed cost and revenue study demonstrates that the revenues from
services offered on the interstate natural gas pipeline or storage
company's system exceed the costs following the adjustments to account
for changes to the tax laws implemented under the Tax Cuts and Jobs
Act. Petitioners contend that, if a pipeline or storage company
believes that it has a Commission-approved settlement that would exempt
it from such a rate analysis (e.g., NGA section 5 rate moratorium), the
Commission should require such company to provide evidence to that
effect. Petitioners argue that if the Commission determines that a
settlement prohibits a rate change during the term of the settlement,
then the show cause order would be applicable to the company at the
termination of any applicable NGA section 5 rate moratorium provisions
of the settlement. Petitioners also argue that if a pipeline or storage
company believes that any of its contracts are exempt from Commission-
ordered rate adjustments (e.g., discounted or negotiated rate
contracts), the Commission should require such company to identify
those contracts and provide evidence to that effect, and permit shipper
counterparties the opportunity to contest such a claim.\37\
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    \37\ Id. at 5-6, 12-19.
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    23. Several parties filed answers in opposition to the
petition.\38\ These parties argue that the petition asks the Commission
to circumvent the statutory requirements of section 5 of the NGA by
unlawfully shifting the burden of proof regarding the justness and
reasonableness of pipeline rates and denying pipelines their right to
an evidentiary hearing.\39\ They contend that NGA section 5 and
Commission precedent does not generally allow for piecemeal review of a
single component of a filed rate considering that a fundamental tenet
of ratemaking is that the end result, not any individual component, is
what determines whether rates are just and reasonable.\40\ They also
argue that, given the unique and different circumstances across all
pipeline rates including the presence of discounted and negotiated
rates, ``black box'' settlements, and moratoria and rate case come-back
provisions, a one-size-fits-all approach to modify rates for every
pipeline is not appropriate.\41\
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    \38\ Parties in opposition to the petition include: Interstate
Natural Gas Association of America, TransCanada Corporation,
Boardwalk Pipeline Partners, LP, and Kinder Morgan Entities.
    \39\ Interstate Natural Gas Association of America, Answer,
Docket No. RP18-415-000, at 4-6 (filed Feb. 12, 2018); TransCanada
Corporation, Answer, Docket No. RP18-415-000, at 4-9 (filed Feb. 12,
2018).
    \40\ Interstate Natural Gas Association of America, Answer,
Docket No. RP18-415-000, at 9-10 (filed Feb. 12, 2018); TransCanada
Corporation, Answer, Docket No. RP18-415-000, at 9-10 (filed Feb.
12, 2018); Kinder Morgan Entities, Answer, Docket No. RP18-415-000,
at 7-11 (filed Feb. 12, 2018).
    \41\ Interstate Natural Gas Association of America, Answer,
Docket No. RP18-415-000, at 11-18 (filed Feb. 12, 2018); TransCanada
Corporation, Answer, Docket No. RP18-415-000, at 2-3, 11-12 (filed
Feb. 12, 2018); Boardwalk Pipeline Partners, LP,
    Answer, Docket No. RP18-415-000, at 1-8 (filed Feb. 12, 2018);
Kinder Morgan Entities, Answer, Docket No. RP18-415-000, at 3-7
(filed Feb. 12, 2018).
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III. Discussion

    24. The Tax Cuts and Jobs Act, together with the Revised Policy
Statement, reduce certain costs eligible for recovery in the rates of
every natural gas pipeline subject to the Commission's jurisdiction.
The Tax Cuts and Jobs Act reduces the federal income tax rate of all
pipelines organized as corporations. The Revised Policy Statement
establishes a policy that all pipelines organized as MLPs should
eliminate any income tax

allowance from their rates.\42\ The Commission believes that interstate
natural gas pipelines and intrastate natural gas pipelines providing
interstate service should flow through the benefits of the corporate
income tax reduction and elimination of MLP income tax allowances to
consumers to the extent that their rates would otherwise over-recover
their costs of service. Therefore, the Commission is initiating this
rulemaking proceeding to consider the most efficient and expeditious
method of accomplishing this goal consistent with the requirements of
the NGA and the NGPA. Specifically, the Commission proposes to revise
its regulations to (1) require interstate natural gas pipelines to file
a One-time Report concerning the effects of these tax changes, (2)
permit interstate natural gas pipelines to voluntarily submit a limited
NGA section 4 filing to reflect the decrease in the federal corporate
income tax rate pursuant to the Tax Cuts and Jobs Act and the
elimination of the income tax allowance for MLPs consistent with the
Revised Policy Statement,\43\ and (3) require NGPA section 311 and
Hinshaw pipelines to modify their rates for interstate service if they
modify their rates for intrastate service to reflect the tax changes.
These proposals are intended to encourage natural gas pipelines to
voluntarily reduce their rates to the extent the tax changes result in
their over-recovering their cost of service, while also providing the
Commission and stakeholders information necessary to take targeted
actions under NGA section 5 where necessary to achieve just and
reasonable rates.
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    \42\ Revised Policy Statement, 162 FERC ] 61,227.
    \43\ In addition, consistent with the Revised Policy Statement,
partnerships or other pass-through entities that have not adopted
the MLP business form must address the double-recovery concern
raised by United Airlines. To the extent any of these partnerships
or pass-through entities argue that they should continue to recover
an income tax allowance, then the entity's revised tax rate should
reflect any relevant tax reductions resulting from the Tax Cuts and
Jobs Act. The Commission will review this information in light of
its post-United Airlines policy changes, including any subsequent
orders affecting the income tax policy for other non-MLP partnership
or pass-through business forms. See Revised Policy Statement, 162
FERC ] 61,227 at P 3 (``While all partnerships seeking to recover an
income tax allowance will need to address the double-recovery
concern, the Commission will address the application of United
Airlines to non-MLP partnership or other pass-through business forms
as those issues arise in subsequent proceedings.'').
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    25. The Commission addresses interstate natural gas pipelines under
the NGA and NGPA section 311 and Hinshaw pipelines separately below.

A. Interstate Natural Gas Pipelines With Cost-Based Rates

    26. The Commission proposes to require interstate natural gas
pipelines to file, pursuant to sections 10 and 14(a) of the NGA, a One-
time Report on Rate Effect of the Tax Cuts and Jobs Act, to be known as
FERC Form No. 501-G,\44\ that includes an abbreviated cost and revenue
study estimating (1) the percentage reduction in the pipeline's cost of
service resulting from the Tax Cuts and Jobs Act and the Revised Policy
Statement, and (2) the pipeline's current ROEs before and after the
reduction in corporate income taxes and the elimination of income tax
allowances for MLPs. As described in more detail below, the FERC Form
No. 501-G is designed to collect financial information to evaluate the
impact of the Tax Cuts and Jobs Act and the Revised Policy Statement on
the pipeline's cost of service, and to inform stakeholders and the
Commission regarding the continued justness and reasonableness of the
pipeline's rates after the income tax reduction and elimination of MLP
income tax allowances. Interstate natural gas pipelines that file
general NGA section 4 rate cases or pre-packaged uncontested rate
settlements before the deadline for their One-time Report will be
exempted from making the One-time Report.\45\
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    \44\ Proposed FERC Form No. 501-G will not be published in the
Federal Register or the Code of Federal Regulations, but is
available in the Commission's eLibrary website under Docket No.
RM18-11-000.
    \45\ In addition, interstate pipelines whose rates are being
investigated under NGA section 5 need not file the One-time Report.
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    27. In addition to the mandatory One-time Report, the Commission
also proposes several options for interstate natural gas pipelines to
voluntarily make a filing to address the effect of the Tax Cuts and
Jobs Act and the Revised Policy Statement. The Commission proposes to
allow an interstate natural gas pipeline to make a limited NGA section
4 filing to reduce its rates by the percentage reduction in its cost of
service resulting from the Tax Cuts and Jobs Act and the Revised Policy
Statement, as calculated in the FERC Form No. 501-G. This would allow
the pipeline to quickly pass on to ratepayers the benefit of the
reduction in the corporate income tax rate or the elimination of the
MLP income tax allowance, without the need for a full examination of
all its costs and revenues. Alternatively, as described below, an
interstate pipeline may commit to file either a prepackaged uncontested
settlement or, if that is not possible, a general NGA section 4 rate
case if the pipeline believes that using the limited NGA section 4
option will not result in a just and reasonable rate. If the pipeline
commits to do this by December 31, 2018, the Commission will not
initiate an NGA section 5 investigation of its rates prior to that
date.
    28. The Commission also recognizes that there may be reasons why
some pipelines need not change their rates at this time and therefore
proposes an interstate pipeline may choose to file a statement
explaining why an adjustment to its rates is not needed. For example, a
pipeline may argue that it is currently under-recovering its overall
cost of service, such that the reduction in its tax costs or
elimination of an MLP income tax allowance will not lead to excessive
recovery. If that is true, no reduction in the pipeline's existing
stated rates would be justified under NGA section 5.\46\ The proposed
FERC Form No. 501-G will provide information as to whether an
interstate pipeline may be under recovering its cost of service. Other
pipelines may have settlements providing for moratoria on rate changes
until some future date or requiring them to file new NGA section 4 rate
cases in the near future.
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    \46\ When an interstate pipeline proposes to increase its rates
pursuant to NGA section 4, the Commission may issue an order
reducing one component of the proposed increased cost of service, so
as to reduce the proposed rate increase, before resolving other
issues. FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 149-156
(1962). However, in order to reduce a pipeline's existing stated
rates below their current level under NGA section 5, the Commission
must consider all the pipeline's costs and revenues related to that
rate. See FPC v. Natural Gas Pipeline Co., 315 U.S. 574 (1942)
(finding that, when acting under NGA section 5, the Commission may
adjust the pipeline's ``general revenue level to the demands of a
fair return'' before adjusting specific rate schedules to eliminate
discriminations and unfairness from its details) (emphasis added).
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    29. Lastly, a pipeline may file its FERC Form No. 501-G without
taking any other action. The Commission will assign each pipeline's
filing of the FERC Form No. 501-G an RP docket number and notice the
filing providing for interventions and protests. Based on the
information in that form, together with any statement filed with the
form and comments by intervenors, the Commission will consider whether
to initiate an investigation under NGA section 5 of those pipelines
that have not filed a limited NGA section 4 rate reduction filing or
committed to file a general NGA section 4 rate case.
    30. The Commission proposes to require only interstate natural gas
pipelines that have cost-based rates for

service under any rate schedule filed pursuant to part 154 of the
Commission's regulations to comply with this proposed rule. Therefore,
pipelines with market-based rates would not be subject to this proposed
rule.
    31. The Commission does not propose to take any action regarding
the effect of the Tax Cuts and Jobs Act on ADIT in this Notice of
Proposed Rulemaking. In a concurrent Notice of Inquiry,\47\ the
Commission is seeking comment regarding this issue.
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    \47\ Inquiry Regarding the Effect of the Tax Cuts and Jobs Act
on Commission-Jurisdictional Rates, 162 FERC ] 61,223 (2018).
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1. One-Time Report on Rate Effect of the Tax Cuts and Jobs Act
    32. The Commission proposes to exercise its authority under NGA
sections 10(a) and 14(a) \48\ to require all interstate natural gas
pipelines that file a 2017 FERC Form Nos. 2 or 2A to submit an
abbreviated cost and revenue study in a format similar to the cost and
revenue studies the Commission has attached to its orders initiating
NGA section 5 rate investigations in recent years.\49\ Using the data
in the pipelines' 2017 FERC Form Nos. 2 and 2A, these studies will
estimate (1) the percentage reduction in the pipeline's cost of service
resulting from the Tax Cuts and Jobs Act and the Revised Policy
Statement, and (2) the pipeline's current ROEs before and after the
reduction in corporate income taxes and the elimination of income tax
allowances for MLPs.\50\ FERC Form No. 501-G is an Excel spreadsheet
with formulas that, when the respondents populate the form, will
calculate an indicated percentage rate reduction reflecting only the
corporate income tax rate reduction provided by the Tax Cuts and Jobs
Act and the elimination of the MLP tax allowance by the Revised Policy
Statement. The form will also calculate the pipeline's estimated actual
return on equity both before and after the tax change and
implementation of the Revised Policy Statement. The Commission and the
parties may use this information in considering whether to initiate NGA
section 5 rate investigations of pipelines which do not opt to file a
limited section 4 to reduce their rates or commit to make a general
section 4 filing by December 31, 2018, and the order in which to
initiate any such investigations so as to make the most efficient use
of the Commission's and interested parties' resources to provide
consumer benefits.
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    \48\ See Tuscarora Gas Transmission Co., 154 FERC ] 61,273, at
PP 4-14 (2016), requiring a pipeline to submit a more detailed cost
and revenue study than that which the Commission is proposing here.
    \49\ See orders cited in footnote 20. Interstate natural gas
pipelines whose rates are being examined in a general NGA section 4
rate case or an NGA section 5 investigation need not file the One-
time Report. In addition, pipelines that file a pre-packaged
uncontested rate settlement before the deadline for their One-time
Report will be exempted from making the One-time Report.
    \50\ An MLP is a publicly traded partnership under the Internal
Revenue Code that receives at least 90 percent of its income from
certain qualifying sources, including gas and oil transportation.
See 26 U.S.C. 7704; Inquiry Regarding the Commission's Policy for
Recovery of Income Tax Costs, Notice of Inquiry, 157 FERC ] 61,210
at PP 4-7.
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    33. Most of the required data is to be taken directly from the
respondent's 2017 FERC Form Nos. 2 or Form 2-A \51\ without
modification. The cost and revenue study incorporates all the major
cost components of a jurisdictional cost of service, including:
Administrative and General, Operation and Maintenance, other taxes,
depreciation expense, and the return related components of ROE,
interest expenses and income taxes.
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    \51\ FERC Form 2s (Annual report for Major natural gas
companies) and 2-As (Annual report for Nonmajor natural gas
companies) for calendar year 2017 are due April 18, 2018. 18 CFR
260.1(b)(2) & 260.2(b)(2).
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    34. A cost and revenue study requires an indicative ROE. In the
proposed form, the Commission uses, consistent with Commission
practice, the last litigated ROE applicable to situations involving
existing plant.\52\ The last litigated ROE was in El Paso Natural Gas
Company, wherein the Commission adopted an ROE of 10.55 percent.\53\
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    \52\ See, e.g., High Point Gas Transmission, LLC, 139 FERC ]
61,237, at P 154 (2012); Alliance Pipeline L.P., 140 FERC ] 61,212,
at P 20 (2012); Northern Natural Gas Co., 119 FERC ] 61,035, at P 37
(2007).
    \53\ El Paso Natural Gas Co., Opinion No. 528, 145 FERC ]
61,040, at P 642 (2013), reh'g denied, Opinion No. 528-A, 154 FERC ]
61,120 (2016).
---------------------------------------------------------------------------

    35. In approving the capital structure to be used for ratemaking
purposes, the Commission uses an operating company's actual capital
structure if the operating company (1) issues its own debt without
guarantees, (2) has its own bond rating, and (3) has a capital
structure within the range of capital structures approved by the
Commission.\54\ If the operating company meets these requirements, then
the Commission will find that the operating company has demonstrated a
separation of financial risks between the operating and parent company.
Where these requirements are not met, the Commission will use the
consolidated capital structure of the parent company or a proxy capital
structure in order to set the overall rate of return for the operating
utility company.\55\ The proposed form requests the respondent's FERC
Form Nos. 2 or 2-A equity related balance sheet items. However, if that
data does not satisfy the three-part test of Opinion No. 414, et al.,
the form provides alternative data entries to reflect parent or
hypothetical capital structures consistent with Opinion No. 414, et al.
If the respondent uses the consolidated capital structure of the parent
company, it should provide the capital structure as shown on the parent
company's U.S. Securities and Exchange Commission's Form 10-K for 2017.
---------------------------------------------------------------------------

    \54\ Transcontinental Gas Pipe Line Corp., Opinion No. 414-A, 84
FERC ] 61,084, at 61,413-61,415, reh'g denied, Opinion No. 414-B, 85
FERC ] 61,323 (1998), petition for review denied sub nom. N.C.
Utils. Comm'n v. FERC, D.C. Cir. Case No. 99-1037 (Feb. 7, 2000)
(per curiam).
    \55\ Id.
---------------------------------------------------------------------------

    36. Income tax expenses for pass-through entities are not captured
by FERC Form Nos. 2 and 2-A. Income tax expenses for such entities are
based upon the individual unit holder's income tax levels. The form
requires pass-through entities to provide the weighting and marginal
tax rates for each unit holder class ending calendar year 2017.
Prospectively for pass-through entities, FERC Form No. 501-G assumes a
federal and state income tax expense of zero. As the Commission states
in the Revised Policy Statement, all partnerships seeking to recover an
income tax allowance will need to address the double-recovery
concern.\56\ If a partnership not organized as an MLP believes that a
federal or state income tax expense is permissible notwithstanding
United Airlines, proposed Sec.  154.404(a)(3) provides that it may
submit that statement with supporting documentation to justify why it
should continue to receive an income tax allowance and to reduce its
maximum rates to reflect the decrease in the federal income tax rates
\57\ applicable to partners pursuant to the Tax Cuts and Jobs Act. The
Commission will review this information in light of its post-United
Airlines policy changes, including any subsequent orders affecting the
income tax policy for other non-MLP partnership or pass-through
business forms.
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    \56\ See Revised Policy Statement, 162 FERC ] 61,227 at P 3.
    \57\ If a pass-through entity that is not an MLP claims an
income tax allowance, it must reflect the corporate rate reduction
and any other relevant tax reductions in the Tax Cuts and Jobs Act.
---------------------------------------------------------------------------

    37. Page 1, Line 33, of FERC Form No. 501-G contains the percentage
reduction of each pipeline's cost of service attributable solely to the
revised income tax allowance. This percentage reflects the amount a
pipeline may choose to use to reduce its reservation rates and any one-
part rates which include a fixed cost recovery should it

choose to file a limited NGA section 4 filing as described below.
    38. The next part of the report estimates the actual rate of return
on equity earned by the pipeline for its non-gas revenues during
calendar year 2017. Page 3 of the report requires the pipeline to
report its revenues from which the cost of service items, as detailed
on Page 1, are subtracted. The report depicts the pipeline's estimated
actual return on equity both before and after the tax change and
implementation of the Revised Policy Statement. The information will be
used to guide the Commission, other stakeholders, and potentially the
pipelines in determining additional steps.
    39. Pipelines may believe that certain 2017 FERC Form Nos. 2 or 2A
cost or revenue data require adjustments to properly reflect their
situation. Respondents should not make adjustments to the data
transferred from FERC Form Nos. 2 or 2-A and 10-K and reported on the
FERC Form No. 501-G. Instead, respondents may make adjustments to
individual line items in additional work sheets. If a respondent
proposes any adjustments, it must fully explain and support the
adjustment in a separate document. All adjustments should be shown in a
manner similar to that required for adjustments to base period numbers
provided in statements and schedules required by Sec. Sec.  154.312 and
154.313 of the Commission's regulations.\58\
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    \58\ See Implementation Guide for Electronic Filing of Parts 35,
154, 284, 300, and 341 Tariff Filings, Appendix, Instruction Manual
for Electronic Filing of Part 154 Rate Filings (November 14, 2016),
found on the Commission's website, http://www.ferc.gov/docs-filing/etariff/implementation-guide.pdf, wherein filers are required to
show the base figure and then the adjustment and the as-adjusted
figures in adjacent columns.
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    40. When respondents file their FERC Form No. 501-G, the form
should be in spreadsheet format with all the formulas unchanged from
those provided in the posted form. The Commission proposes to post the
FERC Form No. 501-G on its website. In addition, the Commission has
prepared an Implementation Guide for One-time Report on Rate Effect of
the Tax Cuts and Jobs Act (Implementation Guide) that provides
additional guidance to parties as to the expected data entries. The
Implementation Guide also contains the proposed staggered compliance
dates and the list of companies for each of the four compliance
periods. Drafts of the FERC Form No. 501-G and Implementation Guide are
attached to this NOPR for review and comment as separate files. The
attachments to the NOPR will be available in the Commission's eLibrary
under Docket No. RM18-11-000 but not published in the Federal Register
or Code of Federal Regulations.
2. Additional Filing Options for Natural Gas Pipelines
    41. The Commission proposes that, upon filing of the FERC Form No.
501-G, interstate natural gas pipelines will have four options. The
first two options--filing a limited NGA section 4 rate filing or a
general section 4 rate case--allow the pipelines to voluntarily make a
filing to address the effects of the Tax Cuts and Jobs Act and the
Revised Policy Statement. Under the third option, pipelines may file an
explanation why no rate change is necessary. Finally, pipelines may
simply file the FERC Form No. 501-G described above, without taking any
other action at this time. The One-time Report should help inform the
pipeline's choice of the four options, as well as assist the Commission
in determining what NGA section 5 investigations it should initiate in
order to assure that the cost reduction benefits of the Tax Cuts and
Jobs Act and the Revised Policy Statement are passed through to
consumers.
a. Limited NGA Section 4 Filing
    42. Under this option, an interstate natural gas pipeline would
file the proposed FERC Form No. 501-G and simultaneously make a
separate limited NGA section 4 filing, pursuant to proposed section
154.404, to reduce its reservation charges and any one-part rates that
include fixed costs \59\ by the percentage reduction in its cost of
service calculated in the FERC Form No. 501-G \60\ resulting from the
reduced corporate income tax rates provided by the Tax Cuts and Jobs
Act and the elimination of MLP tax allowances by the Revised Policy
Statement. In other words, the Commission proposes to allow interstate
pipelines to reduce their rates to reflect the reduced income tax rates
and elimination of the MLP income tax allowance on a single-issue
basis, without consideration of any other cost or revenue changes.
Interested parties may protest the limited NGA section 4 filing, but
the Commission will only consider arguments relating to matters within
the scope of the proceeding. Thus, interested parties could raise
issues as to whether the interstate pipeline is eligible to make the
limited NGA section 4 filing,\61\ whether the percentage reduction has
been properly applied to the pipeline's rates, and whether the correct
information was used in calculating the percentage reduction. However,
the Commission will consider any other issues raised as being outside
the scope of the proceeding and will dismiss it without prejudice. If
shippers or other interested parties believe further adjustments to the
rate are warranted, they may file an NGA section 5 complaint with the
Commission.
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    \59\ A pipeline's 100 percent load factor rate for interruptible
service is an example of a one-part rate containing fixed costs.
    \60\ That percentage reduction is listed on Page 1, Line 33 of
the proposed FERC Form No. 501-G.
    \61\ The pipeline may not be eligible to make a limited NGA
section 4 filing because of a settlement rate moratorium or an
ongoing NGA section 4 or 5 proceeding.
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    43. The Commission believes that FERC Form No. 501-G's comparison
of (1) the pipeline's existing cost of service as reported in its FERC
Form Nos. 2 or 2-A for 2017 to (2) a revised cost of service using the
new income tax rates, or eliminating the income tax allowance of an
MLP, is the most reasonable method to estimate the rate reduction to be
implemented in a limited NGA section 4 filing. The Commission
recognizes that, after the Tax Reform Act of 1986, the Commission
established a procedure for public utilities to reduce their rates
based on a formula using cost data provided by the public utility in
its most recent FPA section 205 rate filing.\62\ However, this
methodology does not appear workable for many interstate natural gas
pipelines. In recent years, many interstate pipelines have filed ``pre-
packaged'' uncontested settlements pursuant to Sec.  385.207(a)(5) of
the Commission's regulations,\63\ without submitting the cost and
revenue data required to be filed with a general NGA section 4 rate
case by Sec. Sec.  154.312 or 154.313 of the Commission's
regulations.\64\ In addition, a number of pipelines have not filed rate
cases in many years, with the result that the cost and revenue data
underlying their existing rates is stale and may not reflect all their
current services or system expansions.
---------------------------------------------------------------------------

    \62\ Rate Changes Relating to Federal Corporate Income Tax Rate
for Public Utilities, FERC Stats. & Regs. ] 30,752, order on reh'g,
41 FERC ] 61,029 (1987) (Order No. 475).
    \63\ 18 CFR 385.207(a)(5) (2017).
    \64\ 18 CFR 154.312 and 154.313 (2017). See, e.g., Dominion
Transmission, Inc., 111 FERC ] 61,285 (2005); Colorado Interstate
Gas Co., 156 FERC ] 61,085 (2016).
---------------------------------------------------------------------------

    44. The Commission recognizes that it generally does not permit
pipelines to change any single component of their cost of service
outside of a general NGA

section 4 rate case.\65\ Here, however, the Commission believes an
exception to that policy is justified in order to permit interstate
pipelines to voluntarily reduce their rates as soon as possible to
reflect a reduction in a single cost component--their federal income
tax costs--so as to flow through that benefit to consumers. In
addition, our proposed requirement that all interstate pipelines file
the abbreviated cost and revenue study in FERC Form No. 501-G will
enable pipelines and all other interested parties to evaluate whether
there are significant changes in other cost components or revenues that
affect the need for a rate reduction with respect to taxes.
---------------------------------------------------------------------------

    \65\ See, e.g., Trunkline Gas Co., 142 FERC ] 61,133, at P 24
n.28 (2013).
---------------------------------------------------------------------------

    45. Finally, any rate reduction implemented pursuant to a limited
NGA section 4 filing under this option would be a reduction to the
pipeline's maximum recourse rates. Similar to the situation in a
general NGA section 4 rate case or an NGA section 5 rate investigation,
a pipeline's limited NGA section 4 filing to reduce its maximum
recourse rate to reflect reduced income tax rates, or elimination of
the MLP income tax allowance, ordinarily will not affect any negotiated
rate agreements the pipeline has with individual shippers. In the
Negotiated Rate Policy Statement,\66\ the Commission allowed pipelines
to negotiate individualized rates that are not bound by the maximum and
minimum recourse rates in the pipeline's tariff.\67\ Among other
things, this permits pipelines, as a means of providing rate certainty,
to negotiate a fixed rate or rate formula that will continue in effect
regardless of changes in the pipeline's maximum recourse rate.\68\
Accordingly, unless a negotiated rate agreement expressly provides
otherwise, the rates in such agreements will be unaffected by any
reduction in the pipeline's maximum rate reductions resulting from the
policies adopted in the rulemaking proceeding, whether in a limited or
general NGA section 4 rate proceeding or a subsequent NGA section 5
investigation.
---------------------------------------------------------------------------

    \66\ Negotiated Rate Policy Statement, 74 FERC ] 61,076 at
61,225-61,226.
    \67\ Northern Natural Gas Co., 105 FERC ] 61,299, at PP 15-16
(2003).
    \68\ Columbia Gulf Transmission Co., 109 FERC ] 61,152, at P 13,
reh'g denied, 111 FERC ] 61,338 (2005). See also Iberdrola
Renewables, Inc. v. FERC, 597 F.3d 1299, 1305 (D.C. Cir. 2010).
---------------------------------------------------------------------------

    46. Discounted rates, by contrast, must remain within the range
established by the pipeline's maximum and minimum recourse rates.\69\
Accordingly, to the extent a pipeline reduces its maximum rate below
the level of a shipper's discounted rate, that shipper's discounted
rate will be similarly reduced.
---------------------------------------------------------------------------

    \69\ Columbia Gulf, 109 FERC ] 61,152 at P 16.
---------------------------------------------------------------------------

b. Commitment to Make General NGA Section 4 Filing
    47. Under this option, an interstate natural gas pipeline would
include with its One-time Report a commitment to file either a
prepackaged uncontested settlement or, if that is not possible, a
general NGA section 4 rate case to revise its rates based upon current
cost data. If a pipeline believes that a reduction in its rates by the
percentage reduction in its cost of service calculated in its FERC Form
No. 501-G would not be reasonable because of other changes in its costs
and revenues since its last rate case, this option would permit the
pipeline to adjust its rates taking into account all such changes
either through an uncontested settlement or a general section 4 rate
case. The pipeline would also indicate an approximate time frame
regarding when it would file the settlement or make the NGA section 4
filing. The Commission proposes that if the pipeline commits to make
such a filing by December 31, 2018, the Commission will not initiate an
NGA section 5 investigation of its rates prior to that date.
c. Statement Explaining Why Adjustment in Rates Is not Needed
    48. Under this option, an interstate natural gas pipeline would
include with its One-time Report a statement explaining why no
adjustment in its rates is needed at this time. The Commission
recognizes that, despite the reduction in the corporate income tax and
the elimination of MLP income tax allowances, a rate reduction may not
be justified for a significant number of pipelines. For example, the
Commission is aware from its reviews of pipeline Form Nos. 2 and 2-A
financial data for prior years that a number of pipelines may currently
have rates that do not fully recover their overall cost of service.
Accordingly, the reduction in those pipelines' tax costs may not cause
their rates to be excessive. The proposed FERC Form No. 501-G will
provide information as to whether an interstate pipeline may fall into
this category. Accordingly, a pipeline may include with its FERC Form
No. 501-G a full explanation of why, after accounting for its reduction
in tax costs, its rates do not over recover its overall cost of service
and therefore no rate reduction is justified. The pipeline would
provide this statement along with any additional supporting information
it deems necessary.
    49. In addition, interstate pipelines may provide any other reason
they believe a rate reduction is not justified at this time. For
example, they may assert that an existing rate settlement provides for
a moratorium on rate changes that applies to any rate changes that
might result from the Tax Cuts and Jobs Act or the Commission's change
in policy concerning MLP income tax allowances. Parties agree to rate
moratoria in settlements in order to provide rate certainty, and
therefore the Commission generally does not disturb a settlement during
a rate moratorium.\70\
---------------------------------------------------------------------------

    \70\ Iroquois Gas Transmission System L.P., 69 FERC ] 61,165, at
61,631 (1994); JMC Power Projects v. Tennessee Gas Pipeline Co., 69
FERC ] 61,162 (1994), reh'g denied, 70 FERC ] 61,168, at 61,528
(1995), aff'd, Ocean States Power v. FERC, 84 F.3d 1453 (D.C. Cir.
1996).
---------------------------------------------------------------------------

    50. As described above, interested parties will have an opportunity
to comment on any assertion by a pipeline that no adjustment to its
rates is needed, and the Commission will then determine whether further
action is needed with respect to that pipeline.
d. Take No Action
    51. Under this option, the interstate natural gas pipeline would
take no action other than making the One-time Report. This option is
consistent with the fact that the Commission lacks authority under the
NGA to order an interstate pipeline to file a rate change under NGA
section 4.\71\ While the Commission is permitting interstate pipelines
to voluntarily file a limited NGA section 4 filing or commit to make
general NGA section 4 filing to modify their rates to reflect the
reduction in the income tax rates or elimination of the MLP income tax
allowance, the Commission is not ordering interstate pipelines to make
such filings. However, based on the information contained in the
pipeline's FERC Form No. 501-G, which the Commission is proposing to
require each interstate pipeline to file, and comments by interested
parties, the Commission will, on a case-by-case basis, consider
initiating a section 5 investigation of a pipeline's rates, if it
appears those rates may be unjust and unreasonable.
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    \71\ Pub. Serv. Comm. of New York v. FERC, 866 F.2d 487, 492
(D.C. Cir. 1989).
---------------------------------------------------------------------------

B. Initial Rates Under NGA Section 7

    52. The issue of how to address the Tax Cuts and Jobs Act in
establishing initial rates for new projects arises in a variety of
contexts, depending upon the current status of the certificate
proceeding and the type of project at

issue. For greenfield pipelines such as PennEast,\72\ the Commission
added a condition to the certificate order directing the company to
recalculate its initial rates consistent with the Tax Cuts and Jobs Act
when it files its compliance tariff records before going into service.
For other filings, such as the Transco St. James Project,\73\ the
Commission estimated downward the incremental rate in order to ensure
analysis of the appropriate initial rate.
---------------------------------------------------------------------------

    \72\ PennEast Pipeline Co., LLC, 162 FERC ] 61,053, at P 66
(2018).
    \73\ Transcontinental Gas Pipe Line Co., LLC, 162 FERC ] 61,050,
at P 17 (2018).
---------------------------------------------------------------------------

    53. For pending incremental expansion certificate filings without
near-term deadlines, Commission staff has issued data requests to
pipelines directing them to provide an adjusted cost of service and
recalculation of the proposed initial recourse rates consistent with
the Tax Cuts and Jobs Act. The Commission will take these responses
into account when evaluating and approving initial rates.
    54. There are a number of certificate projects which have been
authorized by the Commission--including approval of initial rates--but
which have not yet gone into service. The Commission proposes that
existing pipelines, in their FERC Form No. 501-G reports and/or section
154.404 limited NGA section 4 rate reduction filings, address any
approved initial rate for services provided by expansion facilities
that have not gone into service. We recognize that there is also a
finite group of greenfield pipeline projects that have been authorized
but are not yet in service and therefore will not file a Form No. 2 or
2A for 2017. As a result, those pipelines also are not required to file
a FERC Form No. 501-G report. The Commission proposes to address the
issue of the Tax Cuts and Jobs Act and the Revised Policy Statement
impact on these pipelines on a case-by-case basis.\74\
---------------------------------------------------------------------------

    \74\ For example, the Commission may, under section 5 of the
NGA, direct the greenfield pipeline to recalculate its initial
recourse rates consistent with the Tax Cuts and Jobs Act and Revised
Policy Statement when it files actual tariff records before going
into service. See, e.g., PennEast Pipeline Co., LLC, 162 FERC ]
61,053 at P 66.
---------------------------------------------------------------------------

C. NGPA Section 311 and Hinshaw Pipelines

    55. The Commission believes that its existing regulations and
policy concerning the rates charged by NGPA section 311 and Hinshaw
pipelines are generally sufficient to provide shippers reasonable rate
reductions with respect to the Tax Cuts and Jobs Act and Revised Policy
Statement. However, as described below, the Commission is proposing to
modify Sec.  284.123 of its regulations to require all NGPA section 311
and Hinshaw pipelines to file a new rate election for interstate
service if their rates for intrastate service are reduced to reflect
the Tax Cuts and Jobs Act.
    56. As described above, Sec.  284.123(b) allows NGPA section 311
and Hinshaw pipelines an election of two different methodologies upon
which to base their rates for interstate services.\75\ First, Sec.
284.123(b)(1) permits an intrastate pipeline to elect to base its rates
on the methodology or rate(s) approved by a state regulatory agency
included in an effective firm rate for city-gate service. Second, Sec.
284.123(b)(2) provides that the pipeline may petition for Commission
approval of rates and charges using its own data to show its proposed
rates are fair and equitable. The Commission has a policy of requiring
a review of the rates of each NGPA section 311 and Hinshaw pipeline
every five years.\76\ Consistent with that policy, when the Commission
issues an order approving rates filed by an NGPA section 311 pipeline,
the Commission requires the pipeline to file a new rate election within
five years. When the Commission approves rates filed by a Hinshaw
pipeline, it requires the pipeline to file a cost and revenue study
within five years. In addition, the Commission requires NGPA section
311 and Hinshaw pipelines that have elected to use a state rate
pursuant to Sec.  284.123(b)(1) to file a new rate election within 30
days after any change in the state rate.\77\
---------------------------------------------------------------------------

    \75\ 18 CFR 284.123(b) (2017).
    \76\ Contract Reporting Requirements of Intrastate Natural Gas
Companies, FERC Stats & Regs. ] 31,310 at P 96. Pipelines using
state-approved rates pursuant to section 284.123(b)(1) may certify
that those rates continue to meet the requirements of section
284.123(b)(1) on the same basis on which they were approved.
    \77\ 18 CFR 284.123(g)(9)(iii) (2017). See also Lobo Pipeline
Co. L.P., 145 FERC ] 61,168, at P 5 (2013) and Atmos Pipeline--
Texas, 156 FERC ] 61,094, at P 8 (2016).
---------------------------------------------------------------------------

    57. The Commission believes that these requirements adequately
provide for the approximately 44 NGPA section 311 and Hinshaw pipelines
that have elected to use state-derived rates pursuant to Sec.
284.123(b)(1) to pass on to ratepayers the benefit of the reduction in
the corporate income tax rate. Pursuant to their rate election, these
pipelines are authorized to charge rates approved by their state
regulatory agency. Therefore, the decision whether the interstate rates
of these pipelines should be reduced to reflect the Tax Cuts and Jobs
Act is in the hands of the state regulatory agency. If the state
regulatory agency requires any of these pipelines to reduce their
intrastate rates to reflect the decreased income tax, Commission
policy, as explained above, requires those pipelines to file with the
Commission to reduce their interstate rates correspondingly within 30
days of the effective date of the reduced intrastate rates.
    58. We now turn to the approximately 61 NGPA section 311 and
Hinshaw pipelines which have elected to use Commission-established
cost-based rates pursuant to Sec.  284.123(b)(2). Pursuant to our five-
year rate review policy, we estimate that almost half of these
pipelines will have their rates restated within the next 24 months. In
addition, a review of the quarterly transactional reports filed by
these pipelines pursuant to Sec.  284.126(b) \78\ indicates that these
pipelines rarely charge their maximum rates. Instead, they charge
discounted rates for most of their transactions so that any reduction
in their maximum rates is unlikely to provide significant benefits to
the customers in those transactions.
---------------------------------------------------------------------------

    \78\ 18 CFR 284.126(b) (2012). These reports are set forth in
Form No. 549D.
---------------------------------------------------------------------------

    59. However, the Commission believes that, if an NGPA section 311
or Hinshaw pipeline using Commission-established cost-based rates
reduces its intrastate rates to reflect the reduced income taxes
resulting from the Tax Cuts and Jobs Act, it would be reasonable for
that pipeline to make a corresponding reduction in its rates for
interstate service. This would give the same rate reduction benefit to
any interstate shippers on those pipelines as the intrastate shippers
receive, thereby ensuring that the two groups of shippers are treated
similarly. Therefore, for the purposes of the Tax Cuts and Jobs Act
only, the Commission proposes a new Sec.  284.123(i), which would
impose the same re-filing requirement on Sec.  284.123(b)(2) rates as
on pipelines electing to use state-derived rates under Sec.
284.123(b)(1). Namely, if any intrastate pipeline adjusts its state-
jurisdictional rates to reflect the reduced corporate income tax rates
adopted in the Tax Cuts and Jobs Act, then the intrastate pipeline must
file a new rate election pursuant to paragraph (b) of this section no
later than 30 days after the reduced intrastate rate becomes effective.
    60. The Commission notes that, for any pipeline that the Commission
does identify that charges an excessive Commission-established cost-
based maximum rate to captive shippers (whether through staff
investigation or a shipper-filed complaint), the Commission could
exercise its authority under NGPA section 311(c) to order any such
section 311 intrastate pipeline to

reduce its rates to reflect the reduced income tax rates, and take
similar action against any such Hinshaw pipeline under NGA section
5.\79\
---------------------------------------------------------------------------

    \79\ The courts have held that the Commission's conditioning
authority under NGPA section 311(c) permits the Commission to order
changes in section 311 pipelines' rates, terms, and conditions of
service. See Associated Gas Distributors v. FERC, 824 F.2d 981,
1016-7 (D.C. Cir. 1987). See also Bay Gas Storage Co., 126 FERC ]
61,018, at PP 22-24 (2009) (requiring a prospective change in
intrastate pipeline's Statement of Operating Conditions).
---------------------------------------------------------------------------

    61. Finally, the Commission will not take any action with respect
to the market-based rates it has approved for some NGPA section 311 and
Hinshaw pipelines. Market-based rates are, by definition, subject to
change according to market forces, and do not have cost-based rates
that directly account for taxes. For such rates, no change is required.

IV. Implementation

    62. The Commission proposes staggered dates for pipelines filing
the FERC Form No. 501-G report. In the Implementation Guide for the
proposed FERC Form No. 501-G, 133 interstate natural gas pipelines with
cost-based rates are split into four groups. The due date for the first
group will be 28 days from the effective date of any final rule in this
proceeding, and the due date for each subsequent group will be 28 days
from the previous group's due date. When the final due dates are known,
the Office of the Secretary will issue a Notice and update the FERC
Form No. 501-G Implementation Guide. Pipelines may file their FERC Form
No. 501-G report earlier than the proposed dates. The Commission will
post the FERC Form No. 501-G form and the FERC Form No. 501-G
Implementation Guide on its website at http://www.ferc.gov/legal/maj-ord-reg.asp#gas. As noted in the discussion above, this form is in
spreadsheet format. The Commission proposes to require that the form be
filed with the Commission in the same spreadsheet format. Respondents
should not modify the formulas. If respondents, in addition to the
required spreadsheet version of the report, wish to attach a PDF
version of the report, they may do so. The Commission proposes to
require that FERC Form No. 501-G forms be filed through eTariff. The
Commission will establish a new Type of Filing Code (TOFC) \80\ just
for these reports. Respondents may include with this filing, as
appropriate, a statement explaining why no adjustment in its rates is
needed, or their commitment to make a general NGA section 4 rate case
filing in lieu of a limited NGA section 4 filing as permitted by Sec.
154.404. The Implementation Guide provides contact information for
Commission staff if assistance is needed regarding FERC Form No. 501-G.
---------------------------------------------------------------------------

    \80\ The type of filing business process categories are
described in the Implementation Guide for Electronic Filing of Parts
35, 154, 284, 300, and 341 Tariff Filings (November 14, 2016), found
on the Commission's website, http://www.ferc.gov/docs-filing/etariff/implementation-guide.pdf.
---------------------------------------------------------------------------

    63. For the limited NGA section 4 rate reduction option proposed in
Sec.  154.404, the Commission proposes to establish a new TOFC.
Pipelines are required to incorporate by reference their filed FERC
Form No. 501-G as a supporting document. No other documentation is
necessary if the pipelines propose to reduce their rates by the
percentage shown on their FERC Form No. 501-G. Pipelines may file a
Sec.  154.404 rate reduction earlier than the proposed FERC Form No.
501-G compliance dates.
    64. Each report and limited NGA section 4 filing will receive a new
root docket number. The Commission will issue a Notice for each report
and filing, with interventions and comments due under the standard
Sec.  154.210 notice period.\81\ The following table lists the proposed
new TOFCs. FERC Form No. 501-G is a one-time form. As such, the
Commission proposes to retire these TOFCs after the end of the
staggered compliance dates provided in the FERC Form No. 501-G
Implementation Guide.
---------------------------------------------------------------------------

    \81\ 18 CFR 154.210 (2017).

----------------------------------------------------------------------------------------------------------------
           Type of filing code                   Filing title            Citation       Type of filing category
----------------------------------------------------------------------------------------------------------------
1430....................................  FERC Form No. 501-G Report         260.402  Compliance.
1440....................................  Limited Sec. 4 Tax                 154.404  Normal/Statutory.
                                           Reduction.
----------------------------------------------------------------------------------------------------------------

    65. Intrastate pipelines with cost-based rates established pursuant
to Sec.  284.123(b)(2) of the Commission's regulations that are filing
to reduce rates pursuant to proposed Sec.  284.123(i) may use any
appropriate existing TOFC under the NGPA Gas Tariff Program options.

V. Regulatory Requirements

A. Information Collection Statement

    66. The Office of Management and Budget (OMB) regulations require
that OMB approve certain reporting, record keeping, and public
disclosure requirements (information collection) imposed by an
agency.\82\ Therefore, the Commission is submitting its proposed
information collection to OMB for review in accordance with section
3507(d) of the Paperwork Reduction Act of 1995. Upon approval of a
collection of information, OMB will assign an OMB control number and an
expiration date. Respondents subject to the filing requirements of a
rule will not be penalized for failing to respond to the collection of
information unless the collection of information displays a valid OMB
control number.
---------------------------------------------------------------------------

    \82\ 5 CFR 1320.11 (2017).
---------------------------------------------------------------------------

    67. Public Reporting Burden: The overall proposed data collection
(FERC-501G, One-time Report on Rate Effect of the Tax Cuts and Jobs
Act) includes the following requirements.
    68. The Commission has identified 133 interstate natural gas
pipelines with cost-based rates that will be required to file the
proposed FERC Form No. 501-G. That figure is based upon a review of the
pipeline tariffs on file with the Commission. Interstate natural gas
pipelines have four options as to how to address the results of the
formula contained in FERC Form No. 501-G. Each option has a different
burden profile and a different cost per response. Companies will make
their own business decisions as to which option they will select, thus
the estimate for the number of respondents for each option as shown in
the table below is just an estimate.
    69. The number of NGPA section 311 and Hinshaw pipelines that will
be required to file a rate case pursuant to proposed Sec.  284.123(i)
is a function of state actions outside of the control of the
Commission. Thus, the estimate for the number of respondents for NGPA
section 311 and Hinshaw pipelines filing a rate case in compliance with
proposed Sec.  284.123(i) as shown in the table below is just an
estimate.
    70. Based on these assumptions, we estimate the one-time burden and
cost \83\

for the information collection requirements as follows.
---------------------------------------------------------------------------

    \83\ The estimated average hourly cost of $79.77 (rounded)
assumes equal time is spent by an accountant, management, lawyer,
and office and administrative support. The average hourly cost
(salary plus benefits) is: $53.00 for accountants (occupation code
13-2011), $81.52 for management (occupation code 11-0000), $143.68
for lawyers (occupation code 23-0000), and $40.89 for office and
administrative support (occupation code 43-000). (The figures are
taken from the Bureau of Labor Statistics, October 2017 for the year
ending May 2016, figures at http://www.bls.gov/oes/current/naics2_22.htm.).

                                         FERC-501G: One-Time Report on Rate Effect of the Tax Cuts and Jobs Act
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of                     Avg.  burden
                                             Number of     responses per       Total         hr.  per      Avg. cost per   Total  burden  Total cost ($)
                                            respondents     respondent       responses       response        response          hours
                                                     (1)             (2)             (3)             (4)             (5)     (3)*(4)=(6)     (3)*(5)=(7)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Interstate Natural Gas Pipelines with Cost-Based Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
FERC Form No. 501-G, One-time Report                 133               1             133               9             718           1,197          95,485
 \84\...................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Optional Response
--------------------------------------------------------------------------------------------------------------------------------------------------------
No Response.............................              53               0               0               0               0               0               0
Case for no change......................              64               1              64               5             399             320          25,526
Limited Sec 4 filing \85\...............              15               1              15               6             479              90           7,179
General Sec. 4 filing \86\..............               1               1               1        \87\ 512          40,842             512          40,842
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              NGPA section 311 and Hinshaw Pipelines with Cost-Based Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
NGPA rate filing \88\...................         \89\ 15               1              15              24           1,914             360          28,717
    Total...............................        \90\ 148  ..............             228  ..............  ..............           2,479         197,749
--------------------------------------------------------------------------------------------------------------------------------------------------------

    71. The Commission does not expect any mandatory or voluntary
reporting requirements other than those listed above.
---------------------------------------------------------------------------

    \84\ 18 CFR 260.402 (proposed).
    \85\ 18 CFR 154.404 (proposed).
    \86\ 18 CFR 154.312 (2017).
    \87\ The estimate for hours is based on the estimated average
hours per response for the FERC-545 (OMB Control No. 1902-0154),
with general NGA section 4, 18 CFR 154.312 filings weighted at a
ratio of 20 to one.
    \88\ 18 CFR 284.123(i) (proposed).
    \89\ Estimate of number of respondents assumes that states will
act within one year to reduce NGPA section 311 and Hinshaw pipeline
rates to reflect the Tax Cuts and Jobs Act.
    \90\ Number of unique respondents = (One-time FERC Form No. 501-
G) + (NGPA rate filing).
---------------------------------------------------------------------------

    72. Action: Proposed information collection, FERC-501G (One-time
Report on Rate Effect of the Tax Cuts and Jobs Act).
    73. OMB Control No.: To be determined.
    74. Respondents for this Rulemaking: Interstate natural gas
pipelines with cost-based rates, and certain NGPA section 311 and
Hinshaw pipelines.
    75. Frequency of Information: One-time, for each indicated
reporting requirement.
    76. Necessity of Information: The Commission requires information
in order to determine the effect of the Tax and Jobs Act on the rates
of natural gas pipelines to ensure those rates continue to be just and
reasonable.
    77. Internal Review: The Commission has reviewed the proposed
information collection requirements and has determined that they are
necessary. These requirements conform to the Commission's need for
efficient information collection, communication, and management within
the energy industry. The Commission has specific, objective support for
the burden estimates associated with the information collection
requirements.
    78. The Commission requests comments on the utility of the proposed
information collection, the accuracy of the burden estimates, how the
quality, quantity, and clarity of the information to be collected might
be enhanced, and any suggested methods for minimizing the respondent's
burden, including the use of automated information techniques.
Interested persons may obtain information on the reporting requirements
or submit comments by contacting the Federal Energy Regulatory
Commission, 888 First Street NE, Washington, DC 20426 (Attention: Ellen
Brown, Office of the Executive Director,<PHONE_NUMBER>, or email
[email protected]:). Comments may also be sent to the Office
of Management and Budget (Attention: Desk Officer for the Federal
Energy Regulatory Commission), by email at [email protected].

B. Environmental Analysis

    79. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\91\ The
actions proposed to be taken here fall within categorical exclusions in
the Commission's regulations for rules regarding information gathering,
analysis, and dissemination, and for rules regarding sales, exchange,
and transportation of natural gas that require no construction of
facilities.\92\ Therefore, an environmental review is unnecessary and
has not been prepared in this rulemaking.
---------------------------------------------------------------------------

    \91\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. ] 30,783 (1987).
    \92\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5) and 380.4(a)(27)
(2017).
---------------------------------------------------------------------------

C. Regulatory Flexibility Act Certification

    80. The Regulatory Flexibility Act of 1980 (RFA) \93\ generally
requires a description and analysis of rules that will have significant
economic impact on a substantial number of small entities. The
Commission is not required to make such analysis if proposed
regulations would not have such an effect.
---------------------------------------------------------------------------

    \93\ 5 U.S.C. 601-612 (2012).
---------------------------------------------------------------------------

    81. As noted in the above Information Collection Statement,
approximately 133 interstate natural gas pipelines, both large and
small, are respondents subject to the requirements adopted by this
rule. In addition, the Commission estimates that another 59 NGPA
natural gas pipelines may be required to file restated rates pursuant
to proposed Sec.  284.123(i). However, the actual

number of NGPA section 311 and Hinshaw pipelines that will be required
to file is a function of actions taken at the state level. The
Commission estimates that only 15 of the 59 NGPA natural gas pipelines
will file a rate case pursuant to proposed Sec.  284.123(i).
    82. Most of the natural gas pipelines regulated by the Commission
do not fall within the RFA's definition of a small entity,\94\ which is
currently defined for natural gas pipelines as a company that, in
combination with its affiliates, has total annual receipts of $27.5
million or less.\95\ For the year 2016 (the most recent year for which
information is available), only five of the 133 interstate natural gas
pipeline respondents had annual revenues in combination with its
affiliates of $27.5 million or less and therefore could be considered a
small entity under the RFA. This represents 3.8 percent of the total
universe of potential NGA respondents that may have a significant
burden imposed on them. For NGPA section 311 and Hinshaw pipelines,
three of the 59 potential respondents could be considered a small
entity, or 5.1 percent. However, it is not possible to predict whether
any of these small companies may be required to make a rate filing. In
view of these considerations, the Commission certifies that this
proposed rule's amendments to the regulations will not have a
significant impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \94\ See 5 U.S.C. 601(3) citing section 3 of the Small Business
Act, 15 U.S.C. 623. Section 3 of the SBA defines a ``small business
concern'' as a business which is independently owned and operated
and which is not dominant in its field of operation (2017).
    \95\ 13 CFR 121.201 (Subsector 486--Pipeline Transportation;
North American Industry Classification System code 486210; Pipeline
Transportation of Natural Gas) (2017). ``Annual Receipts'' are total
income plus cost of goods sold.
---------------------------------------------------------------------------

D. Comment Procedures

    83. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due April 25, 2018. Comments must refer to
Docket No. RM18-11-000, and must include the commenter's name, the
organization they represent (if applicable), and their address in their
comments.
    84. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word processing
formats. Documents created electronically using word processing
software should be filed in native applications or print-to-PDF format
and not in a scanned format. Commenters filing electronically do not
need to make a paper filing.
    85. Commenters that are not able to file comments electronically
must send an original of their comments to: Federal Energy Regulatory
Commission, Secretary of the Commission, 888 First Street NE,
Washington, DC 20426.
    86. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this proposal are
not required to serve copies of their comments on other commenters.

E. Document Availability

    87. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
internet through the Commission's Home Page (http://www.ferc.gov) and
in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE, Room 2A,
Washington, DC 20426.
    88. From the Commission's Home Page on the internet, this
information is available on eLibrary. The full text of this document is
available on eLibrary in PDF and Microsoft Word format for viewing,
printing, and/or downloading. To access this document in eLibrary, type
the docket number excluding the last three digits of this document in
the docket number field.
    89. User assistance is available for eLibrary and the Commission's
website during normal business hours from the Commission's Online
Support at<PHONE_NUMBER> (toll free at 1-866-208-3676) or email at
[email protected], or the Public Reference Room at 202-502-
8371, TTY<PHONE_NUMBER>. Email the Public Reference Room at
[email protected].
    90. The proposed FERC Form No. 501-G and the Implementation Guide
are available on the Commission's eLibrary and website. These will not
be published in the Federal Register or the Code of Federal
Regulations.

List of Subjects in 18 CFR Parts 154, 260, & 284

Part 154

    Natural gas, Pipelines, Reporting and recordkeeping requirements.

Part 260

    Natural gas, Reporting and recordkeeping requirements.

Part 284

    Continental shelf, Natural gas, Reporting and recordkeeping
requirements.

    By direction of the Commission.

    Issued: March 15, 2018.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    In consideration of the foregoing, the Commission proposes to amend
parts 154, 260, and 284, Chapter I, Title 18, Code of Federal
Regulations, as follows.

PART 154-- RATE SCHEDULES AND TARIFFS

0
1. The authority citation for part 154 continues to read as follows:

    Authority: 15 U.S.C. 717-717w; 31 U.S.C. 9701; 42 U.S.C. 7102-
7352.

0
2. Add Sec.  154.404 to read as follows:

Sec.  154.404  Tax Cuts and Jobs Act Rate Reduction.

    (a) Purpose. The limited rate filing permitted by this section is
intended to permit:
    (1) A natural gas company subject to the federal corporate income
tax to reduce its maximum rates to reflect the decrease in the federal
corporate income tax rate pursuant to the Tax Cuts and Jobs Act of
2017,
    (2) A natural gas company organized as a master limited partnership
to reduce its maximum rates to reflect the elimination of any tax
allowance included in its current rates, and
    (3) A natural gas company organized as a partnership (but not a
master limited partnership) either
    (i) To eliminate any income tax allowance included in its current
rates or
    (ii) To justify why it should continue to receive an income tax
allowance and to reduce its maximum rates to reflect the decrease in
the federal income tax rates applicable to partners pursuant to the Tax
Cuts and Jobs Act of 2017.
    (b) Applicability. (1) Except as provided in paragraph (b)(2) of
this section, any natural gas company with cost-based rates may submit
the limited rate filing permitted by this section.
    (2) If a natural gas company has a rate case currently pending
before the Commission in which the change in the federal corporate
income tax rate can be reflected, the public utility may not use this
section to adjust its rates.
    (c) Determination of Rate Reduction. A natural gas company
submitting a filing pursuant to this section shall reduce:
    (1) Its maximum reservation rates for firm service, and

    (2) Its one-part rates that include fixed costs, by
    (3) The percentage calculated consistent with the instructions to
FERC Form No. 501-G prescribed by Sec.  260.402 of this chapter.
    (d) Timing. Any natural gas company filing to reduce its rates
pursuant to this section must do so no later than the date that it
files its FERC Form No. 501-G pursuant to Sec.  260.402.
    (e) Hearing Issues. (1) The only issues that may be raised by
Commission staff or any intervenor under the procedures established in
this section are:
    (i) Whether or not the natural gas company may file under this
section.
    (ii) Whether or not the percentage reduction permitted in Sec.
154.402(c)(iii) has been properly applied, and
    (iii) Whether or not the correct information was used in that
calculation.
    (2) Any other issue raised will be severed from the proceeding and
dismissed without prejudice.

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

0
3. The authority citation for part 260 continues to read as follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

0
4. Add Sec.  260.402 to read as follows:

Sec.  260.402  FERC Form No. 501-G. One-time Report on Rate Effect of
the Tax Cuts and Jobs Act.

    (a) Prescription. The form for the One-time Report on Rate Effect
of the Tax Cuts and Jobs Act of 2017, designated herein as FERC Form
No. 501-G is prescribed.
    (b) Filing requirement. (1) Who must file. (i) Except as provided
in paragraph (b)(1)(ii) of this section, every natural gas company that
is required under this part to file a Form No. 2 or 2A for 2017 and has
cost-based rates for service under any rate schedule that were filed
electronically pursuant to part 154 of this chapter, must prepare and
file with the Commission a FERC Form No. 501-G pursuant to the
definitions and instructions set forth in that form and the
Implementation Guide.
    (ii) A natural gas company whose rates are being examined in a
general rate case under section 4 of the Natural Gas Act or in an
investigation under section 5 of the Natural Gas Act need not file FERC
Form No. 501-G. In addition, a natural gas company that files an
uncontested settlement of its rates pursuant to Sec.  385.207(a)(5) of
this chapter after March 26, 2018 need not file FERC Form No. 501-G.
    (2) FERC Form No. 501-G must be filed as prescribed in Sec.
385.2011 of this chapter as indicated in the instructions set out in
the form and Implementation Guide, and must be properly completed and
verified. Each natural gas company must file FERC Form No. 501-G
according to the schedule set forth in the Implementation Guide set out
in that form. Each report must be prepared in conformance with the
Commission's form and guidance posted and available for downloading
from the FERC website (http://www.ferc.gov). One copy of the report
must be retained by the respondent in its files.

PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES

0
5. The authority citation for part 284 continues to read as follows:

    Authority: 15 U.S.C. 717-717z, 3301-3432; 42 U.S.C. 7101-7352;
43 U.S.C. 1331-1356.

0
6. In Sec.  284.123, add paragraph (i) to read as follows:

Sec.  284.123  Rates and charges.

* * * * *
    (i) If an intrastate pipeline's rates on file with the appropriate
state regulatory agency are reduced to reflect the reduced income tax
rates adopted in the Tax Cuts and Jobs Act of 2017, the intrastate
pipeline must file a new rate election pursuant to paragraph (b) of
this section not later than 30 days after the reduced intrastate rate
becomes effective. This requirement applies regardless of whether the
intrastate pipeline's existing interstate rates are based on Sec.
284.123(b)(1) or (2).

[FR Doc. 2018-05669 Filed 3-23-18; 8:45 am]
 BILLING CODE 6717-01-P