UNITED STATES OF AMERICA 71 FERC 61,291
                         FEDERAL ENERGY REGULATORY COMMISSION
          Williams Pipe Line Company         )    Docket Nos. IS90-21-003,
                                             )    IS90-31-003, IS90-32-003,
                                             )    IS90-40-003, IS91-1-003,
                                             )    SP91-3-003, SP91-5-003,
                                             )    IS91-28-003, IS91-33-003,
                                             )    OR93-1-001
          Enron Liquids Pipeline Company     )    IS90-39-003, IS91-3-001,
                                             )    and IS91-32-001
                                             )    (Phase I)
                                                  and
          Williams Pipe Line Company         )    IS92-26-000, IS95-2-000,
                                             )    and IS95-7-000
                                  OPINION NO. 391-A
                          OPINION AND ORDER GRANTING IN PART
                            AND DENYING IN PART REHEARING

          Issued:  June 6, 1995
                             UNITED STATES OF AMERICA
                         FEDERAL ENERGY REGULATORY COMMISSION
          Before Commissioners: Elizabeth Anne Moler, Chair;
                                Vicky A. Bailey, James J. Hoecker,
                                William L. Massey, and Donald F. Santa, Jr.

          Williams Pipe Line Company         )    Docket Nos. IS90-21-003,
                                             )    IS90-31-003, IS90-32-003,
                                             )    IS90-40-003, IS91-1-003,
                                             )    SP91-3-003, SP91-5-003,
                                             )    IS91-28-003, IS91-33-003,
                                             )    OR93-1-001
          Enron Liquids Pipeline Company     )    IS90-39-003, IS91-3-001,
                                             )    and IS91-32-001
                                             )    (Phase I)
                                                  and
          Williams Pipe Line Company         )    IS92-26-000, IS95-2-000,
                                             )    and IS95-7-000
                                  OPINION NO. 391-A
                          OPINION AND ORDER GRANTING IN PART
                            AND DENYING IN PART REHEARING
                                (Issued June 6, 1995)
               On August 29, 1994, Williams Pipe Line Company (Williams)
          and the Association of Oil Pipe Lines (AOPL) filed requests for
          rehearing and clarification of the "Opinion and Order on Initial
          Decision, on Motion Proposing Rate Standards, and on Complaint
          and Protest" that was issued by the Commission on July 28, 1994
          (Opinion No. 391). 1/  Texaco Refining and Marketing Inc.
          (Texaco) also filed a petition for rehearing of Opinion No. 391.
          That opinion affirmed and modified an initial decision of the
          presiding administrative law judge (ALJ) relating to tariffs
          filed by Williams proposing changes in its rates for the
          transportation of petroleum products.  As discussed below, the
          Commission grants in part the requests for rehearing and
          clarification and denies the remainder of the requests for
          rehearing.  
               On February 6, 1995, Murphy Oil USA, Inc. (Murphy) filed a
          motion in Docket Nos. IS92-26-000, IS95-2-000, and IS95-7-000 

                              
          1/   Williams Pipe Line Co., 68 FERC  61,136 (1994).

          Docket No. IS90-21-003, et al.       - 2 -
          asking the Commission to sever from those consolidated
          proceedings a limited issue involving certain shorthaul rates
          filed by Williams.  As discussed below, the Commission denies
          Murphy's motion.
          Background
               The background of this proceeding is described in Opinion
          No. 391 and will not be repeated here. 2/  Opinion No. 391
          addressed exceptions to the ALJ's initial decision in
          Phase I 3/ of the proceeding. 4/  
               In Opinion No. 391, the Commission affirmed the ALJ's
          decision to limit the scope of Phase I to a determination of
          Williams' market power in the relevant markets. 5/  In defining
          market power for these proceedings, the Commission adopted the
          ALJ's findings that (1) no specific percentage of price increase
          is required as a test for market power; (2) the relevant product
          market is delivered pipelineable petroleum products; (3) the use
          of destination markets is appropriate for determining the
          geographic scope of the markets; and (4) Williams' destinations
          are the relevant BEAs. 6/
               In analyzing Williams' markets, the Commission accepted the
          ALJ's use of the Herfindahl-Hirschman Index (HHI) to develop an
          initial screen; however, in its examination of the markets, the
          Commission used the HHI less stringently than did the ALJ,
          employing it as an indicator to be evaluated along with other
          factors.  In calculating the HHIs, the Commission affirmed (1)
          the ALJ's use of capacity rather than delivery data; (2) his
          methodology for calculating and measuring effective capacity; and
                              
          2/   Id. at 61,654-55.
          3/   Williams elected to bifurcate the proceedings in accordance
               with the procedures adopted by the Commission in Buckeye
               Pipe Line Co., 44 FERC  61,066 (1988), order on reh'g, 45
               FERC  61,046 (1988), Opinion and Order on Initial Decision,
               53 FERC  61,473 (1990) (Opinion No. 360), order on reh'g,
               55 FERC  61,084 (1991) (Opinion No. 360-A) (collectively 
               (Buckeye).
          4/   Williams Pipe Line Co., 58 FERC  63,004 (1992).
          5/   68 FERC  61,136 at 61,656.
          6/   Id. at 61,658-61.  BEAs are areas of the contiguous United
               States that have been established by the Bureau of Economic
               Analysis of the U.S. Department of Commerce and are intended
               to represent actual areas of economic activity.  A major
               city is at the hub of each BEA.


          Docket No. IS90-21-003, et al.       - 3 -
          (3) where appropriate, the inclusion of private pipelines,
          barges, refineries, and potential competition.  The Commission
          declined to apply a mechanical analysis in assessing the effect
          of truck transportation of products from sources outside of a
          BEA. 7/
               The Commission also evaluated a variety of other factors
          bearing on competition, finding that (1) the ALJ had not applied
          an excessively high standard in assessing market share; (2)
          exchanges should be entitled to little weight in the post-
          screening review of the markets; (3) there is no precise formula
          by which to determine whether sufficient weight has been given to
          excess capacity in the analysis; (4) the evidence does not
          support a conclusion that the presence of vertically integrated
          companies in Williams' markets justifies less regulation of
          Williams; (5) where buyer power is shown, it should be entitled
          to some weight; and (6) profitability is a neutral factor in this
          case. 8/
               The Commission then turned to an examination of the
          individual BEA markets.  It found that Williams had established
          that it lacks market power in the Chicago, St. Louis, Oklahoma
          City, Tulsa, Wichita, Springfield/Decatur, Peoria, Rockford,
          Wausau, Dubuque, Davenport, Columbia, and Minneapolis/St. Paul
          markets. 9/  The Commission also found that Williams had failed
          to establish that it lacks market power in the Springfield (MO),
          Eau Claire, Des Moines, Kansas City, Lincoln, Fargo, Grand Forks,
          Duluth, Rochester, Sioux City, Topeka, Omaha, Grand Island, Sioux
          Falls, Aberdeen, Quincy, Cedar Rapids, Waterloo, and Ft. Dodge
          markets. 10/  The Commission directed the ALJ to proceed with
          Phase II of the proceedings for the purpose of establishing base
          rates for these noncompetitive markets.  
               The Commission addressed exceptions to the ALJ's rulings on
          certain claims of discrimination raised by the intervenors.  In
          each case, the ALJ had found that the alleged forms of
          discrimination were intended to meet competitive conditions and
          did not constitute an abuse of market power.  The Commission
          affirmed the ALJ's reservation for Phase II of the issues of
          cross-subsidization and justifiable differences in costs. 11/ 
          Further, the Commission denied Williams' motion proposing rate
                              
          7/   Id. at 61,663-70.
          8/   Id. at 61,672-75. 
          9/   Id. at 61,675-78, 61,682.
          10/  Id. at 61,679-86.
          11/  Id. at 61,688.
          Docket No. IS90-21-003, et al.       - 4 -
          standards to apply to Phase II of this proceeding, indicating
          that the method to be used for establishing base rates would be
          at issue in the second phase. 12/
          Requests for Rehearing and Clarification
               Williams argues that the Commission erred in (1) finding
          that Williams had failed to show that it lacked market power in
          several of its markets; (2) improperly recalculating the HHIs for
          Williams' markets by excluding certain external sources; (3)
          relying unduly on delivery-based market shares rather than
          effective capacity-based market shares; (4) failing to accord the
          HHI primary significance over other statistics, specifically
          market share statistics; (5) failing to use the HHI as a screen
          to identify markets in which Williams should be presumed to lack
          significant market power; (6) declining to give sufficient weight
          to exchanges; and (7) ignoring evidence of Williams' inability to
          sustain profitably a 15 percent price increase.
               Williams challenges the Commission's determinations that
          Williams failed to demonstrate its lack of market power in the
          following nine markets: (1) Springfield, MO; (2) Kansas City; (3)
          Lincoln; (4) Quincy; (5) Des Moines; (6) Omaha; (7) Eau Claire;
          (8) Fargo; and (9) Grand Forks.  Williams also asserts that the
          Commission erred in reserving for Phase II further analysis of
          the discrimination claims on a cost basis in light of the
          Commission's affirmation of the ALJ's decision that Williams
          proved that the challenged rate disparities are justified by
          competition.  Finally, Williams asks the Commission to clarify
          that, in Opinion No. 391, the Commission has not ruled on the
          merits of Williams' proposed rate standards in any respect and
          that the parties have the right in Phase II to rely on the Phase
          I record regarding costs and cost standards, subject to the right
          of any party to supplement that evidence.
               Texaco maintains that the Commission erred in rejecting the
          consideration of corridors or origin-destination pairs in this
          case.  In the alternative, if the Commission believes that
          origins are not relevant, Texaco argues that Williams must post a
          single rate to each destination from all origins, a rate no
          higher than that of Williams' principal competitors.  Finally,
          Texaco asserts that the Commission erred in finding that Williams
          cannot exercise significant market power in those markets in
          which the pipeline is responsible for over 45 percent of the
          deliveries. 
               AOPL faults Opinion No. 391 for failing to adhere to the
          standards for evaluating market power articulated by the
          Commission.  Further, AOPL contends that the Commission attached
                              
          12/  Id. at 61,695.

          Docket No. IS90-21-003, et al.       - 5 -
          undue importance to market share by calculating that factor based
          on delivery data and by ignoring the concept of relative ability
          to sustain a price increase over a significant period of time as
          a measure of market power.  AOPL also asserts that the Commission
          erred by requiring rate differentials found in Phase I to be
          justified by competitive conditions to be evaluated in Phase II
          for possible cross-subsidization, as well as requiring the rate
          differentials to be justified based on costs. Finally, AOPL
          objects to the Commission's rejection of Williams' proposed use
          of the stand alone cost method for Phase II.
          Discussion
            I. Analysis of Market Power
               Williams, AOPL, and Texaco challenge the Commission's
          holdings respecting the general concepts employed in the market
          power assessment. 
               A.   Exclusion of External Sources
               In Opinion No. 391, the Commission declined to apply a
          mechanical analysis with a specific mileage limit to exclude
          external sources.  While the Commission recognized that a great
          deal of product arrives in Williams' markets via trucks, many of
          which travel from origins more than 50 miles from a BEA, the
          Commission examined the 65 to 70 mile limit established by the
          ALJ and found that the distance of a source from a BEA might have
          little bearing on the economic ability of the source to compete
          effectively in the BEA. 13/ 
               Williams acknowledges that the Commission judged the effects
          of external competition based on the facts of the individual
          BEAs; however, Williams argues that the record does not support
          the Commission's unduly conservative conclusions concerning the
          effect of truck transportation of petroleum products into
          Williams' markets.  According to Williams, the intervenors' own
          evidence confirmed that trucks compete with pipelines at
          distances of 70 and 100 miles, particularly in rural
          areas. 14/  Williams also cites the surveys conducted by its
          Witness Jones, which Williams claims support its position that
          trips in excess of 100 miles are common and that trips in excess
                              
          13/  68 FERC  61,136 at 61,669-70.
          14/  Citing the testimony of Conoco's Witness Stockebrand (Ex.
               749, Ex. 753, Tr. 46/7921-26); Witness Swerczek (Tr.
               47/8228-32); staff's Witness Alger (Tr. 42/7068-128); Ex.
               801; Ex. 735; Tr. 45/7803; Tr. 48/8479-81.

          Docket No. IS90-21-003, et al.       - 6 -
          of even 200 miles are not infrequent. 15/  Williams points to
          its Witness Bollen's survey of gasoline station operators 16/
          and two statistical tests performed by its Witness Schink, all of
          which Williams argues confirm the results of Witness Jones'
          surveys. 17/  
               Williams states that the only conflicting testimony
          considered by the ALJ concerning the economic limits on truck
          transportation was submitted by Kerr-McGee.  However, Williams
          argues that the ALJ incorrectly interpreted Kerr-McGee's
          information in reaching his conclusion that the limit beyond
          which trucks generally cannot travel cost-effectively is 70
          miles; when corrected, Williams states that the actual effective
          range is increased to 90 to 95 miles.
               Moreover, continues Williams, in recalculating the HHIs to
          reflect what the Commission considered to be reasonable economic
          limits on truck movements from external sources, Opinion No. 391
          compounds the unduly conservative approach of the ALJ. 
          Specifically, Williams states that the Commission improperly
          accepted the intervenors' position regarding the length of haul
          for external sources, which in all cases was claimed to be to the
          center of the particular BEA.  However, Williams contends that
          trucks do not have to penetrate all parts of a BEA to make a
          price increase unprofitable.  Williams concludes that, because
          the effective capacity-based HHI already discounts the
          competitive strength of external sources, discarding those
          sources entirely, as the Commission did, constitutes an
          unwarranted double discounting of external sources, creating the
          false impression that there is no competitive impact from sources
          serving only part of a BEA.
               The Commission grants partial rehearing on this issue.  As
          will be discussed in greater detail in the context of the
          individual BEAs, in reassessing the viability of external
          sources, we have carefully examined the record evidence
          highlighted by Williams in its rehearing request concerning truck
          deliveries to the individual BEAs and the relative costs of
          truck, barge, and alternative pipeline deliveries into these
          markets.  Williams sponsored Exhibits 303-337, which in effect
          aggregate and summarize the other evidence it cites in its
          request for rehearing, to validate its claim that specified
          external sources competitively serve the individual BEA markets
          and, thus, should be included in the assessments of those
          markets.  Williams' exhibits include refinery, truck, and gas
                              
          15/  Citing Ex. 295 at 26-27; Ex. 308; Exs. 311-337.
          16/  Citing Ex. 501 at 7, 23-24.
          17/  Citing Ex. 260 at 126-175.

          Docket No. IS90-21-003, et al.       - 7 -
          station surveys that document truck shipments by origin and
          destination, as well as extensive tables for each BEA that
          compare transportation costs for Williams with those of a number
          of internal and external sources.  These cost tables provide
          pipeline tariffs and a consistent reference guide to trucking
          costs for distances ranging from eight to 425 miles.  On
          rehearing, the Commission is now persuaded that these comparative
          cost tables provide a sound basis on which to evaluate the
          ability of external sources to serve a market competitively, as
          the comparative costs are highly relevant in determining whether
          a source can represent effective competition.  We are now
          inclined to give less weight to the Kerr-McGee evidence relating
          to the economic limits of truck transportation, as it is less
          comprehensive.  Our revised findings are addressed in the
          discussion of the individual BEAs below.
                    B.   Use of Delivery-Based Market Shares
                         Versus Capacity-Based Market Shares
               In Opinion No. 391, the Commission affirmed the ALJ's use of
          capacity data in calculating the HHIs for Williams' markets, but
          held that use of delivery data as an additional and secondary
          indication of market concentration in determining the market
          share does not produce a distortion and, in fact, permits each
          methodology to offset the inherent deficiencies of the
          other. 18/  
               On rehearing, Williams and AOPL challenge the Commission's
          reliance on delivery data.  Both emphasize that delivery data
          focus on historical events and provide no indication of a future
          response to a price increase.  AOPL argues that the correct
          indicator of market power is market behavior -- the potential
          competitive response by the market to any attempt to exercise
          market power.  According to AOPL, excessive reliance on market
          share, particularly when calculated on the basis of actual
          deliveries rather than capacity, ignores the potential for
          competitive response.
               AOPL asserts that a determination of market behavior
          requires an evaluation of a host of factors, only one of which is
          market share.  AOPL also emphasizes the potential ability to
          sustain a small but significant nontransitory increase in price
          as a key factor in assessing market behavior.  
               According to AOPL, the Commission's undue reliance on
          delivery-based market share information distorts the ultimate
          determinations of market power.  For regulatory purposes, as
          opposed to merger policy, AOPL claims that the focus on market
          share should be more on market dominance.  Typically, states
                              
          18/  68 FERC  61,136 at 61,665.
          Docket No. IS90-21-003, et al.       - 8 -
          AOPL, federal courts have employed market share thresholds of 60
          percent and higher to indicate dominance. 19/  
               Williams and AOPL assert that the record in this proceeding
          demonstrates that delivery data -- especially where competitors
          are involved -- are not readily available and are of questionable
          accuracy. 20/  In contrast, states AOPL, capacity data tend to
          be public information and are more readily verified.  AOPL
          concludes that, if the Commission continues to use market share
          both for HHI purposes and as a separate and discrete screen, then
          at least the potential competition afforded by the capacity of
          the various competitors in the market should be used for both
          purposes.  
                
               Although the Commission found delivered pipelineable
          petroleum products to be the product in this case, Williams
          argues that the product actually is the capacity to supply                      
          19/  Citing U.S. v. Aluminum Company of America, 148 F.2d 416 (2d
               Cir. 1945); U.S. v. Grinell Corp., 384 U.S. 563 (1966);
               Holleb & Company v. Produce Terminal Cold Storage Co.; 532
               F.2d 29 (7th Cir. 1976); Hiland Dairy v. Kroger Co., 402
               F.2d 968 (8th Cir. 1968), cert. denied, 395 U.S. 961 (1969).
          20/  Citing Tr. 27/3755, 3758, 3760-61; Tr. 32/4836-37.  Williams
               points out that its delivery data are unavoidably flawed and
               incomplete, rendering market shares calculated using these
               data highly suspect.  Specifically, Williams explains that
               delivery data are available only from Williams and not from
               any of its competitors.  Further, asserts Williams, even the
               delivery data it provided cannot be assigned accurately to
               BEA markets because of serious reporting errors and
               omissions on the bill of lading records that are filled out
               by truckers who deliver the product to its final
               destination.  Williams states that these truckers often
               enter home office or billing address locations in the
               delivery destination field or report vague destinations,
               such as "various."  Williams states that all of its pipeline
               deliveries to non-Williams off-line terminals are recorded
               in Williams' delivery data as being consumed at the site of
               these off-line terminals.  In fact, maintains Williams,
               trucks take this product to locations both inside and
               outside the BEA market.  Finally, Williams points out that,
               in at least two BEAs, it shares terminals with other
               companies, making it impossible to determine truck
               deliveries by pipeline because bill of lading records do not
               provide that information.
          Docket No. IS90-21-003, et al.       - 9 -
          petroleum products in a BEA. 21/  Finally, Williams asserts
          that, even if delivery-based market share data have some
          probative value, that would not justify simply disregarding
          capacity-based market share data which, according to Williams,
          demonstrate clearly that Williams lacks market power.
              
               The Commission denies rehearing on this issue.  We
          acknowledge Williams' concerns regarding reliance on the delivery
          data that were available in this case.  As Williams has noted,
          there are serious deficiencies in the market delivery data
          available in this proceeding.  First, such data were only
          available for Williams' deliveries.  Second, delivery data are
          not kept in a uniform or consistent fashion that would permit
          accurate or uniform analysis.   However, those concerns were
          taken into account in our choice of capacity as the basis for our
          market assessment.  Our primary measure of market concentration
          was capacity-based, and we used Williams' delivery figures only
          as a secondary consideration.  We did not, as Williams alleges,
          disregard capacity-based market shares, nor did we base any
          market finding solely on delivery-based market share.  As
          discussed below, we have rejected Texaco's argument that we do
          so. 22/
               We emphasize again that we find it redundant to use a
          capacity-based HHI and a capacity-based percentage of a given
          market, as though these were two separate measures.  They are
          not.  While expressed differently, both measure Williams' share
          of available capacity in the market.  Deliveries into a market by
          individual pipelines may be somewhat less than their available
          capacity.  Therefore, it is more informative to compare relative
          capacity and relative deliveries when accurate figures are
          available.  It is even more useful when actual delivered product
          costs are also available for comparison.  Any serious discrepancy
          between relative capacity, relative delivered costs, and relative
          delivery-based market shares would cause us to examine a
          particular market more closely.
               We also believe that our use of capacity-based HHIs
          addresses sufficiently the issues raised by AOPL concerning
          market behavior and market dominance.  AOPL claims that our
          consideration of delivery data was misplaced and led the
          Commission to ignore the more important market power measure of
          relative ability to sustain a price increase over a significant
                              
          21/  Williams cites the testimony of Witness Schink, claiming
               that because marketers and refiners determine where they
               will market product and how capacity is deployed, available
               capacity best depicts the likely response to an exercise of
               market power.  Tr. 28/3881-83.
          22/  See infra part I.C.

          Docket No. IS90-21-003, et al.       - 10 -
          period of time.  Our use of capacity based HHI's does, contrary
          to AOPL's assertion, permit consideration of market responses to
          a price increase.  Our capacity-based HHI's take into account
          both excess and potential capacity, the existence of which in a
          market provides the potential for rapid response to a significant
          price increase.  
               AOPL is correct that we did not use as the basis for our
          analysis the measurement of specific responses to specific price
          increases.  The record in this case does not contain data that
          would enable us to make the price analysis that AOPL seeks. 
          The parties have been inconsistent and sporadic in their
          exploration of the potential for new entry under sustained price
          increases.  We are unable to use price increases/potential
          capacity as a tool for market definition in this case because
          Williams has not presented sufficient evidence on alternatives in
          that context.  Additionally, there is not sufficient information
          on actual costs in the record to permit us to perform the
          analysis independently.
               In Opinion No. 391, we found the relevant product to be
          delivered pipelineable petroleum products, recognizing that a
          large volume of product arrives in Williams' markets via other
          modes of transportation and through exchanges. 23/  We find no
          merit in Williams' argument that capacity is the true product in
          this case, which is essentially the same point that Texaco raises
          in its contention that the Commission should use corridors in
          analyzing the markets in this proceeding.  We have consistently
          rejected the use of corridors in this proceeding, and find
          nothing new in the claims of Williams and Texaco that persuade us
          to reverse that position.
                    C.   Weight Accorded Effective
                         Capacity-Based HHI Statistic
               In Opinion No. 391, the Commission affirmed the ALJ's
          consideration of Williams' delivery-based market share in markets
          identified for further examination by the HHI screening.  The
          Commission concluded that the ALJ did not establish an
          excessively high standard in assessing delivery-based market
          share, nor did he establish an absolute threshold of 70 percent
          as indicative of market power.  For example, the ALJ did not
          exclude automatically from examination those markets in which
          Williams' share is below 50 percent, although the Commission
          pointed out that the ALJ found those markets to be "less
          troublesome." 24/ 
                              
          23/  68 FERC  61,136 at 61,659.
          24/  68 FERC  61,136 at 61,672.

          Docket No. IS90-21-003, et al.       - 11 -
               Williams states that the HHI statistic takes into account
          the market shares of all market participants.  Therefore, if any
          market participant has a large share, the resulting high HHI will
          indicate that the market is highly concentrated and that one or
          more of the market participants may have market power.  A low
          HHI, on the contrary, indicates that no participant can have
          market power.  Thus, reasons Williams, market shares for
          individual market participants are relevant only when the HHI
          statistic is high.
               Williams further states that the effective capacity-based
          HHI statistic used by staff also takes into account the number of
          companies supplying the market and the capacity of these
          companies to do so.  Williams explains that, for external supply
          sources, the capacity to serve the market is measured not only in
          terms of the capacity of the sources but also in terms of the
          reach of trucks from these sources into the BEA.  According to
          Williams, an external source typically serves only a small
          fraction of the market, and the effective capacity-based HHI
          credits the source only to that extent.  Therefore, asserts
          Williams, the effective capacity-based HHI appropriately
          discounts the competitive influence of external supply sources
          relative to internal suppliers.  Williams concludes that the
          Commission should consider the effective capacity-based HHI as
          the primary statistic and should use market share statistics only
          when the HHI is high.
               Rehearing is denied on this issue.  We find that the
          question of the weight accorded capacity has been addressed
          adequately in our calculations, as reflected in Opinion No. 391. 
          Although in Buckeye, we relied on delivery data in calculating
          the HHIs, we recognized that circumstances might warrant the use
          of other appropriate data in other cases. 25/  In the instant
          case, we used capacity data because it was more complete than the
          delivery data.  In fact, delivery data was only available for
          Williams and not for other market participants.  We also
          emphasize again that we have based no market decision solely on
          delivery-based market share, but have employed that factor only
          as a secondary indicator of market power.
               In its request for rehearing, Texaco contends that the
          Commission erred in finding that Williams cannot exercise
          significant market power when Williams has over 45 percent of the
          deliveries in a particular market, such as in the Columbia BEA. 
          In the alternative, Texaco asks the Commission to reconsider its
          arguments relating to the competitiveness of the challenged BEAs
          where Williams was allowed to set rates on its own.  Texaco
          offered no specific examples other than Columbia, which will be
                              
          25/  Opinion No. 360, 53 FERC  61,473 at 62,667; Opinion No.
               360-A, 55 FERC  61,084 at 61,261.
          Docket No. IS90-21-003, et al.       - 12 -
          addressed below in the context of the individual BEAs.  It thus
          appears that Texaco's real argument relates to the magnitude of a
          price increase in a particular market, rather than to the general
          concept of market share.  Therefore, the Commission denies
          Texaco's request for rehearing on the question of whether a
          delivery-based market share of 45 percent or greater can permit
          Williams to exercise market power in a market.
                    D.   Use of the HHI as a Screen
               Williams asserts that the Commission correctly affirmed the
          ALJ's use of a 2500 HHI as an initial screen to identify markets
          warranting further scrutiny, but erred in holding that the HHI is
          an analytical tool rather than an irrebuttable presumption of
          lack of market power. 26/  Although, in its rehearing request,
          Williams maintains that an HHI of 2500 should constitute an
          irrebuttable presumption that a market is workably competitive,
          Williams declines to seek rehearing on this point, but does ask
          the Commission to hold that markets with HHI's less than 1800 are
          irrebuttably deemed workably competitive.  AOPL contends that
          such screens do not prejudice the parties' rights, but rather
          focus the debate and streamline the proceeding.
               Williams asserts that the record in this case supports its
          position.  Williams cites the testimony of the economic
          witnesses, 27/ the Commission's decision in Buckeye, 28/
          the Department of Justice study addressing oil pipeline
          deregulation, 29/ and the ALJ's decision in this
          proceeding 30/ as being in agreement that the HHI alone should
          be the initial screen for identifying markets requiring further
          analysis.  Williams states that the superiority of the HHI as an
          index of market power stems from the fact that the HHI, unlike
          delivery-based market share, reflects both the number and size of
          all firms in the market. 31/  Williams disputes the
                              
          26/  See 68 FERC  61,136 at 61,661-63.
          27/  Citing Ex. 208 at 3; Ex. 619 at 47; Ex. 932 at 6.
          28/  Citing 53 FERC  61,473 at 62,663.
          29/  Citing Ex. 18 at 29-31. U.S. Dep't of Justice, Oil Pipeline
               Deregulation (1986) (Oil Pipeline Study).
          30/  Citing 58 FERC  63,004 at 65,023. 
          31/  Citing FTC v. University Health, Inc., 938 F.2d 1206, 1211
               n.12 (11th Cir. 1991); FTC v. PPG Industries, Inc., 798 F.2d
               1500, 1503 (D.C. Cir. 1986);  First and First, Inc. v.
               Dunkin' Donuts, Inc., 1990-1 Trade Cases,  68,989 at 63,368
                                                             (continued...)
          Docket No. IS90-21-003, et al.       - 13 -
          Commission's statement that its approach in this case is
          consistent with Buckeye, claiming that the dispute in Buckeye was
          between an HHI threshold of 1800 and 2500, rather than whether a
          threshold, if adopted, would in fact serve as an irrebuttable
          presumption.  Further, contends Williams, in Buckeye, the
          Commission found all markets with HHIs below 1800 to be workably
          competitive.
               Rehearing is denied on this issue.  An HHI of 1800 merely
          indicates that the shippers in a market have at least six good
          choices, suggesting that the market is not captive.  However, the
          Commission continues to believe that, for its purposes in
          assessing market power, the HHI should be used as an analytical
          tool, along with other criteria, rather than establishing an
          irrebuttable presumption of lack of market power when it falls
          below a specific number.  This practice gives the Commission the
          greatest flexibility in discharging its legal responsibilities
          under the Interstate Commerce Act (ICA).  We are not persuaded
          that the parties' claimed need for certainty mandates a different
          decision.  The parties still must offer evidence sufficient for
          the Commission to assess market power in each market, and our
          unwillingness to establish a firm HHI threshold in a particular
          case does not add significantly to that obligation.    
               The testimony cited by Williams is not as definitive as
          Williams suggests.  The passages cited explore the preferences of
          each witness for a particular HHI value (1800 vs. 2500), as being
          indicative of a lack of market power.  However, the witnesses do
          not espouse a particular number as the basis for an irrebuttable
          presumption of competition.  Rather, each witness addresses the
          need to consider a number of factors in making a market power
          determination.
               Further, we do not read the Oil Pipeline Study to require
          that a particular HHI can establish an irrebuttable presumption
          of competitiveness.  Although the study does state that, with a
          BEA of less than 2500, competitive concerns are presumed to be
          small relative to the costs of pipeline regulation, 32/ we
          find no language that would bar additional analysis, particularly
          if other factors present in a case suggest that further
          examination may be of value.  
               We also disagree that Buckeye supports the notion that a
          particular HHI can serve as an irrebuttable presumption of lack
          of market power.  In that proceeding, the parties argued for an
                              
          31/(...continued)
               (E.D. Pa. 1990); United States v. LTV Corp., 1984-2 Trade
               Cases  66,133 at 66,336 n.5 (D.D.C. 1984).
          32/  Oil Pipeline Study at 30.
          Docket No. IS90-21-003, et al.       - 14 -
          HHI threshold, but the Commission concluded that, while the use
          of HHIs is the appropriate first step in evaluating the
          likelihood of market power, knowing the degree of concentration
          in a market merely "provides useful information about where on
          the competitive spectrum that market likely lies and what other
          factors will have to be weighed to enable a finding as to the
          existence or absence of significant market power." 33/ 
          Although the Commission stated that, where a market had a
          "particularly low" HHI, it did not undertake further review, the
          Commission did not recognize any specific number as raising an
          irrebuttable presumption of competitiveness. 34/
               Neither do we agree that the ALJ's decision supports the
          notion of a particular HHI number raising an irrebuttable
          presumption of lack of market power.  While the ALJ chose to use
          2500 as an initial screen for his analysis, he acknowledged that
          in Buckeye, the Commission did not adopt a particular
          number, 35/ and he recognized that caution suggested a look at
          BEAs with HHIs below 2500 where Williams has a high market
          share. 36/  His choice of 1800 as a lower limit appears to be
          based in large part on the fact that several parties had urged
          adoption of that number as the screen.  Accordingly, based on all
          of these considerations, we deny rehearing on this issue. 37/ 
                    E.   Weight Accorded Exchanges
               The Commission, in Opinion No. 391, affirmed the ALJ's
          conclusion that exchanges should be entitled to little weight in
          the post-screening review of the markets in this case.  Further,
          the Commission recognized that the potential for double counting
                              
          33/  53 FERC  61,473 at 62,667.
          34/  Id.  See also 55 FERC  61,084 at 61,254.
          35/  58 FERC  63,004 at 65,013.
          36/  Id. at 65,023.
          37/  In both the Buckeye proceeding and this proceeding we have
               used an initial screen of 2500.  The Commission did so to
               follow the recommendations and the precedent of the Justice
               Department in its work on oil pipelines.  More recently, the
               Commission has requested comments on a Staff Paper on
               Market-Based Rates for Natural Gas Companies.  In that
               Paper, Staff proposed an initial screen of 1800 for
               analyzing natural gas pipeline transportation markets,
               proposing a relatively strict standard when the Commission
               considers market-based rates for natural gas pipelines. 
               Request for Comments on Alternative Pricing Methods, Docket
               No. RM95-6-000, 70 FERC  61,139 at 61,403, 61,408.   
          Docket No. IS90-21-003, et al.       - 15 -
          exists where capacity is included in the HHI and the exchange
          utilizing the capacity is added into the HHI as well or
          considered a mitigating factor.  The Commission pointed out that
          exchanges do not create new barrels of product and do not always
          involve the owner's taking physical possession of the barrels. 
          Finally, the Commission concluded that exchanges tend to be
          negotiated with reference to Williams' rates rather than
          disciplining the rates. 38/
               Williams disputes the conclusion that assigning significant
          weight to exchanges would result in possible double counting. 
          According to Williams, it never asked the Commission to take
          exchanges into account as some sort of adjustment to HHIs, but
          merely asked the Commission to consider the extensive volume and
          pricing information contained in the record on exchanges. 
          Williams claims that this record shows a consistent pattern of
          intense price rivalry among alternative sources, even in the BEAs
          found not workably competitive.  
               The Commission's use of supply capacity as a measure of
          market concentration already takes exchanges into account, as
          explained in Opinion No. 391. 39/  While exchanges may obviate
          the use of specific pipeline corridors between two markets, they
          do not obviate the need for ultimate delivery into the BEA.  This
          must be accomplished with existing delivery capacity, including
          trucks, pipelines, barges, and direct refinery sales.  All of
          these alternatives, where viable, have been included in our HHI
          calculations for individual markets.  
               We do acknowledge the considerable traffic in exchanges
          documented by Williams and the fact that this permits shippers to
          bypass all or part of the Williams system.  However, this does
          not change the fact that delivery of exchanged product into a BEA
          must take place through the facilities of some existing supplier. 
          The ability of suppliers to deliver exchanges into the BEA is
          already accounted for in our HHI analysis.  
               Williams has offered specific examples of what it claims to
          be the effects of exchanges in the Omaha, Duluth, Grand Island,
          and Sioux City BEAs.  Although Williams alleges that product is
          received on exchange in the Omaha BEA, thereby eliminating the
          need for transportation on its system, as we have stated above,
          our use of supply capacity as a measure of market concentration
          already considers exchanges.  Although Williams has not sought
          rehearing of our market power determinations relating to the
          Duluth, Grand Island, and Sioux City BEAs, the same principle
          applies in those markets.
                              
          38/  68 FERC  61,136 at 61,673.
          39/  Id. at 61,672-73.
          Docket No. IS90-21-003, et al.       - 16 -
                    F.   Ability to Sustain a 15 Percent Price Increase
               The Commission accepted the ALJ's definition of market power
          as "a firm's ability to sustain a price increase over a
          significant period of time, or to exclude competition." 40/ 
          The Commission also affirmed the ALJ's rejection of any specific
          rate increase as a litmus test for market power. 41/
               Williams and AOPL challenge the Commission's failure to
          establish a specific price increase threshold for determining the
          existence of market power.  First, they contend, use of such a
          threshold flows from the definition of market power adopted by
          the ALJ.  Williams and AOPL also object to the Commission's
          reliance on the Merger Guidelines 42/ for the proposition that
          a small but significant nontransitory price increase is only a
          methodological tool and does not establish a tolerance level for
          inferences concerning market power.  According to Williams and
          AOPL, the point of the statement in the Merger Guidelines is that
          an small but significant nontransitory price increase is not
          intended to license a particular quantum of future price, and in
          any event, that is not what Williams seeks to do.  Rather, state
          Williams and AOPL, the evidence of Williams' inability to sustain
          a 15 percent price increase demonstrates that it lacks the
          ability to increase its rates by that amount today.
                Williams contends that the Commission ignored a great deal
          of evidence when it accepted the ALJ's finding that Williams
          studied the impact of a hypothetical rate increase in only three
          of its markets where market concentration suggested further
          scrutiny.  According to Williams, the record demonstrates that
          its rates have not increased significantly in real terms over its
          pre-existing rates and actually have decreased in real terms,
          particularly its average rates to each of the BEAs where it was
          found not to have shown that it lacks market power.  Further,
          emphasizes Williams, its average systemwide rates also decreased
          6.6 percent in real terms, although its systemwide average
          nominal rates increased 13 percent. 
               Williams maintains that the record contains evidence that
          would have allowed the ALJ and the Commission to test the effect
          of a 15 percent increase in all of the markets that were
          subjected to further analysis.  Williams states that it presented
          BEA-by-BEA evidence of the number of additional truckloads of
          product per day from non-Williams sources that would make a 15
                              
          40/  Id. at 61,657.
          41/  Id. at 61,658.
          42/  Dep't of Justice and Federal Trade Commission Horizontal
               Merger Guidelines (April 2, 1992).
          Docket No. IS90-21-003, et al.       - 17 -
          percent real price increase by Williams unprofitable. 43/ 
          Williams claims that this evidence is extremely conservative
          because it relies on the delivery-based market share data
          presented by the staff, which includes 100 percent of Williams'
          deliveries to non-Williams terminals even if they were trucked
          outside of the destination BEA.  Despite that flaw, Williams
          seeks to demonstrate that, in most of the BEAs where the ALJ
          found that Williams had failed to demonstrate that it lacks
          market power, fewer than ten additional truckloads per day would
          be sufficient to make a 15 percent increase unprofitable. 
          Finally, Williams states that the trucking cost table presented
          by Kerr-McGee and relied on by the ALJ also showed the extent to
          which external sources could cost-effectively serve each BEA as a
          result of a 15 percent real price increase by Williams.  Williams
          concludes that the analysis, which it depicted in the maps
          contained in the individual BEA discussions in its Brief on
          Exceptions 44/ and the Appendix to its Brief Opposing
          Exceptions, 45/ confirmed that Williams would lose sufficient
          business to render such a price increase unprofitable.
               The Commission denies rehearing on this issue.  Opinion No.
          391 thoroughly explains the Commission's reasons for rejecting
          the use of a specific level of rate increase as a litmus test for
          market power.  Williams and AOPL raise no new arguments that were
          not addressed by the Commission in its previous order.  For
          example, the Commission rejected Williams' argument that rate
          decreases in certain of its markets requires the Commission to
          establish a specific rate increase threshold for determining the
          presence or absence of market power.  The Commission also pointed
          out that the Merger Guidelines reject mechanical application of
          the concept of a small but significant nontransitory price
          increase.
               We also find a lack of agreement on the use and definition
          of a small but significant nontransitory price increase in this
          proceeding.  When Williams alludes to the importance of such a
          price increase in measuring its competition, it looks at the
                              
          43/  Williams explains that it calculated its daily deliveries to
               each BEA by multiplying its net percentage share of
               deliveries by total daily consumption in the BEA.  Citing
               Ex. 306 at 2; Ex. 354 at 3; Ex. 217 at 8.  Then Williams
               determined the number of tank truckloads that would be
               required to displace 15 percent of those deliveries and
               presented the results in the individual BEA discussions in
               its Post-Hearing BEA Appendix.
          44/  Brief on Exceptions of Williams Pipe Line Co. at 72-113.
          45/  Brief Opposing Exceptions of Williams Pipe Line Co., BEA
               Addendum. 
          Docket No. IS90-21-003, et al.       - 18 -
          effect of a 15 percent price increase on competition in its
          markets, citing the reference to 15 percent in Buckeye, but
          adding 15 percent to its 1990 proposed rate increase. 46/  By
          contrast, Witness Alger, in his assessment of transit pipelines
          that could build terminals profitably in particular BEAs, used as
          his small but significant nontransitory price increase a $0.10
          increase over pre-1990 rates. 47/  There is no need for the
          Commission to resolve this conflict.  
                    G.   Use of Corridors  
               Opinion No. 391 affirmed the ALJ's use of destination
          markets, rejecting Texaco's contention that corridors should be
          used in determining the relevant geographic markets in this
          proceeding.  The Commission found that the real economic concern
          of shippers is the delivered product and its price rather than
          whether the product travels between specific locations via
          pipeline.  Additionally, the Commission recognized that, if
          geographic markets were limited to specific origin/destination
          pairs, this would fail to recognize the economic concern of the
          shippers as well as eliminating from consideration competitive
          suppliers who bring product into the markets without utilizing
          the specific corridors.  The Commission also explained that the
          availability of exchange options mitigates situations in which a
          shipper might otherwise be captive and that the use of
          destinations as the relevant market allows for those exchanges to
          be recognized and considered as the viable options that they are
          for shippers.  Finally the Commission found that the use of
          destinations as the relevant markets is consistent with
          Buckeye. 48/
               Texaco argues that, just as Williams may have captive and
          non-captive destination markets, with relief tailored
          accordingly, there should be recognition that both captive and
          non-captive corridors can exist. 49/  Texaco's request for
          rehearing on this issue is denied.  In Opinion No. 391, the
          Commission thoroughly explained its reasons for rejecting the use
          of corridors, principally that defining geographic markets by
          specific corridors would eliminate from consideration those
          suppliers who bring product into a market without using the
          corridors.
                              
          46/  See, e.g., Ex. 208 at 38.
          47/  Tr. 41/6997, 7006; Ex. 627.
          48/  68 FERC  61,136 at 61,660-61.
          49/  Texaco states that the Commission recognized this in the
               NOPR for market-based ratemaking for oil pipelines. Citing
               68 FERC  61,137, slip op. at 10, n.18 (July 28, 1994).
          Docket No. IS90-21-003, et al.       - 19 -
               Texaco argues in the alternative that, if the only
          consideration is for destination markets, and corridors are
          immaterial, then there should be only a single competitive rate
          to each market where Williams lacks significant market power. 
          Texaco maintains that, if Williams posts more than one rate to
          the market destination, it demonstrates either that (1) there is
          a segmented market in the destination, with one segment insulated
          from another, or (2) only some customers are receiving the
          benefit of any competition, contradicting the finding that
          competition will hold the rates within just and reasonable
          levels.  Texaco asserts that the single rate it advocates should
          be set at the lowest of the rates posted, subject to verification
          that the lowest rate is no higher than the rate of the principal
          competitors.
               Texaco has cited the Dubuque BEA as an illustration,
          claiming that, while Williams claims to face competition in this
          market, the range of rates in this BEA makes it appear that only
          some customers benefit from this competition.  However, Texaco is
          incorrect when it assumes that competition requires that there be
          only one pipeline rate into a BEA.  Competition will tend to
          effect a single market price of delivered product, but that does
          not require all suppliers to have identical costs at every level
          of the delivery chain.  Competition, in fact, may require
          differential pricing, as will be discussed in greater detail
          later in this order.  We also emphasize that competition does not
          preclude price increases.  In any of its markets, if Williams'
          cost for product transportation is above market levels, it will
          lose customers.  In the case of Dubuque, shippers not only have
          pipeline alternatives to use instead of Williams, but may receive
          barge deliveries as well. 50/
               Texaco mistakenly assumes here that Phase I of this
          proceeding is for the purpose of establishing just and reasonable
          rates in individual markets, rather than for the purpose of
          performing a market analysis to determine market power.  Market
          power that controls access to a destination is relevant to that
          market, and market power that controls egress from an origin
          market is relevant to that market; however, the options open to
          shippers in an origin market do not prove or disprove competition
          in the destination market.  The fact that a pipeline may be able
          to post more than one rate to a market could also reflect
          differences in distances, costs, product prices, density of
          traffic, and trucking or delivery costs for competitors in
          various sectors of a market. 
               Texaco appears to be seeking an inappropriate result -- that
          Williams should post a single rate from all destinations into                    
          50/  See Ex. 321.
          Docket No. IS90-21-003, et al.       - 20 -
          each of its competitive markets.  The Commission rejects that
          argument as well.  To require a single transportation rate, which
          would be set at the lowest of the rates posted, subject to the
          verification sought by Texaco, would be to impose by regulation
          the desired outcome of a single party without regard to market
          realities.  It would also be inconsistent with the Commission's
          philosophy of light-handed regulation where market forces are
          effective.  
               II.  Challenged BEA Findings
               With respect to the nine BEA markets where it challenges the
          Commission's findings, Williams argues that Opinion No. 391 (1)
          failed to take into account the recent entry of the Heartland and
          Cenex pipelines into Williams' markets; (2) ignored the surveys
          and interviews demonstrating that external sources are serving
          Williams' markets on a regular and ongoing basis; (3) failed to
          consider the impact of barge competition; (4) failed to consider
          the competition created by the Department of Defense (DOD) annual
          bidding process; and (5) misconstrued staff analyses concerning
          the potential for profitable construction of terminals on
          pipelines traversing several of Williams' markets.  Texaco asks
          the Commission to grant rehearing and find the Columbia BEA to be
          noncompetitive, claiming that Williams has been able to raise its
          rates significantly in that market. 
                    A.   Springfield, MO
               Despite the ALJ's 1317 HHI for this market and Williams' 38
          percent delivery-based market share, the Commission found that
          Williams had failed to demonstrate that it lacks market power in
          this BEA.  The Commission explained that this is a large BEA and
          that five of the external sources utilized in the ALJ's
          calculation are at too great a distance from the BEA border to
          provide economic competition.  The Commission's recalculated HHI
          was over 3000. 51/
               On rehearing, Williams states that the Commission excluded
          all external sources as well as three pipelines that do not have
          operating terminals within the BEA.  As a result, contends
          Williams, the recalculated HHI is high because only three
          suppliers with capacity sufficient to supply the entire BEA were
          considered. 52/  Williams argues that the Commission is
          incorrect about the potential for terminals on the three excluded
          pipelines because the staff found that two terminals could be
                              
          51/  68 FERC  61,136 at 61,679.
          52/  The three pipelines are Williams, CRA-Farmland, and
               Cherokee.
          Docket No. IS90-21-003, et al.       - 21 -
          constructed profitably within this BEA and should be included in
          the HHI calculation. 
               Further, maintains Williams, the exclusion of external
          supply sources was based on inaccurate information, which cited
          distances from external sources to the City of Springfield,
          rather than distances to the border of this large BEA.  
          According to Williams, Phillips supplies this BEA market from
          both Jefferson City and Kansas City.  Williams contends that the
          Commission eliminated both sources, although Kansas City is twice
          as far as Jefferson City from the market.  Williams argues that
          inclusion or exclusion of external sources should be based on
          observed trucking activity, such as the survey and interview
          evidence in the record.  
               Williams explains that the HHI used by staff discounts the
          external sources by recognizing that these sources are capable of
          serving only part of a BEA market.  However, Williams argues that
          even these external supply sources are capable of competing with
          an internal source.  Williams notes that Phillips at Kansas City
          is capable of competing in slightly more than one-half of the
          market, while Shell at Wood River, Illinois, competes in less
          than four percent of the market. 
               Williams also argues that the staff's recalculated HHI is
          conservative because it excludes sources that logically would
          supply the BEA but were not documented by the trucker interviews
          or the gas station manager surveys.  Williams lists six external
          sources that logically could serve the Springfield BEA but were
          excluded because there was no documentation on the record. 53/ 
          Williams concludes that these additional supply sources require
          an HHI even lower than the staff's calculation.  
            
               We will grant rehearing with respect to the Springfield BEA. 
          Our further examination of the record indicates that the
          Springfield BEA could support the profitable construction of
          terminals for the ARCO and Explorer transit pipelines, although
          not for the KCPS line. 54/  We will, therefore, include these
          two internal sources in our recalculation of the HHI for this
          market.
               We reach a different conclusion regarding the viability of
          external sources.  We have examined carefully the documentation
          of delivery costs provided by Williams for this BEA, which
                              
          53/  Williams lists Chase at Valley Center, Kansas; Texaco at El
               Dorado, Kansas; Derby at Wichita, Kansas; Total at Arkansas
               City, Kansas; ARCO at Kansas City, Kansas; and Sinclair at
               Tulsa, Oklahoma.
          54/  See Ex. 627.
          Docket No. IS90-21-003, et al.       - 22 -
          demonstrates that delivery costs for Phillips and Shell far
          exceed those of Williams. 55/  Phillips' delivery costs into
          this BEA through Jefferson City are nearly double those of
          Williams.  Shell's terminal which, according to Williams, is 50
          miles further from the BEA, would necessarily be even more
          costly, although Williams provides no costs for this source. 
          Therefore, on the basis of this evidence, we are unable to
          conclude that deliveries by Phillips and Shell are economically
          viable competitive sources for this BEA.
               Truck deliveries from the Sun refinery in Tulsa are
          questionable; it is not clear that such deliveries would occur
          because both Conoco and Williams offer pipeline service from
          Tulsa to a number of terminals in the Springfield BEA, at
          delivered costs well below the cost of trucking. 56/  If
          Williams were to raise its rates, the Sun alternative could
          become more attractive.  However, because Williams assigns only a
          five percent market share to Sun, including or excluding it
          barely changes the market concentration.  
               We will not include the other six potential suppliers cited
          by Williams.  As Williams itself admits, these sources are not
          documented in the record and are included by Williams for the
          first time on rehearing. 
               With the inclusion of the ARCO and Explorer pipelines as
          internal sources, we can find that Williams lacks significant
          market power in this market.  Even with the continued exclusion
          of Phillips and Shell as external sources, customers in this BEA
          now have a choice of taking deliveries from five alternative
          suppliers in addition to Williams.  This is reflected in the
          recalculated HHI of 1800 for the Springfield BEA.  Therefore, we
          grant rehearing for this market. 
                    B.   Kansas City
               For the Kansas City BEA, the Commission recalculated the HHI
          to eliminate sources more than 100 miles from the BEA, finding
          that the record did not show them to be competitive with
          Williams.  The recalculated HHI of more than 2500, in addition to
          Williams' delivery-based market share of 63 percent and the lack
          of offsetting circumstances, caused the Commission to find that
          Williams had failed to establish that it lacks market power in
          the Kansas City BEA. 57/                      
          55/  See Ex. 311.
          56/  Id. 
          57/  68 FERC  61,136 at 61,680.

          Docket No. IS90-21-003, et al.       - 23 -
               Williams asserts that the Commission erred by relying on an
          inaccurate high delivery-based market share and by improperly
          excluding external supply sources. According to Williams, the
          market share cited by the Commission actually represents the
          combination of Williams' and Phillips' pipeline deliveries to
          this market because the two companies share breakout facilities.  
          Williams also states that the shippers have exaggerated the
          distances from the external supply sources to the BEA border. 
          Williams urges the Commission to adopt the original staff HHI of
          2340 because this calculation appropriately recognizes the effect
          on this market, albeit small, of the external sources located
          more than 100 miles from the BEA border. 
               Williams maintains that it included in the HHI calculations
          only external sources that had been identified and documented as
          serving the BEA by the gas station manager surveys or trucker
          interviews.  However, in the case of the Kansas City BEA,
          Williams contends on rehearing that there are four other external
          supply sources that could be included in the HHI calculation,
          thereby lowering the HHI. 58/  
               On review of the record, we find that some of these external
          sources may indeed deliver into this BEA at competitive prices. 
          Truck deliveries from two external sources -- the Farmland
          refinery in Coffeyville, Kansas, and the Conoco terminal at Mt.
          Vernon, Missouri -- were improperly excluded from our calculation
          for this market.  Although both sources face some competition
          from pipeline deliveries, they are still economically feasible. 
          Product from both Coffeyville and Mt. Vernon can serve the border
          counties of the BEA in viable competition with product delivered
          at Kansas City and trucked back to the border counties.  On this
          basis, we will include trucking from the Farmland refinery and
          the Mt. Vernon terminal as separate and competitive alternatives
          to Williams' pipeline in this BEA. 59/   
               However, the record does not contain capacity figures for
          the alleged external supply sources at Salina, Phillipsburg, El
          Dorado, and Council Bluffs that would allow us to examine their
          potential as competitors.
               For this BEA, we also agree that the delivery data are
          somewhat misleading.  Because Williams shares breakout facilities
          with Phillips in this BEA, the data on market share include
          deliveries for both companies.  With this correction, Williams'
                              
          58/  These sources are Kaneb at Salina, Kansas; NCRA at
               Phillipsburg, Kansas; Texaco at El Dorado, Kansas; and NCRA
               at Council Bluffs, Iowa.
          59/  See Ex. 315.
          Docket No. IS90-21-003, et al.       - 24 -
          market share falls almost by half, causing us considerably less
          concern about Williams' market power.
               On review, we find that six other suppliers in addition to
          Williams can serve this BEA competitively.  Therefore, our HHI
          calculation, which now includes Amoco, ARCO, KCPS/Texaco,
          Phillips, Williams, Farmland, and Conoco (at Mt. Vernon only), is
          2400.  This figure, along with a corrected market share for
          Williams of 36 percent, causes us to find that Williams has
          successfully demonstrated that it lacks market power in this BEA. 
          Accordingly, rehearing is granted. 
                    C.   Lincoln
               The Commission concluded that Williams had failed to prove
          that it lacks market power in the Lincoln BEA.  In this market,
          the Commission found Williams' delivery-based market share to be
          65 percent.  Eliminating the NCRA pipeline, which does not have a
          terminal in the BEA, produced a recalculated HHI of over 3000. 
          The Commission also found no evidence of any factors offsetting
          the high market share and HHI numbers. 60/ 
               Williams argues that the Commission erred in excluding the
          NCRA and Heartland pipelines in its HHI recalculation and in
          relying too heavily on Williams' pre-Heartland delivery-based
          market share.  Williams cites the evidence presented by staff's
          Witness Alger that NCRA would find it profitable to build a
          terminal because the net present value of the incremental profits
          that would be generated would exceed the cost of constructing the
          terminal.  Williams further states that the Heartland pipeline,
          with a rated capacity of 50,000 barrels per day, began operation
          in September 1990 and was fully operational throughout 1992.  
               On review, we find that the evidence demonstrates that, even
          though NCRA presently has no terminal in the Lincoln BEA, it does
          have a terminal at Council Bluffs, some 60 miles from the City of
          Lincoln, that can deliver product competitively into the Lincoln
          area. 61/  Given this fact, the question of a potential
          internal NCRA terminal is moot.  We will include the Council
          Bluffs terminal in the HHI calculation.  However, our reading of
          Witness Alger's testimony concerning the Heartland terminal at
          Lincoln differs from that of Williams.  Witness Alger merely
          agreed that if Williams' assumptions about the economics of the
          potential NCRA terminal were accepted, then an NCRA terminal
          would be profitable; however, he did not accept Williams'
                              
          60/  68 FERC  61,136 at 61,680.
          61/  See Ex. 327.
          Docket No. IS90-21-003, et al.       - 25 -
          assumptions. 62/  We believe that his assumed price increase
          of $0.10 over pre-1990 rates is more realistic than Williams'
          assumed price increase of 15 percent over pre-1990 rates.
               Although Williams presented evidence that Heartland was
          under construction, we excluded it from our analysis of the
          market as an uncertainty.  However, the Heartland terminal at
          Lincoln became fully operational in 1992, in which year Williams'
          deliveries fell by a significant percentage.  While the record
          does not contain any evidence of costs for this new pipeline, it
          is in fact an internal source in this BEA, with an effective
          capacity equal to that of Williams or Kaneb.  With the inclusion
          of Heartland and the NCRA Council Bluffs terminal, our
          recalculated HHI is 1542.  Therefore, based on our determination
          that Williams lacks significant market power in this market, we
          grant rehearing. 
                    D.   Quincy
               The Commission examined the Quincy BEA and reversed the
          ALJ's decision, based on Williams' 74 percent delivery-based
          market share and the recalculated HHI of 6559. 63/  The
          Commission found that Williams has the only pipeline terminal in
          the BEA and that evidence demonstrated that it would not be
          profitable for Amoco, which has a proprietary pipeline traversing
          the BEA, to build a terminal there. 64/
               Williams argues that, contrary to the Commission's
          conclusion, staff Witness Alger determined that it would be
          profitable for Amoco to build a terminal in the Quincy BEA.  
          Williams also states that, in evaluating external supply sources
          in this BEA, it included only external sources that had been
          identified and documented as serving the BEA by the gas station
          manager surveys or trucker interviews.  However, Williams
          contends that there are three other external supply sources that
          could have been included. 65/ 
               Next, Williams contends that, contrary to its findings in
          Buckeye, the Commission erred in not recognizing the strong
          competitive effects of the barge facilities that are located
          virtually in the center of the Quincy BEA market at Canton and
                              
          62/  Tr. 42/7185.
          63/  The ALJ found the HHI to be 2026.  58 FERC  63,004 at
               65,023.
          64/  68 FERC  61,136 at 61,685.
          65/  Williams lists Conoco at St. Charles, Missouri; ARCO at Ft.
               Madison, Iowa; and Shell at St. Louis, Missouri.
          Docket No. IS90-21-003, et al.       - 26 -
          LaGrange, Missouri. 66/  Williams also maintains that its
          effective capacity-based market share in Quincy is 25 percent,
          demonstrating that it cannot exercise market power in this
          market.
               On rehearing, we find that Williams is correct in its
          contention regarding the possible construction of an Amoco
          terminal.  Using his own conservative assumptions, staff Witness
          Alger found that it would be profitable to construct this
          terminal, and that its inclusion in the HHI calculation might
          alter his finding on competition in this BEA. 67/  We have
          accepted Witness Alger's assessment of the potential
          profitability of such terminals in other markets and will do so
          here as well by including the potential Amoco terminal in the
          market and the HHI calculation.
               With respect to external sources that might serve as
          alternatives in this BEA, the trucking and delivery costs
          presented in the record lead us to reaffirm our exclusion of
          Phillips as an economically viable alternative in the BEA.  The
          trucking costs alone from Phillips' terminals are almost equal to
          Williams' total delivered costs in the Quincy market.  By
          contrast, these cost data indicate that ARCO, while not a least-
          cost supplier, could serve this BEA in competition with
          Williams. 68/
               The external barge sources cited by Williams, which are St.
          Louis and Gulf Coast suppliers, also must be eliminated.  If they
          serve the BEA through the internal barge terminals at Canton and
          LaGrange, they should not be counted twice as sources.  If
          supplies are offloaded from barges at St. Louis and trucked to
          Quincy, the 79 mile trip to the border of the BEA would be
          uncompetitive with more direct barge deliveries because barge
          transport costs are approximately one to two mils per mile as
          opposed to approximately one cent per mile for trucks.
            
               We also recognize that there are year-round barge facilities
          within this BEA at LaGrange and Canton, Missouri, which together
          are capable of providing more than 10 times the BEA's consumption
          of product. 69/  If these barge facilities were included at an
          effective capacity to serve the entire BEA, the HHI would be
                              
          66/  Citing 50 FERC  63,011 at 65,055-56; 53 FERC  61,473 at
               62,669 (199O).
          67/  See Ex. 627.
          68/  See Ex. 318.
          69/  BEA Appendix to the Opening Post-Hearing Brief of Williams
               (BEA Appendix), n.30.
          Docket No. IS90-21-003, et al.       - 27 -
          2700.  According to the evidence provided by Williams, barge
          deliveries into this BEA account for some 28 percent of total
          deliveries. 70/  However, the HHI calculation relied on by the
          ALJ in making his findings credits these facilities with a very
          low capacity.  Like the ALJ, we merely relied on Williams'
          numbers in reaching our conclusion in Opinion No. 391.  
               We will recalculate the HHI to include Amoco on the basis
          that a terminal could be constructed profitably in this BEA.  We
          will exclude Phillips because we find that it is not economically
          viable, and we will exclude the external barge sources to avoid
          double counting, as explained above.  The recalculated HHI is
          3100, almost half of our previous HHI, but not enough by itself
          to change our finding about the concentration of this market. 
          However, it is commonly viewed that the existence of waterborne
          traffic, coupled with expandable capacity for waterborne
          deliveries, makes an oil market competitive. 71/  The staff in
          the past has suggested a more conservative approach, holding that
          expandable waterborne capacity, coupled with waterborne
          deliveries that account for at least 10 percent of total
          deliveries into a market, create a presumption of competition in
          that market. 72/  We will adopt this more conservative
          approach.  Accordingly, because the conditions in the Quincy
          market satisfy this presumption, we find that Williams does not
          have significant market power in this market.  Despite the
          seemingly high HHI for this BEA, we will grant rehearing. 
                    E.   Des Moines
               The Commission found that Williams has a 78 percent
          delivery-based market share in the Des Moines BEA.  Eliminating
          two external sources, barge terminals at Dubuque and Bettendorf,
          Iowa, the Commission's recalculated HHI was over 2500.  In
          concluding that Williams had failed to establish that it lacks
          market power in this BEA, the Commission explained that Williams
          had not offered other considerations to offset the two high
          numbers. 73/
                              
          70/  See Ex. 211 at 3.
          71/  See, e.g., John A. Hansen, U.S. Oil Markets 40, 49, 64
               (1983); Department of Justice, Oil Pipeline Study at 36, 64
               n.75.
          72/  Commission Staff Proposal for Revisions to Oil Pipeline
               Regulations Pursuant to the Energy Policy Act of 1992 at 46-
               47, 54 (March 1993).  See also Oil Pipeline Study at xii,
               17, 36 (indicating the importance of port facilities in
               determining the competitiveness of a market). 
          73/  68 FERC  61,136 at 61,680.
          Docket No. IS90-21-003, et al.       - 28 -
               Williams emphasizes that Heartland began operating in this
          BEA in September of 1990, causing Williams to cut its rates from
          Central Oklahoma origins to Des Moines in November.  Despite this
          action, Williams states that it lost substantial volumes to
          Heartland. 74/  Williams argues that these losses verify the
          strong pro-competitive effect of Heartland and also Williams'
          lack of market power.
               Williams maintains that the Bettendorf and Dubuque barge
          facilities were documented to be serving the Des Moines BEA
          through interviews with truckers and surveys of gas station
          managers, as validated statistically by Witnesses Bollen and
          Schink.  Although the Commission found that the barge facilities
          at Bettendorf and Dubuque to be approximately 160 miles distant,
          Williams states that these are the approximate distances to the
          central city of the BEA, not to the BEA border.  Williams also
          points out that neither of these external barge sources serves
          the entire BEA market.
               Williams claims that it did not include external sources
          unless they were specifically identified by the truck driver
          interviews or through the telephone surveys.  Thus, Williams
          urges consideration of two other documented sources for this BEA:
          NCRA's pipeline terminal in Council Bluffs and the Mississippi
          River barge terminals in Canton, Missouri.  Williams points out
          that trucks from Amoco's terminal in Council Bluffs and from
          Williams' terminal in Omaha serve a large part of the Des Moines
          BEA; therefore, reasons Williams, it is logical that trucks from
          NCRA's terminal in Council Bluffs should have the same reach
          within the Des Moines BEA as do trucks from Amoco's Council
          Bluffs and Williams' Omaha terminals.  Williams calculates that
          NCRA competes in 41 percent of this market.  Noting that trucks
          from the barge terminal in LaGrange, Missouri, serve the Des
          Moines BEA, Williams assumes that the effective supply capacity
          for the barge docks at Canton is at least as great as the
          effective supply capacity of the barge docks at LaGrange, given
          the fact that the Canton docks are approximately seven miles
          closer to the Des Moines BEA border than the LaGrange docks.
               We reject Williams' argument that we failed to give adequate
          consideration to the effects of Heartland's entry into the
          market.  Our calculations did take full account of Heartland,
          viewing it as equal to Williams in its ability to serve the
          market.  Because our HHI in this case is a simple capacity-based
          measure, the price and volume changes experienced by Williams are
          irrelevant to, but implied by our calculations.
                              
          74/  Williams claims that Heartland's FERC Form No. 6 submitted
               December 31, 1992, confirms that these barrels, along with
               volumes lost by Williams at Lincoln, were diverted to
               Heartland. 
          Docket No. IS90-21-003, et al.       - 29 -
               As to external sources, Williams correctly notes that NCRA
          can serve this BEA competitively for a small share of the
          market. 75/  By contrast, Williams' cost evidence shows that
          ARCO deliveries from Ft. Madison exceed Williams' own delivery
          costs by almost $1.00 per barrel. 76/  We will, therefore,,
          include NCRA but not ARCO in our recalculated HHI for this
          market.  We will also include the barges at LaGrange and Canton
          as minor sources.
           
               We disagree with Williams' contention that the barge
          terminals at Dubuque and Bettendorf can serve 72 percent and 81
          percent of the BEA market respectively in competition with
          Williams.  We conclude that we properly excluded trucked
          deliveries from these barge terminals  as regularly viable
          sources.  The trucking and delivery costs presented in the record
          for this BEA show a disparity of $1.00 to $2.00 per barrel
          between Williams' pipeline rates and the parallel trucking
          costs, 77/ making it unlikely that anyone would choose
          trucking from these terminals.
               In contrast, the record shows that pipeline deliveries from
          these barge terminals into the BEA are cost-effective.  However,
          our reexamination of the record reveals that three of the four
          terminals at Bettendorf and one of the two at Dubuque are
          connected to Williams. 78/  Access to the BEA from these
          terminals is thus primarily through Williams unless product is
          trucked.  If we include deliveries made into the Des Moines BEA
          by pipeline, then we must recalculate the HHI to consolidate some
          of this capacity into Williams' share of the market.  We can
          ascribe 3/4 of the capacity at Bettendorf and one-half the
          capacity at Dubuque to Williams.
               With this addition to Williams' share of capacity in the Des
          Moines market, and reflecting the other changes discussed in this
          section we have a recalculated HHI of 2897.  Shippers in this
          market have a choice of only two other pipelines in the BEA, with
          limited service alternatives from external sources.  Accordingly,
          because Williams exercises significant market power in this
          market, rehearing is denied with respect to the Des Moines BEA.                        
          75/  See Ex. 326.
          76/  Id.
          77/  Id.
          78/  Tr. 23/3017-19, 41/6971-72.
          Docket No. IS90-21-003, et al.       - 30 -
                    F.   Omaha
               On review of the ALJ's determination, the Commission
          affirmed that Williams exercised significant market power in the
          Omaha BEA.  The Commission based its decision on Williams'
          delivery-based market share of 46 percent and an HHI of 2786. 
          The Commission rejected Williams' arguments concerning
          competition from the Heartland pipeline.  Finally, the Commission
          rejected Williams' contention that the reduction in its rates to
          Omaha was conclusive evidence of competition, emphasizing that a
          rate increase or decrease per se does not prove or disprove
          market power. 79/
             
               Williams states that both the ALJ and the Commission failed
          to recognize the presence of a Heartland terminal in Lincoln,
          Nebraska, which also serves this BEA.  Williams points out that
          the Heartland Lincoln terminal is located just 25 miles from the
          Omaha BEA border and less than 50 miles from the City of Omaha.
          Based on documented truck movements from Williams' terminals in
          Lincoln, Williams argues that trucks from the Heartland terminal
          at Lincoln logically could serve a large portion of the Omaha
          BEA. 
               Williams also points out that this terminal, owned and
          operated by Conoco, was served exclusively by Williams prior to
          the construction of the Heartland pipeline.  Subsequently,
          asserts Williams, shipments to Conoco's Lincoln terminal were
          largely rerouted through the new pipeline, which sharply reduced
          Williams' shipments to the Lincoln BEA.
               Williams also argues that the Omaha market can be served
          from the Heartland terminal at Des Moines, and that a strong
          potential exists for construction of a new terminal or
          modification of an existing facility served by the Heartland
          pipeline within the Omaha BEA. 80/  Finally, Williams states
          that it delivers substantial volumes of product in Omaha for
          ultimate use at Offutt Air Force Base.  Williams argues that this
          business is constantly at risk because the DOD puts the fuel
          contract out for competitive bid every year.  
               On rehearing, the Commission finds that Williams is partly
          correct.  The trucking cost information provided by Williams for
          this BEA confirms that the Heartland terminal in Lincoln, located
          25 miles from the BEA border and 58 miles from Omaha, could be
                              
          79/  68 FERC  61,136 at 61,684.
          80/  Williams points out that the Heartland Pipeline, which is
               jointly owned by Conoco and Enron, runs through the southern
               portion of the BEA and currently makes LPG deliveries to an
               Enron terminal in Plattsmouth, Nebraska.  
          Docket No. IS90-21-003, et al.       - 31 -
          considered a viable supply source for this BEA. 81/  Although
          the record contains no evidence of costs for this terminal,
          Williams notes that its share of deliveries in this BEA has
          dropped substantially since Heartland began operations, which
          reduces Williams' delivery-based market share. 
            
               By contrast, we do not find that Heartland's terminal in Des
          Moines, some 130 miles from Omaha and 68 miles from the BEA
          border, should be included as an economically viable source for
          this BEA.  According to evidence presented by Williams, the
          additional trucking charges from Des Moines would make deliveries
          from this terminal uncompetitive in this BEA.  Trucking costs to
          the border would be approximately 70 cents and approximately
          $1.20 to Omaha, exclusive of pipeline and terminal fees. 82/
               There is insufficient evidence to permit us to rule on the
          inclusion of the potential Heartland terminal near Omaha; in
          fact, Williams does not include any capacity figure for it.  We
          can acknowledge the possibility of its construction, but will not
          include it in our HHI calculation.  
               Although Williams argues that its market share in this BEA
          is subject to serious competition because a large volume is
          subject to annual bids for DOD contracts, we conclude that
          Williams' ability to compete for DOD sales is no different than
          its ability to compete for other business.  Such decisions are
          made on the basis of Williams' transportation costs, as those
          affect the delivered price.
           
               Under our revised market analysis, we find that shippers in
          this BEA have a choice of five internal sources, including
          barges, as well as the Heartland terminal at Lincoln.  The
          recalculated HHI is 2300.  Accordingly, we find that Williams
          lacks significant market power in this market, and grant
          rehearing.
                    G.   Eau Claire
               In finding that Williams failed to prove that it lacks
          market power in the Eau Claire BEA, the Commission relied on
          Williams' 59 percent delivery-based market share and recalculated
          the HHI, eliminating the Koch pipeline, which lacks a terminal,
          and the Badger terminal, which is at too great a distance to
          serve as effective competition for Williams.  The recalculated                         
          81/  See Ex. 316.
          82/  Id. 
          Docket No. IS90-21-003, et al.       - 32 -
          HHI was over 3000, which the Commission found was not offset by
          other factors. 83/
               Williams claims that the Commission improperly excluded Koch
          as a supplier for this market because Koch does not have an
          operating terminal on its transit pipeline.  However, contends
          Williams, Koch serves the entire Eau Claire BEA from its
          Minneapolis-area refinery.  Williams also contends that the
          Commission erroneously excluded the Badger pipeline terminal in
          McFarland, Wisconsin, believing the truck haul to be too lengthy. 
          However, according to Williams, the uncontroverted gas station
          manager surveys and trucker interviews substantiated that this
          was a regular and ongoing movement.  
               Further, Williams states that only external sources from
          which product movements could be documented were included in the
          HHI.  However, in the case of the Eau Claire BEA, Williams states
          that there is one external source that logically would be capable
          of serving the entire market, namely Amoco's pipeline terminal
          located at Minneapolis, only 67 miles from the border of the Eau
          Claire BEA.  According to Williams, it has been documented that
          trucks serve the entire Eau Claire BEA from truck racks at
          Ashland's and Koch's refineries and Williams' terminal, all of
          which are located in Minneapolis.  
               In this market, Williams argues that delivery-based data
          overstate Williams' market share and are unreliable. 
          Specifically, Williams points out that it does not operate a
          terminal within the Eau Claire BEA, but instead delivers to three
          third-party terminals operated by shippers.  Given this fact,
          Williams states that it has no information as to where the
          product from these terminals is delivered; therefore, all of the
          product shipped to these terminals is counted as being delivered
          to the county where the terminals are located.  However, Williams
          reasons, trucks from these terminals clearly deliver product to
          locations throughout the Eau Claire BEA and into adjacent BEAs.
            
               On rehearing, the Commission acknowledges the weakness of
          the delivery-based data in this market.  The Commission also
          agrees that its HHI calculation was in error in this BEA.  The
          record demonstrates that Koch could serve the BEA competitively
          from its St. Paul refinery, 74 miles from Eau Claire itself and
          57 miles from the edge of the BEA.  In the initial calculation,
          following the method established by staff's Witness Alger, this
          external capacity was combined with Koch's internal
          capacity. 84/  When Koch was excluded as an internal source,
          we inadvertently also dropped the external refinery capacity
                              
          83/  68 FERC  61,136 at 61,679.
          84/  See Ex. 619 at 60-61.
          Docket No. IS90-21-003, et al.       - 33 -
          properly attributable to Koch.  Therefore, the total exclusion of
          Koch from the HHI calculation was an error.
               Williams also urges the inclusion of several Koch pipeline
          terminals as sources for this BEA.  A review of the trucking and
          delivery costs in the record shows that, with delivery costs
          nearly twice that of Williams, none of these is a viable
          alternative source.  We only include the refinery.  Further, on
          the basis of these trucking and delivery costs, we continue to
          find that Badger would not be a competitive alternative to
          Williams in this BEA. 85/
               Adding Koch's St. Paul refinery to our previous analysis,
          but not the Badger terminal, reduces Williams' market share and
          results in an HHI of 2500.  Williams is the only internal
          pipeline source for this BEA, but the market is served by at
          least three refineries at prices that undercut Williams. 86/ 
          Given the significant potential for price discipline from these
          sources, we find that Williams lacks significant market power in
          this market, and we grant rehearing.   
                    H.   Fargo
               The Commission recognized that the Fargo BEA covers a large
          area and found that the external sources cited by Williams are
          too distant to serve as viable alternative sources.  In this BEA,
          Williams has a delivery-based market share of 51 percent, and the
          Commission's recalculated HHI is in excess of 3000.  Given these
          facts, the Commission found that Williams had failed to prove the
          market to be workably competitive. 87/ 
               Williams states that Cenex was constructing a pipeline into
          Fargo during the evidentiary hearing.  According to Williams,
          this eight-inch pipeline, which transports product to Fargo from
          the Cenex refinery in Montana, has a design capacity exceeding
          the consumption of petroleum products in the entire Fargo BEA.  
          Williams points out that the Cenex pipeline is connected to
          Williams' terminal at Fargo in the same way that Phillips
          pipeline is connected to Williams' terminal in Kansas City,
          allowing Cenex to deliver product to the Fargo BEA through
          Williams' tank truck loading racks.  Further, states Williams,
          Cenex has chosen to use Williams' truck racks instead of
          constructing its own only because Williams offered Cenex an
          attractive rate for providing these racking services. 
                              
          85/  See Ex. 333.
          86/  The refineries are owned by Ashland, Koch, and Murphy.  See
               BEA Appendix at 4-5.
          87/  68 FERC  61,136 at 61,681.
          Docket No. IS90-21-003, et al.       - 34 -
               Williams argues that the Commission improperly excluded all
          external supply sources, which, Williams maintains, have been
          documented as occurring on a regular and ongoing basis by the
          gasoline station manager surveys and the truck driver interviews
          and statistically validated by Witnesses Bollen and Schink.  
          According to Williams, the shipper-intervenors' own trucking
          distribution data are consistent with the trucking distances
          determined in the driver interviews.  Further, states Williams,
          trucking distances can be expected to be longer in remote rural
          areas such as Fargo.  Finally, Williams argues that its delivery
          data do not provide a reliable indication of the location of its
          deliveries in this market.  
               We find the evidence demonstrates that Cenex can deliver
          product directly into Fargo; therefore, it should be included in
          the HHI calculation as an internal source. 88/  Adding Cenex
          to this market will reduce Williams' delivery-based market share.
               We also have reviewed the evidence relating to the three
          additional external sources that Williams claims should be
          included in the HHI calculation for this market.  These sources
          include the Interprovincial facility at Winnipeg (168 miles from
          the BEA), and the Koch and Ashland refineries at Minneapolis (175
          miles from the BEA).  According to evidence on trucking and
          delivery costs submitted by Williams for this BEA, we find that
          the cost of deliveries to Fargo from these sources exceed the
          cost of deliveries on Williams' system by 40 to 112 percent, and
          thus, would not offer serious price discipline for Williams' rate
          increases.  By contrast, product from Amoco's refinery in Mandan
          can be delivered to Fargo by pipeline or by truck (a distance of
          more than 100 miles) at a cost that far undercuts
          Williams. 89/
                
               The HHI recalculated to include Cenex, but not
          Interprovincial, Koch, or Ashland, is 2500.  The following
          factors suggest that this market is competitive: (1) shippers in
          this BEA have a choice of service from four pipelines, even
          without external sources; 90/ (2) Williams offers proportional
          discounts in the western half of the Fargo BEA in order to meet
          the competition it faces from Kaneb and Amoco; 91/ and (3)                       
          88/  Tr. 26/ 3519-21.
          89/  See Ex. 330.
          90/  The Fargo BEA is served by Amoco and Kaneb, in addition to
               Williams and Cenex.  Request of Williams for Rehearing and
               Clarification of Opinion No. 391 at 73. Citing Staff BEA
               Appendix at 31; Ex. 217 at 31.
          91/  See Ex. 15.  

          Docket No. IS90-21-003, et al.       - 35 -
          according to the cost evidence supplied by Williams, its rates
          into this BEA are considerably undercut by Amoco and by trucking
          deliveries from Amoco's refinery in Mandan. 92/  Accordingly,
          we find that Williams lacks significant market power in this
          market, and grant rehearing with respect to this BEA. 
                    I.   Grand Forks
               The Grand Forks BEA is also large, and Williams' delivery-
          based market share is 56 percent.  Because external sources were
          not shown to offer effective competition, the Commission's
          recalculated HHI was greater than 3000, and the Commission found
          that the Grand Forks BEA is not a workably competitive
          market. 93/ 
               According to Williams, the Cenex pipeline into Fargo is
          located only 64 miles from the BEA's southern border and 77 miles
          south of the City of Grand Forks.  Williams argues that the
          record contains ample evidence of truck deliveries from Amoco's
          Fargo terminal and the Cenex terminal at Minot into the Grand
          Forks BEA.  Further, Williams claims that truck driver interviews
          and gas station manager telephone surveys confirmed specific
          towns within the BEA being served and the extent of the service. 
               Williams lists seven other external sources, located at
          distances ranging from 68 to 189 miles to the BEA border. 94/ 
          Williams claims that these sources can serve varying percentages
          of the market -- from four percent to 22 percent. 95/ 
          According to Williams, this demonstrates that external sources
          need not reach the center city of a BEA to be competitive with
          Williams. 
               Williams also claims that it is under constant pressure to
          charge competitive rates to Grand Forks, largely because of the
          highly competitive nature of the DOD business in the BEA. 
          Williams states that, in Grand Forks, off-line deliveries to the
          DOD represented nearly one-quarter of total shipments to the BEA
                              
          92/  See Ex. 330.
          93/  68 FERC  61,136 at 61,681.
          94/  Request of Williams for Rehearing and Clarification of
               Opinion No. 391 at 77.  They are Winnipeg at Winnipeg,
               Manitoba; Kaneb at Jamestown, North Dakota; Amoco at Fargo,
               North Dakota; Mandan, North Dakota; and Sauk Center,
               Minnesota; Ashland and Koch at Minneapolis, Minnesota;
               Murphy at Superior, Wisconsin; and Cenex at Minot, North
               Dakota. 
          95/  Id. at 78.

          Docket No. IS90-21-003, et al.       - 36 -
          during 1990, but that it has lost a substantial portion of this
          business.
               We agree with Williams that the now-completed Cenex terminal
          in Fargo should be included in our HHI calculation.  However, as
          for external sources, the trucking and delivery costs in the
          record for this BEA indicate that only Amoco, in addition to
          Cenex, can make competitively viable deliveries into this BEA.  
          According to the delivery cost data provided by Williams, all
          other options are 60 to 120 percent more costly than Williams and
          so cannot be expected to offer sufficient pricing
          discipline. 96/  
           
               Again Williams has argued that it faces serious competition
          because a large portion of its sales is subject to annual
          contract awards by the DOD.  As stated above in the discussion of
          the Omaha BEA, we consider Williams' ability to compete for the
          DOD business to be no different than its ability to compete for
          other business in its markets.  Therefore, as with the Omaha BEA,
          we will not consider the DOD business as a separate factor in our
          market power analysis of the Grand Forks BEA.  
               Our recalculated HHI for this BEA is 3500, reflecting market
          shares for Williams, Amoco, and Cenex.  This figure remains too
          high to permit a finding that Williams lacks significant market
          power in this market.  Accordingly, rehearing is denied with
          respect to the Grand Forks BEA.
           
                    J.   Columbia
               The Commission determined the HHI for this BEA to be 1738
          and acknowledged that Williams' market share is 49 percent.  The
          Commission accepted the testimony of Witness Alger that it would
          be economical for Amoco to construct a terminal in the Columbia
          BEA, and the Commission also recognized that external sources
          might economically serve particular areas of the BEA.  Therefore,
          the Commission affirmed the ALJ's finding that the Columbia BEA
          is a workably competitive market. 97/ 
               Emphasizing Williams' 49 percent market share, Texaco states
          that Williams has demonstrated its ability to raise rates by 44
          percent.  Further, argues Texaco, if the Commission continues to
          hold that BEAs such as Columbia are competitive, then Williams
          should be estopped from charging rates above the 15 percent
          standard for which Williams argued.  In the Columbia BEA, Texaco
          states that the rate first went from 87 cents to 110.40 cents, an
          increase of 26 percent.  Texaco also claims that subsequent
                              
          96/  See Ex. 335.
          97/  68 FERC  61,136 at 61,678.
          Docket No. IS90-21-003, et al.       - 37 -
          increases to 119.10 cents and then to 124.90 cents are near the
          15 percent mark. 
               On review of the record, we find that the Columbia BEA is
          served by three pipelines having terminals within the BEA. 98/ 
          According to Witness Alger, a fourth pipeline, Amoco, could build
          a terminal profitably on its transit pipeline in this BEA. 99/ 
          Moreover, the BEA is served competitively by the Conoco terminal
          just outside the BEA boundary and by two barge terminals within
          30 miles of the BEA. 100/  We continue to find that Williams
          lacks significant market power in the Columbia BEA, with an HHI
          of 1800.  
               Texaco errs in suggesting that the Williams' 49 percent
          share of deliveries in this market should be dispositive of a
          market power finding.  As discussed at the outset, market
          delivery data in this proceeding are incomplete and inconsistent,
          and cannot be used as a primary indicator of market power.  We
          have used delivery data primarily as a matter for further
          scrutiny when the more reliable capacity-based HHI was
          sufficiently high to warrant further examination of the market. 
          That is not the case with Columbia. 
               Texaco also errs in its argument that an increase in
          Williams' rates -- even a significant one -- is indicative of
          market power.  The existence of competition does not
          automatically imply an inability to raise rates or even that low
          rates should prevail.  The existence of competition means that
          price increases above efficient, market-driven equilibrium prices
          will not be sustainable for any length of time. 101/  
               Texaco has cited evidence of price increases in this BEA,
          but has offered no evidence that these price increases are undue,
          incongruent with efficient competitive pricing, or indicative of
          the exercise of market power.  Texaco has not discussed the
          effect of Williams' 1985 price freeze on real rates, has not
          compared Williams' rates with those of competing sources in this
          market, nor has it compared the rates paid by Texaco with those
          paid by other shippers on Williams to this BEA.  Absent any such
          showings, and given the wide range of alternatives to Williams in
          this BEA, we find no basis for granting rehearing with respect to
          the Columbia BEA.                        
          98/  See Ex. 619 at 19.
          99/  See Ex. 627.
          100/ See Ex. 314.
          101/ Merger Guidelines at 4.
          Docket No. IS90-21-003, et al.       - 38 -
               III. Discrimination Claims
               The intervenors raised a variety of discrimination
          claims. 102/  The ALJ found that each alleged form of
          discrimination was intended to meet market conditions and was not
          an abuse of Williams' market power; however, he reserved for
          evaluation in Phase II the questions of whether one service
          cross-subsidizes another and whether, in certain instances,
          differences in costs also could be used to justify the alleged
          discrimination. 103/  On review, the Commission affirmed all
          of the ALJ's determinations, but stated that the ALJ's findings
          did not establish that the rate differentials are lawful.  The
          Commission determined that it would review Williams' rate
          differentials in Phase II using the cost information required in
          that phase to determine whether the proposed rates are just and
          reasonable or unjustly discriminatory. 104/
               On rehearing, Williams and AOPL argue that all of the
          discrimination claims have been resolved in Phase I and should
          not be relitigated in Phase II.  Williams emphasizes that rate
          disparities can be sustained solely on the ground that they are
          reasonably related to differing competitive conditions, 105/
          a defense that the ALJ accepted.  However, Williams concedes that
          the issue of whether one service cross-subsidizes another is a
          legitimate question for Phase II. 
                              
          102/ The discrimination issues addressed by the ALJ are as
               follows: (1) the disequalization of certain "Group 3" rates,
               resulting in relatively higher rates to certain northern
               destinations from relatively more distant origins in
               Oklahoma than from Kansas; (2) the approximate equalization
               on a per-mile basis of rates from northern and southern
               origins on Williams' system; (3) alleged discrimination
               against rural destinations in relation to urban
               destinations; (4) discounts for relatively higher volume
               shippers (or shipper groups); (5) "proportional rate"
               discounts -- i.e., discounts for movements to certain
               destinations on Williams' system which then move by truck
               into certain designated counties; and (6) Williams'
               operation on an "open stock" (or "fungible") basis whereby
               Williams is able to meet shipper demand at a particular
               destination without moving that barrel from a particular
               origin.
          103/ 58 FERC  63,004 at 65,025-28.
          104/ 68 FERC  61,136 at 61,688.
          105/ Citing Associated Gas Distributors v. FERC, 825 F.2d 981,
               1011 (D.C. Cir. 1987) (AGD), cert. denied, 485 U.S. 1006
               (1988).
          Docket No. IS90-21-003, et al.       - 39 -
               The ALJ's decision is replete with citations to evidence
          indicating that Williams relied on its extensive calculations of
          competitors' and shippers' delivered prices into various Williams
          markets to justify its newly-instituted rate differentials. 
          According to the ALJ, Williams then based its competitive
          discounts on these determinations of what the market could bear. 
          Williams did not rely primarily on its own cost-of-service/cost
          allocation data, and only briefly mentioned cost differentials
          between routes where rate differentials were established or where
          discounts are provided. 106/
               The ALJ noted that, absent full cost evidence, any reliance
          on costs to support these discounts and rate differentials would
          have to await Phase II. 107/  However, he also concluded that
          this would not be necessary because Williams had justified its
          rate differentials on the basis of competitive exigencies.  He
          correctly pointed out that any talk of cost justification is no
          longer of significance once the competitive need for rate
          differentials has been established. 108/  The Commission
          agrees.  
               Opinion No. 391 responded to claims that these discounts
          constitute undue discrimination by requiring the allegations to
          be examined in Phase II.  The Commission is concerned that
          discounts to some shippers not entail cross-subsidies by others. 
          Simply put, customers in noncompetitive markets should not be
          required to pay excessive rates in order to make up for any
          losses suffered in competitive markets.  We recognize, however,
          that rate differentials -- even if not based on corresponding
          cost differences -- are not necessarily tantamount to cross-
          subsidies.
               In fact, discounts to customers with other shipping
          alternatives are recognized as benefitting captive customers, so
          long as the non-captive customers contribute something to common
          costs. 109/  Therefore, competitive discounts do not
          constitute or require subsidies from captives, and can be found
          to be not unduly discriminatory in this Phase I rehearing.  On
          the basis of the competitive justifications provided by Williams,
          the Commission finds that for Williams to charge such rate
          differentials is not unduly discriminatory.  Accordingly, the
                              
          106/ See 58 FERC  63,004 at 65,024-28.
          107/ Id. at 65,025, 65026, and 65,027.
          108/ Id. at 65,025 and 65,026.
          109/ Policy Statement Providing Guidance with Respect to the
               Designing of Rates, 47 FERC  61,295 at 62,053 (1989),
               citing AGD, 824 F.2d 981, 1011-11.
          Docket No. IS90-21-003, et al.       - 40 -
          Commission clarifies its previous order on this point, and will
          not require re-examination of the issues of alleged
          discrimination on a cost basis in Phase II of this proceeding.
               Nevertheless, questions of rate design, that is, how rates
          and rate differentials should be set in noncompetitive markets is
          properly the subject of Phase II.  We also fully expect Phase II
          to explore the role of efficient and not-undue price
          discrimination in both competitive and captive markets.  However,
          to insist that the issue of cross subsidies can only be fully
          explored in the context of  cost-of-service or point-to-point
          cost allocations would be to misread our intent.  These issues
          can also be considered, for example, by examining the cost and
          revenue contributions of relevant services or markets.  The
          rights of the participants in Phase II to examine these important
          questions of cross subsidies, cost contributions, and discounts
          do not depend on the use of a single sanctioned method for
          determining justness and reasonableness.  
               IV.  Whether the Commission Has Ruled on the Merits of
                    Williams' Proposed Rate Standards    
               Following issuance of the ALJ's decision, Williams filed a
          motion with the Commission proposing a standard for adjudicating
          in Phase II the maximum reasonable level of rates in any market
          not found workably competitive in Phase I.  Williams proposed
          that it make two showings in any rate filing: (1) that the
          overall earnings generated by the proposed rates do not exceed
          the revenue requirement permitted by Opinion No. 154-B and its
          progeny, 110/ and (2) that the total of its proposed rates do
          not exceed the stand-alone costs of its services in
          total. 111/  Williams also proposed a standard for
          adjudicating in Phase II the minimum reasonable level of rates in
          any market not found workably competitive in Phase I.  Under
          Williams' proposal, the minimum rate standard for any given
          service would be short-run marginal 112/ or incremental
          costs.  In proposing a one-year time horizon to measure short-
          term marginal costs, Williams asserted that such short-term costs
                              
          110/ Williams Pipe Line Co., 31 FERC  61,377 (Opinion No. 154-
               B), modified, 33 FERC  61,327 (Opinion No. 154-C) (1985);
               ARCO Pipe Line Co., 52 FERC  61,055 (Opinion No. 351),
               reh'g denied, 53 FERC  61,398 (Opinion No. 351-A) (1990).
          111/ Williams claimed that the total stand-alone costs would
               equal a rate of return ceiling based on a current cost rate
               base for a hypothetical, optimally efficient pipeline
               designed to supplant the present Williams pipeline as a
               whole.
          112/ Marginal cost is the cost of producing one more unit.

          Docket No. IS90-21-003, et al.       - 41 -
          consisted only of variable fuel and power costs.  The rate
          maximum for each service would be the stand-alone costs.
               In Opinion No. 391, the Commission pointed out that the rate
          standards proposed by Williams would govern not only the
          establishment of base rates in this case, but also would
          establish how Williams' rates would be judged in future cases. 
          The Commission explained that it had adopted a final rule
          instituting a simplified and generally applicable ratemaking
          methodology for oil pipelines.  The Commission noted that, in the
          rulemaking, it had considered requests by Williams and AOPL to
          establish a stand-alone maximum rate standard for changing rates. 
          However, the final rule rejected the stand-alone methodology as a
          primary vehicle for rate changes in favor of an indexing
          methodology.  Therefore, because the indexing methodology adopted
          by the Commission is inconsistent with Williams' proposed stand-
          alone methodology, the Commission rejected Williams' proposed use
          of the stand-alone methodology to justify future rate changes. 
          The Commission stated that the only question remaining is what
          base rates will be allowed for Williams in this case and will
          serve as the basis for future indexing.  The Commission set for
          hearing in Phase II the method to be used for establishing base
          rates, but directed the ALJ and the parties, in developing such a
          method, to give particular attention to the allocation of costs
          between the competitive and noncompetitive markets to ensure that
          customers in the noncompetitive markets do not subsidize those in
          the competitive markets. 113/
               Williams and AOPL seek clarification of Opinion No. 391
          insofar as its denial of Williams' motion could be read to have
          ruled on the merits of any cost standards proposed by Williams in
          Phase I or to preclude Williams from continuing to advocate such
          standards in Phase II.  Williams and AOPL ask the Commission to
          clarify that, in Phase II, Williams may continue to advocate the
          cost-based standards that it advocated in Phase I.
               Both Williams and AOPL rely on Order No. 561, et
          al. 114/  They emphasize that Williams did not intend for the
          rate standards proposed in its motion or the similar standards
          proposed in the rulemaking by AOPL to apply in lieu of the
          indexed rate cap.  Rather, states Williams, these standards were
          proposed in the present case to enable Williams to establish base
          rates to the extent necessary in Phase II.  Indeed, states
          Williams, in Order No. 561-A, the Commission expressly (1)
                              
          113/ 68 FERC  61,136 at 61,695.
          114/ Citing Revisions to Oil Pipeline Regulations Pursuant to the
               Energy Policy Act of 1992, order on reh'g, Order No. 561-A,
               59 Fed. Reg. 40,243, (Aug. 8, 1994), III FERC Stats. & Regs.
               Preambles  31,000 (July 28, 1994). 
          Docket No. IS90-21-003, et al.       - 42 -
          recognized that cost-based standards are necessary as a
          supplement to the index in certain circumstances; (2) declined to
          decide the issue of whether fully-allocated costs should be
          employed for that purpose; and (3) promised that proponents of
          the stand-alone cost methodology or other costing methodologies
          will not be precluded from advocating such methodologies in
          individual cases. 115/
               Despite this promise, continues Williams, Opinion No. 391 is
          confusing.  While the Commission set for hearing in Phase II the
          method to be used for establishing base rates, the opinion
          admonishes the participants and the ALJ to give particular
          attention to the allocation of costs between competitive and
          noncompetitive markets to ensure that customers in the
          noncompetitive markets do not subsidize customers in the
          competitive markets.  This admonition, asserts Williams, could be
          read to suggest that the cost standards proposed by Williams,
          which do not rely on cost allocations in order to prevent cross-
          subsidies, have been prejudged.  
               Thus, concludes Williams, rehearing should be granted for
          the purpose of clarifying that Williams may advocate any cost-
          based standards of its choosing in Phase II and that the
          Commission has made no rulings on the merits of any cost issue
          for Phase II.  Further, Williams states that the evidence
          regarding cost standards submitted in Phase I is massive and was
          prepared at considerable cost.  Although Williams believes that
          all participants should have the right to supplement that
          evidence in Phase II, Williams maintains that it would be
          wasteful if the participants were required to construct a Phase
          II record from scratch.  Accordingly, Williams also asks the
          Commission to clarify that the participants may rely on any
          portion of the Phase I record in Phase II, subject to
          supplementation by any participant.
            
               The Commission clarifies that its ruling in Opinion No. 391
          was not intended to pre-judge the validity of Williams' proposed
          rate standards as a means of establishing base rates in Phase II
          of this proceeding.  As both Williams and AOPL acknowledge,
          future rate increases will be subject primarily to the indexing
          process established in Order No. 561, et al.  However, in Phase
          II of this proceeding, Williams is free to present any method it
          chooses for arriving at just and reasonable rates for the markets 
          we have determined to be noncompetitive.  As we stated above, the
          rights of the parties to address important questions relating to
          cross subsidies do not depend on the use of a single sanctioned
          method for determining justness and reasonableness of rates. 
          Finally, we agree with Williams that it is efficient in terms of
          both time and costs to permit the parties to rely on data already
          115/ Citing Order No. 561-A, slip op. at 47.

          Docket No. IS90-21-003, et al.       - 43 -
          submitted in Phase I, supplemented as determined to be necessary
          by the ALJ and the parties.
               V.   Motion to Sever Limited Issue
                    for Investigation and Decision
               On October 31 and November 10, 1994, Williams filed proposed
          tariffs in Docket Nos. IS92-26-000, IS95-2-000, and IS95-7-000.
          In orders issued November 30 and December 9, 1994, the
          Commission's Oil Pipeline Board accepted and suspended the
          proposed rates, subject to refund, but stayed these consolidated
          proceedings pending rehearing of Opinion No. 391 and completion
          of the Phase II investigation in that earlier
          proceeding. 116/
               Murphy Oil USA, Inc. (Murphy) owns and operates an oil
          refinery in Superior, Wisconsin.  Murphy states that it is
          captive to Williams for shorthaul shipments from its refinery
          across the state line to the Duluth and Wrenshall, Minnesota
          terminals.  Murphy asks the Commission to sever from the
          proceedings in Docket No. IS92-26-000, et al., the limited issue
          of whether Williams' shorthaul rates from Superior to Duluth and
          Wrenshall create unlawful discrimination against shorthaul
          intrastate shipments from Minnesota refineries to Williams' own
          Minneapolis terminal.  Murphy states that, because the Phase II
          investigation in Docket No. IS90-21-000, et al., is now only in
          its preliminary stages, there is likely to be a lengthy delay in
          the resolution of this issue.
               Williams filed an answer opposing Murphy's motion to sever. 
          Williams states that Murphy has failed to make even a prima facie
          case that the rates identified are discriminatory or that it has
          in any way been injured as a result of the alleged
          discrimination.  Williams also contends that the revenues
          involved do not warrant a separate investigation into the
          challenged rates.  Finally, Williams states that Murphy failed
          timely and properly to protest the rate increases it now
          challenges.
               The Commission denies Murphy's motion to sever.  Since the
          Commission commenced the investigation in Docket No. IS90-21-000,
          it has routinely suspended subsequent Williams rate filings and
          consolidated them with Docket No. IS90-21-000, as occurred in
          this instance.  As discussed in greater detail above, differences
          in rates do not necessarily establish discrimination.  Williams
          correctly points out that a variety of non-mileage factors can
          influence a particular rate and justify a differential.  The
          issue of just and reasonable rates for the Duluth BEA remains to
                              
          116/ Williams Pipe Line Co., 69 FERC  62,175; 69 FERC  62,206
               (1994).
          Docket No. IS90-21-003, et al.       - 44 -
          be resolved in Phase II of the proceedings in Docket No. IS90-21-
          000, et al.  
            
               The Commission is satisfied that staying the proceedings in
          Docket No. IS92-26-000, et al., pending resolution of the earlier
          proceeding will promote administrative efficiency and that Murphy
          will suffer no injury.  It appears that the volumes and revenues
          associated with Murphy's shipments to Duluth and Wrenshall are
          rather minimal and do not outweigh the potential cost to the
          parties and to the Commission that would result from separately
          investigating the rates Murphy challenges.  In any event, both of
          the Oil Pipeline Board orders clearly require Williams to
          maintain accurate records of the revenues it receives under these
          tariff sheets so that refunds with interest can be made in the
          event the proposed rates are found to be unjustified.
          The Commission orders:
               (A)  Rehearing and clarification are granted and denied as
          discussed in the body of this order.
               (B)  No further rate review is required for the following
          markets where Williams has established that it lacks market
          power: Springfield (MO), Kansas City, Lincoln, Quincy, Omaha, Eau
          Claire, Fargo, and Columbia.
               (C)  The ALJ is directed to continue with Phase II of this
          proceeding for the purpose of establishing base rates for the
          following markets where Williams has failed to establish that it
          lacks market power: Des Moines and Grand Forks.  These markets
          are in addition to those listed in ordering paragraph (C) of
          Opinion No. 391 that were unchallenged on rehearing.
               (D)  Murphy's motion to sever is denied.
          By the Commission.
          ( S E A L )
                                             Lois D. Cashell,
                                                Secretary.