Pennsylvania pipeline fight could upend international oil flows
NEW YORK: Refiners from the Midwest United States are fighting for access to a vital Pennsylvania pipeline – a move that could cripple their East Coast competitors and redraw the map for international flows of crude and fuel into coveted coastal markets.
The regulatory dispute centers on a proposal by pipeline operator Buckeye Partners’ to that state’s Public Utilities Commission. The plan would reverse the flow of fuels on a section of Buckeye’s 350-mile Laurel Pipeline, which currently flows from the East Coast to Pittsburgh.
Because pipelines only flow in one direction, the change would effectively block five East Coast refineries from serving Pittsburgh – with Midwest refiners picking up their market share.
The commission will decide on whether to allow Buckeye to reverse the flow from Pittsburgh, near the state’s western border, to Altoona, a small city about a hundred miles to the east.
Initially, such a reversal would cost East Coast refiners about US$10 million annually, according to a study gasoline marketer Gulf Operating commissioned to include in its objections to the Buckeye proposal. Piping gasoline to Pittsburgh yields some of their highest per-barrel profits.
But opponents, including East Coast refiners and some state lawmakers, are far more worried that such a decision would presage a reversal of the entire pipeline. That would take Midwest fuels all the way to Philadelphia on the state’s eastern border, where it connects to distribution networks serving the entire eastern seaboard.
For Buckeye, the move represents a bet that surging Midwest refiners will be better customers – keeping its pipeline full to capacity – than their struggling East Coast counterparts.
The stakes are much higher for the refiners involved. Midwest refiners could gain a huge market opportunity to pipe fuels into the East Coast, the largest U.S. gasoline market.
Their products could also make their way to the New York Harbor, a major gasoline trading hub, where they would likely displace imports from Europe that currently account for about 23 percent of the fuel consumed in the region.
For East Coast refiners, access to the Laurel pipeline is a matter of survival.
“I have terrible anxiety, to say the least, when I see this proposal,” said Anthony Gallagher, business manager for the local Philadelphia pipefitters union, speaking at a recent hearing on the proposal in Harrisburg, the state’s capital. “It will totally choke off these refiners, and they will have to start laying people off. Then, they will shut down.”
Buckeye’s proposal has also drawn formal objections from state lawmakers and two refiners from the Philadelphia region, Philadelphia Energy Solutions ( PES) and Monroe Energy, a subsidiary of Delta Airlines. Together, they employ about 1,000 people. — Reuters