The Senate Republican Policy Committee Tuesday held a hearing on the issue of whether to reverse the flow of the Laurel Pipeline now shipping products east to west and supplying the Pittsburgh area with gasoline, heating oil and jet fuel.
Buckeye Pipeline, the owner of Laurel, wants to reverse the flow to carry petroleum products from the Pittsburgh area to Altoona introducing products from Midwest refineries to Western Pennsylvania.. Click Here for more.
The issue is now before the Public Utility Commission for a decision. [Docket Number: A-2016-2575829.]
Christopher Ruggiero, Vice President of Monroe Energy (a Philadelphia area refiner), said, “For about 60 years, Laurel has been transporting finished fuel products, made by our Southeastern Pennsylvania refineries, westward into the greater Pittsburgh region. During that time, Laurel has always flowed in a westerly direction; today it is the only remaining refined products pipeline running from eastern Pennsylvania to the west.
“Buckeye’s application to the PUC seeks to reverse the pipeline between Pittsburgh and Altoona, effectively cutting of Pennsylvania refineries from the Pittsburgh market and making consumers in the western part of our Commonwealth entirely dependent on refineries from Ohio and points further west and south.
“Buckeye proudly advocates on behalf of these out-of-state refiners, claiming that the crude oil they use will somehow lead to lower prices for consumers in Pennsylvania. But both the facts and even a basic understanding of how economic competition works shows such claims to be faulty.
“To be clear-- Buckeye does not want to reverse the Laurel because it will be good for Pennsylvania. It wants to reverse the pipeline because it will be good for Buckeye-- in the way of substantially more revenue for shipping these fuels on a federally regulated tariff from Ohio into Pennsylvania than it does today on a PUC tariff from Philadelphia to Pittsburgh,” Ruggiero said.
“Buckeye would like you to believe that this is a complicated issue. But it’s really not. Simply ask yourselves why have a group of large, well-recognized Pennsylvania companies such as Monroe, Sheetz, Gulf, Giant Eagle, Philadelphia Energy Solutions and Guttman Energy banded together in opposition to Buckeye’s proposal?
“These are companies that represent every facet of the fuel production and supply chain, and in some cases, companies that are even in competition with one another,” he continued. “Yet on this question of the Laurel Pipeline, they are absolutely united-- because they know that a reversal of Laurel would threaten more than just their business-- it would threaten consumers, workers, and the Commonwealth as a whole.”
Mike Lorenz, Executive Vice President of Petroleum Supply, Sheetz, spoke against reversing the Laurel Pipeline.
“You have to ask yourself why do Buckeye and Midwest refining partners want to reverse the line? It’s because both will benefit at the expense of Pennsylvania consumers. Remember the reverse line will be an interstate line and only be subject to federal regulation and not state oversight by the PUC.
“As a result, Buckeye will enjoy higher revenues due to higher tariff rates. Midwest refiners already have full access to the Pittsburgh market and beyond and have only supplied 15 percent of the demand,” he said. “The true benefit to them is clearly not access to Altoona, but the elimination of eastern competition to the larger Pittsburgh market.
“They will benefit by blocking out competition and increasing revenues with higher prices,” he said. “The reversal proposal is a bad idea for Pennsylvania… Laurel and Midwest refiners will be the clear winners while Pennsylvania consumers and businesses will be the clear losers.”
David Arnold, Vice President of Domestic Pipelines, Buckeye Partners, emphasized the reversal would only impact the “westernmost part” of the Laurel Pipeline.
“The proposed reversal will not impact the ability of gasoline importers into the New York harbor or the Philadelphia refineries to reach any other Laurel destinations. There is no proposal before the PUC to alter that.
“Our project will further expand the pipeline capacity into Western Pennsylvania and extend the supply into Central Pennsylvania,” he said. “All we ask is that the process be allowed to go forward as intended and nobody put a thumb on the scale. We are confident that the facts that are in the record bear out our argument that this project benefits all consumers throughout Pennsylvania.”
Dave MacGregor, Principal, Post and Schell, said, “The situation for Laurel under its current operating circumstances is dire; the Laurel pipeline is a wasting asset and is already beginning to see operational problems due to the decline in volumes moving from the east. But, there is one problem: transportation bottlenecks are preventing this lower-- cost Midwest-refined gasoline from reaching Central and Eastern Pennsylvania.
“The reversal, along with a companion debottlenecking project in Ohio by Laurel’s affiliate, Buckeye Pipe Line Company, will help unlock the door to Central Pennsylvania and bring an increased supply of lower cost petroleum product,” he said. “After the reversal, for the first time, lower-cost Midwest supplies and corresponding lower-priced gasoline will be able to reach Central Pennsylvania by pipeline, including Johnstown, Altoona, State College and the surrounding areas.
“And, as more volumes move east from the Midwest, they will push out higher cost supplies on the East Coast, particularly product imports from overseas, which are the highest cost supply to the East Coast,” MacGregor said. “This will reduce reliance on foreign oil and result in lower gasoline prices in Eastern Pennsylvania, including Philadelphia. In addition, the reversal will significantly improve reliability of supply for Central Pennsylvania.”
Testimony was also submitted to the Committee by: Allegheny Institute, Commonwealth Foundation and Steamfitters Local Union 420.
Click Here for a video of the hearing and written testimony.
Sen. David Argall serves as Chair of the Senate Republican Policy Committee.
(Based on reporting by Pennsylvania Legislative Services.)
(Photo: S&P Global Platts.)
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