HARRISBURG, Pa. -- Convenience-store and fuel retailer Sheetz Inc. is battling a proposal to reverse the flow of a major fuel pipeline in Pennsylvania, arguing it would increase gasoline prices and pressure supply in part of the state.
For the past 60 years, refiners in Philadelphia have used the Laurel pipeline, which runs from Philadelphia in the east to Pittsburgh in the west, to carry fuel and heating oil across the state. In 2016, its owner, Houston-based Buckeye Partners LP, asked Pennsylvania’s Public Utility Commission (PUC) to approve plans to reverse the flow of part of the 350-mile-long pipeline, reported The Inquirer.
Buckeye would halt the pipeline’s current east-to-west flow from Philadelphia to end at its Eldorado terminal in Altoona, Pa., in the center of the state. It would then reverse the flow on the western portion of the pipeline to move west to east, to bring fuel into Pennsylvania from Midwest refineries.
At a hearing in front of the Pennsylvania Senate Majority Policy Committee in December, representatives from Buckeye argued that the Laurel pipeline is operating below capacity because the market is moving toward cheaper Midwestern refiners for supply, and that the reversal would help lower gasoline prices in the state, The Inquirer said in a separate report.
“Let me be clear: Prices in Pennsylvania and Pittsburgh are going to go down,” Buckeye Partners attorney Dave MacGregor told the newspaper.
Tom Kloza, global head of oil analysis for the Oil Price Information Service, told The Inquirer that Midwest refiners are able to produce gasoline at a lower cost than some East Coast refiners because they can process lower-priced heavy crude from Canadian oil sands.
“Pennsylvania has become the battleground for Midwestern refiners trying to take more market share,” he said.
But fuel retailers including Altoona-based Sheetz and Pittsburgh-based Giant Eagle have protested the plan, arguing the pipeline reversal could reduce supply from Philadelphia and increase wholesale prices in the western part of the state. At the December committee meeting, Mike Lorenz, executive vice president of petroleum supply for Sheetz, argued that not only do Midwestern refiners have sufficient access to the Pittsburgh market, but that cutting off fuel supplies from the east would make gasoline prices “skyrocket” in Sheetz’s western Pennsylvania markets, as well as reduce competition among refiners.
“Instead of Pittsburgh being a battleground for competition, it will become a playground for Midwest refiners,” Lorenz told the paper.
Opponents of the reversal plan also argue that Buckeye could charger higher fees on the pipeline’s western portion, because it would fall under federal interstate regulations.
“Buckeye doesn’t want to reverse the pipeline because it will be good for consumers,” said Christopher Ruggiero, vice president and general counsel for Monroe Energy, at the committee hearing. “It wants to do it because it will be good for Buckeye.”
The PUC is expected to rule on the pipeline reversal in 2018. State Sen. Tom Killion (R), whose eastern district includes a refinery and opposes the reversal, wanted the Senate Majority Policy Committee to examine it “from the macro level.” This is as the five-person PUC board has received “thousands of pages of filings” from advocates and detractors of the plan.
David Arnold, vice president of domestic pipelines for Buckeye Partners, asked the committee to give the PUC room to make its decision.
“All we ask is that the process be allowed to go forward as it’s intended, and that nobody put a thumb on the scale,” Arnold told the paper. “We are confident that the facts that are in the record bear out our argument that this project does benefit all the consumers throughout Pennsylvania.”
State Sen. Elder Vogel, who represents a district on the western border of Pennsylvania, was in favor of the reversal because it could draw in less expensive gasoline from the Midwest. “With the lower prices in Ohio, Indiana, Michigan—places like that—this is a good thing to do,” Vogel told the paper.
Lorenz, meanwhile, countered that the difference in prices between states is mostly due to differing fuel taxes. Pennsylvania has the highest gasoline tax in the United States, and it is significantly higher than in neighboring states. For much of the year, he said, the wholesale price of gasoline from Philadelphia refiners is less than from those in the Midwest.
“If the Midwest is awash in cheap product, where is it?” he said.