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Fuels

Pennsylvania Retailers Eye Pipeline Settlement

Sheetz, Giant and East Coast refiners agree to Buckeye Partners’ reversal plans
Photograph: Shutterstock

PHILADELPHIA Fuel retailers, refiners and Pennsylvania regulators have reached a settlement with Buckeye Partners LP over its planned reversal of a major cross-state pipeline.

In 2016, Houston-based Buckeye asked Pennsylvania’s Public Utility Commission (PUC) to approve plans to reverse the flow of part of the 350-mile-long Laurel pipeline, which carries fuel and heating oil from Philadelphia in the east to Pittsburgh in the west. Buckeye wanted to reverse the flow of the western portion of the pipeline to move west to east, to bring fuel into Pennsylvania from Midwest refineries. The pipeline was operating below capacity, Buckeye Partners argued, and because the market was shifting toward cheaper Midwestern refiners for supply, reversing the flow would help lower gasoline prices in Pennsylvania.

Fuel retailers including Altoona, Pa.-based Sheetz Inc. and Pittsburgh-based Giant Eagle Inc. fought the plan, however. They argued that reversing the pipeline could affect supply from Philadelphia and increase wholesale prices in the western part of the state. Philadelphia and New Jersey refiners and importers with East Coast fuel terminals wanted to maintain an east-to-west flow up to Pittsburgh, to protect their capacity.

Regulators have repeatedly ruled against Buckeye; this spring, it asked the Federal Energy Regulatory Commission (FERC) to approve making a section of the pipeline bidirectional after PUC rejected its reversal plans.

But the closure of a major refinery in south Philadelphia has encouraged a compromise between the parties, the Philadelphia Inquirer reported. In late June, Philadelphia Energy Solutions (PES) decided to shut down its 335,000-barrel-per-day refinery after a June fire. PES, which has filed for bankruptcy and is searching for a buyer, is a shipper on the Laurel pipeline and represents 25% of Northeast refining capacity, according to the Inquirer.

The settlement would guarantee pipeline access to refiners shipping from east to west through the end of 2024. After this date, Buckeye could switch the flow from west to east up to Altoona. If shipments from PES or any potential acquirer decline after 2022, then Buckeye can limit the pipeline to carrying fuels from the Midwest into central Pennsylvania. The PUC and FERC need to approve the settlement.

“We are pleased to reach this agreement that settles nearly three years of proceedings aimed at ensuring Pennsylvania consumers, shippers and retailers enjoy reliable access to fuels on the Laurel pipeline," said Buckeye Partners. "This forward-looking settlement, subject to regulatory approvals, will provide Pennsylvania consumers with greater access to more affordable, American-made fuels from the Midwest while maintaining westbound service.”

 

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