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Will gas at region's pumps cost more or less if flow of Laurel Pipeline is reversed?

Dillon Carr
| Friday, May 12, 2017, 11:31 p.m.

A pipeline company's proposal to reverse the flow of its fuel line west of Altoona has ignited debate on whether it would result in higher or lower prices at the pumps in the Pittsburgh region.

Laurel Pipeline Co., a subsidiary of Houston-based Buckeye Partners, filed an application with the Pennsylvania Public Utilities Commission in November to reverse the direction of flow to bring as many as 40,000 barrels of fuel from Midwest producers into Western Pennsylvania,.

The reversal would benefit consumers because the glut of petroleum in the Midwest has driven down the price, according to Bill Hollis, senior vice president at Buckeye Partners.

“This opens up to more competition,” Hollis told the Tribune-Review editorial board this week.

Retailers in the western side of the state now receive imported fuel piped from the Philadelphia area.

If the supply increases and demand stays relatively flat, prices for consumers in western and central sections of Pennsylvania should go down, Hollis noted.

The proposal faces resistance from corporate gasoline and diesel retailers and some state lawmakers who say the supply change would mean higher pump prices for Western Pennsylvania consumers and could cost jobs at Philadelphia refineries.

Opponents argue the change essentially would eliminate market competition west of Altoona by shutting out the Philadelphia refineries. Western Pennsylvania retailers already receive Midwest petroleum from other pipelines, and their only supply from eastern Pennsylvania is through the Laurel Pipeline, opponents say.

O'Hara-based Giant Eagle, Altoona-based Sheetz and Sunoco LP have submitted protests in PUC filings, contending the shift to fuel flowing from the west would push up prices at the pump.

Sheetz, which owns and operates 250 stores statewide, called the proposal “detrimental to the public interest” and claimed it would “eliminate Pittsburgh-area locations as PUC-jurisdictional delivery points.”

Because of ongoing proceedings, a Sheetz spokesman declined to comment further.

East Coast refiners and fuel suppliers such as Philadelphia Energy Solutions, Monroe Energy and Gulf Operating also filed protests.

Rep. Eric Nelson, R-Westmoreland, said he believes a company should be allowed to do what it sees as a good business decision.

“The government shouldn't be restricting the business. The legislature in the past has restricted Western Pennsylvania by mandating this summer gas issue. That results in higher prices for our residents,” Nelson said.

Since 1999, the state Department of Environmental Protection and federal Environmental Protection Agency have required that gasoline sold between May 1 and Sept. 15 in seven Pittsburgh-area counties be a “summer blend” that creates less pollution but is more expensive.

Nelson thinks that mandate will be phased out in the next year or two, which would result in lower gas prices whether or not the Laurel Pipeline is reversed.

But, he said, “If the pipeline (Laurel) switches and we still have the summer gas (mandate) ... I would be very confident that it would cause gas prices to increase in Western Pennsylvania, because where are you going to get it?”

Hollis said Midwestern refineries can meet that demand at a favorable price.

State legislators from both parties have sent the PUC versions of a form letter that expresses concern about Buckeye's proposal.

Rep. John Maher, R-Allegheny, who serves as chairman of the House's Environmental Resources and Energy Committee, cited less market competition in his letter.

The greater Pittsburgh fuel market “is supplied by multiple pipelines from Ohio- and Chicago-based refineries, but there is only one line that feeds Pittsburgh from the east — the Laurel Pipeline,” he wrote. Cutting off the supply from the east will “make it substantially more difficult for a competitive environment to exist.”

Maher was not available for comment.

Hollis pointed out that East Coast refineries still would have up to 40,000 barrels a day to sell to markets in Central Pennsylvania, Philadelphia, upstate New York and the New York Harbor.

“What this can provide is a way to get more product back into the East Coast. In essence, by putting more product into Western Pennsylvania, you need less product from Eastern Pennsylvania, so your supply kind of grows in effect,” Hollis said.

Among supporters of the proposal are BP and Marathon Petroleum Co.

“Reversal of the Laurel Pipeline would have an expected result of attracting more Midwest products to the Western Pennsylvania areas,” said Mike Palmer, Marathon's senior vice president, in the company's written comments to the PUC on Feb. 1. “This should increase utilization of domestic U.S. refining capacity and reduce dependence on foreign gasoline imports.”

The PUC has scheduled two public meetings — “Smart Hearings” — at 1 and 6 p.m. Tuesday in Harrisburg. To offer comments by telephone, participants must notify the PUC at 717-787-1399 by Monday.

Both meetings will be available to stream live via the PUC's website.

To read public comments for and against the pipeline reversal, visit the case summary on the PUC's website at http://www.puc.state.pa.us/about_puc/consolidated_case_view.aspx?Docket=A-2016-2575829

Dillon Carr is a Tribune-Review staff writer. Reach him at 724-850-1298, dcarr@tribweb.com or via Twitter @dillonswriting.

Bill Hollis, senior vice president of Buckeye Partners, points to a map of the company's pipelines across the United States. (Trib photo)
Dillon Carr | Tribune-Review
Bill Hollis, senior vice president of Buckeye Partners, points to a map of the company's pipelines across the United States. (Trib photo)
Pipes carry gasoline to fuel tanks at Buckeye Partners' tank farm in Hempfield.
Dillon Carr | Tribune-Review
Pipes carry gasoline to fuel tanks at Buckeye Partners' tank farm in Hempfield.
A fuel tank storing unleaded gasoline at Buckeye Partners' tank farm in Hempfield warns workers of smoking.
Dillon Carr | Tribune-Review
A fuel tank storing unleaded gasoline at Buckeye Partners' tank farm in Hempfield warns workers of smoking.
Bill Hollis, senior vice president at Buckeye Partners, talks to the Tribune-Review about the proposed reversal of the Laurel Pipeline. (Trib photo)
Dan Speicher | Tribune-Review
Bill Hollis, senior vice president at Buckeye Partners, talks to the Tribune-Review about the proposed reversal of the Laurel Pipeline. (Trib photo)
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