May 12, 2017 5 min read

The operator of a trans-Pennsylvania pipeline is seeking to reverse a portion of its flow of gasoline and diesel fuel to enable it to bring more product from refineries based in the Midwest to Western Pennsylvania fuel retailers.

Bill Hollis, senior vice president of Buckeye Partners LLP, said Wednesday Buckeye’s petition to the state Public Utility Commission, which will begin taking public comment on the request Tuesday, has the potential to bring lower gasoline prices to Western Pennsylvania motorists.

However, the plan, which seeks to reverse a portion of Buckeye’s Laurel Pipeline, has its detractors in the Keystone State.

In November, Buckeye filed an application with the PUC proposing to reverse the direction of flow on Laurel between Altoona and Pittsburgh. The change would allow eastward flows of gasoline and diesel fuel from the Midwest to the Altoona area. The remainder of the line, east of Altoona, would continue to flow westward from Philadelphia.

According to information provided by Buckeye, the proposed project is being driven by market forces, which it says are led by steadily increasing supplies of lower-cost gasoline and diesel from Midwestern refineries.

“The Midwest has a tremendous amount of new refineries and transports to various markets,” Hollis said, adding that massive investment in refinery infrastructure in that region has been a result of the availability of crude oil from Canadian tar sands as well as from the Bakken Shale in North Dakota. The refineries also are connected to both crude oil and refined product pipelines from the Permian Basin in Texas, another hotbed of shale oil production.

The North American-produced fuel supplies, particularly from American shale regions, Hollis noted, are a result of the country’s movement toward becoming energy independent.

Buckeye also states that the partial reversal of Laurel will bring as much as 1.7 million gallons, about 40,000 barrels, per day of Midwestern-produced gasoline and diesel fuel into central and western Pennsylvania, enhancing competition, supply and consumer choice.

But others have notified the PUC of their concerns that Buckeye’s proposal could stifle competition.

State Sen. Camera Bartolotta, R-Carroll, in a Feb. 2 letter to the PUC, stated that the Laurel Pipeline is the state’s “only avenue to ship fuel from refineries in the southeast (Pa.) to sizable fuel markets in the western region of the state.

“The Laurel Pipeline is crucial to maintaining affordable fuel prices and refinery jobs in the Commonwealth because it is the only connection between refineries in the southeast (Pa.) and retailers in the greater Pittsburgh area,” Bartolotta wrote. “The proposed reversal will force fuel retailers in the Pittsburgh area to use refineries outside the state. While this will not only impact refinery jobs in Pennsylvania, it will limit competition, risking higher fuel prices across the state.”

State Rep. John Maher, R-Upper St. Clair, expressed similar concerns in his letter to the PUC.

“Currently 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. Reversing Laurel would make it impossible to move fuel to Pittsburgh via pipeline from the east,” Maher wrote. “While currently, the Pittsburgh area fuel retailers are able to buy product form the Midwest or from the southeast PA refiners (and choose to do so depending upon which is cheapest), the pipeline reversal will eliminate this optionality and make it substantially more difficult for a competitive environment to exist.”

Giant Eagle, whose GetGo convenience stores are a popular fueling place for area motorists, Altoona-based Sheetz, another popular fueling option locally, and Sunoco also oppose the Laurel reversal proposal, telling the PUC it would eliminate fuel supply alternatives and lessen competition.

Supporting letters were sent to PUC by BP Products and Marathon Petroleum Co., both of which have substantial refining capacity in the Midwest.

Buckeye bolsters its contention that its move is being driven by market forces with figures on deliveries to Pittsburgh from the east on its Laurel line.

According to a chart provided by the company, deliveries on the line coming from the east have fallen from 100,000 barrels per day in 2006 to just above 20,000 bpd this year.

The biggest declines in shipments have occurred since 2014, a year when the line carried 90,000 bpd, a period that coincides with the ramp-up of shale oil production in the Midwest and West.

Hollis noted that unlike Midwestern refineries, those in Philadelphia are bringing in imported oil and fuel.

“The crude oil being shipped to the Midwest refineries (costs) less than the foreign crude,” he said.

Another concern raised by Maher’s letter is that abandonment of westward-bound fuel from the east could create shortages when the federally mandated “summer gas,” a specially blended fuel sold between May 1 and Sept. 15 in the seven Pittsburgh-area counties, goes into effect.

Hollis said refineries in the Midwest can make the blend, but added that the state Department of Environmental Protection is in the process of repealing the special-blend mandate, something he said could be resolved before May 2019, which would be the first summer of the proposed reversal.

“The Midwest refineries are already making (the summer blend) for Detroit and other areas of the Midwest,” he said.