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Fuel prices spike after explosion

For the second time in less than two months, a major breach closed down a key gasoline pipeline, driving up fuel prices and demonstrating the vulnerability of the entire Eastern Seaboard to an accident on a single piece of infrastructure.
Just before 3 p.m. Monday, a track hoe used for excavation struck Colonial Pipeline’s Line No. 1 in Shelby County, Ala., breaking the 53-year-old steel pipe and igniting the gasoline inside. One worker was killed and five severely injured. The fire sent flames and black smoke billowing high into the sky and was still burning Tuesday afternoon.
The accident took place just a few miles from the site of a Sept. 9 leak from the same pipeline. The leak closed down the pipeline for 12 days, sparking long lines for gasoline in Georgia, Tennessee and Alabama.
Colonial’s Line No. 1, 36 inches in diameter, carries approximately 1.3 million barrels a day of gasoline from Houston to Linden, N.J., branching off along the way to provide more than a third of the supplies for the entire East Coast.
“I think the issue of pipeline safety is important, given several recent high-profile accidents,” said Jason Bordoff, director of Columbia University’s center on global energy policy. “It certainly is a reminder of the vulnerability of East Coast gasoline supply.”
Bordoff said the Energy Department had considered creating a reserve for refined products after Hurricane Sandy, in part because of the East Coast’s dependence on limited pipeline infrastructure. Hurricane Katrina also caused gasoline shortages in places such as Atlanta because refineries along the Gulf of Mexico could not supply the southeastern portion of the pipeline network. But no reserve has been created.
Gasoline prices before taxes and fees soared Tuesday more than at any time since 2008. Early in the day, prices jumped 15 percent but finished the day up 4.6 percent at $1.4841 a gallon after the company said it hoped to reopen the pipeline Saturday afternoon. But Barclays analysts said the outage could last longer. “In an optimistic scenario,” they wrote, “Line 1 remains shut for at least another month, as the fire is put out and repairs and safety inspections take place.”
“It’s a very fragile system,” said Andre LeBlanc, vice president of Petroleum Marketing Group, which supplies more than 1,400 gas stations, from Maine to Tidewater, Va. “As we’ve seen over the past two months, this can be very impactful to us.”
Michael O’Connor, president of the Virginia Petroleum Convenience and Grocery Association, said that 70 percent to 80 percent of the gasoline and diesel for the state’s 5,000 fuel stations come through the Colonial pipelines. Colonial’s line No. 2, which parallels line one, carries diesel.
“That is a lot of dependence on one source,” he said, adding “you have to look at the 99.5 percent of the time when things are working like finely tuned Swiss watch.”
Throughout the Mid-Atlantic, wholesalers made plans for trucks to pick up supplies in ports such as Baltimore and in northern New Jersey. O’Connor said Virginia Gov. Terry McAuliffe (D) had not lifted emergency measures imposed during Hurricane Matthew. Those measures eased limits on truckers and also relaxed weight restrictions on trucks carrying fuel.
In addition to concerns about the reliability of supplies, the latest pipeline accident exacerbates anxiety about pipelines in general. Environmental groups have been opposing both oil and natural gas pipelines from North Dakota to New England.
Colonial, founded in 1962, is owned by a group that includes Koch Industries, an affiliate of the KKR buyout firm, Caisse de dépôt et placement du Québec, and a Royal Dutch Shell affiliate. The company’s two pipelines form a 5,500-mile network.
The Sept. 9 leak occurred in the original pipeline construction and dumped about 7,370 barrels of gasoline into man-made ponds about 460 yards away, according to the Pipeline and Hazardous Materials Safety Administration. The ponds were once used for waste from strip mining.
The PHMSA, recently given expanded authority to order pipeline closures, said later that a crack was discovered on a buckle in the pipe. PHMSA regulators ordered Colonial to limit the volume of gasoline flow so that pipeline pressures did not exceed 80 percent of ordinary levels.
To restore the pipeline to service, Colonial used a stretch of pipe to bypass the leak.
Then on Monday, a crew working for a contractor was excavating the pipeline in preparation for the removal of the bypass when it hit the gasoline line.
For now, Colonial is literally focusing on getting the smoke to clear. The company said about 4,000 barrels of gasoline had burned or leaked since the explosion. Fire departments from three counties and two cities have teamed up with state and federal agencies to put out the fire. The firefighters had already been busy battling wildfires after weeks of drought.
The company said it also had laid containment booms at two locations along the Cahaba River. It said it did so “out of an abundance of caution.”
Firefighting crews built a 75-foot-long earthen dam to contain burning fuel, Reuters reported. Two wildfires caused by the explosion burned across 31 acres of land, officials said.
“Given these two recent disasters, we call for the federal government to conduct an immediate investigation into the Colonial Pipeline Company so that those impacted are fully compensated and no community is forced to face the risks Shelby County and so many like it around the country do on a daily basis, ” Lena Moffitt, director of Sierra Club’s Dirty Fuels campaign, said in a statement.
In North Carolina, Attorney General Roy Cooper told residents that the state’s anti-price-gouging law remains in effect, ABC News reported. Gov. Pat McCrory (R) urged citizens not to indulge in panic buying that could create artificial shortages.

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