July 12, 2018 / 3:23 PM / in 5 months

UPDATE 3-Pennsylvania rejects Buckeye plan to partly reverse fuel pipeline

(Recasts)

By Jarrett Renshaw and Stephanie Kelly

NEW YORK, July 12 (Reuters) - The Pennsylvania Public Utility Commission on Thursday unanimously rejected a petition by Buckeye Partners to reverse a western portion of the Laurel product pipeline that connects Philadelphia area refiners to the Pittsburgh market.

The partial reversal of the traditional westward flow on of the 350-mile (563-km) pipeline to bring 40,000 barrels per day of fuels, including gasoline and diesel, to Pennsylvania would have given Midwest refiners like Marathon Petroleum Corp and Husky Energy greater access to the Pittsburgh market, while essentially cutting off their East Coast peers.

Midwest refiners have added nearly 500,000 barrels of daily refining capacity in the last 10 years, tailoring their systems to run crude out of Canada and North Dakota’s Bakken shale oil field. The investments have increased fuel production, creating a need for new markets.

The five-member commission agreed with a previous administrative law judge opinion that said the partial reversal threatened consumers and the state’s two East Coast refineries.

Buckeye argued there was more demand from Midwest refiners than from East Coast refiners for pipeline capacity, so reversing the line made the most commercial sense.

“The company did not provide any evidence that it couldn’t achieve the same goals by increasing rates,” PUC Chairwoman Gladys M. Brown said before casting her vote to reject the petition.

The vote ends Buckeye’s bid at the state level to partially reverse the line, but it recently submitted a slightly different petition to the Federal Energy Regulatory Commission.

In that petition Buckeye is now proposing to allow the western section of the pipeline to move in both directions, though not at the same time, giving East Coast refiners limited access to the Pittsburgh market.

In a statement, Buckeye said they disagree with the PUC decision and still believe it would provide state consumers with greater access to cheaper fuels.

“Bi-directional service will enhance competition and provide shippers and suppliers with more options,” the company said.

Buckeye requested that FERC act on the petition no later than July 16, and FERC has not yet ruled on the issue.

Some Philadelphia-area refiners such as Philadelphia Energy Solutions and Delta Air Lines subsidiary Monroe Energy opposed the reversal, saying it would harm their business and lead to closures.

Buckeye argues that Midwest shippers and refiners have urged expansion of its pipeline network into central Pennsylvania, the company said in the FERC petition. (Reporting by Jarrett Renshaw; editing by Chizu Nomiyama and Marguerita Choy)

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