Pipeline operator will move to cut Philly refiners' access to Pittsburgh

Philadelphia Energy Solutions Inc. says its South Philadelphia refinery could be impacted by a pipeline change that would shut it out of Pittsburgh retail markets.

Buckeye Partners LP announced Friday that it would move forward to extend access on its Laurel pipeline from Midwestern refineries to central Pennsylvania, potentially cutting into markets of Philadelphia refiners.

Philadelphia refineries and Pittsburgh fuel retailers had opposed Buckeye’s proposal to reverse the flow of its pipeline, which now delivers fuel from East Coast sources to central and western Pennsylvania. A Pennsylvania Public Utility Commission administrative law judge in March recommended the PUC reject Buckeye’s proposal to abandon east-to-west service.

The refiners said the loss of access to Pittsburgh could imperil some of the 1,600 refinery jobs, and Pittsburgh retailers like Sheetz and Giant Eagle said it would reduce their choices of fuel supply, causing gas-price increases.

Buckeye announced Friday that it was “actively undertaking the steps necessary to provide bidirectional service” on the Pittsburgh-to-Altoona section of the pipeline. While not abandoning east-to-west service, the move could effectively shut out Philadelphia refiners from Pittsburgh markets while the pipeline is flowing in the opposite direction.

“Buckeye fully respects and remains committed to the ongoing PUC process,” said Robert A. Malecky, the company’s president of domestic pipelines and terminals. “We see the addition of eastbound service to the current westbound capability as providing an operational solution for all our customers.”

Buckeye, which is based in Houston, said that east-to-west fuel deliveries have plunged in recent years, and that its proposal was in response to demand from Midwestern refiners to provide more fuel supplies.

The company said it would leave Laurel’s existing PUC rates in place for intrastate service from Philadelphia to Pittsburgh, while establishing new interstate rates for service into Altoona from Midwestern refiners in Ohio and the Great Lakes region.

According to submissions with the PUC, Laurel transported 76 million barrels of gasoline, diesel, and heating oil in 2016, including 11 million barrels from Philadelphia origin points, mostly the Monroe Energy refinery in Trainer and the Philadelphia Energy Solutions refinery in South Philadelphia.

PUC Administrative Law Judge Eranda Vero recommended in March that the PUC reject Laurel’s request to abandon east-to-west service, saying Laurel had failed to show that Pittsburgh markets would not suffer from the loss of access to Philadelphia fuel supplies.

Philadelphia refiners, which produce more low-volatility fuel used in the summer, tend to be more cost-competitive during the summer months and Midwest products have the price edge during the winter, so the pipeline flows fluctuate seasonally.

Deny Buckeye, a coalition of affected firms ranging from Giant Eagle and Sheetz to Philadelphia Energy Solutions, issued a statement Friday on Buckeye’s plan.

“We don’t have details, but we’re certainly suspicious of this decision,” the statement said. “After over a year of telling the PUC, legislators, media, and the public that a reversal is best for Pennsylvania, Buckeye is now trying to take unilateral action that appears to be circumventing the Pennsylvania Public Utility Commission process.”