Will consumers benefit from Pa. gasoline pipeline reversal?

A controversial proposal to reverse the flow of the state’s biggest motor fuel pipeline would cut off Philadelphia refiners from Pittsburgh markets. But would it be bad for motorists?

Business adversaries offered starkly different assessments of the consumer impact of a proposal to reverse the Laurel Pipe Line at a hearing Tuesday before the Pennsylvania Senate Majority Policy Committee.

“Let me be clear: Prices in Pennsylvania and Pittsburgh are going to go down,” argued Dave MacGregor, an attorney representing the pipeline’s parent company, Buckeye Partners LP.

Buckeye last year asked the Pennsylvania Public Utility Commission to approve a reversal of the pipeline’s flow to give Midwestern refiners more access to Pittsburgh markets and to exclude Philadelphia refiners from Western Pennsylvania.

Buckeye says the pipeline is now underutilized, and Midwestern refiners desire to expand eastward. The Houston company says that its proposal to halt the pipeline’s westward flow at Altoona will allow more low-cost Midwestern fuel to Western and central Pennsylvania, and force Philadelphia refiners to sell their product to coastal markets.

But a representative of the Sheetz convenience-store chain in Western Pennsylvania said that Midwestern refiners already have access to Pittsburgh, and cutting off eastern fuel supplies will increase risk, reduce competition, and cause prices to “skyrocket.”

Camera icon Staff graphic
Laurel pipeline has proposed to change its east-to-west flow to halt at Altoona, and reverse the western portion to flow eastward to transport fuel into Pennsylvania from the Midwest

“Instead of Pittsburgh being a battleground for competition, it will become a playground for Midwest refiners,” said Mike Lorenz, executive vice president of petroleum supply for Sheetz.

Members of the all-Republican Senate Majority Policy Committee, which held Tuesday’s hearing, won’t have any say in the decision, which rests entirely on the PUC, which is expected to rule on Buckeye’s request next year.

Sen. Tom Killion, a Delaware County Republican whose district includes the Monroe Energy LLC refinery in Trainer — which opposes the pipeline proposal — said he called for the hearing  to “look at the issue from the macro level.”

Nevertheless, the one-hour hearing provided advocates an opportunity to generate sympathy and score points for their causes, which they have made in thousands of pages of filings before the PUC.

David Arnold, the vice president of domestic pipelines for Buckeye Partners, recognized the political pressure mounting on the five appointed PUC members and seemed to be asking the elected officials to butt out.

“All we ask is that the process be allowed to go forward as it’s intended, and that nobody put a thumb on the scale,” he said. “We are confident that the facts that are in the record bear out our argument that this project does benefit all the consumers throughout Pennsylvania.”

Opponents of the pipeline reversal say that if the PUC approves the plan, Buckeye would be able to charge higher fees on the western portion of the pipeline because it would come under federal interstate regulatory jurisdiction.

“Buckeye doesn’t want to reverse the pipeline because it will be good for consumers,” said Christopher A. Ruggiero, vice president and general counsel for Monroe Energy. “It wants to do it because it will be good for Buckeye.”

Sen. Elder Vogel, whose Beaver County district lies on the state’s western border, indicated he favored the pipeline reversal because it might attract more Midwestern gasoline, which he said costs as much as 30 cents per gallon less in neighboring Ohio.

“So I think obviously with the lower prices in Ohio, Indiana, Michigan — places like that — this is a good thing to do,” said Vogel.

Lorenz, the Sheetz official, pointed out that the price disparity among states is caused mostly by fuel taxes (Pennsylvania’s fuel tax is higher than any surrounding state’s — 31.3 cents more per gallon than Ohio’s, 23.6 cents more than West Virginia’s, 36.3 cents more than Delaware’s, and 22.2 cents more than New Jersey’s).

“I know, you can’t tell people that,” said Vogel, who voted for the 2013 gasoline tax increase. “I understand that, though. We did that to build our better roads.”

Lorenz said that the wholesale price of fuel from Philadelphia refiners cost less than Midwestern fuel for eight months out of the year, especially in the summer, when Pittsburgh retailers are required to sell lower-volatility gasoline to reduce air pollution.

“If the Midwest is awash in cheap product, where is it?” said the Sheetz official.