For a couple of years now, Buckeye Partners has been working to advance a controversial plan to reverse the western half of its Laurel refined-products pipeline in Pennsylvania to allow motor gasoline, diesel and jet fuel to flow east from Midwest refineries into the central part of the Keystone State. Some East Coast refineries that have relied on Laurel for 60 years to pipe their refined products as far west as Pittsburgh have been fighting Buckeye’s plan tooth and nail, arguing that it would hurt their businesses and hurt competition in western Pennsylvania gas and diesel markets — and refined-product retailers in the Pittsburgh area agree. Now, after a state administrative law judge’s recommendation that Pennsylvania regulators reject Buckeye’s plan, Buckeye has proposed an alternative: making the western half of the Laurel Pipeline bi-directional, which would allow both eastbound and westbound flows. Today, we consider the latest plan for an important refined-products pipe and how it may affect Mid-Atlantic and Midwest refineries.
Like Mick Jagger, Keith Richards and the three other members of the Rolling Stones — the band behind the song in today’s blog title — each of the U.S.’s five Petroleum Administration for Defense Districts (PADDs) has its own character, personality and history. While People magazine and, yes, Rolling Stone magazine closely track the ups and downs of Sir Mick and Mr. Richards (who famously turned down knighthood), the RBN blogosphere has served as a regular chronicler of the refining sector in each and every PADD. PADD 3 (Gulf Coast) is the biggest — with 9.7 MMb/d of refining capacity, or just over half of the U.S. total — and still growing (see Beaumont-ian Rhapsody), PADD 4 (the Rockies) benefits from lofty crack spreads (see Gonna Fly Now) and PADD 5 (West Coast) is quirky as heck (especially California; see Beast of Burden), but we’ve blogged more about PADD 1 (East Coast) and PADD 2 (Midwest) than any of those — there’s been a lot to say about them both.
A while back, in Back to Red, we recounted that East Coast refineries can supply only a small portion of PADD 1’s total demand for refined products, and that for years they relied almost exclusively on waterborne imported crude for feedstock and therefore had little or no competitive advantage over their European refined-product rivals. More recently, in Philadelphia Freedom, we discussed the rise and fall of Philadelphia Energy Solutions (PES), owner of the East Coast’s largest refinery (the 335-Mb/d Philadelphia Refining Complex), which at first benefitted from the Shale Revolution by railing in steeply discounted light sweet crude from the Bakken but later lost that leg-up when pipeline constraints from the Bakken to the Gulf Coast eased and the spread between Bakken and Brent prices narrowed — in essence, leaving PES and a number of other PADD 1 refiners back in the same leaky boat they were rowing pre-Shale.