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Colonial May Expand Capacity on Northeast Pipeline System

Colonial Pipeline Co. is considering projects that would add as much as 600,000 barrels a day of capacity to its Northeast fuel pipeline system, including at least 100,000 barrels a day to the New York Harbor area.

Colonial, based in Alpharetta, Georgia, is looking to expand a line to Linden, New Jersey; extend another to New Jersey from its current terminus near Baltimore; add capacity to the two main lines; and build a new pipeline to Atlanta from the Gulf Coast, the company said today in a statement. It’s also taking steps to protect the system against a “superstorm” like Hurricane Sandy.

The company will “more clearly define” the plans by the middle of 2013, Chief Executive Officer Tim Felt said in the statement. The proposed projects underscore how refinery closings on the Atlantic Basin have increased demand for other routes to get fuel to New York Harbor, the delivery point for futures contracts traded on the New York Mercantile Exchange.

“This concept of growing Colonial is fully supported by Colonial’s owners and is in direct response to customers who demand more capacity,” Felt said. “We have many permitting and other hurdles to cross, but we are convinced this is the kind of infrastructure our customers want and our country needs.”

Hurricane Protection

The proposed projects would also harden the Northeast’s infrastructure against another hurricane, Felt said. Sandy, which went ashore in New Jersey on Oct. 29, limited pipeline deliveries to the Northeastern region and sent the area’s gasoline supplies to 22.4 million barrels in November, the lowest seasonal level in at least 10 years, data compiled by Bloomberg show.

Colonial is evaluating a 100,000-barrel-a-day capacity increase to Line 3, which carries gasoline, diesel and other products to Linden from Greensboro, North Carolina. The company finished a 60,000-barrel-a-day expansion to the line Feb. 27, which brought capacity to 885,000 barrels a day.

If Colonial moves forward with that expansion, it plans to consider several other projects, including extending Line 4, which starts in Greensboro, to southern New Jersey from its terminus near Baltimore.

Colonial then might consider adding capacity to Lines 1 and 2, its main gasoline and diesel lines that run to Greensboro from Houston. The company expects to increase gasoline capacity on Line 1 by 100,000 barrels a day to 1.5 million in the second quarter of this year. Line 2 can move more than 1 million barrels of distillate today.

Gulf Coast

Colonial is also reconsidering a shelved plan to build a new pipeline to Atlanta from Baton Rouge, Louisiana. Altogether, the projects could add 600,000 barrels a day to the system.

Demand to ship products on Colonial’s system has increased in recent years as refineries shut in Pennsylvania, New Jersey, Aruba and the Virgin Islands, taking 833,000 barrels a day of refining capacity offline in the U.S. Atlantic Basin. Demand for shipping gasoline on Colonial’s mainline has outstripped capacity in 12 of the past 13 five-day shipping cycles, according to bulletins from the company.

The Colonial system includes 5,500 miles of pipelines originating in Houston and ending in Linden on the New York harbor. The company says it transports approximately 100 million gallons of fuels a day.

To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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