Colonial Finds Pipeline Workaround to Ease Gasoline Shortage

  • Main line to restart a day earlier thanks to bypass connector
  • Gasoline spreads collapse with supply-squeeze relief in sight

The largest gasoline pipeline in the U.S. is set to restart its main shipping route, easing almost two weeks of disruptions in supplies to the East Coast following a leak in Alabama.

Colonial Pipeline will resume shipments on the 1.3 million-barrel-a-day line on Wednesday, one day ahead of schedule, after building a 500-foot long connector to bypass a stretch deemed hazardous by a federal agency following the Sept. 9 spill, the company said in an e-mailed statement Tuesday. It will still take several days for the fuel delivery supply chain to return to normal, Colonial said.

Gasoline futures on the New York Mercantile Exchange, which jumped last week because of the supply curtailments, slumped as shipments are set to come back to normal. The spread between October and November gasoline futures narrowed to 3.62 cents a gallon after reaching a record 8.60 cents Friday.

“The restart of the Colonial line is good news for consumers and it’s bad news for Nymex gas cracks as supply will be able to make its way back into the East Coast market," said Andy Lipow, president of Lipow Oil Associates in Houston, by telephone.

The company said it brought in pipe to stretch the distance of one and a half football fields as one of the emergency measures that were developed soon after the leak was discovered.

"From early on we started working several contingency plans just so we’d have options," said Colonial’s spokesman Steve Baker in a telephone interview. "This one turned out to be the safest and most expeditious way to get the line restarted. We had the line there at the site ready to be assembled. It was all pre-positioned and ready to go.”

Drivers in major cities like Atlanta, Nashville, Tennessee and Raleigh, North Carolina, experienced shortages at retail stations over the weekend as reports of the pipeline outage spread to worried gasoline consumers.

“It was a classic shortage situation,” Mike Williams, executive director of the Tennessee Petroleum Council, said by phone. “It’s going to take a little while to resupply all the stations.”

Alabama Governor Robert Bentley praised Colonial on Monday for its response to the spill, saying the company treated the incident “very much like a natural disaster.”

"It’s amazing to see how quickly everybody has reacted," Bentley said.

Federal and state mandates were lifted in response to the short squeeze that led motorists to line up at supplied stations. Rules on blending and hours that truckers can deliver fuel were waived, and one tanker that normally ships gasoline to Florida was rerouted to supply markets in Georgia and South Carolina. Bentley urged Alabama residents to stay calm amid the temporary shortage.

“I want people to first of all not panic,” he said. “I think that right now with the state of emergency we’re able to bring more fuel in if we need it by truck or barge.”

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