What Happens When the Most Important Pipeline in the U.S. Explodes

Bloomberg got our attention this morning with this story.  Does this generally unseen vulnerability in our fuel delivery system for a major part of the US not push us even harder to produce clean energy, with storage and big investments in efficiency, even harder?  Do we not want to cut delivery down to a bare min?  We need redundancy and resilience in our power chain.  Renewables and batteries, with microgrid technology, get us there quickly.

The 5,500-mile Colonial delivers about half of the refined products used on the East Coast.

On Monday, a construction crew in Alabama triggered a massive explosion when a track-hoe struck the biggest fuel pipeline in the U.S. The blast killed one person, injured several, and sparked a wildfire that burned for nearly a day across 31 acres.

It also stopped the flow of millions of gallons of gasoline that move up the East Coast each day, from refineries in Houston to tanks in Linden, N.J., outside New York Harbor. The 5,500-mile Colonial Pipeline delivers about half of the refined products used on the East Coast. It consists of two lines—one that carries gasoline, the other that carries distillate fuels such as diesel and jet fuel. Think of it as the country’s fuel aorta.

The consortium that owns Colonial includes private equity behemoth KKR, industrial conglomerate Koch Industries, and oil-and-gas supermajor Royal Dutch Shell. The fact that it’s so little known, yet such a vital piece of infrastructure, is a testament to how well Colonial has been run over the years.

But this is its second outage in two months. In September, a spill leaked 250,000 gallons of gasoline and caused states of emergency to be declared in Georgia and Alabama as gasoline ran out in some areas. The Colonial was down for 12 days.

The U.S. has plenty of gasoline in storage. Tanks are brimming with near-record levels of supply. But that was true in September as well, when the outage caused all kinds of disruptions and price spikes.

“All that supply does you absolutely no good if you can’t move it around,” said Phil Flynn, a senior market analyst with the Price Futures Group in Chicago.

By Tuesday morning, Colonial’s Line 2, the distillate pipe, was up and running. By Tuesday afternoon, news broke that its main line, Line 1, would be back up by Saturday afternoon, an optimistic timetable, according to some traders, given the level of destruction at the site. Still, the news helped cool the initial spike in the price of gasoline futures, which had jumped the most since 2008, fueled by a record level of trading that day.

Traders in Houston working for big refineries have had to find a place to put all the excess barrels of gasoline and diesel they normally would send into the Colonial. That has set off a bidding war for the limited number of tankers and barges available to move products between U.S. ports. An obscure maritime law called the Jones Act requires that only U.S.-made, U.S.-flagged ships can deliver goods between ports. According to Bloomberg vessel-tracking data, about 27 Jones Act vessels were in service around the U.S. Gulf and the East Coast as of Thursday morning...

REST OF STORY AT: http://www.bloomberg.com/news/articles/2016-11-03/what-happens-when-the-most-important-pipeline-in-the-u-s-explodes