On Thursday, March 29th Pennsylvania Administrative Law Judge Eranda Vero, “urged the state’s public utility commission to reject Buckeye Partners LP’s proposal to reverse the western portion of a 350-mile (560-km) product pipeline that extends from Philadelphia to Pittsburgh.” Although the judge has made a ruling on this case, it is ultimately up to the Pennsylvania Utility Commission (PUC) to render a final verdict.
This ruling is fundamentally important to Western Pennsylvania and the regions optionality to purchase fuel from the Midwest and/or the New York Harbor. Today, the greater Pittsburgh area is the final destination for refined products coming from both the Midwest and New York Harbor thus allowing price stability in the market. Due to the fact that this region is not sourced from a single point, natural disasters in pipeline disruptions provide less of an impact to the consumer.
There are valid reasons for both arguments. According to Reuters, on the reversal side, “Midwest refiners such as Marathon and Husky Energy have invested billions of dollars in recent years to take advantage of cheaper Canadian crude. These refiners were hoping to extend their ability to deliver products deeper into Pennsylvania, opening the door for a full reversal all the way to Philadelphia.” These refiners argue that there is a benefit to opening markets further east to accommodate for their increased production and storage.
On the anti-reversal side, “Philadelphia-area refiners such Philadelphia Energy Solutions and Delta Air Line's subsidiary Monroe Energy opposed the reversal, saying it would harm their business and lead to closures. They argued it would take away a key market and cause fuel price spikes in western Pennsylvania.” Additionally, according to the Tribune Review, locally in Western Pennsylvania the reversal met strong opposition by the largest two independently owned retail gas chains. “Sheetz Executive Vice President Mike Lorenz and Giant Eagle Get-Go Senior Vice President Polly Flinn said the reversal will eliminate competition from East Coast fuel refineries… There is little upside but plenty of downside to the proposed reversal… Midwest refiners already have access to Pennsylvania markets and currently compete with supply from the East Coast.” Their argument focuses on allowing competition between the two markets and keeping the need for refineries based in the New York Harbor.
As we wait to hear the Pennsylvania Utility Commission’s final ruling on this pipeline reversal, it is abundantly clear that this issue is far from over. Neither side is willing to concede defeat due to the large financial impact felt on both sides. This is just one battle in the war between the two sides and ultimately, we will hear from the PUC soon enough.