Colonial Pipeline leak in Helena, Alabama
By Devika Krishna Kumar
NEW YORK, Sept 20 (Reuters) – Colonial Pipeline Co said on Tuesday it expects to restart its main gasoline line on Wednesday after its biggest leak in nearly two decades which led to a surge in prices at the pump and long lines in the southeast United States.
The leak, discovered by a mining inspector who detected a gasoline odor in Helena, Alabama on Sept. 9, released about 6,000 to 8,000 barrels (252,000-336,000 gallons) of the fuel in Shelby County, Alabama. The cause of the leak is unknown.
The partial shutdown of the damaged Line 1, which carries about 1.3 million barrels per day of gasoline from the refining hub on the Gulf Coast to the East Coast, has snarled delivery of products and gasoline.
Colonial Pipeline Co, the nation’s largest refined products system, has built a bypass line to resume full operations of Line 1. The 500 to 700 foot (150-210 meter) line is expected to have essentially the same pressure and capacity specifications as the main line.
Construction, fabrication and positioning of the bypass segment around the leak site is complete and Colonial said it is in the process of testing the segment. It will then begin tying the segment into the main line.
However, when Line 1 restarts, it will take several days for the fuel delivery supply chain to return to normal and some markets served by the pipeline may experience “intermittent service interruptions,” Colonial said.
U.S. gasoline futures tumbled 5 percent on news of the restart. Gasoline futures had surged 9 percent and spreads had rallied last week after Colonial’s leak was discovered.
“We have built too much of a fear premium in gasoline since last week because of this outage, and proof of that is how quickly it’s all going away,” said James Williams, energy economist at WTRG Economics in London, Arkansas.
“Anything that impacts the East Coast has an amplified, often exaggerated, impact on NYMEX prices. Now that we’re up and running, in a week or two, we may have a little bit of an oversupply in East Coast gasoline.”
PUMP PRICES MAY RISE FURTHER
Analysts have said retail prices may continue to climb as supply disruptions will not be alleviated immediately. The state of Georgia has been the hardest hit, with prices rising 4.5 cents overnight. At $2.361 per gallon of regular gasoline, the cost of fuel has risen by more than 25 cents in a week, compared with an increase of just over 3 cents nationwide, according to motorist advocacy group AAA.
North Carolina Governor Pat McCrory welcomed news that the line would likely restart on Wednesday but said it would take several days for the state’s fuel supply chain to return to normal.
“North Carolina is currently receiving about one-third of our normal supply of fuel,” the governor said at a news conference in Charlotte.
Shippers are adjusting by bringing more gasoline shipments by sea into the U.S. East Coast. The number of shipments rose by about 58 percent and volumes rose by 23 percent between Sept. 9 and 15 compared with the previous three weeks, according to data from Panjiva, a trade data company which tracks imports and exports.
About half of the 10 gasoline shipments to the East Coast during the period were from the U.S. Gulf, Panjiva said.
Sources have said Colonial shippers began booking vessels to transport fuel as Colonial’s Line 1 remained partially shuttered.
The company has more than 700 employees and partners on site working to repair and restore the damaged line.
Shipments of ultra-low sulfur diesel (ULSD) have not increased but may do so if Line 1 cannot be reinstated, since Colonial is using its distillates line to haul gasoline, Panjiva said.
(Reporting by Devika Krishna Kumar in New York, Colleen Jenkins in Winston-Salem, North Carolina, additional reporting by Barani Krishnan; Editing by Franklin Paul and Meredith Mazzilli)