Wisconsin Gas pipe shutdown may drive up prices

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Gas pipe shutdown may drive up prices Major source of area's gasoline to close for at least 10 days By Kenneth R. Lamke and Rose Wesolek of the Journal Sentinel staff Last Updated: May 19, 2000

A major petroleum pipeline that supplies reformulated gasoline to Wisconsin will shut down late this month for 10 days of maintenance, which could diminish supplies and drive gas prices here even higher for the Memorial Day holiday, officials warned Friday.

The officials, including a state lawmaker and a gas-station industry representative, are urging the federal Environmental Protection Agency to grant Milwaukee a temporary waiver from the requirement to use reformulated gas, similar to a waiver granted St. Louis, where a gas pipeline developed a leak.

But a key EPA official said it was too soon to judge the effect of the pending pipeline shutdown here, although he did not rule out a possible waiver from the reformulated gas requirement.

Gas prices in the Milwaukee area are already about 15 cents a gallon higher than elsewhere in Wisconsin because of a recently imposed environmental requirement that a higher quality of reformulated gas be used here, Mike Bie, a spokesman for AAA-Wisconsin, said Friday.

Reformulated gasoline is specially processed to produce lower air emissions.

The average gasoline price in Milwaukee is $1.69 for a gallon of regular unleaded, Bie said. It rose quickly to that level in early May when a new, stricter requirement for reformulated gas took effect, and the price has remained fairly steady since then, he said.

The pipeline that supplies much of this area's reformulated gas - the West Shore Pipeline - is set to close down for routine leak checks, said Scott Croston, an official with West Shore Pipe Line Co., the company that runs the pipeline.

"This has been scheduled for a long time and our customers have known about this long before they were formally told in April," Croston said. "Hopefully, they have a surplus built up."

Kent Young, spokesman for Citgo Pipeline Co., which is part owner and the operator of the pipeline, said, "Everything should go fairly smooth considering the amount of time it takes to plan a shutdown like this."

But Bob Bartlett, a spokesman for the Petroleum Marketers Association of Wisconsin, which represents independent gas stations and other sellers of petroleum products, said he learned of the pending shutdown just this past week.

The pipe should be shut down for only 10 days or so, but if repairs to the pipe are needed, the process would be slowed down.

"Obviously, if we find something that needs to be repaired, it would take additional time," Young said. "The longer the pipeline is shut down, the more potential there is for problems to occur."

Bartlett said, "If supply is further reduced, demand is likely to drive prices slightly higher."

State Rep. Tim Hoven (R-Port Washington) said the result could be far worse. He warned of severe gas shortages similar to those in the 1970s and "massive price increases."

Bartlett said he did not think things would get that bad, either in terms of supply or price.

As a result of the planned pipeline shutdown, Hoven, chairman of the Assembly Utilities Committee, and Bartlett both said that federal officials should grant Milwaukee a temporary waiver from the requirement that the Milwaukee area use reformulated gas.

That would allow area gas station retailers to sell ordinary gas, which is not in short supply, as a temporary substitute, they said.

Hoven and Bartlett both noted that the EPA granted such a waiver to the St. Louis area on March 17 after a pipeline leak interrupted supplies of reformulated gas there.

But an EPA official said Friday that it could not grant a waiver to Milwaukee unless and until it had evidence of a shortage - and there is no such evidence now.

"We can only grant a waiver when a shortage exists and we've got nothing that substantiates that a shortage exists" in the Milwaukee area, said Rich Biondi.

"We'll have to evaluate that at the time" of the pipeline shutdown, said Biondi, the EPA's associate director of the air enforcement division.

"These (waivers) are not taken lightly," he said.

Southeastern Wisconsin, northeastern Illinois and the St. Louis area are among 17 metropolitan areas nationwide that are required to use reformulated gas, which the EPA says will cut down on air pollution.

After a more stringent requirement took effect on May 1 requiring use of a more highly oxygenated form of reformulated gas, prices here started to rise sharply.

Industry sources cited a variety of reasons for the price increases, including the required upgrading of refineries, rising crude oil prices, tight gasoline inventories and a reformulated gas patent lawsuit.

But politicians were quick to suggest that the industry was using the new reformulated gas regulation as an excuse to gouge customers.

Hoven noted Friday that the industry knew "for years" that the stricter requirement would take effect this May 1.

And, he added, "This is the worst possible timing to shut down the pipeline."

"Gas prices are historically high around Memorial Day to begin with. And now this," Hoven said.

The Assembly Republican said that if the EPA "suspends the reformulated gas program and allows us to use conventional gas at least until the pipeline is operational, I think we can avoid major problems."

The West Shore Pipeline travels 640 miles through southern Wisconsin, northern Illinois, and western Indiana, said Croston, business development manager at West Shore Pipe Line Co.

The pipeline moves gasoline, diesel and turbo fuels from Chicago to petroleum terminals at Granville, Ill., Mitchell International Airport and Green Bay for the market in southeastern Wisconsin. These terminals then distribute fuel to various gasoline stations.

West Shore is one of two pipelines supplying reformulated gas to the area. The Koch Gateway Pipeline Co. feeds Milwaukee from Pine Bend, Minn., and gasoline also is trucked into the area from various locations. Buzz Anderson, of Koch Gateway, says his line supplies about 35% of the area's needs, suggesting that trucks and West Shore together supply about 65% of the Milwaukee area's reformulated gas consumption.

Federal regulations require hydrostatic testing of pipelines that have electric weld resistance pipe that was installed before 1970. Planning for the tests has been under way for several years, and the tests must be conducted before the end of this year, Croston said.

http://www.jsonline.com/news/state/may00/gas20051900.asp



-- Martin Thompson (mthom1927@aol.com), May 20, 2000


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