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UPDATE 2-U.S. East Coast refineries cut output ahead of Sandy

* PBF, Hess, Phillips, Philadelphia Energy plants cut rates

* Pipelines begin to put storm plans into effect

* Coast Guard issues storm conditions for Mid-Atlantic

NEW YORK, Oct 28 (Reuters) - Oil refineries along the U.S. East Coast began to cut rates and companies prepared other energy facilities on Sunday ahead of Hurricane Sandy's expected landfall along New Jersey's barrier islands.

Sandy, forecast to come ashore late Monday, is expected to create strong winds and dangerous flooding to the East Coast from the Mid-Atlantic states to New England.

Gasoline and heating oil prices rose on Friday as the storm threatened the region's six oil refineries, which hold 1.19 million barrels per day - or 7 percent of U.S. capacity.

As the storm threatened power supplies across the region, PBF Energy, Phillips 66, Philadelphia Energy Solutions and Hess Corp began reducing production from refineries while other plants put emergency plans in place, according to sources familiar with operations.

See FACTBOX on energy disruptions due to Sandy for complete refinery details:

The CME Group halted all NYMEX floor trading for Monday, although electronic trade, which makes up the lion's share of the exchange's futures activity, will continue normally.

PIPELINES PREPARE

The storm comes as low inventories of refined products, especially distillates and heating oil, have stirred concerns of potential price spikes during the winter heating season.

The Colonial Pipeline, a critical supply link for the East Coast which carries about 15 percent of the country's gasoline and diesel from Gulf Coast refineries up to the New York Harbor, is preparing for the storm, spokesman Steve Baker said.

The pipeline activated its hurricane preparedness plan on Friday afternoon and has started making sure emergency generators are in place, as well as sandbagging critical areas that may be prone to flooding.

Buckeye Pipeline, which owns and operates about 6,000 miles (9,700 km) of oil product pipelines mostly north and west of Philadelphia, has prepared a hurricane contingency plan.

``Buckeye will continue to operate their pipelines as scheduled until the time that it is no longer safe to do so, or power or product availability make it no longer possible to run a particular line section,'' the company said in a statement.

``Buckeye has secured some generator capability that is being staged strategically to provide temporary power to certain pump stations,'' it said.

Vessels in and out of some southern and Mid-Atlantic ports are operating under Coast Guard storm conditions.

In Hampton Roads, near Plains All American's 6.6-million-barrel crude and oil products storage facility in Yorktown, Virginia, coastal waters are closed and under code Zulu, the highest warning level. The warning extends from Virginia to the Maryland/Delaware border, with expectations of gale-force winds within 12 hours.

The New York Harbor is under Code Yankee, with gale-force winds seen within 24 hours.

REFINERY RATES CUT

PBF Energy, which operates a 190,000-barrels-per-day plant in Delaware City, began to cut rates by an unspecified amount on the crude unit, coker and gasoline-making fluid catalytic cracking unit as well as some downstream units, a source familiar with refinery operations said.

``We continue to treat this storm seriously. We have comprehensive preparedness plans in place and will continue to follow them as well,'' said Michael Karlovich, a spokesman for the company.

PBF Energy also owns the 180,000-bpd Paulsboro plant in southern New Jersey, across the Delaware River from the Philadelphia area.

Meanwhile, Hess Corp would begin to cut rates at its 70,000-bpd refinery in Port Reading, New Jersey, at 6 p.m. EDT (2200 GMT) as a precaution, a company spokesperson said.

Phillips 66 said on Sunday it had begun shutting its 238,000-barrels-per-day Bayway refinery in Linden, New Jersey in preparation for Sandy.

Philadelphia Energy Solutions began to lower rates at its 330,000-barrels-per-day refinery in Philadelphia, the largest plant on the East Coast, according to a source familiar with the refinery. The plant had shut an acid unit but it was not clear by how much rates had been cut at the other units.

Hurricane Irene, which hit the region in August 2011, caused severe flooding and power outages along the East Coast as well as some refinery disruptions. Phillips 66 closed the Bayway refinery while other refiners cut rates, but the oil industry escaped Irene with relatively little, if any, damage.

Delta Air Lines' 185,000-bpd Monroe Energy plant in Trainer, Pennsylvania was monitoring the storm.

``We have not and do not anticipate changing operation at this juncture,'' said a source familiar with operations. ``We are on the leeward side of the storm's path.''

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