GO
Loading...

FACTBOX-Waivers, pipelines, barges slowly untangle NY fuel bind

NEW YORK, Nov 2 (Reuters) - New Yorkers hunting for gasoline after Hurricane Sandy may soon get some relief after major pipelines resumed flows, barges steamed back into the harbor's waterways to deliver fuel, and the government waived shipping requirements on Friday.

While power outages continue to keep some gasoline stations and oil terminals shut, the efforts could put an end to the unwelcome revival of one of the 1970s less fashionable trends in New York: infuriatingly long lines for gasoline.

To ease the crisis caused by a wave of disruptions Sandy kicked up across the East Coast oil complex, the government has waived restrictions limiting only U.S.-flagged barges and tankers to carry fuel from the Gulf Coast refining hub to the region, allowing companies to charter foreign ships. Flooded refineries should eventually resume production.

Power is gradually being restored in New Jersey, where much of the key infrastructure is located and tankers have begun to discharge fuel at New York Harbor terminals with power to receive it.

The bad news is that the supply crunch is still far from over. Supplies at some gas stations that remained open are dry, and it may be several more days before wholesale fuel supplies get where they need to go. Public Service Enterprise Group Inc , the biggest utility in New Jersey, said it may be up to a week to fully restore power. Oil tank trucks are driving three hours to Delaware City to get fuel, but they can only carry up to 9,000 gallons each.

WHAT'S BEING DONE

Some efforts are underway to aid the flow of fuel, although it is unclear how quick or effective they will be.

* JONES ACT WAIVER: The Department of Homeland Security issued a blanket waiver of the Jones Act earlier on Friday in an attempt to relieve fuel shortages gripping the Northeast after the storm shut refineries and cut power to gasoline stations. The waiver allows foreign flagged ships transporting oil products, such as gasoline and diesel, to embark from the Gulf of Mexico through Nov. 13 and deliver the fuel up to a week later to New England and Mid-Atlantic states. The ships must discharge by Nov. 20.

* TAX BREAK: New York temporarily lifted tax and registration requirements on tankers docking on the New York Harbor.

* FUEL MERCHANT WAIVER: New Jersey issued a waiver allowing fuel merchants to buy fuel from suppliers outside of the state, which lasts through Nov. 7.

* FUEL WAIVERS: The Environmental Protection Agency has waived clean gasoline across the eastern seaboard and clean diesel rules in New Jersey through Nov. 20, in order to help boost supply.

The waivers, in theory, make it easier for refiners to produce more volume of the higher-sulfur fuel, and make it simpler to buy additional supplies from other regions or countries, although it does nothing to ease the logistics snarl.

The Federal Emergency Management Agency director Craig Fugate suggested it could help restore power to gasoline stations.

``We are also working to supply, make sure we have supplies going to the retail sector, because many of the gas stations don't have power,'' he said. ``They are looking at emergency power supplies for those, that won't get power back soon.''

INDUSTRY EFFORTS:

* TANK TRUCKS: PBF Energy, an independent refiner, whose two East Coast refineries quickly resumed normal output following Sandy, said it is loading trucks at its 190,000 bpd plant in Delaware City to bring gasoline and diesel to the region. It also said that some northern New Jersey customers were also driving the oil tankers to the refinery's rack.

* Sunoco was trucking fuel from southern New Jersey and upstate New York to northern New Jersey, New York City and Long Island.

* Fuel barges began unloading in the New York Harbor, with one tanker carrying 2 million gallons of gasoline docked at Newburgh, New York.

DEMAND

The East Coast consumes about 5.5 million barrels per day (bpd) of fuel, more than a quarter of the country's total.

Within that, the mid-Atlantic region -- termed PADD 1B, and the area hardest hit by the storm -- comprises New York, New Jersey, Pennsylvania, Maryland and Washington D.C., and accounts for about a third of the total for the region.

It consumes just over 1 million bpd of gasoline alone, plus another 166,000 bpd of jet fuel, 250,000 bpd of diesel and 133,000 bpd of home heating fuel oil, according to federal government data on final fuel sales in the area.

REFINERIES STILL CRIPPLED

Two of the region's refineries remain shuttered after the storm, reducing East Coast capacity by more than 300,000 bpd or about a quarter of its 1.2 million bpd slated capacity. Typically, the area's six refineries supply a fifth of fuel demand, a share that has shrunk due to recent closures.

The most important plant, Phillips 66's 238,000 bpd plant in Bayway, just south of Newark, was flooded by Sandy's storm surge and lost power. The company says power has now been restored and floodwater has receded, but sources said heavy damage from salt water could cause the plant to be shut for weeks.

Work is underway on one of the two docks where the pumps were ruined by water, and estimates for one dock to return to service and receive product are for next week, the source said. Parts of the neighboring co-generation plant which provides steam and power to the refinery hit by flooding were expected to be able to restart quickly.

Hess Corp's 70,000 bpd refinery, just 10 miles (16 km) south of Bayway in Port Reading, which runs on gas oil rather than crude, also remains closed due to a lack of power. It is unclear whether the plant sustained any damage that could delay its recovery. Refineries can take weeks to recover from floods.

The area's four other refineries are running, although the largest in Philadelphia is still below full capacity.

PIPELINE RESTARTS

Line 3 of the Colonial Pipeline, the main conduit for moving fuel produced in the Gulf Coast refining hub up the East Coast, on Friday began deliveries to its tank farm in Linden, New Jersey, the terminus of the line.

It expects to deliver 700,000 barrels per day, which is about normal for the destination. Colonial's Line 3 has a capacity of 825,000 bpd.

Colonial restarted deliveries to Buckeye's Linden terminal and expects to restart three more delivery lines to other terminals later on Friday and two more over the weekend.

With the restart of these lines, about one-quarter of the shipper terminals served by Colonial from the Linden Tank Farm will be supplied. The tank farm, which is the northern terminus of the 5,500 mile pipeline as well as the delivery point of the gasoline and heating oil contract on NYMEX futures.

HARBOR REOPENS

Perhaps the biggest problem is not producing or shipping the fuel in pipelines, but getting it into the storage tanks and terminals dotted around the New York Harbor, a critical link in the supply chain used to break down large shipments into smaller batches for shipment inland or loading on trucks.

The harbor opened to fuel barges and gasoline was discharging at some terminals, but many discharge points remained shut as efforts to restore power continued. Larger tankers were still restricted.

Even once the vessels start moving again, it is unclear that they will have anywhere to discharge: at least a dozen major terminals in and near the harbor have been shut because of a lack of power, or because of damage during the storm.

Two tanks at Motiva's Sewaren site have reportedly spilled over 300,000 gallons of diesel, factors that are likely to delay the restoration of service. IMTT's giant 16 million barrel facility in Bayonne, NJ also remained shut.

It is not clear how much of the harbor's estimated 75 million barrel storage tank capacity has been incapacitated due to the storm.

STOCKPILES

The storm struck at an already delicate moment for the regional market, with stockpiles of motor fuel at unusually low levels because of the structure of the oil futures market -- called ``backwardation'' -- discourages companies from holding inventories because future prices are cheaper than current ones.

For instance, PADD 1B gasoline inventories hit the lowest level on records dating back to 1991 in the week to Sept. 28. They have risen by 3 million barrels since then, but are still 10 percent below the five-year average, according to DOE data.

PADD 1B distillates stocks -- which includes heating oil and diesel, and is a particular concern ahead of the winter -- are now 45 percent below the five-year average. Stockpiles hit their lowest level since May 2008 in the week to Oct. 12.

(Reporting by Jonathan Leff and Matthew Robinson; Editing by Marguerita Choy)