Electricity outages shut in California products line

Jan. 19, 2001—Gasoline could be in short supply in California after a major products pipeline with an interruptible electricity supply contract was shut down for almost 3 straight days. With California’s power crisis spreading, inventories were building at some refineries that were unable to ship gasoline through the idle pipeline to distribution points in the state.

Kinder Morgan Inc.’s pipeline returned to service Friday. Pacific Gas & Electric Co. cut electricity to service during emergencies earlier in the week. The utility was ordered to call all interruptible load and the pipeline has an interruptible tariff. Kinder Morgan did not return phone calls.

“Our inventory is rising and we are approaching maximum production soon,” says Rich Marcogliese, plant manager for Valero Energy Corp.’s 135,000 b/d Benicia refinery. “If the crisis prolongs, refineries will have to shut down.”

The Benicia refinery transports 80% of its finished product—gasoline—through Kinder Morgan’s pipeline. With the pipeline shut down, the refinery is storing its gasoline on site in tanks. Marcogliese says if the pipeline is not operating full time, the refinery can run only 2-3 days more before it must shut down.

Equilon Enterprises LLC’s 154,000 b/d Martinez refinery is in similar straits.

“Our ability to receive crude and transport finished product have both been curtailed,” says Mark Hughes, spokesman for the refinery in the San Francisco area. “It’s causing us to build up inventories.”

Hughes would not say if the refinery is close to its storage capacity or if it anticipates having to shut down production. “The company is evaluating what we will do if the situation continues,” he said.

Pacific Gas & Electric Co. called both refineries during this week’s rolling blackouts to ask them to reduce electricity use. Both refineries have firm contracts and asked to be exempt from the rolling outages. An orderly shut down takes at least 2 days, Marcogliese said.

Marcogliese said refiners and pipeliners had asked the state’s attorney general to intervene with the California Public Utility Commission to release the Kinder Morgan pipeline from its interruptible contract. He also would like to see refineries excluded from rolling outages by law.

The impact on California’s gasoline market could begin as soon as 2-3 days from now. The interruption of Valero’s use of the pipeline means as much as 10% of the state’s gasoline didn’t get delivered for a few days.

“As word gets out that refineries are having difficulties, people could feel the impact on retail gas prices in a few days,” says Marcogliese. “California does not get a lot of imports of gasoline. It’s a very tight in-state market.”

Tosco Refining Co. has a 131,000 b/d refinery in Los Angeles where products are also getting backed up, said Paul Oves, vice-president external affairs. “It’s a huge mess,” he said.

The refinery has sufficient storage capacity to get through the weekend, should the pipeline go back down, Oves said. They will be evaluating the situation Monday.