Published On: Tue, Nov 1st, 2016

Largest U.S. Gasoline Pipeline Shuts After Alabama Explosion

The biggest gasoline pipeline in the U.S. shut its mainlines Monday after an explosion and fire in Alabama, sending prices of the fuel surging as supply disruptions loom.

Alabama Gasoline Pipeline Explosion

Colonial Pipeline Co., which carries refined products to New York Harbor from Houston, shut the lines for the second time in two months after a spill in September knocked them offline for 12 days, cutting supplies to 50 million Americans in the Southeast. Alabama Governor Robert Bentley said in a that the incident in Shelby County was about a mile west of the September spill. Major fuel suppliers began notifying wholesalers in South Carolina late Monday of allocations.

The explosion, which injured eight or nine people, occurred while contractors were working in an area home to a “complex series of pipelines,” Shelby County Sheriff’s Office Major Ken Burchfield said by phone. Colonial had planned to remove a temporary bypass pipeline that was built around the site of the Sept. 9 gasoline spill between late October and mid November.

The southeastern U.S. is “highly dependent on pipeline supplies from Colonial, and, ultimately, Colonial flows form the baseline of U.S. East Coast supply,” Robert Campbell, head of oil products research at Energy Aspects Ltd. in New York, said in a note. The longer the mainlines are offline, “the more upward pressure will be placed on U.S. East Coast fuel prices, while downward pressure will be exerted on U.S. Gulf Coast product prices.”

December gasoline futures rose as much as 21.56 cents, or 15 percent, to $1.6351 a gallon after Monday’s settlement. The New York Mercantile Exchange contract delivers into New York Harbor.

Emergency workers were responding to the blaze on Colonial’s right of way late Monday, according to an e-mailed statement from the company.

Pipeline and Hazardous Materials Safety Administration spokesman Darius Kirkwood said the agency had received an alert about the incident on Colonial, but could not provide additional information.

Colonial — and to a lesser extent the smaller Plantation Pipe Line Co. — play a key role in supplying the U.S. Southeast because there aren’t any refineries between Alabama and Pennsylvania that produce substantial quantities of transportation fuels. The region is supplied primarily by pipeline flows from refineries along the U.S. Gulf Coast, according to the U.S. Energy Information Administration.

While Colonial has a capacity of 2.6 million barrels a day of refined products, the Plantation pipeline carries just 700,000 barrels a day.