Fuel Pipeline Built, but Relief Isn’t Delivered

A long-awaited pipeline finally is carrying fuel across Texas to help ease Arizona’s heavy dependence on California for gasoline and other petroleum products.

But like a rescue party cut off at the pass, the newly operational Longhorn Pipeline won’t provide relief for overburdened California refiners anytime soon.

That’s because the Longhorn, which originates outside Houston, comes to a dead end in El Paso. A connecting pipeline is too full to take the fuel to Tucson and Phoenix, and an expansion won’t be completed until next year.

In the meantime, the gasoline, diesel and jet fuel are being pumped into trucks and ferried across New Mexico to Arizona, reducing to a trickle the 10 million gallons a day that the Longhorn is capable of carrying.

“Right now, it doesn’t mean a lot for Californians,” but someday the pipeline could deliver gasoline to Arizona representing more than 4% of California’s daily demand, said David Hackett of Stillwater Associates, an Irvine-based energy consulting firm. “That [fuel] that used to leave L.A. [for Arizona] would now never leave L.A..”

The Longhorn’s owners see their pipeline as a vital link between the Gulf Coast states, which are thick with refineries, and Arizona, which has none and must import about 5.5 million gallons of fuel a day from California.

“When it comes to energy supply and demand, the world is tied together,” said Richard Rabinow, president of Longhorn Partners Pipeline.

“While we don’t directly connect to Phoenix or Los Angeles, the fact that there is a way for refined product that originates on the Gulf Coast to get to Phoenix changes the logistics in the United States.”

California energy officials hope that the Longhorn project eventually will enable Golden State refiners to keep more of the gasoline they produce inside the state.

California has 13 refineries that produce the state’s unique recipe for cleaner-burning gasoline. They operate at maximum capacity to satisfy California’s gas needs, as well as to help supply Arizona, Nevada and Oregon.

Demand for fuel in Southern California, Nevada and Arizona continues to go up, said Gordon Schremp, senior fuels specialist at the California Energy Commission.

In 2004, fuel demand among Californians increased 1.6% to nearly 44 million gallons a day. In Arizona, demand grew 3% to more than 6 million a day.

With fuel supplies stretched so thin, experts say any disruption can cause prices to skyrocket.

“It’s all just-in-time supply,” said California state Sen. Christine Kehoe (D-San Diego).

Last year, Kehoe introduced a bill to help gasoline retailers shop for cheaper gas by forcing California refiners to allow their dealers to buy generic gas from any supplier and pay the oil companies separately for the additives that make each brand of fuel unique. The legislation never got out of committee.

“We have an extremely tight supply and just a few producers in California, so the market, without any collusion and communication on their part, can very easily be subject to price spikes,” Kehoe said.

Indeed, California gas prices have risen nearly 20% this year, propelled by oil price increases.

The Longhorn saga began 10 years ago, with a vision to overhaul a 50-year-old neglected system of pipes. Longhorn Partners Pipeline spent $300 million to add 250 miles of pipe and modernize the entire network, which originates in Galena Park, an industrial park east of the company’s Houston headquarters.

Longhorn began sending petroleum products across Texas last summer, but the fuel had nowhere to go except the local El Paso market.

A second pipeline, known as the East Line, already runs at full capacity from El Paso to Phoenix, supplying about 30% of the Arizona city’s gasoline. (The other 70% comes into Arizona by way of a pipeline originating in Colton.) To relieve the bottleneck, East Line owner Kinder Morgan Inc. said the company planned to install more than 200 miles of fatter pipe to handle the additional fuel brought by the Longhorn.

“All we’re doing is expanding our East Line in response to our customers, the shippers,” Kinder Morgan spokesman Rick Rainey said.

Houston-based Kinder Morgan is applying for permits to expand the pipeline and doesn’t expect to complete construction until 2006. The expansion would enable refiners to send about 44,000 barrels of refined product to Arizona cities that currently depend primarily on California hydrocarbons.

Longhorn Partners stockpiled supplies until mid-February, when they began trucking fuel to Arizona. Since then, nearly 500 truckloads, each holding 7,500 to 8,400 gallons, have crossed into Arizona.

“Now consumers have an alternative,” Longhorn Partners’ Rabinow said. “If Kinder Morgan expands their pipeline, that will provide even more flexibility.”