The owner of a pipeline that supplies diesel and jet fuel to three locations in Arkansas - El Dorado, North Little Rock and Jonesboro - has notified a federal agency that it plans to make changes in the pipeline.
The changes could affect the central Arkansas economy by as much as $100 million a year, according to businessmen in the area.
Enterprise Products Partners of Houston and its affiliate Enterprise TE Products Pipeline Co. will stop shipping diesel and jet fuel in Arkansas through a 16-inch pipeline beginning July 1. By early next year, Enterprise will reverse the flow of the pipeline and transport ethane, which is used to make plastics for the automotive industry. Ethane will flow from the Marcellus-Utica shale region in the Northeast to the Gulf Coast, according to a filing that Enterprise made with the Federal Energy Regulatory Commission.
One reason for the change is the decline in demand for diesel and jet fuel in Arkansas, said Rick Rainey, an Enterprise spokesman. Rainey declined to say how significant the decline has been. Also, Enterprise has a long-term contract to transport ethane from the Northeast to the Gulf Coast, Rainey said.
Enterprise currently moves diesel and jet fuel along an 800-mile route, beginning with a 14-inch pipeline from Beaumont, Texas, to El Dorado, where the line’s diameter increases to 16 inches for shipment to North Little Rock and Jonesboro. The portion that delivers diesel and jet fuel eventually ends near Seymour, Ind.
Enterprise is the only supplier of diesel fuel, as well as jet fuel and gasoline, to the North Little Rock terminals off Interstate 40 near Prothro Junction.
In March, Enterprise made a federal filing regarding its pipeline plans. At that time, it had no plans to continue shipping diesel fuel through Arkansas after July. But, after concerns were raised in Arkansas about the March filing, Enterprise decided to use a parallel 20-inch line that is now primarily used to ship gasoline to also ship diesel fuel.
Now, instead of shipping diesel from Texas for several suppliers, Enterprise will allow diesel to be shipped to North Little Rock and Jonesboro only from a refinery in El Dorado. Lion Oil Co., which is owned by Israel-based Delek U.S. Holdings Co., will be the diesel supplier.
Enterprise delivers about 1 billion gallons of diesel fuel to central Arkansas a year,said Randy Zook, executive director of the Arkansas State Chamber of Commerce.
If the price of diesel fuel increases by 10 cents a gallon because of Enterprise’s changes, the impact on the central Arkansas economy would be about $100 million, Zook said.
The change has businesses concerned about several things, including whether Lion Oil will be able to meet the demand for diesel that had been provided through Enterprise and what the alternate supplies of diesel are if Lion cannot meet the demand.
Steve Cousins, an executive with Lion Oil in El Dorado, did not return a call to discuss Lion’s plans.
Enterprise currently has capacity for 200,000 to 230,000 barrels of diesel a day along the 20-inch pipeline, Rainey said. Rainey declined to say how much diesel fuel Enterprise actually ships to Arkansas.
In an article last August, Delek U.S. Holdings said its El Dorado refinery provides 80,000 barrels of crude oil a day, with another 25,000 barrels that can be shipped via rail.
“It appears the El Dorado refinery does not have the capacity to maintain adequate diesel supply to the North Little Rock terminals based on current demand,” said Dennis Fitzgerald, president of Knox Nelson Oil Co. in Pine Bluff. “We estimate there will be a 10,000 to 12,000 [barrels-a day] shortfall that cannot be made up by diesel produced at Delek.”
If Delek cannot meet the demand, diesel fuel can also be supplied by barge and trucked in from other pipelines, Rainey said.
Transporting diesel from other pipelines, such as from Memphis or Fort Smith, could cause problems, Fitzgerald said.
That changes what is now about a 50-mile round trip from North Little Rock to the end users to as much as 300 miles, Fitzgerald said. It could also mean up to 60 additional truckloads - and possibly double that - from surrounding markets to meet the fuel demand, Fitzgerald said.
The additional transportation costs will mean an increase of 7 to 10 cents a gallon for diesel at the pump, Fitzgerald said.
There is also a concern that in case of an emergency at the El Dorado refinery, the main supply for Arkansas diesel would be stopped, Fitzgerald said. The Delek refinery already has scheduled a 45-day maintenance shutdown in January, Zook said.
The Arkansas attorney general’s office plans to make a filing with the federal commission challenging the legality of the “selective termination of transportation services.” Ending the service to Arkansas “would have a significant, damaging effect” on Arkansas, the attorney general said.
The attorney general will ask that the commission reject Enterprise’s plan or at least delay it for seven months to allow for an investigation.
The attorney general filed a challenge to Enterprise’s proposal in April before Enterprise withdrew its filing. The attorney general plans to make an almost identical filing in Enterprise’s latest case, an attorney general spokesman said.
On behalf of the state Chamber of Commerce, Zook also asked the secretary of the federal commission to reject Enterprise’s request to change the pipeline use or suspend it for seven months. Enterprise’s proposal will create a diesel shortfall in central Arkansas, Zook said.
There will be no shipment of jet fuel along the 20-inch pipeline, Rainey said.
The lack of a major supplier of jet fuel in central Arkansas should not cause delays for the Little Rock Air Force Base, which has a contract for jet fuel with Defense Logistics Agency Energy.
The Enterprise pipeline is currently used to supply jet fuel to the base, said Irene Smith, a spokesman with Defense Logistics Agency Energy. The agency is researching its options, Smith said.
“We don’t expect delays in resupply because of the numerous supply options DLA Energy can utilize,” Smith said in an e-mail.
Individual vendors who provide jet fuel at the Bill and Hillary Clinton National Airport in Little Rock are finding alternate suppliers, said Shane Carter, a spokesman for the airport.
Front Section, Pages 1 on 05/17/2013