DOE to establish Northeastern gasoline reserve at two sites

The US Department of Energy will establish a Northeastern gasoline reserve at two locations near New York Harbor and in northern New England to provide short-term relief during supply disruptions, US Energy Sec. Ernest J. Moniz reported.

The reserves, which will hold 500,000 bbl each, are part of the Obama administration’s response to infrastructure problems following Superstorm Sandy in 2012, Moniz said on May 2.

With major petroleum product supply and distribution infrastructure along the Atlantic coasts, the Northeast’s energy supply reliability is vulnerable to the impacts of hurricane winds, tidal surges, severe wind, snow and icing conditions, Moniz noted.

He said Sandy heavily damaged two refineries, and more than 40 New York Harbor terminals closed due to water damage and loss of power, leaving some New York gas stations without fuel for as long as 30 days.

DOE said it anticipates awarding contracts for commercial storage, service, and product acquisition in order to launch the gasoline reserve by late summer of 2014. It will complement the Northeast Home Heating Oil Reserve, a 1 million bbl supply which was tapped for the first time to supply first responders and run emergency generators following Sandy.

The US Strategic Petroleum Reserve contains crude oil, but not refined products, DOE noted. It said establishing a gasoline reserve—acquired and owned by the US government, and stored at leased commercial storage terminals along the East Coast—would help mitigate the impacts of sudden and unexpected supply interruptions.

‘Delivered gut shot’

Two US Senate Democrats from the Northeast applauded the announcement. “The sudden, massive [gasoline] supply shortage after Superstorm Sandy resulted in interminable lines and panic, and delivered a gut shot to the region's economy,” said Charles E. Schumer (NY). “That's why we called for regionally placed reserves to ensure an uninterrupted fuel supply in the event of future storms like Sandy.”

“Like sandbags and stockpiles of food and medicine, this gasoline reserve is what the Northeast needs to be ready for supercharged storms from climate change,” said Edward J. Markey (Mass.). “This gasoline reserve will ensure that just because a dangerous storm soaks our region, it doesn’t mean that consumers have to get soaked at the pump.”

One oil and gas trade association’s initial response was mixed. The American Fuel & Petrochemical Manufacturers was encouraged the administration recognized that gasoline and diesel fuel are basic necessities that can help save lives in emergencies, AFPM Pres. Charles T. Drevna said on May 2.

“Since the decision, however, was made with no input from the industry, we question whether due consideration was given to how the gasoline reserve will be filled, managed, and dispersed,” he continued.

“Moving forward, we ask that [DOE] work with the industry as it implements this plan to address market and logistical issues to ensure that the gasoline reserve does not result in unintended or counterproductive consequences,” Drevna said.

Contact Nick Snow at nicks@pennwell.com.

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