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Oil And Gas Industry Watches Two Major Gasoline, Jet Fuel Pipelines in Wake of Hurricane Michael

Oil And Gas Industry Watches Two Major Gasoline, Jet Fuel Pipelines in Wake of Hurricane Michael


The oil and gas industry is keeping a close eye on two major pipelines that transport gasoline, diesel and jet fuel from the Gulf coast up to the mid-Atlantic in the wake of Hurricane Michael for fear of lingering effects of strong winds and flooding.

The Colonial and Plantation pipelines together carry about 2 million barrels of refined products daily from the Gulf coast to the mid-Atlantic, serving states along the way.

Hurricane Michael made landfall Wednesday in the Florida Panhandle sparing many refineries and other energy infrastructure, but industry sources say that a disruption in those two pipeline operations, including disruptions caused by widespread power outages, heavy rain and flooding could mean a shortage of gasoline, diesel and jet fuel.

The Edison Electric Institute, which represents investor-owned electric companies, said 1.5 million customers throughout the southeast are without power.

Widespread power outages can constrain energy supplies because pipelines cannot operate without power. The Energy Information Administration says when gasoline storage terminals lose power, supply can become constrained because pipelines and barges have no way to load or discharge product.

The good news is most of Florida’s gasoline is delivered via ship so if ports are not blocked, the state should have energy supply, said Suzanne Lemieux, manager in midstream industry operations group for the American Petroleum Institute and a leader on the oil and gas trade group’s hurricane team.

Notwithstanding the two pipelines and gasoline stations potentially damaged, energy companies with operations throughout the Gulf of Mexico breathed a little easier this week after Hurricane Michael spared what Hurricane Harvey didn’t when it slammed into the Texas gulf coast last year and took out major oil and gas operations across the Gulf coast.

Harvey shut down oil and gas production and refinery operations for days, which took a toll—a 21% drop in production and a 12% drop in refining capacity in a region that represents more than 25% of U.S. refining capacity.

Not this time, Lemieux said.

Energy industry officials said Harvey was the harbinger that a nimbler and streamlined hurricane response was on its way.

“Communication, clear and frequent communication, is at the core of this,” Lemieux said.

Lemieux has been on the oil and gas hurricane response since Hurricane Gustav hit the Gulf coast in 2005. “How companies respond now versus then, is vastly different,” she said.

For one, API works with more than two dozen energy trade organizations to develop a coordinated communications plan so there is no confusion about what the oil and gas industry response is to an emergency like Hurricane Michael. And energy companies now use API as communications headquarters that can help connect companies with resources and government officials.

Energy companies prepare year-round with regular emergency exercises. They use the response playbook for an oil spill.

Lemieux said, “An oil spill isn’t that different from a hurricane in the way you respond. The actions are different, but the structure is the same.”

Exxon Mobil spokeswoman, Julie King, said the company take an “aggressive” approach to preparedness. The company conducts drills, tabletop exercises and implements site specific training.

“We have a multi-step hurricane response plan in place at all of our coastal facilities,” King said.

“Several days before expected landfall, we initiate preemptive inspections and preparations, as well as shutdowns and evacuations as appropriate.”

King echoed Lemieux’s focus on communication. “Relationships with local officials and first responders in the areas where we operate is key to coordinating effectively in emergency situations,” she said.

Typically, 48 hours before a hurricane makes landfall, oil platforms and other downstream facilities shut in.

This week, as Hurricane Michael approached, the Bureau of Safety and Environmental Enforcement ordered the evacuation of 75 production platforms; there are 687 in the Gulf of Mexico. Eight dynamically positioned oil rigs were moved off the storm’s path; there are 17 in the Gulf. Dynamically positioned rigs maintain their position by using thrusters and propellers.

BSEE reported nearly 40% of current oil production and 28% of natural gas production in the Gulf was shut-in to prepare for the hurricane.

“ExxonMobil’s Gulf Coast refineries operated as normal during the storm,” King said. “Our response to Hurricane Michael was also governed by our established framework called the Operations Integrity Management System (OIMS), which includes elements that address items such as emergency preparedness, risk assessment and facility design.”

Hurricane Michael made landfall in the far eastern portion of the Gulf at Panama City, Florida and bypassed a large swath of onshore and offshore facilities.

The onslaught of hurricanes, seemingly one after another, does affect recovery. In the case of Harvey, Lemieux said it was all about fatigue. First Harvey slammed onto the doorstep of the energy hub of the country—Houston—and then Irma hit.

“People were trying to recover their own lives and houses and then having to come into work created some challenges,” Lemieux said.

After Hurricane Harvey hit the energy sector in its backyard, things changed.

“The speed with which companies are able to recover has certainly improved across the industry and that’s indicative of investment,” Lemieux said.

API could not quantify the financial impact these frequent hurricanes are having on member companies’ bottom line. But there is a financial impact and companies bury that number as “risk mitigation.”

Lemieux said it’s not always easy or clear whether an energy company is upgrading a facility to address impending storms, or whether they’re discussing improvements to address the contentious issue of climate change.

But there’s no doubt there’s a financial impact from hurricanes, especially the most recent ones.

Hurricane Harvey was the most expensive storm in terms of recovery in the history of this country. Harvey cost $127.5 billion in recovery according to the National Centers for Environmental Information. Hurricane Irma, which hit right after Harvey, cost more than $90 billion.

In this aerial photo, holding tanks for Colonial Pipeline Company sit in floodwaters caused Tropical Storm Harvey in Port Arthur, Texas, Friday, Sept. 1, 2017. (AP Photo/LM Otero)

Damage is still being assessed on Hurricane Florence, which slammed into the Carolina coastline last month.

While climate scientists blame industrialization for extreme weather and more frequent and devastating hurricanes, and environmentalists blame the fossil fuel industry, the oil and gas industry says increased oil and gas production has kept us resilient during these terrible storms.

“Industry as a whole has become more efficient over the last few years and because of that America has become the [leader] of oil and gas,” Lemieux said.

Because of that, the system is more resilient, she said.

“Even if you’re impacted [by Hurricane Michael] in Florida, companies are able to move supply in after the storm, as they did after Hurricane Irma. The geographic diversity of where we’re producing and refining is also part of that resilient system.”

The United States has 140 refineries around the country, in places not usually associated with energy production, like Chicago and Philadelphia and Washington State.

“That really makes the system resilient. Our domestic production makes us very resilient,” Lemieux said.

 



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