Directs parties to sort out issues in settlement conference
Refiners, diesel shippers protested relief singling out jet fuel
The US Federal Energy Regulatory Commission denied Aug. 4 a request by Nevada's Reno-Tahoe International Airport and several major airlines to order a pipeline to allocate more space for jet fuel to meet a shortage caused by air travel spiking above pre-pandemic levels.
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Register NowFERC called the supply disruption a commercial issue, not an emergency. While it denied a request for emergency action, the commission encouraged the parties to "work collaboratively to resolve these issues."
The commission directed a settlement judge to be appointed to facilitate talks among the parties, holding a conference within seven days and issuing a report within 14 days.
Like many oil product pipelines, Kinder Morgan's SFPP North Line allocates space to shippers on a rolling 12-month history. Last year's plunge in air travel demand meant jet fuel allocations on the system shrank while diesel and gasoline allocations took larger shares, as those products were affected less severely by pandemic lockdowns and recovered more quickly.
The Reno airport, along with six major airlines, Federal Express, World Fuel Services, and two airline trade groups asked FERC in a July 26 filing for emergency relief to address the supply disruptions (OR21-10). They said action was needed to prevent jet fuel shortages, canceled flights, and disruptions to critical passenger and cargo transportation through August.
Flight demand out of Reno has returned to pre-pandemic levels, the airlines said.
They asked FERC to order SFPP to immediately give jet fuel priority in transportation and provide an additional 541 b/d of jet fuel capacity above the already scheduled shipments until Sept. 6, which is Labor Day and marks the end of summer travel demand.
Airlines have turned to trucking jet fuel from Sacramento and the Bay Area of California, but that alternative is limited by capacity and a shortage of truck drivers. They have also resorted to "tankering," or loading planes bound for Reno with extra fuel to avoid having to refuel at RNO, the petition said.
SFPP responded to the filing that it recognizes the strain the pandemic has placed on all stakeholders dependent on its pipeline system but that it must abide by its set pro-rationing policy. It said it would not be able to deviate from its policy and schedule absent an order from FERC.
Refiners protest
SFPP said it could add 5,000 barrels of jet fuel to each of the remaining three August cycles if directed to do so by FERC. It said it is working with any shippers willing to convert their gasoline or diesel line time to jet fuel to further address potential shortages in late August.
West Coast refiners Chevron Products, Marathon Petroleum, and Phillips 66 urged FERC to "carefully consider whether the alleged emergency is unique to the jet fuel consumer community and whether the requested emergency relief would exacerbate problems with other commodities markets more than it would solve with jet fuel alone."
They said all North Line shippers have had their nominations cut because of pipeline integrity concerns and that the whole market has been impacted as demand recovers from the pandemic.
Pilot Travel Centers and Pro Petroleum, which ship diesel on the North Line, similarly urged FERC to decline the request, as it would be singling out a single shipper class for special treatment when all users of the pipeline have been hit by unprecedented demand destruction and uncertain recoveries.
The Association of Oil Pipe Lines asked the commission to "proceed cautiously" in considering the airlines' request.
"Pipeline shippers are sophisticated enterprises that take risks and make commercial decisions based on their assessment of economic and market considerations, and therefore, should not be relieved of those decisions unless a clear and convincing showing of emergency need is demonstrated," the oil pipeline trade group said.
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US FERC denies airlines' request for emergency order on Nevada jet fuel shortage - S&P Global
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