Reconsidering the Laurel Pipeline flow

Reconsidering the Laurel Pipeline flow

One would think that the demise of the Philadelphia Energy Solutions gasoline refinery would hit the reset button for regulators who twice have put the kibosh on bringing cheaper Midwest product to Western Pennsylvania.

The Pennsylvania Public Utility Commission (PUC) rejected Buckeye Partners’ request to reverse the flow of its Laurel Pipeline between Pittsburgh and Altoona from east to west to west to east. The PUC acceded to the objections of a coalition of gasoline retailers, Sheetz and Giant Eagle among them.

Perversely, they claimed the move that would give consumers a likely lower-priced choice would limit choice. But, as previously opined herein, one has to wonder if the PUC rejection was a matter of using regulation to prop up the long-struggling and heavily taxpayer-subsidized Philly refinery.

In a punt (called an end-around by opponents), Buckeye Partners later sought permission from the Federal Energy Regulatory Commission (FERC) to make its Altoona-to-Pittsburgh pipeline leg bi-directional, meaning it could alternate the flow to take advantage of market conditions.

But FERC rejected the request in June, saying Buckeye had not shown that the move would be “just, reasonable and non-discriminatory.”

Now, the Tribune-Review reports, Buckeye Partners has petitioned FERC for a reconsideration, calling its rejection “arbitrary and capricious.” There’s even an intimation that FERC and the PUC are operating in cahoots.

But the FERC rejection, mind you, appears to have been predicated, at least in part, on the availability of product flow from the now-closed and not-to-be reopened Philly refinery.

Adding another layer of complexity to this matter is the question of which regulator(s) – the state PUC, FERC or both – has/have final purview of the pipeline flow. That’s because intrastate and interstate commerce is involved.

At the base of this dispute is the classic battle among free markets, government regulators (rank interventionists?) and, dare it be said, government engaging in crony capitalism – goring one business to the benefit of another, favored business.

Of course, in such a scenario, consumers typically pay the price – a higher gasoline price, in this case.

But in the least, sound public policy demands that FERC reconsider allowing Buckeye Partners to implement bi-directional service on the Laurel Pipeline between Altoona and Pittsburgh. Not only has the supply chain from a major East Coast refinery dried up, Allegheny County no longer is required to use reformulated summer gasoline.

And sound public policy also demands some kind of formal review to try to determine if the state PUC, and even FERC, was/were acting on behalf of consumers or on behalf of a gasoline retailers attempting to use government to protect their market share.

After all, there are larger and critically important economic and moral principles at stake here.

As libertarian activist Larken Rose once framed the macro issue:

“Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.

“Steal a fish from one guy and give it to another–and keep doing that on a daily basis–and you’ll (upset) the first guy … but you’ll make the second guy lazy and dependent on you.

“Then you can tell the second guy that the first guy is greedy for wanting to keep the fish he caught. Then the second guy will cheer for you to steal more fish.

“Then you can prohibit anyone from fishing without getting permission from you. Then you can expand the racket, stealing fish from more people and buying the loyalty of others.

“Then you can get the recipients of the stolen fish to act as your hired thugs. Then you can … well, you know the rest.”

That is, free markets cannot work without fundamental fairness in what should be the paucity of regulations overseeing them.

Again, in the least, and coupling that fundamental fairness with changing market conditions, FERC and the PUC have an obligation to reconsider the Laurel Pipeline question.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (