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Nov. 22, 2006
Copyright © Las Vegas Review-Journal


Nevada needs pipelines for fuel, but builders are lacking

By BENJAMIN SPILLMAN
REVIEW-JOURNAL

New pipelines from California and Arizona could stabilize Southern Nevada's precariously thin fuel supplies within a few years, but only if someone is willing to build them.

That was the message the leader of a group charged with studying the region's fuel supply told Clark County Commissioners on Tuesday.

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Randall Walker of the Clark County Blue Ribbon Fuel Commission urged local officials to pressure private pipeline firms to make good on pledges to increase the amount of fuel coming to Southern Nevada so the region can avoid a crisis.

"I think public scrutiny is what got us where we are at," said Walker, whose remarks were the culmination of 15 months of work by the fuel commission. "I think it should continue."

The government can mobilize public pressure for more fuel supplies, but it can't force companies to build the pipelines. Economic incentive is their motivation.

Walker suggested county commissioners seek periodic updates from the private sector to track pipeline progress, or lack thereof.

The Clark County Commission didn't take a vote. But Commissioner Rory Reid complimented the fuel group on its work.

"I think this is a path to where we need to go and there is momentum," Reid said.

The fuel group was created in October 2005 to consider ways to increase and diversify fuel supplies for Southern Nevada beyond the existing two pipelines between Colton, Calif., and Las Vegas.

"Had there been a plan in place 18 months ago ... there would have been no reason for us to get involved," Walker said.

The existing pipelines carry nearly every drop of gasoline, diesel and jet fuel that comes into Southern Nevada -- about 140,000 barrels per day at full capacity.

The pipelines run by Kinder Morgan Energy Partners are vulnerable to shutdown in the event of an earthquake, mudslide, flood, fire or blackout. In addition, the amount of fuel demand in the region could soon outpace the supply the two pipelines can carry, Walker said.

The fuel group started meeting after community leaders in Southern Nevada found out, by chance, that Kinder Morgan had no plans to upgrade the pipelines until demand outpaced supply by 30 percent.

That, Walker said, could have a dramatic effect on fuel prices for airlines, truckers and commuters.

"One way to ration demand, of course, is price," he said.

And a fuel shortfall would also make the region even more vulnerable to pipeline interruptions, especially if more than one occurs in a short time frame.

"You get less and less excess capacity in the pipeline, it takes longer and longer to rebuild your inventory," he said.

Southern Nevada already uses as many as 100,000 barrels of gasoline on peak summer days, Walker said. And the population in the Las Vegas Valley, now about 1.7 million, is expected to grow as high as 3 million by 2020.

The existing diesel and gasoline pipeline now imports as much as 108,000 barrels per day and there are short-term plans to add 11,000 barrels of capacity, Walker said.

And since the Blue Ribbon fuel group started meeting, Kinder Morgan has announced a $388 million plan to expand the California-to-Nevada Calnev pipeline system to accommodate as much as 200,000 barrels per day. It could be in operation by 2010.

Also, new companies have stepped in with proposals to build pipelines that would connect Las Vegas to Phoenix, then to Texas and fuel supplies in the Gulf Coast region.

Michael Owens, president of Pacific Texas Corp. of Tempe, Ariz., said a pipeline from Phoenix could save Nevadans $72 million a year compared to the California supply.

Owens said it is cheaper to import fuel from the Gulf Coast because there is more supply. The pipelines from Phoenix would supply cheaper fuel for nine months out of the year and increase overall supply capacity 50 to 60 percent above the existing level, Owens said.

A Phoenix-to-Las Vegas pipeline could be in operation by 2009 if permitting goes smoothly, Owens said.

"In Phoenix and Las Vegas the need is here and the need is coming," Owens said. "Two of the fastest-growing cities in the country and both have a serious fuel concern."



PIPE DREAMS

Recommendations from the Blue Ribbon Commission to improve the reliability of Southern Nevada's fuel supply

SHORT TERM (0-2 YEARS): Increase storage capacity at McCarran International Airport and around the Las Vegas Valley, upgrade existing pipelines in California (completed) and the southwest Las Vegas Valley.

INTERMEDIATE (2-5 YEARS): Reduce demand by encouraging conservation and alternative fuel use, supplement supply via rail delivery.

LONG TERM (5 YEARS AND BEYOND): Build pipelines from new sources, reduce demand through conservation and alternative fuel use.

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