Correction: Magellan Midstream Partners LP wants to build a new petroleum pipeline connecting Fort Smith and Little Rock. An incorrect description of cities the pipeline would connect was reported in this article.
A new pipeline that will connect Fort Smith to Little Rock and Memphis will create a more competitive petroleum market for consumers in central Arkansas, industry analysts and government officials said Tuesday.
The pipeline will also reduce the number of trucks carrying petroleum products between Fort Smith and Memphis, making it safer to transport the liquids, which include diesel, gasoline and jet fuel, they said.
"It's absolutely good for central and most of Arkansas," said Randy Zook, president and chief executive officer of the Arkansas State Chamber of Commerce. "Pipeline is the most economical and safest way to transport those liquids."
Magellan Midstream Partners LP announced plans Monday to build the pipeline, connecting Little Rock to its terminal in Forth Smith.
The company plans to spend about $150 million on 50 miles of new pipeline and will lease an existing 160-mile pipeline for a portion for the route from Ozark Gas Transmission LLC, a subsidiary of Spectra Energy Partners LP.
The 12-inch line will have the capacity to move up to 75,000 barrels per day of gasoline, diesel fuel or jet fuel. The marketplace demand in central Arkansas is about 90,000 barrels per day, said company spokesman Bruce Heine.
"We are very excited about this project, which will provide the Little Rock market with more refined products and supply options," Magellan Chief Executive Officer Mike Mears said during the company's first-quarter conference call Tuesday. "Through this extension, shippers will for the first time have access to supplies from refineries in the midcontinent" U.S.
The pipeline will carry fuel from refineries in Oklahoma and Kansas, Heine said.
"This project will ensure there is a sufficient supply of diesel, gasoline and jet fuel in Central Arkansas to the benefit of the local economy and, importantly, will do so by utilizing already-existing infrastructure," Attorney General Dustin McDaniel said Tuesday in a statement.
"The project will mean fewer trucks on Interstate 40 between Fort Smith and Memphis, reducing traffic congestion and vehicle emissions," he said. "It will open up an additional segment of the petroleum market to Central Arkansas distributors, which will hopefully lead to some price stability at the gas pump for consumers."
The Arkansas Economic Development Commission is still in talks with Magellan to determine whether the company will receive incentives from the state, spokesman Scott Hardin said in an email. He said the commission is still determining what Magellan's ongoing employment levels in Arkansas will be before deciding on incentives.
Magellan first said it was interested in building a pipeline to serve central Arkansas last year after Enterprise Products Partners LP stopped shipping diesel and jet fuel to El Dorado, North Little Rock and Jonesboro on one of its pipelines.
Enterprise was shipping diesel and jet fuel along a 14-inch pipeline from Beaumont, Texas, to El Dorado where the pipeline increases to 16 inches and continues to Ohio. The company ended shipments to Arkansas on the line and is now shipping ethane from the Northeast to the Gulf Coast.
Enterprise has a parallel, 20-inch line that it continues to use for the transport of diesel fuel through the state because of an agreement between Enterprise and Murphy USA Inc. The company halted interstate delivery on the line last year but resumed the diesel shipments this month after concerns were raised by customers, said Rick Rainey, spokesman for Enterprise.
The Little Rock Air Force Base in Jacksonville had to use 10 tank trucks a day to transport aviation fuel from Shreveport because of Enterprise's decision.
Magellan is "exploring a direct connection" to the Air Force base, Heine said.
The pipeline planned by Magellan will make it safer for fuel to be shipped into the state and make the area less susceptible to supply interruptions by having an additional source, said James Williams, an energy analyst and owner of WTRG Economics near Russellville.
"If you can avoid sending it by truck or rail, it's safer," he said. "Any extra pipeline is good for Arkansas. Even if it does nothing more than keep the lid on the prices."
Business on 05/07/2014