Colonial Pipeline Update

NATSO remains in close contact with the Environmental Protection Agency, U.S. Department of Transportation, regulators and lawmakers regarding the status of fuel supplies and any potential shortages as a result of the cybersecurity attack on the Colonial Pipeline. NATSO will continue to update its members as information becomes available. 

Updated May 18: NATSO has spent much of the past 10 days working in close coordination with officials at the Environmental Protection Agency and Department of Transportation, as well as the White House and FERC, to trigger any and all policy levers available to fuel marketers and retailers to minimize the supply disruptions caused by the Colonial Pipeline shutdown.  This included successful efforts to urge EPA to waive RFG and RVP requirements, and U.S. DOT to waive driver Hours of Service requirements and provide certain truck weight flexibilities for fuel haulers.  

Recent reports indicate that the Pipeline has started to accept nomination changes from shippers for its entire pipeline system, a key step allowing shippers to schedule deliveries to resupply the most depleted markets. ("Nominations" are essentially shippers' requests for space to ship products to a destination from an original location.)

Updated May 17:  The U.S. fuel crisis is subsiding as the Colonial Pipeline resumed normal fuel deliveries to the markets it serves after a cyberattack forced the company to shut down its pipeline network for several days. However, Reuters reported that more than 13,400 gas stations in the east and south were still out of fuel as of May 16, according to fuel tracking app GasBuddy.

On May 14, Georgia extended its Declaration of Emergency until midnight on May 22. South Carolina issued an Executive Order directing the South Carolina Department of Transportation and Department of Public Safety to waive enforcement of federal and state regulatings related to permitting, length, width, weight, load and hours of service for commercial vehicles responding to emergency conditions in South Carolina or providing direct assistance to North Carolina or Georgia. 

Updated May 13: The Colonial Pipeline restarted on May 12 following its six-day shutdown from a cyberattack. The company initiated the restart at approximately 5 p.m. but said that it may take several days for operations to return to normal. "Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period," the company said in a statement. "Colonial will move as much gasoline, diesel, and jet fuel as is safely possible and will continue to do so until markets return to normal." 

Following that statement, federal agencies and states continued to issue waivers. 

The Department of Homeland Security will approve a temporary and targeted Jones Act Waiver in response to eastern seaboard oil supply constraints. Last night, FMCSA also issued another regional waiver.

DHS Press Release: Statement by Secretary Mayorkas on the Approval of a Jones Act Waiver in Response to Eastern Seaboard Oil Supply Constraints

FMCSA: AMENDED REGIONAL EMERGENCY DECLARATION UNDER 49 CFR § 390.23 No. 2021-002 (ALABAMA, ARKANSAS, CONNECTICUT, DISTRICT OF COLUMBIA, DELAWARE, FLORIDA, GEORGIA, KENTUCKY, LOUISIANA, MARYLAND, MISSISSIPPI, NEW JERSEY, NEW YORK, NORTH CAROLINA, PENNSYLVANIA, SOUTH CAROLINA, TENNESSEE, TEXAS, VIRGINIA, AND WEST VIRGINIA). The waiver is effective on May 12 and expires on June 8 or until the end of the emergency. 

IRS:  The Internal Revenue Service said it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway in the States of Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia. This relief is retroactive to May 7, 2021, and will remain in effect through May 21, 2021.

This penalty relief is available to any person that sells or uses dyed diesel fuel for highway use.  In the case of the operator of the vehicle in which the dyed diesel fuel is used, the relief is available only if the operator or the person selling such fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use.

The IRS will not impose penalties for failure to make semimonthly deposits of this tax. IRS Publication 510, Excise Taxes, has information on the proper method for reporting and paying the tax. The IRS said it would approve additional relief as needed. 

States: Maryland, Florida (Emergency Road Use Permit, Colonial Pipeline Emergency Order 051121 and FDOT First Emergency Order) and Virginia each issued new waivers late May 12 to help facilitate the transport of fuel and fuel deliveries. Kentucky’s Secretary of Transportation also waived hours-of-service for drivers transporting fuel to affected states and the requirement to stop at weigh stations. 

Update May 12: The White House and DOT announced that previous declarations of “major disaster” issued by the President within the past 120 days allow States covered by those declarations to use Interstate highways in their State to transport overweight loads of gasoline and other fuels. Each state must continue to follow its own procedures for issuance of special permits authorizing the loads, but the added flexibility announced today lawfully permits these trucks to run on the Interstate Highway System and other Federal highways. This flexibility is in addition to preexisting authority for states to issue special permits allowing the trucks to run on State highways.

The previous Presidential declarations created this authority for up to 120 days. Given the declarations’ varied dates of issuance, that period will expire at different points for the affected states between now and early September. The first State whose 120-day period will expire is Maryland, on June 4. The last State is Virginia, on September 7.

The 10 states covered are Alabama, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Tennessee and Virginia. All these States are already covered under the separate Emergency Declaration that the Federal Motor Carrier Safety Administration issued on May 9, which grants truck drivers making emergency fuel deliveries in areas affected by the pipeline disruption relief from the Federal hours of service limits and certain other safety regulations.

Energy Secretary Jennifer Granholm said that the Southeast could expect a “crunch” that would take several days to alleviate. She said Colonial Pipeline officials had told her that a decision on a “full restart” could come as soon as the evening of May 12. “We have gasoline,” she said during a White House briefing. “We just have to get it to the right places. And that’s why I think the next couple of days will be challenging.”

The states of Florida and North Carolina marked the latest to declare a Declaration of Emergency that allows higher weight limits for tanker trucks. Georgia previously issued an HOS waiver and also is waiving weight requirements for transporting fuel if drivers have an oversized permit. Georgia also suspended the collection of motor fuel and diesel fuel taxes during the effective dates of the State of Emergency for the Petroleum Shortage, May 10-15. The suspension of taxes applies only to the Georgia motor fuel excise tax and does not apply to any local sales or use taxes (including prepaid local tax). New York also issued an Hours-of-Service waiver as did the state of Virginia. Delaware on May 12 granted regulatory relief from weight requirements for the purpose of transporting gas, diesel, jet fuel and refined petroleum products.

Update May 11: On May 11, 2021, the Environmental Protection Agency (EPA) issued a waiver of the requirements for low volatility conventional gasoline and Reformulated Gasoline (RFG) in Alabama, Delaware, District of Columbia, Georgia, Specific Counties of Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, and Virginia. The waiver begins May 11, 2021, and ends May 31, 2021. Second Colonial Pipeline Fuel Waiver Concerning Conventional and Reformulated Gasoline (PDF)

White House: The Biden Administration also issued what it called an “All of Government” effort to address the colonial pipeline incident.  President Biden is receiving regular briefings on the incident and has directed agencies across the Federal Government to bring their resources to help alleviate shortages where they are occurring. 

Department of Transportation: The U.S. Department of Transportation said May 11 that the Administration is continually assessing the impact of the ongoing Colonial Pipeline incident on fuel supplies for the East Coast and is monitoring reported shortages in parts of the Southeast. This ongoing effort includes evaluating resources the federal government can mobilize to mitigate potential impacts.

As part of this process, the U.S.DOT said it has started the work needed to enable consideration of a temporary and targeted waiver of the Jones Act. Waiving the Jones Act could allow foreign tankers to transport fuel to fill any supply gaps. A number of existing, Jones Act-compliant ships are already used to transport gasoline from refineries in Texas and Louisiana to Florida, according to Bloomberg. 

USDOT’s Maritime Administration (MARAD) initiated a survey of Jones Act-qualified vessels to begin the process of evaluating what assets are available in the Jones Act fleet to carry petroleum products within the Gulf, and from the Gulf up the Eastern Seaboard. This step is being taken to determine whether there is sufficient capacity on Jones Act-qualified vessels to carry the product and to determine if a waiver is warranted. Responses have been requested today.

Colonial is reportedly pledging to restore deliveries of fuel to the Eastern U.S. by the end of the week.

EPA Issues Emergency Fuel Waiver

In response to the recent ransomware attack on the Colonial Pipeline, U.S. Environmental Protection Agency (EPA) Administrator Michael Regan issued an emergency fuel waiver to help alleviate fuel shortages in states whose supply of reformulated gasoline has been impacted by the pipeline shutdown. EPA has waived the federal Reid vapor pressure requirements for fuel sold in Reformulated Gasoline areas of District of Columbia, Maryland, Pennsylvania, and Virginia to facilitate the supply of gasoline. This waiver will continue through May 18, 2021.

The Clean Air Act allows EPA Administrator Michael Regan, in consultation with the Department of Energy, to waive certain fuel requirements to address shortages. As a result of the Colonial Pipeline shutdown, Administrator Regan determined that extreme and unusual fuel supply circumstances exist and has granted a temporary waiver to help ensure that an adequate supply of gasoline is available in the affected areas until normal supply to the region can be restored. 

[EPA May 2021 Fuel Waiver in Response to Colonial Pipeline Shutdown]

UPDATE: Georgia has issued an HOS waiver and also is waiving weight requirements for transporting fuel if drivers have an oversized permit.

UPDATE: Virginia has issued an HOS waiver.

FMCSA Issues Emergency HOS Waiver for Drivers Hauling Fuel

The Federal Motor Carrier Safety Administration (FMCSA) on May 9 issued a regional emergency declaration to waive the hours-of-service (HOS) requirements for drivers hauling fuel. The waiver, effective until June 8, was issued in response to the cyberattack on the Colonial Pipeline, which has disrupted the fuel supply on the East Coast. The waiver applies to Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. NATSO had previously urged FMCSA to expand the HOS waiver in place due to COVID-19 to include the transportation of fuel because of concerns about the truck driver shortage. NATSO recently met with the agency to discuss those concerns.

UPDATE: FMCSA amended its waiver on May 11 to include West Virginia.

Analyst Expectations:

Wells Fargo analyst Roger Read said if the pipeline is restarted by May 12 any significant impacts could be kept at bay. If the line remains closed for six to 10 days, however, refiners may need to reduce output to keep supply and demand in balance. Crude oil inventories will grow and prices will fall in the Gulf Coast. Prices in the East Coast, however, will move higher.  A shutdown of greater than 10 days will lead to “significant shortages in the interior Southeast of the U.S.”, according to the analyst.

Patrick De Haan, head of petroleum analysis at GasBuddy, said there hasn’t been much information on when the pipeline could come back online.