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Chris Jones

Crude Reality Looms: Where Will Las Vegas Get its Fuel?

24 April 2006

Fuel consumption in Southern Nevada is on pace to next year exceed the capacity of the community's two California-fed pipelines.

And unfortunately for local residents and businesses, the Golden State could soon export a more troublesome pump-related pinch that would squeeze Nevada's economic growth unless a solution is found.

A Clark County-backed panel of government and business leaders learned Friday that California refineries, which supply almost all of Las Vegas' petroleum fuel needs, now produce about 45 million gallons of fuel per day.

That's roughly equivalent to the amount needed to fuel California's planes, cars and other vehicles, said Joe Sparano, president of the Western States Petroleum Association.

To meet the demand of neighboring states such as Nevada, Oregon and Arizona, Sparano said, California refineries import 3.5 million gallons of fuel per day, primarily by ship.

With demand rising both in and out of state -- as well as pending output reductions at its in-state refineries -- state leaders worry that California's refineries by 2020 will run 35 percent shy of the crude oil needed to meet customer demand, Sparano said.

Ports in the Los Angeles basin are already crowded, so where those refineries will get their additional oil is a key concern for the Golden State and its fuel-dependent neighbors.

"The picture is not rosy that California will increase as an incremental supplier," Sparano said.

Over the past few months, much of the talk surrounding a solution for Las Vegas' fuel needs has involved ways to increase imports from Southern California.

But Friday's comments heightened local leaders' existing interest in alternative fuel sources.

Fortunately for Nevada, California isn't the only place where petroleum fuels are produced.

Mitchell Truman, vice president of North Las Vegas-based Pan Western Transportation Specialists, on Friday gave a detailed report on his company's desire to bring more fuel here via rail connection to refineries in the Gulf Coast.

Pan Western hopes to expand its existing rail spur near Craig Road and Interstate 15 so it can handle regularly scheduled fuel shipments.

He said rail is less expensive than trucking, and offers greater flexibility than a pipeline.

"Las Vegas really lacks an alternative fuel supply because its major sources are all in California," Truman said. "Las Vegas, as we grow, is at the mercy of an economy larger than ours."

Pan Western is building a depot to accept large-scale rail shipments and hopes to add tanks that can hold up to 60,000 gallons of fuel on site.

The company is also meeting with Kinder Morgan Energy Partners, which operates existing pipelines from California, to discuss a 4.2-mile pipeline that would connect the two companies' North Las Vegas depots, he added.

Five dedicated fuel trains per week would supply 200,000 more barrels of fuel every seven days, Truman said. A rail-based fuel chain could potentially operate as soon as 2007 or 2008, he added.

Another solution could come from Utah. On Thursday, Dallas-based Holly Energy Partners said it is considering building a pipeline that would carry petroleum products to Southern Nevada by way of Salt Lake City.

The proposed 12-inch-thick pipeline would have an initial daily capacity of 50,000 barrels. It would be supplied by multiple Rocky Mountain refineries that typically process lower-cost Canadian crude oil before shipping fuel products elsewhere by way of Salt Lake City.

Holly Energy said in a written statement that it will collect and measure shippers' interest in the pipeline through May 31 before deciding whether to proceed.

Houston-based Kinder Morgan brings in most of Clark County's gasoline using a 14-inch pipeline between Colton, Calif., and a fuel terminal near Nellis Air Force Base. Tanker trucks fill up at the depot and deliver products to gasoline stations around town.

A second 8-inch pipeline brings jet fuel from Colton to McCarran International Airport, which can also draw directly from Kinder Morgan's North Las Vegas terminal using another 8-inch pipeline running beneath the valley.

Both the 14-inch and 8-inch Colton pipelines are nearing their ultimate capacities of approximately 140,000 barrels per day.

Kinder Morgan said earlier this month it will spend $15 million to increase the Colton pipelines' daily capacity to 156,000 barrels. That's in addition to a $10 million upgrade announced earlier this year.

The company is also looking into building a $300 million to $400 million parallel pipeline it claims could boost the system's capacity to about 220,000 barrels per day by 2010.

Regardless of whether California refineries can supply the proposed Calnev pipeline improvements, Clark County Aviation Director Randall Walker suggested Kinder Morgan's time frame could be overly optimistic.

Permitting alone could make it difficult to build such a large pipeline so quickly, he said. Walker said local leaders must improve the fuel system's reliability, not just its capacity.

Relying solely on Kinder Morgan's system would leave the valley dangerously vulnerable to interruptions along that line.

Trucks could present another option for carrying more fuel here.

The Blue Ribbon Commission to Improve the Reliability of Southern Nevada's Fuel Supply will meet monthly before presenting its recommendations to the Clark County Commission in November.