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Chris Jones

Panel Members Question Their Ability to Resolve Fuel Problem

24 July 2006

SOUTHERN NEVADA -- Trains and trucks aren't the solution to Southern Nevada's worsening fuel supply.

Beyond that consensus, members of a Clark County fuel commission spent much of their July meeting struggling to determine how much pull they possess to resolve one of the community's most pressing problems.

Southern Nevada's two fuel pipelines are on pace to reach capacity within the next 12 months. Without new delivery methods, fuel shortages will soon follow as local jet and motor vehicle traffic grows an estimated 3 percent to 5 percent each year.

To curtail the coming crisis, the Clark County Commission in September formed a public/private task force to study ways to bring more gasoline and jet fuel to the valley. Since October, that 12-member group of government and business leaders has met monthly to outline the problem, and weigh potential solutions.

The fuel commission's findings are scheduled to reach the Clark County Commission sometime in November. But before that can occur, participants on Friday said they need a better understanding of their powers and limitations.

Regardless of what the fuel commission decides, whether a new fuel strategy occurs will ultimately be decided by the businesses who manufacture, ship and consume fuel products.

"I don't know how we can get into the middle of a business decision," said Rose McKinney-James, an MGM Mirage board member and president of Las Vegas-based Energy Works Consulting.

While conceding that businesses will have the final say, Clark County Aviation Director Randall Walker said government agencies can help achieve the commission's recommendations. State and federal leaders could help resolve right-of-way issues for pipeline construction, for example, or offer tax incentives to businesses with favorable plans for boosting local fuel inventory.

Government could also speed the development process by licensing corridors for new pipelines before a company files to build, shaving months if not years off of the normal permitting time, said Roberto Denis, Sierra Pacific Resources' senior vice president of energy supply.

For now, there's no shortage of businesses seeking to address -- and likely profit from -- Southern Nevada's fuel demand.

In recent months, four companies have shared plans for new pipelines. Each seemed to vie for the commission's endorsement, said moderator Lewis Michaelson, though Walker and other members said the fuel commission's best course may be to recommend two options to county leaders.

Competitive concerns may render that step pointless, however.

"I think once the first one starts building, the rest are done until the demand is there" again, Walker said of the competing pipeline proposals.

No decision has been made on which pipelines best suit local needs, and commissioners still have mixed opinions.

Houston-based Kinder Morgan Energy Partners now supplies most of Southern Nevada's fuel through a pair of pipelines running from Colton, Calif. It's proposing one of two options, either of which would increase capacity by 41 percent.

Some commissioners favor new pipelines from California because time-consuming right-of-way issues would be minimized by building near an existing route. But Kinder Morgan was criticized by others who believe its plan would increase dependence on fuel obtained from a single source.

Pete Konesky, an energy specialist from the Nevada State Office of Energy, deemed the addition of a second fuel source "mandatory."

Konesky favored Dallas-based Holly Energy Partners' plan to build a pipeline between Las Vegas and Salt Lake City. John Haycock, president and CEO of Haycock Petroleum Co., said that plan has merit, particularly if coal-based alternative fuels ever catch on with consumers. Utah and neighboring Wyoming are rich in coal.

But Haycock and Walker also said Holly's plan to tap into Canadian oil reserves suffers because it depends on several steps that have yet to occur, most notably the need for additional refineries in the Rocky Mountain region.

WesPac Pipelines of Newport Beach, Calif., hopes to build a 16-inch pipeline to Las Vegas through Yuma, Ariz. In addition to reaching sites in California and the Gulf Coast, this route would eventually be connected to one of two deep-water ports in Mexico where foreign crude could be off-loaded to support an Arizona refinery.

Commissioners spoke favorably of WesPac's plan, but Walker questioned whether Phoenix-based Pacific & Texas Pipeline & Transportation Co. was capable of building its proposed pipeline project through Arizona.

Trucks and trains were discussed in detail at prior monthly meetings, but commissioners on Friday said those options are too expensive when compared with pipelines.