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Chris Jones

Shortage Of Fuel Looming in Valley

16 August 2005

As increasing numbers of residents and visitors stretch the limits of Southern Nevada's inbound fuel network, leaders are planning to discuss what options might best prevent local cars, trucks and planes from running on fumes.

Clark County Commissioner Rory Reid said Monday that early next month he'll call for the formation of a special committee to address how to avert pending fuel shortages for drivers in the Las Vegas Valley, as well as the many aircraft that form the lifeblood of the local travel industry. Unless action is taken, serious shortages could arise as soon as two years from now.

Potential solutions include building a new $400 million fuel pipeline from Southern California, increasing local fuel storage capacity and adding a so-called "second straw" that would connect Las Vegas to fuel supplies in Arizona, Utah or Northern California.

"We need to do something before it's a crisis," Reid said from his sixth-floor office at the Clark County Government Center.

The Las Vegas Valley gets almost all of its gasoline from a 14-inch pipeline that runs from Colton, Calif., to a fuel terminal that Houston-based Kinder Morgan Energy Partners operates near the main entrance to Nellis Air Force Base. Tanker trucks load up there before delivering various gasoline products to local service stations.

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

Both the 14-inch and 8-inch Cal-Nev pipelines from Colton are nearing their ultimate capacities, Clark County Aviation Director Randall Walker said Monday, approximately 10 days after he discussed local fueling needs with representatives of Kinder Morgan.

The 14-inch line is now pumping 96,000 barrels per day, which is close to its 105,000 barrel daily capacity, Walker said.

In addition, the 8-inch line to McCarran is carrying 26,000 barrels per day; its daily limit is 27,000 barrels. One barrel equates to approximately 42 gallons.

While McCarran has a five- to six-day reserve stored on-site, storage tanks at Kinder Morgan's local depot are usually empty despite having a 3 1/2-day capacity. And demand continues to grow.

McCarran will this year handle between 43 million and 44 million passengers, up from last year's record total of nearly 41.5 million, Walker said. Based on current growth models, he estimates the airport will exceed the 8-inch line's limits by approximately 7 percent just two years from now.

Short-term fixes, including booster pumps and asking planes to sometimes fill up elsewhere, are available, but Reid said they won't address the valley's long-term needs.

Southern Nevada's gasoline retailers have regularly struggled through shortages in recent years.

Sean Higgins, general counsel for the Terrible Herbst Oil Co., on Monday said many of his company's 90 local stations ran dry two weeks ago after a 14-hour interruption to the Colton pipeline. Such problems will only worsen, he added.

"This is not a Terrible Herbst problem; it's the valley's problem," Higgins said. "None of these (recent interruptions) have been catastrophic to date, but what if one was? We're in trouble in this valley."

Gasoline can still be trucked here whenever the Colton pipeline is down, but Higgins said that step typically costs retailers an additional 7 cents to 8 cents per gallon -- costs that are passed on to consumers at the pump.

"And that's if you've got enough trucks to get it here, which you probably don't," Higgins added, dispelling any notion that trucking would offer an attractive long-term solution to local needs. McCarran alone uses close to 1 million gallons of jet fuel a day, Walker said.

"There's no way that you can deliver that much gas any other way than a pipeline," Walker said, adding tanker trucks typically carry about 9,000 gallon loads. Rail-based tankers are also a short-term solution, at best.

Higgins said Terrible Herbst hopes to participate in Reid's proposed committee, which Walker said will probably include gasoline retailers; representatives of the local resort industry and the Las Vegas Convention and Visitors Authority; airlines operating at McCarran; elected officials, including members of Nevada's congressional delegation; as well as Kinder Morgan.

To prevent a bureaucratic bog down, Clark County Manager Thom Reilly hopes the committee will include no more than 10 members.

Reid will raise the issue when the commission meets Sept. 6; he hopes the committee will be formed by the end of next month.

Other fuel-related questions that must be addressed include the viability of a third Cal-Nev pipeline; how much fuel should be kept in reserve locally; and whether Southern Nevada leaders should pursue a new pipeline to the north or east.

Earlier this month, The Arizona Republic newspaper reported Kinder Morgan plans to spend $130 million to upgrade an existing 12-inch pipeline between Phoenix and El Paso, Texas, with a modern 16-inch pipeline.

The company is already at work on a $210 million project to install 16-inch segments from El Paso to Tucson, Ariz., as well as a 12-inch pipeline from Tucson to Phoenix.

Those improvements are expected to boost gasoline supplies in the Phoenix area by more than 40 percent. Looking long-term, the extra pipe space could also form the basis for another Southern Nevada supply line, should an extension from Phoenix to Las Vegas prove feasible.

David Hackett, president of Stillwater Associates, an energy consulting company in Irvine, Calif., on Monday described the valley's existing fuel supply network as a "leftover from when Las Vegas was a little town."

Local leaders must work to improve it, just as they've added new freeways, water supply systems and electrical capacity.

"The place is growing like crazy," Hackett said. "You have to keep up with the demand, and it takes infrastructure to do it."

Hackett also believes adding a pipeline from someplace other than Colton could produce small reductions in Las Vegas gasoline prices, which have recently ranked among the nation's highest.

"Phoenix gets its gas from New Mexico, Texas and California, so from time to time there tends to be something of a price battle between refineries to the east and west," Hackett said.

Still, both Hackett and Higgins concede another pipeline would be just one component of consumer-level fuel costs. Other factors include crude oil prices; the number of service stations operating in a market; taxes; and environmental considerations such as Southern Nevada's wintertime requirement for a 10 percent ethanol blend to lower seasonal air pollution.