Hutchinson, Arkansas’ congressional delegation applaud $200 million Magellan pipeline project

Gov. Asa Hutchinson, Lt. Gov. Tim Griffin and three members of the state’s congressional delegation all gathered together on Wednesday at a North Little Rock petroleum storage facility off the Arkansas River to praise the completion of a $200 million, Fort Smith-to-Little Rock pipeline development that will bring refined gasoline products into state’s largest transportation hub.

Although Magellan Midstream Partners 200-mile, 12-inch diameter pipeline has been in production since the Fourth of July weekend, the Tulsa-based pipeline giant and the governor officially christened the opening of much-anticipated pipeline project that will deliver up to 75,000 barrels per day of gasoline, diesel fuel and jet fuel into Central Arkansas.

“This is an exciting day for us (and) we are really working hard to create more economic growth and we are having success,” Hutchinson told the crowd of mostly Magellan employees, fuel partners and customers. “All of this sustained economic growth creates a demand for more new energy. Everything ties together.”

According to Magellan officials, the new pipeline will able to transport processed at Gulf Coast and Midwest refineries into the state across the Arkansas River Valley east to Little Rock. The Tulsa master limited partnership will also provide a new fuel source for aviation and trucking interests who lost their major supply of jet and diesel fuel after Houston-based Enterprise Products Partners announced plans in May 2013 to cease providing refined product by pipeline to Little Rock and Jonesboro.

Magellan CEO Michael Mears, who appeared on the stage with Hutchinson, Lt. Gov. Tim and Republican U.S. Sens. John Boozman and Tom Cotton, said the central Arkansas fuel market has not had access in the past to Midwest refined fuel from states such as Oklahoma, Kansas and other refineries farther West that produce cheaper petroleum products during the winter months.

Mears said the successful completion of the pipeline project, which took two years of planning and another two years to construct and upgrade the pipeline infrastructure between Fort Smith and Little Rock, means cheaper refined petroleum products can now be delivered into Central Arkansas more safely and reliably.

“Most people don’t think about how gasoline gets to their local retail stations, but pipelines are the safest, most efficient, lowest-cost and the most reliable transportation method for deliver those fuels.”

Originally, Mears said, Magellan has planned to build 250 miles of new pipeline between Fort Smith and Little Rock, but decided against those plans because of the added costs and potential issues associated with right-of-way access. In the spring of 2014, Magellan negotiated an agreement with Spectra to use a portion of an existing third-party natural gas pipeline that would connect to Magellan’s Fort Smith terminal and a newly-constructed pipeline that will flow into the Little Rock market.

In the end, Magellan had to only construct approximately 12 miles of new pipeline to connect the Fort Smith petroleum distribution terminal to the existing pipeline, and then add 38 miles of new pipeline to connect the existing pipeline (near Searcy) to distribution facilities in North Little Rock.

Mears also played up pipeline project’s many benefits to the state of Arkansas, including more than 1,000 construction jobs to build the pipeline, increased tax bounty and potentially lower fuel prices in the Little Rock market. He said the project will also reduce the volume of truck traffic that delivers gasoline and other fuel products from out-of-state refineries to local fuel distributors and gas stations. Beginning in 2017, Mears said Magellan’s pipeline will also be able to deliver jet fuel to central Arkansas, supplying both the Bill and Hillary Clinton National Airport and the Little Rock Air Force Base.

At the end of the press event, Mears and Hutchinson also addressed some safety and environmental concerns about the project from Arkansas landowners route and communities along the route of the pipeline.

In response to a question on what steps the Tulsa-based pipeline giant had taken to make sure there was not another incident like the ExxonMobil oil spill in Mayflower in 2013, Mears said the company has a safety program in place to monitor the system and made upgrades to the older section of the pipeline it is leasing from Spectra.

“Obviously safety is of paramount importance to the pipeline industry,” said the Magellan chief executive. “The new construction on this pipeline met all the all the necessary standards, but we take it too extra levels.”

Mears said the company has fully tested the pipeline through several methods, including water pressurization and periodic and real-time monitoring for fissures, corrosions and other defects at the Magellan’s Tulsa control center.

“But, we also have a coordinated emergency response program just in case something would happen,” he said. “We pride ourselves on running a safe system and we exceed all regulations.”

Hutchinson said he was pleased Magellan was able to use 150-miles of existing pipeline infrastructure that already existed, which resulted in easier right-of-way acquisition and less impact on the surrounding communities.

“Mistakes can always happen, but you want to make sure that good safety requirements are in place,” he said. “Overall, whether you look at trucking or whether you look at railroads, pipelines have historically been a very secure, safe and environmentally-friendly means of transportation and delivery of the fuel supply.”

And while not going as far as to promise cheaper fuel prices, the Arkansas governor said bringing more refined petroleum products into a growing market that consumes more than 125,000-barrels per day of gasoline per day will create more competition and lessen possible fuel shortages in the future.

“This is an example of a good project. The need has really been extraordinary and as I indicated, I don’t think there are not many in Central Arkansas who have not had some experience with not having fuel at their gas station – and boy, that’s not good.”

Separately, following the press event, Mears told Talk Business & Politics that Magellan and Enterprise Products plan to extend the Fort Smith-to-Little Rock pipeline another 140 miles to the Memphis market over the next 18 months.

That project in partnership will connect the Little Rock section of the pipeline to an existing refined products system that Enterprise closed three years ago, giving Magellan access to East Arkansas, the Memphis transportation hub and other more lucrative fuel markets east of the Mississippi River.