Magellan, Valero announce another major Gulf Coast pipeline to ease regional gas demand

Tulsa-based Magellan Midstream Partners, a major Gulf Coast refined productions transporter that delivers gasoline and other motor fuels into Arkansas’ market, announced plans Wednesday (Sept. 6) to build another 135-mile, interstate pipeline that will bring gasoline, diesel fuel and jet fuel from the Houston areas into the central and north Texas and Midcontinent markets, including the Little Rock area.

Magellan expects to spend approximately $375 million for its share of the new pipeline project, with the expanded capacity available in mid-2019, subject to receipt of necessary permits and regulatory approvals. Magellan’s partner in the joint venture is Valero Corp., which will contribute $380 million for the project and separately build a terminal in Hearne, Texas, and a 70-mile, 12-inch pipeline connecting the two terminals.

“Demand for refined petroleum products remains strong along Magellan’s extensive pipeline system,” said CEO Michael Mears. “Magellan is pleased to meet the industry’s need for pipeline capacity serving the Dallas market and other important demand centers along our refined products pipeline system with an attractive investment supported by long-term commitments from well-known, strong creditworthy customers.”

Just a week ago, the Tulsa-based pipeline partnership suspended all inbound and outbound refined products and crude oil transportation services on its pipeline systems in the Houston area. This time last year, Gov. Asa Hutchinson helped Magellan dedicate a $200 million, Fort Smith-to-Little Rock pipeline project which is now bringing refined gasoline products and jet fuel into state’s largest transportation hub from the Gulf Coast.

For its part, Valero is already involved in another major pipeline project that will impact Arkansas consumers. The nation’s largest refiner received the green light a year ago for its controversial $900 million Diamond Pipeline project that will eventually deliver U.S. benchmark West Texas Intermediate crude from its Plains facility in Cushing, Okla., across Arkansas to Valero’s 195,000-barrel per day refinery in Memphis.

Construction on that joint venture project between Valero and Houston-based pipeline giant Plains All American quietly began in the fourth quarter and is expected to be completed in late 2017.

Still, none of those interstate pipeline projects are expected to stem the continued rise in gasoline prices from now through the rest of 2017, energy analysts say. On Sunday, Magellan spokesman Bruce Heine told Talk Business & Politics that the company’s refined products pipeline system originating in Houston are back to operating normally, but transporting gasoline and diesel from Houston refineries upstream to north and west Texas markets by truck and pipeline and eventually into Arkansas will take time.

“Until those markets can be adequately resupplied, we will continue to deliver refined products from our reversed pipeline segment that provides transportation services from Oklahoma refineries into the Dallas/Ft. Worth and West Texas markets,” Heine said a company update following Hurricane Harvey flooding last week.