Deal struck for gasoline pipeline

Holly Corp. and Holly Energy Partners, two affiliated Dallas companies, announced Monday that they signed a memorandum of understanding with Sinclair Transportation Co. to build a second pipeline to carry gasoline and diesel fuel to Las Vegas.

The Las Vegas area now relies almost entirely only on two Kinder Morgan pipelines that run from a terminal near San Bernardino, Calif., and one of those carries jet fuel.

With a new booster at the California terminal, Southern Nevada is getting 157,000 barrels per day of gasoline, diesel and jet fuel. A barrel holds 42 gallons.

Holly and Sinclair propose to build the $300 million, 400-mile UNEV Pipeline from Salt Lake City. It will carry 62,000 barrels per day to terminals at North Las Vegas and Cedar City, Utah.

If the Bureau of Land Management approves a permit by next April, as expected, the 12-inch pipeline could be completed by the end of 2008, said Neale Hickerson, vice president of Holly Energy Partners.

Holly has obtained commitments from shippers who want more than the 20 percent to 30 percent of capacity of the pipeline needed to proceed with the project, Hickerson said.

The pipeline could be expanded to carry 120,000 barrels per day.

The UNEV Pipeline could later be used to carry jet fuel, but Holly expects initially to use the pipeline mostly to ship gasoline and diesel, Hickerson said.

The additional source of motor fuel could create competition for Kinder Morgan, which operates the pipelines now carrying nearly all of Las Vegas’ fuel supplies, and result in lower retail prices, said Peter Krueger, state executive of the Nevada Petroleum Marketers & Convenience Store Association.

“This is going to give Kinder Morgan some competition, which is a good thing,” Krueger said.

The pipeline could reduce some of the demand pressure on California refineries, reducing the tendency of gasoline prices to jump when a refinery is temporarily shut down, said Suzanne Garfield-Jones, a spokeswoman for the California Energy Commission.

“More than anything, what we look for is stable prices so we don’t get the price spikes of the last few years,” Garfield-Jones said.

Hickerson said the pipeline would also give service stations another source of gasoline and diesel.

Affiliate Holly Corp. operates a refinery in the Salt Lake City area and that refinery has made adaptations so it can process so-called “sour” crude oil coming from oil fields in the Rocky Mountains area of the United States and in Canada, as well as more expensive “sweet” crude oil. Sour crude has a high sulfur content.

Hickerson expects other refiners to do the same.

Nevada officials welcomed the news, in part because it will give the Las Vegas area another source of motor fuel when accidents cause temporary outages of Kinder Morgan’s pipeline.

“It’s great news. Las Vegas is in dire need of another straw for petroleum products, not only for the citizens of Las Vegas but the tourism industry and the whole economy of Clark County,” said Rebecca Wagner, a former energy adviser to Gov. Kenny Guinn. Wagner, a member of the Public Utilities Commission, served on the Clark County’s Blue Ribbon Commission which heard pipeline proposals from Holly and other companies last year.

“A reliable fuel supply is essential for a healthy tourism industry and the residents of Southern Nevada,” Rossi Ralenkotter, president of the Las Vegas Convention & Visitors Authority, said in a statement.

Ralenkotter also was a member of the commission.

Kathryn Landreth, Nevada state director of Nature Conservancy and commission member, said she was concerned that wildlife habitat might be disturbed along the pipeline route.

“You are going to disrupt habitat,” she said, “and that may damage some of our species.”