Farms Eye Colonial Supply Disruptions

LINCOLN, Neb. (DTN) -- Northwest Indiana farmer Ann Parks is betting on a combination of delayed planting from cooler weather and a new supply of fuel that arrived Monday to get through planting season despite growing supply concerns tied to the closure of the Colonial Pipeline last Friday.

"We make attempts to secure tanker deliveries in any significant event that might impact planting or fieldwork," Parks said.

"Locally, we're seeing deliveries made yesterday but no commitments forward. Which begs the question if fuel will be rerouted from the Midwest to the East Coast at planting time. This is a very live situation and should be closely watched by farmers and consumers alike."

The pipeline closed last Friday following a cyberattack with ransomware.

The Federal Bureau of Investigation determined the attack was from a criminal network known as DarkSide. The Colonial Pipeline supplies about 45% of the fuel consumed along the East Coast and carries 2.5 million barrels per day originating in Houston and ending in Linden, New Jersey.

Late Monday, Colonial Pipeline Company officials said they were manually operating a portion of the pipeline from North Carolina to Maryland with existing inventory. Colonial said it expects to have most of the entire system restored by Friday.

The Parks farm received a tanker of fuel on Monday, Ann Parks said, with the hope it will help get through a critical time.

"It should last us through critical plant -- weather is cold, affecting germination, so better to hold a few days," she said.

"Hopefully, both conditions improve. The greater risk are East Coast dairy farmers or any farmer on the Eastern Seaboard -- lot of hog producers out there. Those are the folks I'm worried about."

North Carolina Pork Council CEO Roy Lee Lindsey told DTN that, so far, hog producers in his state have experienced no disruptions in normal farm operations.

"North Carolina pig farmers are just now recognizing the impacts from the pipeline closure," Lindsey said.

"As of this (Tuesday) afternoon, I have not heard from any of our farmers about adverse impacts. However, we are constantly moving animals, feed and supplies on our farms, so any increase in fuel costs -- and certainly any reductions in availability of fuel -- will have a negative impact on our farmers."

Jennifer Gwyn, a spokeswoman for Virginia-based Southern States Cooperative, said in an email to DTN that the cooperative, which serves 21 states, is monitoring the gas supply shortages currently being experienced in the South and East and its impact on the co-op's farmers and its business.

"Reports on the projected timeline to restore the pipeline to service indicate the shortages and price pressures will be short-lived," she said.

Jeff Ingalls, senior vice president of energy for Central Valley Ag, told DTN the current fuel shortage affecting the East Coast down into the Carolinas should have minimal effect on Midwest farmers' supply of diesel fuel as planting season continues in the Western Corn Belt.

The Nebraska-based cooperative sources most of its fuel from the NuStar Energy pipeline, a pipeline in the Southern Plains that was unaffected by the recent supply issues.

As for fuel prices, Ingalls said the gas and diesel basis levels might see some effect from the current situation, but he does not believe large price movements will occur.

"This should not have as large of an effect on us as when Texas fuel refineries were shut down in February because of freezing temperatures," he said.

"We should see minimal effect in our market area."

Scott Wilson, manager of customer risk management with GROWMARK, said the Illinois-based agricultural cooperative sources their fuel from several different pipelines across the country.

The company purchased Virginia-based South States Cooperative last fall. That cooperative sources most of its fuel needs from the affected Colonial Pipeline, he said.

Because GROWMARK has several different sources for fuel supply, Wilson said the regional fuel shortage would not be experienced by its farmer customers. The freezing temperatures closing Texas fuel refineries this winter probably had more of an effect on their supply than this situation, he said.

If the Colonial Pipeline is back up and running by then end of this week, Wilson said there should be little fuel price movement. The crude oil futures market saw a slight price increase this week but nothing significant, he said.

Wilson said other factors will probably have a larger effect on the fuel market than this week's situation. The COVID pandemic continues to drive the fuel market but issues such as a driver shortage, inflationary issues and diesel supply and demand could have a larger effect on the ag fuel market longer term, he said.

"We have already seen fuel-supply issues in Illinois not because of this current situation with the Colonial Pipeline but because of a driver shortage of getting the fuel out to retail stations," Wilson said. "This type of issue has more effect then what we are seeing right now."

EPA GRANTS FUEL WAIVER

The EPA on Tuesday granted waivers to allow E15 to be made available at fuel terminals in states on the Eastern Seaboard in response to the attack on the Colonial Pipeline. EPA expanded the waiver on Tuesday night to more areas of the District of Columbia and Maryland, Pennsylvania, Virginia, Alabama, Delaware, Georgia, specific counties in Florida, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee.

The agency's actions came on the same day two major ethanol interest groups asked EPA Administrator Michael Regan to take actions to make E15 more widely available.

EPA waived the federal Reid vapor pressure requirements for fuel sold in reformulated gasoline areas of the District of Columbia, Maryland, Pennsylvania and Virginia to relieve any gasoline supply issue through May 18. Reformulated gasoline is sold in areas with ozone pollution concerns.

The temporary closure of the 5,500-mile pipeline has created a fuel pinch on the East Coast.

"As required by law, EPA and the Department of Energy evaluated the situation and determined that granting a short-term waiver was consistent with the public interest," EPA said in a news release. "EPA and DOE are continuing to actively monitor the fuel supply situation resulting from the Colonial Pipeline shutdown and considering additional measures to alleviate the impact."

NO MIDWEST SHORTAGES

DTN Product Manager Brian Milne said that, so far, there are not supply shortages across the Corn Belt as spring planting continues, but suppliers are being cautious.

"There are shortages in the Southeast reaching north to the mid-Atlantic states, Tennessee too," he said.

"Haven't heard of shortages in Illinois, but we do know suppliers are limiting gasoline and diesel sales to their branded customers. So, if Casey's was shopping the rack for lower prices to pull product, they could find themselves with no supply at some terminals."

At the moment, Milne said, motorists on the East Coast have been stepping up their gasoline purchases.

"We're seeing panic buying and are aware of retail outlets that have run out of fuel in North Carolina, South Carolina, Alabama, Virginia, Georgia and Florida," he said.

"We're not sure of the extent of the station outages; could be a small handful. But the longer the outage drags on, the more you will see stations running out of fuel.

"So, outages at retail stations are real, but so is panic buying," Milne said. "And the panic buying could be driving these outages. There's enough supply. It's getting that supply to where it's needed."

E15 PUSH

On Tuesday, Growth Energy and the Renewable Fuels Association took the opportunity to ask EPA Administrator Regan to expand E15's availability.

"E15 is now sold at nearly 2,400 locations across the country including several hundred locations throughout the Southeast --- where the impact of the Colonial is most felt," Growth Energy CEO Emily Skor said in a letter to Regan (https://growthenergy.org/…).

"By immediately removing remaining regulatory hurdles and providing greater access to E15, you can help keep fuel prices in check for American consumers and ease concerns about fuel supply."

Skor also asked Regan to finalize a proposed rule to broaden the availability of existing infrastructure for use with E15 and related labeling concerns.

"We also urge you to remove unnecessary misfuelling requirements including restrictions on the use of E15 in shared fueling hoses with 10% blended fuel and related fuel sampling requirements," she wrote. "Finally, we strongly encourage the government to strengthen its use of higher ethanol blends such as E85 in its current flex-fuel vehicle fleet."

RFA President and CEO Geoff Cooper told Regan in a letter (https://files.constantcontact.com/…) some 180,000 barrels per day of ethanol production capacity is currently idle and could be "quickly activated or reoriented" to help alleviate impending fuel shortages on the East Coast.

"The Colonial Pipeline outage underscores a larger need for greater diversity and flexibility in our transportation fuels sector," Cooper wrote.

"Overreliance on petroleum has left our transportation fuels infrastructure vulnerable to disruption, with American consumers bearing the brunt of resultant price spikes and fuel shortages. By comparison, the fuel ethanol industry's infrastructure is unconcentrated, dispersed, and uses a variety of efficient delivery channels."

Also on Tuesday, the Biden administration said it was considering a temporary waiver of the Jones Act, which requires goods shipped between United States ports to be transported on U.S.-owned and operated vessels (https://www.transportation.gov/…).

DTN Staff Reporter Russ Quinn contributed to this story.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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