Potential Refined Petroleum Product Reserve Analysis

1. Click to edit Master title style Potential Refined Petroleum Product Reserve Analysis Office of Petroleum Reserves US Department of Energy

2. United States Domestic Vulnerabilities

3. Hurricane Sandy • Hurricane Sandy demonstrated extreme vulnerability of East Coast. • Category 1 Hurricane. • Struck East Coast on 10/30/12 • Hurricane Sandy Impacts: • Major Loss of Electrical Power • 2 Refineries Damaged • Over 40 NYH Terminals closed due to electric power losses and water damages • NY area gas stations without power and fuel for 5-30 days. • NEHHOR was called on to provide ULSD supplies to DLA-Energy and address Connecticut fuel shortages.

4. Hurricane SandyGasoline Price Impacts Differential in NY Harbor vs. Gulf Coast Gasoline Prices Hurricane Sandy Landfall 10/30/12 NUSTAR Restarts Deliveries 11/10/12 Colonial P/L Resumed Deliveries 11/12/12

5. Hurricane Sandy ULSD Price Impacts Differential in NY Harbor vs. Gulf Coast ULSD Prices Hurricane Sandy Landfall 10/30/12 NEHHOR Release of 450Bbls 11/03/12 NEHHOR Release of 20,000 Bbls 11/24/12 NEHHOR Release of 100,000 Bbls 11/12/12

6. East Coast Vulnerabilities to Gulf Coast Hurricanes E. Coast has increased its Vulnerability to Gulf Coast Hurricanes: • East Coast Refinery closures have increased East Coast dependence on Gulf Coast products. • Gulf Coast Hurricanes will impact product supplies via Colonial Pipeline to the East Coast • Gulf Coast Hurricanes will similarly impact product supplies via U.S. flagged Tankers and ATBs to the East Coast. East Coast Refinery Closures & Changes Sunoco Westville, NJ (145,000 B/D) – closed 2/10 Sunoco Marcus Hook, NJ (178,000 B/D) – closed 12/11 Western Yorktown, VA (66,300 B/D – closed 12/11 Phillips 66 Trainer, PA (185,000 B/D) – sold to Delta 4/12 Sunoco Philadelphia, PA (335,000 B/D) – sold to Carlyle Group (Philadelphia Energy Solutions) 7/12 6

7. Potential Options to Consider • Government-Owned Reserve • Government owned stocks • Could be in commercial storage similar to NEHHOR • Mandated Industry Storage • Statutory requirement on Industry to hold extra stocks in storage (no legislative authority) • Government Option (Tickets) • Government contract with Industry to hold extra stocks in storage

8. RPPR Regions & Size Regions: Previous experience showed that the Northeast and Southeast regions are most impacted by East Coast and Gulf Coast hurricanes. 5-10 days of supplies: Previous analysis of a Southeast RPPR (2011) concluded that an RPPR providing 5-days worth of emergency products would provide 70% of the benefits of an RPPR 5-times larger & that an RPPR providing 10 days of supplies would replace the fuel supplies lost during the most serious hurricane scenarios. Size: To provide 5-10 days of supplies to the Southeast & Northeast regions, 2 RPPRs would be needed each with 10 to 20 million barrels of product.

9. RPPR – Configuration Criteria Southeast RPPR Located on the Colonial & Plantation pipelines Direct interconnections to Colonial & Plantation terminals for product rotation and distribution Note: “Downstream” fuel supply infrastructure would not likely suffer major disruptions. Northeast RPPR Located in areas of major product demand High ground Hardened with emergency power Direct interconnections to regional terminals for product rotation and distribution Where necessary, provide direct truck rack and marine distribution

10. Southeast Reserve Overview • Reserve Size (for 5-10 days of supply) • 10-20 mmb • ~ 60% Gasoline • ~ 40% Distillate • Collocated with Colonial/Plantation pipelines • Adds new terminal capacity through lease or Federal build (little excess capacity available in Southeast region). • Direct connections to local distribution. • Downstream fuel distribution infrastructure not disrupted.

11. Possible Southeast Reserve Locations • Reserve Locations • Greensboro, NC • Belton , SC • Chattanooga, TN • Bremen/Atlanta, GA • Collins, MS (underground storage for 20 mmb reserve)

12. Northeast Reserve Overview • Reserve Size (for 5-10 days of supply) • 10-20 mmb • ~ 60% Gasoline • ~ 40% Distillate • Utilizes existing terminals that may be available above the likely storm surge. • Adds new terminal capacity through lease or Federal build. • Provides truck racks to bypass disrupted downstream fuel-distribution infrastructure. • Emergency power sufficient to operate terminals.

13. Possible Northeast Reserve Locations • Reserve Locations • Southern New England • NY Harbor • Philadelphia • Chesapeake (MD/VA) • Boston (If NEHHOR is assimilated into RPPR)