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Houston Chronicle: Ethanol switch cited for outages at some Houston-area gas stations

Ethanol switch cited for outages at some Houston-area gas stations

By PURVA PATELCopyright 2006 Houston Chronicle

Scores of gas stations in Houston were out of at least one grade of gasoline today as the conversion to ethanol-blended gasoline presented logistical problems, fuel suppliers and station owners said.

Experts say the problem is not a general lack of supply, but bottlenecks in delivery as companies convert to a new gasoline formula. This could mean scattered outages through the weekend.

“It’s been a total nightmare,” said Mohammed Ali Dhanani, who distributes gasoline to retailers and owns dozens of gas stations in the Houston area. He noted that 60 percent of his locations were out of gasoline by late today. “Many terminals where we get our gas have been down because of the ethanol transition.” Valero reported problems at 80 Houston-area stations today, while Shell had about nine stations with outages.

The problem comes as gasoline stations in Houston, and in other cities with serious air pollution problems, are switching to a new fuel formula containing ethanol, rather than the additive MTBE, because of changes in federal laws.

The empty pumps are showing up as retail stations drain and clean their tanks to prepare for the fuel switch. There have also been delays at fuel terminals where truckers pick up gasoline, as they are retrofitted to handle ethanol. A shortage of drivers and trucks to deliver fuel has also compounded the problem, said Valero spokeswoman Mary Rose Brown.

Some 80 Valero stations in the Houston area were out of at least one grade today, she said.

“Unfortunately, there is little that can be done to alleviate the backlog because there are not a lot of extra trucks and drivers available to deliver product to market because the need to truck ethanol from the railroads to the terminals has put a lot of stress on the trucking industry,” Brown said. “We are offering bonuses to drivers to lift additional loads for us and that has helped a bit.”

Ethanol-based reformulated gasoline can’t be distributed via pipelines to terminals because water in pipelines can easily contaminate the fuel. Instead, the gasoline and ethanol must be mixed at the terminal from which truckers then deliver the fuel to service stations.

Similar outages have occurred in Dallas, where problems lasted several weeks, Brown said.

Some supply outages have also been reported in the East Coast, after which Maryland and Pennsylvania requested waivers from the U.S. Environmental Protection Agency to allow them to sell a cheaper, lower grade of gasoline.

An EPA spokeswoman said the agency is reviewing the requests, and is encouraged that fuel supplies are improving in those states. The agency has not received such a request from Texas, she said, though the agency is monitoring fuel supplies nationwide.

In February federal energy officials warned that Houston motorists could face price spikes and fuel shortages beginning this spring because of potential supply disruptions during this switchover.

The oil industry is rapidly moving away from using MTBE because of the potential cost of the litigation from lawsuits blaming it for costly groundwater pollution problems.

About 60 of 400 Shell-branded gas stations in the Houston area had outage problems this week though that number dropped to nine today, said Stan Mays, a spokesperson for Motiva, which is owned by Royal Dutch Shell and Saudi Refining.

Neither Valero nor Motiva would say what specific stations experienced outages. Spokespersons for both companies said they expect the conversion to be completed this weekend with stations operating as normal by Monday.

Kinder Morgan plans to convert its large fuel terminal in Pasadena this weekend, said spokesman Rick Rainey. The energy transportation, storage, and distribution company informed customers well in advance, he said, which likely prompted longer lines this week.

“We’ve seen lifting in the Pasadena terminal increase by 34 percent in recent days which indicates shippers and truckers are making arrangements to stock up to make sure there’s plenty of fuel during the conversion this weekend,” he said. “The truck traffic has increased substantially.”

He added that some other companies have already completed converting their terminals, which should help mitigate any fuel supply concerns.

Worries of outages due to this switch have also helped push gasoline prices up in recent weeks.

The average price of regular self-serve in Texas rose six cents a gallon this week to $2.89, or 76.5 cents higher than last year’s average, according to AAA Texas’ Weekend Gas Watch.

But Rose Rougeau, spokeswoman for the auto club in Houston, said drivers should see some price relief as the transition is completed.

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