Colonial Pipeline transports 45 percent of the East Coast’s fuel supply, carrying refined gasoline, diesel fuel and jet fuel from the Gulf Coast to the New York Harbor. The pipeline services one of the most populated corridors in the country, delivering more than 100 million gallons each day.
This weekend, in response to a ransomware attack, Colonial Pipeline brought those operations to a screeching halt. Today, some of its lines remain inactive, including the line that provides gasoline to communities across the Northeast and Mid-Atlantic. With this shutdown expected to persist for at least the remainder of the week, the Federal Motor Carrier Safety Administration took the rare step of issuing a regional emergency declaration following the incident that aims to lift restrictions on commercial drivers.
The shutdown of the Colonial Pipeline raises obvious questions about our nation’s vulnerability to cyber-attacks, but it also raises questions about our nation’s increasingly vulnerable fuel supply.
Without a regionally diverse and competitive U.S. refining sector, American consumers are just one accident, operational incident or cyberattack away from a significant supply chain disruption, including soaring prices at the pump.
So, when a cyberattack shuts down 5,500 miles of pipeline – bringing hundreds of thousands of barrels of refined gasoline and fuel to a resounding halt and causing gas prices to climb ahead of the peak summer travel season – it is a stark reminder that we need to protect and support the regional diversity of our nation’s refining capacity.
The U.S. East Coast once had 12 regional refineries that met the brunt of the area’s demand. Today, it has four. As a result, the East Coast has lost 1.5 million barrels per day of refining capacity since 2007, with only about 708,000 barrels per day of fuel manufacturing capabilities left. One of the most heavily populated regions in the nation is now reliant on a combination of fuels refined in the Gulf Coast more than 1,000 miles away and delivered through the Colonial Pipeline and foreign imports. And while Colonial Pipeline contributes to nearly half of the fuel consumed on the East Coast, additional refinery closures will necessitate an increase in foreign imports.
Unfortunately, ill-crafted federal regulations threaten to increase the Eastern seaboard’s reliance on fuels refined outside the region and overseas. The skyrocketing cost of compliance credits – Renewable Identification Numbers (RINs) – for the federal Renewable Fuel Standard (RFS) is a major reason the East Coast refineries left continue to be at risk of closure. RINs cost around 14 cents last January. Today, they are $1.89. What had once only added a few cents per gallon to the cost of making our fuel supply now adds nearly $9 per barrel – or more than 21 cents per gallon – to that cost today. America’s independent refiners are now spending more on RINs than on any other operational costs.
East Coast closures, combined with the eight refineries that shuttered or announced closure last year due to the economic havoc associated with COVID19, will make our nation increasingly reliant on foreign refiners for its fuel supply. Such a situation would bring America back into the same addiction to foreign oil and gas that was used to justify creation of the RFS in the first place.
As federal investigators work to uncover the perpetrators behind the Colonial Pipeline attack – and understand the cyber vulnerabilities that made it possible – lawmakers and regulators cannot ignore the underlying factors that make this shutdown so disruptive to Americans up and down the East Coast. We need to address skyrocketing RIN prices to make sure populated communities have sufficient access to refined fuels. Failure to do so will make the costs of the next cyberattack on an American pipeline even more disastrous for workers, consumers and businesses.
