New pipeline to Vegas may impact Utah gas prices
Energy • As fuel leaves Utah, the balancein supply and demand could change.
Published: January 20, 2012 06:55PM
Updated: January 20, 2012 11:49PM
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HollyFrontier Corp., the operator of a 31,000 barrel-per-day crude oil refinery in Woods Cross, said it expects to start sending gasoline and diesel fuel to the Las Vegas area over its newly completed UNEV pipeline by the end of this month.

What remains to be seen, though, is whether HollyFrontier will be sending so much refined product to southern Nevada that it will tighten fuel supplies in northern Utah and drive up the price of gasoline and diesel fuel along the Wasatch Front.

Neale Hickerson, a spokesman for the Dallas-based company, said the first shipment of product from the Salt Lake City area to the Las Vegas market represents the end of a four-year effort to get the 400-mile, 12-inch pipeline up and running.

“When we first announced our intentions to build the pipeline in 2007, we thought we only had a year or so worth of permitting work ahead of us,” he said, noting that it took longer than expected to get regulatory approval.

Hickerson said HollyFrontier has been supplying the Las Vegas market and other nearby states with product from Woods Cross for years. “We’ve been transporting product to Las Vegas via tanker truck. The UNEV pipeline will reduce our transportation cost by 30 percent to 40 percent.”

But John Hill, state director of the Utah Petroleum Marketers and Retailers Association, said he is worried gasoline supplies will be going down in northern Utah and prices up as HollyFrontier fills its pipeline with product.

“Anytime there is even a slight price differential between Las Vegas and here they will be sending a lot of product down there to take advantage of it,” Hill said. “And gasoline prices in Las Vegas typically are higher than we pay here.”

AAA Utah was reporting Friday that the average cost of unleaded regular gasoline in the Salt Lake City/Ogden area was $2.91 a gallon. In Las Vegas, the average cost was $3.42.

“They will be able to make money sending product (over the UNEV pipeline) to Nevada, even if the spread between here and there is only a nickle a gallon,” Hill said.

Hickerson, though, argues rather than tightening the supply in Utah, the new pipeline will lead to increased production from Salt Lake City-area refiners as they expand to take advantage of increased access to the markets in southern Utah and Las Vegas. And he pointed out that both Tesoro and HollyFrontier have announced major expansions of their refineries in Utah.

“Conceivably you’ll also be seeing more product flowing into and through the Salt Lake area from refineries outside the state,” Hickerson said. “And you could also see the refineries [in Utah] running at higher capacity year-round” instead of slowing production because of the typical drop off in demand in Utah during the winter months.

Hickerson said federal regulators prevent the company from disclosing the names of its customers who are using the UNEV pipeline and how much product they will be sending through.

steve@sltrib.comTwitter: @oberbeckbiz