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Apr. 9 - Colonial Group says The Palmetto Pipeline is a Bad Deal for Georgia

Savannah Business Journal Staff Report

April 9, 2015 — Colonial Group, the parent company of several local subsidiaries including Colonial Oil, Colonial Terminals and Enmark, announced that over 200 employed workers could be displaced if Georgia allows construction of the proposed Palmetto Pipeline to proceed. At issue are trucking, port-related, and U.S. Merchant Marine jobs that currently deliver fuel to Savannah. Today, approximately 75% percent of Savannah’s fuel needs are trucked into Savannah from existing pipelineterminals in North Augusta and Macon. The remainder is supplied by competitors Colonial Oil and Western Refining through two ocean terminals on the Savannah River.

This news breaks after further review of the Palmetto Pipeline’s proposed tariff published on its website revealed that there will be at east four different volume-related rate structures for shippers on its planned pipeline. Although Kinder Morgan does not publicly disclose its rates for these tiers, this approach is dramatically different from the pipelines currently serving the market. ”Both petroleum pipelines that serve Georgia today have publicly available rates that are equivalent for all shippers regardless of volume,” said Ryan Chandler, Vice President of Business Development at Colonial. “It’s a level playing field, and smaller shippers like Colonial can effectively compete against the likes of giant refineries like Exxon and Marathon Oil. A tiered structure based on volume seems calculated to advantage the big refineries over the independents.”

Another key difference is in the number of competing shippers. According to Chandler, existing pipelines supplying Savannah and Coastal Georgia support more than 100 competing shippers. While Kinder Morgan has refused to publicly identify who it has signed up to ship product through its new pipeline, Chandler offers what he hears in industry circles. “Exxon and Marathon Oil are likely the major players here, which makes sense considering they have the most to gain. They will control the entire supply chain from start to finish.” Chandler explained, “Exxon and Marathon control key refineries at the beginning of the supply chain in Louisiana. They have huge distribution in higher-priced Jacksonville, where it will end. The Palmetto Pipeline gives them control of everything in between.”

Less clear is the Palmetto Pipeline’s impact on local fuel prices. In its application to the Georgia Department of Transportation seeking the State’s power of eminent domain, Kinder Morgan argues the Palmetto Pipeline “could serve to decrease prices.” Chandler urges caution for the public. “If Kinder Morgan wants public power to take private land, Georgians deserve to know the basic details necessary to establish public need. Other pipelines, including those currently serving Georgia, make their tariffs and costs publicly available. Kinder Morgan needs to share its cost and shippers’ names with the public.” Citing confidentiality agreements, Kinder Morgan has offered no specifics on the number of suppliers, their names or the cost these shippers will pay to move gasoline through the pipeline.

In an OpEd published in the Savannah Morning News on March 20th, Ron McClain, President of Kinder Morgan ProductsPipelines suggested Colonial’s opposition to the Palmetto Project was based upon “an obvious fear” of “increased competition in the marketplace.” Chandler dismissed that characterization. “Kinder Morgan’s idea of competition is using government power to stomp on private land owners’ rights in order to create a Southeastern fuel monopoly for big oil refineries. For three generations and more than 90 years, Colonial has earned its way into all the markets we serve by building highly efficient supply chains without Government assistance. We welcome fair, open competition.” Chandler also countered Kinder Morgan’s claim about lower fuel prices. “Notice that they say prices ‘could’ decrease. If two big refineries force out local competition, it’s more likely prices will go up.”

Kinder Morgan cites additional benefits to Georgia of “estimated annual revenue to state and local taxing bodies… of over $14 million.” “Show Georgians the math,” responds Chandler. “Kinder Morgan isn’t using a net number. How much of this revenue is already being collected through the existing supply chain? Kinder is out preaching to every local government body about what their project might add, but they’re totally silent on what it subtracts from the local and state economy in the form of reduced property values, higher fuel prices and lost jobs.”

Chandler said the impact to local jobs was particularly important to Colonial. “We estimate well over 200 Georgia jobs are at risk, and it extends far beyond Colonial and Coastal Georgia. Truckers, port workers, and US merchant mariners are exposed by thispipeline.” He continued, “Kinder Morgan estimates the Palmetto Pipeline will create up to 28 full time jobs, but they’re not talking about the ones that will be lost. Then again, they’re not talking much at all.”

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