Biden Has Emergency Powers to Counter Fuel Disruption

(Bloomberg) -- A cyberattack on the nation’s biggest fuel pipeline system has threatened to disrupt the supply of gasoline, jet fuel and diesel from Atlanta to New York. President Joe Biden can invoke an array of emergency powers to ensure that supplies keep flowing to big cities and airports along the U.S. East Coast, despite the Colonial Pipeline outage.

The federal government has the power to waive a slew of requirements governing the formulation of gasoline and even a mandate that U.S. ships be used to transport fuel and other cargo between American ports. Previous presidents have turned to such emergency action to keep fuel flowing after hurricanes, pipeline shutdowns and other disasters. Biden on Sunday used one of them: extending the amount of time delivery drivers can spend behind the wheel when transporting fuel.

1. What does the trucker waiver do?

Truckers delivering fuel to 17 states and the District of Colombia impacted by the pipeline shutdown can temporarily drive more hours per day under an emergency exemption issued by the U.S. government. The action was designed “to avoid disruption to supply” to states from Alabama to New York, the Federal Motor Carrier Safety Administration said in an emailed press release. Drivers are normally restricted to a maximum of 11 hours of driving during a 14-hour work day.

2. Have trucking rules been exempted previously?

In March 2020, as the coronavirus pandemic ramped up across the U.S., the Federal Motor Carrier Safety Administration issued an emergency declaration exempting trucking operations from normal work rules. The waiver only applied, though, to “direct assistance in support of emergency relief efforts related to the Covid-19 outbreaks.”

3. Can ships supply fuel while the pipeline is shut?

Some ships can immediately be enlisted to help supply fuel -- but they have to be built and flagged in the U.S., and crewed by American workers, under a 101-year-old law known as the Jones Act that governs the transport of goods between American ports. A number of such Jones Act-compliant ships are already used to transport gasoline from refineries in Louisiana and Texas to Florida, and they could be tapped to ferry fuel to New York. But temporarily lifting Jones Act requirements could allow foreign-flagged tankers to help fill the gap too, by taking fuel on a roughly 6-day journey from the Gulf Coast to New York harbor. The alternative could be the delivery of more cargoes from Europe, with ships taking roughly 10 to 14 days to reach the region.

4. Has the Jones Act been waived before?

After Hurricane Sandy in 2012, the Department of Homeland Security issued a Jones Act waiver permitting foreign-flagged vessels to transport petroleum products to areas along the East Coast. The waiver lasted for almost three weeks.

5. Why not waive it?

For any president, there are major political considerations in any decision involving the Jones Act, which was aimed at boosting the domestic shipbuilding industry and has strong support from organized labor. Biden, who has emphasized “Buy-American” requirements and cultivated union support, may be under pressure to maintain existing U.S. shipping requirements.

6. What about environmental requirements?

The Environmental Protection Agency can issue short-term waivers of reformulated gasoline and gasoline volatility requirements in response to emergency conditions and supply disruptions. Temporarily lifting requirements on gasoline would provide limited help while the Colonial Pipeline is shuttered. But fuel waivers could have a bigger impact after pipeline operations resume, by allowing refiners to produce more, cheaper fuel -- that doesn’t comply with the requirements -- and get that into the market right away.

7. What are those fuel rules?

Federal law limits the volatility of gasoline from June 1 through Sep. 15, and refiners have already shifted toward producing that summertime blend. Separate requirements for cleaner-burning “reformulated gasoline” also could be temporarily lifted, potentially allowing more conventional gasoline to supply the East Coast.

8. How have fuel waivers been used before?

After Colonial Pipeline failures in 2016 prompted southern governors to request the relief, the EPA issued fuel waivers to stem supply disruptions. Volatility requirements were lifted to help consumers around Atlanta and Nashville, Tennessee. Reformulated gasoline requirements also were briefly lifted in 13 states and in Washington, D.C.

9. Does the U.S. have an emergency gasoline stockpile?

Yes. The Energy Department could tap its reserve of 1 million barrels of diesel fuel in the Northeast. There are currently 400,000 barrels located in storage tanks in the Boston area, 300,000 positioned in the New York Harbor area, and 300,000 in Groton, Connecticut. Fuel shortages after Sandy led the agency to dispense 120,000 barrels to emergency workers in the New York and New Jersey area. While unleashing that could help in some areas, it’s “little more than a Band-Aid,” ClearView Energy Partners said in a research note for clients.

10. Will Biden act?

A long-term pipeline outage that causes gasoline prices to spike could prompt emergency intervention. The Biden White House is likely reticent to waive environmental rules governing gasoline and the Jones Act, but “both seem possible if an acute shortage emerges,” said Kevin Book, managing director of ClearView Energy Partners. “It’s hard for elected officials to do nothing when pump prices are rising.” The national average gas price is $2.96, according to AAA’s daily survey, having risen as the peak summer driving season approaches. The $3 mark for regular unleaded is viewed as a psychological hurdle for drivers.

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