New York (Platts)--17Dec2012/513 pm EST/2213 GMT

US petroleum marketers have formed a post-Hurricane Sandy task force to study changes that need to be made before the next catastrophic East Coast event occurs, according to Dan Gilligan, president of the Petroleum Marketers Association of America.

One big focus of discussion will be on streamlining communications between marketers and state and federal agencies. That should help speed approval of fuel specification and other waivers ahead of time when a storm takes aim at a vulnerable fuel supply area.

"We could have had communications all set up" ahead of Sandy, said Gilligan in a recent interview, noting that weather forecasts were spot-on with expectations of where damage would occur. "Waivers could have been issued before the storm hit. That would have had the industry prepared to do whatever they can to mitigate the damage," he said.

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Sandy was a particularly tough storm for the industry to deal with, he said. "The density of the population is something no one had ever dealt with before," said Gilligan, adding that, on top of that, the major port of New York Harbor shut, as did two major pipelines bringing product into the region -- Colonial and Buckeye.

While Hurricane Katrina's devastation was enormous, with Sandy, "to have so many people in the dense areas of New York and New Jersey subject to this, it was just a major strain on every aspect of our industry," said Gilligan. Bringing fuel in from outside the region turned out to be "a much more difficult circumstance than what we run into in the South," he said, citing needs to register with each state and deal with various tax schemes. "Marketers had trucks full of fuel ready to deliver into New Jersey, but they could not come into the state because they were considered an importer of fuel."

"The markets in the urban East Coast states are far more regulated" than markets in the South, he said. "That's something we need to work on going forward, is anticipating all of those intrastate things that are going to have to be done better next time and handled more quickly."

It took "several days" to get some of the taxes waived and states did not coordinate their decisions, said Gilligan. For example, New Jersey waived some of its tax requirements a few days before New York did. "That created concern because marketers in that region do business in both states," he said. The marketer task force hopes to share its findings with state and federal regulators before the next storm hits.

"They have to address the entire sequence, from refiner to pipeline to trucking to gas station. They've got to address the bottlenecks from top to bottom if they want to be better prepared the next time around," said Gilligan.

He said some New York and New Jersey legislators are seeking to force marketers to install backup power generators. "Yes, having electric supply at a gas station was important in many cases; however ... there wasn't any product really available to get to stations even if they had electricity."

"To throw a $50,000 requirement on a gas station whose bottom line is probably $40,000 a year in net profit...what it would do would actually force some of the smaller stations to close," said Gilligan.

He expects those bills won't become laws, but perhaps a compromise will be reached where tax credits are given to some companies to have hookups for generators installed. While the National Guard had some generators available for use after Sandy hit, they weren't always compatible with the electrical connections at gas stations.

--Beth Evans, beth_evans@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com

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