USDOT Declares Emergency Over Colonial Pipeline Shutdown
US Declares State Of Emergency To Keep Gasoline Flowing After Colonial Fails To Restart Hacked Pipeline
11 May, 2021
Update 9:00pm ET: The US government declared a state of emergency late on Sunday, lifting limits on the transport of fuels by road in a bid to keep gas supply lines open as fears of shortages spiked after the continued shutdown of the Colonial Pipeline.
“This Declaration addresses the emergency conditions creating a need for immediate transportation of gasoline, diesel, jet fuel, and other refined petroleum products and provides necessary relief,” the Department of Transportation said. White House Press Sec Jen Psaki added that “as the Administration works to mitigate potential disruptions to supply as a result of the Colonial Pipeline incident, @USDOT is taking action today to allow flexibility for truckers in 17 states.”
The move lifted limits on the transport of fuels by road to ease the fallout from the continuing closure of the Colonial pipeline, which carries almost half the fuel consumed on the US East Coast, following a ransomware cyber attack on Friday.
The decision comes as the government scrambles to deal with the fallout from the closure of Colonial, the biggest refined products pipeline in the US, transporting 2.5m barrels of fuel a day from refineries on the Gulf Coast to markets such as Atlanta, Washington and New York (see more below).
If the pipeline is not quickly reopened the impact on prices could become more severe in the coming days, said Patrick De Haan, head of petroleum analysis at data provider GasBuddy. “We’re realizing the gravity of it is maybe worse than what we’d expected,” said De Haan. “There’s still a little breathing room, we’re starting to run low on it. But Monday, Tuesday if there’s no news, you know we’re dealing with something fairly significant.”
* * *
Just in case the US didn’t already have a “transitory hyperinflation” problem, gasoline futures soared more than 4% – and are likely to jump much more – late on Sunday after the Colonial Pipeline announced that while some smaller lateral lines between terminals and delivery points are now operational, its mainlines (Lines 1, 2, 3 and 4) remain offline since late Friday after the company suffered a crippling cyberattack that affected its key IT systems.
Colonial operates Line 1 for gasoline and Line 2 for diesel and jet fuel from Pasadena, Texas, some 15 miles from the nation’s largest refineries, to Greensboro, North Carolina, at a combined 2.5 million barrels a day. They merge at Greensboro to feed a line carrying about 900,000 barrels a day into New York Harbor, and other East Coast pipelines.
Colonial said that it is “in the process of restoring service to other laterals and will bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations.” Full statement below:
Update — Sunday, May 9, 5:10 p.m.
On May 7, Colonial Pipeline Company learned it was the victim of a cybersecurity attack and has since determined that the incident involved ransomware. Quickly after learning of the attack, Colonial proactively took certain systems offline to contain the threat. These actions temporarily halted all pipeline operations and affected some of our IT systems, which we are actively in the process of restoring.
Leading, third-party cybersecurity experts were also immediately engaged after discovering the issue and launched an investigation into the nature and scope of this incident. We have remained in contact with law enforcement and other federal agencies, including the Department of Energy who is leading the Federal Government response.
Maintaining the operational security of our pipeline, in addition to safely bringing our systems back online, remain our highest priorities. Over the past 48 hours, Colonial Pipeline personnel have taken additional precautionary measures to help further monitor and protect the safety and security of its pipeline.
The Colonial Pipeline operations team is developing a system restart plan. While our mainlines (Lines 1, 2, 3 and 4) remain offline, some smaller lateral lines between terminals and delivery points are now operational. We are in the process of restoring service to other laterals and will bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations.
At this time, our primary focus continues to be the safe and efficient restoration of service to our pipeline system, while minimizing disruption to our customers and all those who rely on Colonial Pipeline. We appreciate the patience and outpouring of support we have received from others throughout the industry.
Meanwhile, downstream customers, which includes pretty much the entire Eastern seaboard, are starting to freak out as they face a new week without the primary source of gasoline supply for hundreds of millions of customers.
In response to the news, gasoline futures jumped 4% to $2.21 a gallon, approaching the highest since 2014. WTI and Brent both spiked more than 1%, while other products such as diesel and jet fuel are also likely to jump.
Should Colonial be unable to bring its main pipeline back online, which as a reminder were hacked by a ransomware group called DarkSide, according to Allan Liska, senior threat analyst at cybersecurity firm Recorded Future, there is no telling how high prices will shoot up as Colonial supplies nearly half the east coast gasoline.
On Friday, the national average stood at $2.96 a gallon Friday, according to auto club AAA, and with national gasoline inventories ample, the pump price wasn’t expected to tick much higher until Memorial Day at the end of May, which is traditionally viewed as the start of the U.S. summer driving season. However, it now appears that we can add gas to the list of items that have seen prices soar. Gasoline last bested the $3 average in October 2014.
Price increases in road fuel may stoke even more worries about inflation as commodities from oil to lumber to corn skyrocket with the world’s major economies emerging from pandemic restrictions. The oil industry was gearing up to meet what is expected to be a surge in fuel demand as newly vaccinated Americans take to the roadways and skies this summer. The downed Colonial Pipeline is a key artery for gasoline, diesel and jet fuel produced by oil refiners on the U.S. Gulf Coast and major metropolitan areas between Atlanta and New York.
“It all comes down to the duration of the disruption. If it lasts longer, it’s likely to result in some location dislocations — shortage of oil products in the East Coast, abundance in the Gulf region. That will support New York product prices and might attract more oil products from abroad,” said Giovanni Staunovo, commodity analyst at UBS Group AG.
One bank that is optimistic on the outcome of the shutdown is Goldman, its commodities strategist Damien Courvalin writing on Sunday that “the Colonial pipeline disruption likely to be brief” while “falling inventories will exacerbate the impact of future potential outages.” Some more details from the note:
With no physical damage to the pipeline, sufficient PADD1 inventories and above seasonal gasoline imports into the region, only a long outage (likely more than 5 days) would materially tighten local supplies. The Southeast region is most at risk of shortages given tighter inventories in the PADD 1C region.
As prior Colonial outages have shown, like in 2016, resupply is further likely to be rapid:
- the Colonial pipeline was running below capacity so a resumption of flows at capacity would accelerate the restocking,
- Kinder Morgan is working to accommodate additional barrels on its PPL line,
- vessels from the USGC and EU can arrive in 7 to 14 days, while
- the US administration could waive the Jones Act shipping restriction as well as summer gasoline requirements.
As a result, while NY Harbor petroleum product June cracks and June-July timespreads are set to rally on Sunday’s open/Monday should the pipeline not have been restarted by then, such moves are likely to be short-lived and mean reverting, with the June RBOB contract expiring on May 28.
Not everyone is so sure, and Bloomberg reports that traders are already seeking vessels to deliver gasoline that would have otherwise been shipped on the Colonial system. Some tankers are being secured to temporarily store gasoline in the U.S. Gulf in the event of a prolonged shutdown, they said.
There is some good news: the terminus of the pipeline, New York, was well stocked with fuel ahead of the attack and could weather the upset if missing fuel is replaced or the line restarts quickly. East Coast gasoline stockpiles at the end of April were near five-year seasonal averages. Of course, a lenghty shutdown would mean gasoline shortage the likes of which were last seen in the 1970s…
… which would be poetic justice since price are already soaring at a pace that has surpassed America’s hyperinflationary period, which ended with the Volcker Fed hiking rates to 20% in 1980.
USDOT Declares Emergency Over Colonial Pipeline Shutdown – Waives Trucker Hours of Service Rules
11 May, 2021
The United States Department of Transportation, (DOT) and the Federal Motor Carrier Safety Administration have declared an emergency over the shut down of the Colonial Pipeline and waived trucker hours-of-service rules to transport fuel in 17 states.
The declaration of emergency reads as follows:
The federal trucking waiver came over the weekend after the owners of Colonial Pipeline let it be known they have NOT been able to re-start the four main pipelines of their system. The waiver makes it OK for drivers to exceed the hours-of-service rules if they are hauling fuel products to the states mentioned.
The Colonial pipelines carry 100 million gallons of fuel PER DAY from Houston, TX all the way up Linden, New Jersey.
The pipes supply refined products, not simply oil. They provide gasoline for cars, diesel fuel for trucks and military bases, aviation fuel for major airports. In fact, this single pipeline system provides about 45% of ALL the fuel needs for the entire east coast of the United States!
Here’s a look at the Colonial Pipeline system (Click image to enlarge):
The sad truth is that even with Hours-of-Service rules waived, there is very little chance the trucks will be able to cover the fuel needs.
In order to replace the amount of fuel carried by those pipelines, fuel depots would have to fill about 10,000 trucks , each transporting 40 tons of fuel…DAILY, to make up for the pipe capacity.
Or 7 trucks loaded with 40 tons of fuel … per SECOND.
. . . . which cannot be done.
If this pipeline is not brought back into service, there will be fuel shortages in the very near term, and massive fuel outages if the system remains offline.
My son is in Information Technology (IT). He says:
“IF THIS IS TRUE, any hardware that has already been damaged by the ransomware, like pipeline valves, can be replaced AND most computer servers are Virtual Machines (VM) these days.
A VM several Terabytes in size can be completely restored in hours.
EVEN IF a critical system is “ransomed” the software can easily be relicensed in a few hours.
The configs for the Software are, 9 times out of 10 are kept in a database, and App Servers have their configs stored internally which can be EASILY copied onto a new one or the entire app server restored in minutes.
All large companies have a disaster recovery (DR) site and one this size (Colonial Pipeline) may have 4 to 5 DR sites that they bring online if an event like this happens. So I call 100% total BULLSHIT on this entire thing.”
Based on my son’s experience in IT, it appears that critical infrastructure of this size simply cannot be taken offline for days, never mind longer than that. Something else seems to be in-play here.
Readers are encouraged to fill up some five gallon gasoline cans to have emergency fuel available before it runs out.
In the event this goes longer term, which we all hope is not likely, they could have to ration and prioritize who gets gasoline first.
Hopefully they are smart enough to keep the food supply chain going, but get ready for empty store shelves for non essential goods!
While Colonial Pipeline is working hard to undo the damage caused by a cyber attack with computer ransomware, it may take awhile to get their pipeline and it’s complex pumping systems, back online.
All these function USED TO BE performed by people. But computers could get the job done just as well, and maybe even better in some cases, so people were taken out of the loop. Many either retired or died, and the knowledge of how to do those tasks manually . . . died with them. The knowledge was not passed down.
The computer brainiacs of today, have no idea at all how to operate the valves and diverter units at pumping stations, how to purge one product in advance of another being pumped, how to regulate pipe pressure, purge air pockets; which valves to turn which way, at what time, to handle what fuel, how much fuel to put in what tank to allow for temperature expansion so the storage tanks don’t burst . . . and now we’re all stuck because of it.
Ain’t technology grand?
ESC-SSC-WSC – Regional Emergency Declaration 2021-002 – 05-09-2021
Federal Motor Carrier
May 9, 2021
REGIONAL EMERGENCY DECLARATION
UNDER 49 CFR § 390.23
ALABAMA, ARKANSAS, DISTRICT OF COLUMBIA, DELAWARE, FLORIDA, GEORGIA, KENTUCKY, LOUISIANA, MARYLAND, MISSISSIPPI, NEW JERSEY, NEW YORK, NORTH CAROLINA, PENNSYLVANIA, SOUTH CAROLINA, TENNESSEE, TEXAS, AND VIRGINIA
In accordance with the provisions of 49 CFR § 390.23, the Regional Field Administrators for the Federal Motor Carrier Safety Administration’s (FMCSA) Eastern, Southern, and Western Service Centers hereby declares that an emergency exists that warrants issuance of a Regional Emergency Declaration and an exemption from Parts 390 through 399 of the Federal Motor Carrier Safety (FMCSRs), except as otherwise restricted in this Emergency Declaration. Such emergency is in response to the unanticipated shutdown of the Colonial pipeline system due to network issues that affect the supply of gasoline, diesel, jet fuel, and other refined petroleum products throughout the Affected States. This Declaration addresses the emergency conditions creating a need for immediate transportation of gasoline, diesel, jet fuel, and other refined petroleum products and provides necessary relief. Affected States and jurisdictions included in this Emergency Declaration (“Affected States”) are: Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.
By execution of this Emergency Declaration, motor carriers and drivers providing direct assistance to the emergency in the Affected States in direct support of relief efforts related to the shortages of gasoline, diesel, jet fuel, and other refined petroleum products due to the shutdown, partial shutdown, and/or manual operation of the Colonial pipeline system are granted relief from Parts 390 through 399 of Title 49 Code of Federal Regulations except as restricted herein.
This Emergency Declaration provides for regulatory relief for commercial motor vehicle operations while providing direct assistance supporting emergency relief efforts transporting gasoline, diesel, jet fuel, and other refined petroleum products into the Affected States during the emergency from shortages due to the shutdown, partial shutdown, and/or manual operation of the Colonial pipeline system. Direct assistance terminates when a driver or commercial motor vehicle is used in interstate commerce to transport cargo or provide services not in support of emergency relief efforts related to the shortages of gasoline, diesel, jet fuel, and other refined petroleum products due to the shutdown, partial shutdown, and/or manual operation of the Colonial pipeline system in the Affected States, or when the motor carrier dispatches a driver or commercial motor vehicle to another location to begin operations in commerce. (49 CFR § 390.23(b)). Upon termination of direct assistance to emergency relief efforts related to the shortages of gasoline, diesel, jet fuel, and other refined petroleum products due to the shutdown, partial shutdown and/or manual operation of the Colonial pipeline system in the Affected States, the motor carrier and driver are subject to the requirements of 49 CFR Parts 390 through 399, except that a driver may return empty to the motor carrier’s terminal or the driver’s normal work reporting location without complying with Parts 390 through 399. When a driver is moving from emergency relief efforts to normal operations a 10-hour break is required when the total time a driver operates conducting emergency relief efforts, or a combination of emergency relief and normal operation, equals 14 hours.
All other applicable safety requirements remain in place and will be enforced by the FMCSA. Specifically, nothing contained in this Emergency Declaration shall be construed as an exemption from the controlled substances and alcohol use and testing requirements (49 CFR Part 382), the commercial driver’s license requirements (49 CFR Part 383), the financial responsibility (insurance) requirements (49 CFR Part 387), the hazardous material regulations (49 CFR Parts 100-180), applicable size and weight requirements, or any other portion of the regulations not specifically authorized pursuant to 49 CFR § 390.23.
Motor carriers or drivers currently subject to an out-of-service order are not eligible for the relief granted by this declaration until they have met the applicable conditions for its rescission and the order has been rescinded by FMCSA.
In accordance with 49 CFR § 390.23, this declaration is effective immediately and shall remain in effect until the end of the emergency (as defined in 49 CFR § 390.5) or until 11:59 P.M. (ET), June 8, 2021, whichever is earlier. FMCSA intends to continually review the status of this Emergency Declaration and may take action to modify or terminate the Emergency Declaration sooner if conditions warrant.
Taft Kelly, Regional Field Administrator
Federal Motor Carrier Safety Administration
Eastern Service Center
Darrell L. Ruban, Regional Field Administrator
Federal Motor Carrier Safety Administration
Southern Service Center
Scott G. Hernandez, Regional Field Administrator
Federal Motor Carrier Safety Administration
Western Service Center
Colonial Says Pipeline Segments Being “Brought Back Online”, Goal Is For Service To Be “Substantially Restored” By End Of Week
With fears growing that the Colonial shutdown could last for much longer than initially expected, with some analysts warning that a 5-day shutdown could lead to sharply higher prices, and the Biden admin activating a state of emergency to make sure that critical gasoline supplies continue to flow up the eastern seaboard, moments ago Colonial Pipeline issued an update on its attempts to restore operations, saying that “segments of our pipeline are being brought back online in a stepwise fashion” and that the goal now is to “substantially” restore operational service by the end of the week.
Just out from the company:
Monday, May 10, 12:25 p.m.
Colonial Pipeline continues to dedicate vast resources to restoring pipeline operations quickly and safely. Segments of our pipeline are being brought back online in a stepwise fashion, in compliance with relevant federal regulations and in close consultation with the Department of Energy, which is leading and coordinating the Federal Government’s response.
Restoring our network to normal operations is a process that requires the diligent remediation of our systems, and this takes time. In response to the cybersecurity attack on our system, we proactively took certain systems offline to contain the threat, which temporarily halted all pipeline operations, and affected some of our IT systems. To restore service, we must work to ensure that each of these systems can be brought back online safely.
While this situation remains fluid and continues to evolve, the Colonial operations team is executing a plan that involves an incremental process that will facilitate a return to service in a phased approach. This plan is based on a number of factors with safety and compliance driving our operational decisions, and the goal of substantially restoring operational service by the end of the week. The Company will provide updates as restoration efforts progress.
We continue to evaluate product inventory in storage tanks at our facilities and others along our system and are working with our shippers to move this product to terminals for local delivery. Actions taken by the Federal Government to issue a temporary hours of service exemption for motor carriers and drivers transporting refined products across Colonial’s footprint should help alleviate local supply disruptions and we thank our government partners for their assistance in resolving this matter.
Our primary focus continues to be the safe and efficient restoration of service to our pipeline system, while minimizing disruption to our customers and all those who rely on Colonial Pipeline. We appreciate the patience of the traveling public and the support we have received from the Federal Government and our peers throughout the industry.