Midwest and Rocky Mountain Transportation Fuels Markets March 2017 Independent Statistics & Analysis U.S. Department of Energy www.eia.gov Washington, DC 20585 This report was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA’s data, analyses, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in this report therefore should not be construed as representing those of the U.S. Department of Energy or other federal agencies. U.S. Energy Information Administration | Midwest and Rocky Mountain Transportation Fuels Markets i March 2017 Introduction A new study commissioned by the U.S. Energy Information Administration (EIA), find that changes in North American energy markets over the past decade have strengthened the supply of transportation fuels including motor gasoline, distillates, and jet fuel in the Midwest and Rocky Mountain regions. The development of Canadian oil sands crude and the emergence of light, tight crude oil in the United States have provided refiners in the Midwest and Rocky Mountain regions with access to abundant, cost-advantaged crude supply, providing opportunities to optimize crude slates and expand refinery capacity and utilization. Increased refinery production, combined with moderating demands for transportation fuels, has enabled suppliers in the Midwest and Rocky Mountain regions to reduce their dependence on inbound transportation fuels supply from the Gulf Coast, and has enhanced the redundancy and resiliency of their transportation fuels supply chains. Refinery capacity and production of transportation fuels in the Midwest and Rocky Mountain regions grew significantly between 2005 and 2015, and fuels markets and supply chains in these regions have become increasingly self-sufficient. Meanwhile, demand for transportation fuels has been stagnant in the Midwest (but has grown in the Rocky Mountain Region), while increasing volumes of renewable fuels—ethanol and biodiesel—have been added to the supply mix. As a result, in-region refinery production of fuels used (net of ethanol and biodiesel inputs) in 2015 has grown to 84% in the Midwest and 101% in the Rocky Mountain region, up from 69% and 97%, respectively, in 2005. Figure 1 compares transportation fuels production with consumption in the Midwest and Rocky Mountain regions in 2005 and 2015. U.S. Energy Information Administration | Midwest and Rocky Mountain Transportation Fuels Markets 1 March 2017 Figure 1. Midwest and Rocky Mountain transportation fuels production and consumption, 2005 vs. 2015 This study is the third and final in a series of reports that examines supply, consumption, and distribution of gasoline, diesel fuel, and jet fuel across the United States. This study focuses on the Midwest and Rocky Mountain regions. The Midwest region comprises 15 states in the north central United States, and the Rocky Mountain region comprises five states in the western north-central United States, corresponding to Petroleum Administration for Defense Districts (PADDs) 2 and 4. Previously published studies focused on the East and Gulf Coasts and the West Coast. This study examines transportation fuels supply, demand, and distribution at both the regional level and for three areas within the Midwest (which are referred to as sub-PADD regions in this analysis). The Midwest and the Rocky Mountain regions cover a large and diverse geography, and supply/demand balances and supply patterns vary within each region. Consequently, the Midwest has been divided into three regions including the Eastern Midwest region corresponding to EIA’s Indiana-Illinois-Kentucky refining district, the Northern Midwest region corresponding to EIA’s Minnesota-Wisconsin-North and South Dakota refining district, and the Southern Midwest region corresponding to EIA’s Oklahoma- Kansas-Missouri refining district. The Rocky Mountain region is not subdivided in this analysis. Each region is depicted with its corresponding states in Figure 2. U.S. Energy Information Administration | Midwest and Rocky Mountain Transportation Fuels Markets 2 March 2017 Figure 1. Map of regions covered in the analysis For each of these regional markets, this study uses 2015 as a base year and takes into account expected changes in infrastructure and supply in subsequent years. Demand includes in-region consumption, movements of fuels to other regions of the United States, and exports to the global market. Supply includes in-region refinery production, receipt of fuels transferred from other U.S. regions and other Midwest and Rocky Mountain regional markets, and foreign imports. Distribution infrastructure includes storage terminals, pipelines, marine loading and unloading facilities, marine vessels, and rail facilities. For this study, ICF, LLC analyzed data and information from EIA, Airlines for America, the Federal Energy Regulatory Commission, the U.S. Army Corps of Engineers Waterborne Commerce Statistics Center, the U.S. International Trade Commission, and publicly available data on companies and fuels infrastructure from U.S. Securities and Exchange Commission 10-K reports, investor presentations, and various other sources. This report completes a series of three studies that EIA has conducted to inform its analyses of petroleum product markets, especially during periods of supply disruption and market change. U.S. Energy Information Administration | Midwest and Rocky Mountain Transportation Fuels Markets 3 Midwest and Rocky Mountain Transportation Fuels Markets A report prepared by ICF for EIA March 2017 Midwest and Rocky Mountain Transportation Fuels Markets March 2017 Acknowledgements This report was prepared by ICF for the U.S. Energy Information Administration (EIA) under the general guidance of Lynn Westfall, Director of Office of Energy Markets and Financial Analysis. Information concerning the content of this report may be obtained from Hannah Breul ([email protected]). Principal contributors from ICF International are Kevin DeCorla-Souza, Matt Gilstrap, and CeCe Coffey. Acknowledgements i Midwest and Rocky Mountain Transportation Fuels Markets March 2017 Table of Contents Acknowledgements ........................................................................................................................................ i Table of Contents .......................................................................................................................................... ii Tables .......................................................................................................................................................... vii Figures ........................................................................................................................................................ viii Introduction .................................................................................................................................................. x Executive Summary ..................................................................................................................................... xii Study regions ..........................................................................................................................................xiii Midwest (PADD 2) ............................................................................................................................... xiv Rocky Mountain (PADD 4) ................................................................................................................... xv Conclusion ............................................................................................................................................... xv Overview ....................................................................................................................................................... 1 Demand ..................................................................................................................................................... 1 Supply/Demand balances ......................................................................................................................... 2 Refineries .................................................................................................................................................. 3 Refinery yields ....................................................................................................................................... 4 Supply and logistics ................................................................................................................................... 5 Pipelines ................................................................................................................................................ 7 Trend: Decline in PADD 3 to PADD 2 transportation fuels shipments .................................................. 8 Ports and waterways ........................................................................................................................... 10 Supply vulnerability................................................................................................................................. 11 Midwest (PADD 2) ............................................................................................................................... 11 Rocky Mountain (PADD 4) ..................................................................................................................