How the Colonial Pipeline Turned a Very important Artery for Gasoline

HOUSTON – The operator of a vital Texas to New Jersey fuel line that was shut down for days after a ransomware attack announced Monday that it hopes to restore most operations by the end of the week.

Federal investigators said the attackers wanted poorly protected corporate data rather than directly taking control of the pipeline that carries nearly half of the motor and aviation fuels consumed in the northeast and much of the south.

The operator, Colonial Pipeline, apparently stopped deliveries as a precautionary measure to prevent the hackers from taking any further action, e.g. B. turning off the system itself or damaging it if they had stolen highly sensitive information from company computers.

Colonial said it will “gradually” revitalize service to segments of the pipeline in consultation with the energy department. The aim of his plan is to “restore operations significantly by the end of the week”. However, the company warned that “this situation remains fluid and evolving”.

The attack carried out by the Federal Bureau of Investigation by an organized crime group called DarkSide exposed the vulnerability of the American energy system.

Part of this vulnerability reflects Texas’s increasing role in meeting domestic demand for oil and gas over the past decade and a half. This resulted in the Northeast relying on an aging pipeline system to bring in fuel, rather than locally refining imported fuel.

There have been no long lines at gas stations since the pipeline shutdown, and with many traders expecting a brief interruption, the market reaction was subdued. Nationwide, the price of regular gasoline rose by just half a cent to $ 2.97 from Sunday on Monday, even though the company was unable to set a schedule for restarting the pipeline. New York state prices remained stable at $ 3 per gallon, according to the AAA Motor Club.

“It may be impractical,” said Ed Hirs, an energy economist at the University of Houston. “But it’s not a big deal because there are storage facilities in the northeast and all major oil and gas companies can divert cargoes of refined products to sea if necessary.”

The Colonial Pipeline is based in Alpharetta, Georgia and is one of the largest in the United States. It can transport approximately three million gallons of fuel a day over 5,500 miles from Houston to New York. It serves most of the southern states and branches off the Atlantic coast to Tennessee.

Some of the largest oil companies, including Phillips Petroleum, Sinclair Pipeline, and Continental Oil, began construction on the pipeline in 1961. It was a time of rapid growth in highway driving and long-haul air travel. Today the private Colonial Pipeline is owned by Royal Dutch Shell, Koch Industries and several domestic and foreign investment firms.

In business today


May 10, 2021, 5:52 p.m. ET

This is especially important to the functioning of many airports in the eastern United States, which typically only have supplies for three to five days of operation.

There are many reasons, including regulatory restrictions on pipeline construction that go back nearly a century. There are also restrictions on the use of foreign ships to transport products between American ports, as well as on the transport of fuel by road.

But the main reason is coming closer to home. In the past two decades, at least six refineries in New Jersey, Pennsylvania and Virginia have ceased operations, reducing the amount of crude oil used for fuel in the region by more than half, from 1,549,000 to 715,000 barrels per week.

“Those refineries just couldn’t make any money,” said Tom Kloza, global director of energy analysis for Oil Price Information Service.

The reason for their decline is “energy independence,” which has been a White House goal since the Nixon administration. When shale exploration and production began to boom around 2005, refineries on the Gulf Coast had easy access to Texas-produced natural gas and oil.

This gave them a huge competitive advantage over the east coast refineries, which imported oil from the northeast or by rail from North Dakota once the shale boom started there. As the local refineries closed their doors, the Colonial Pipeline became increasingly important as a connection to refineries in Texas and Louisiana.

The Midwest has its own pipelines from the Gulf Coast, but while the East Coast has closed refineries, the Midwest has opened some new plants and expanded others over the past 20 years to process Canadian oil, mostly from Alberta sands. California and the Pacific Northwest have sufficient refineries to process crude oil made in California and Alaska and South America.

Not much. The northeastern supply system is flexible and resilient.

Many hurricanes have damaged pipelines and refineries on the Gulf Coast in the past, and the east coast managed to handle this. The federal government stores millions of gallons of crude oil and refined products for emergencies. Refineries can import oil from Europe, Canada, and South America, although it can take up to two weeks for transatlantic cargo to arrive.

When Hurricane Harvey hit Texas in 2017 and damaged refineries, shipments from the Colonial Pipeline to the northeast were suspended for nearly two weeks. Port of New York gasoline prices rose rapidly by more than 25 percent, and the additional costs were passed on to motorists. It took over a month for prices to return to previous levels.

Hacking a large pipeline may not be a major problem for drivers, but it is a sign of the times. Criminal groups and even nations can threaten power lines, personal information, and even banks.

The group responsible for the pipeline attack, DarkSide, usually locks their victims’ data using encryption and threatens to release the data unless a ransom is paid. Colonial Pipeline did not say whether it paid a ransom or intended to do so.

“The unfortunate truth is that infrastructure today is so fragile that almost anyone who wants to get in can get in,” said Dan Schiappa, chief product officer of Sophos, a UK security software and hardware company. “Infrastructure is an easy and lucrative target for attackers.”

Comments are closed.