U.S. energy officials looking into shortages after Colonial blast

By Erwin Seba and Devika Krishna Kumar

HELENA, Ala./NEW YORK (Reuters) - U.S. energy officials sought to determine the extent of gasoline shortages on Wednesday, two days after a fatal blast in Alabama shut a crucial supply pipeline to the East Coast, as retail gasoline prices inched higher in southeastern states.

Monday's blast, which killed one worker and injured five others, occurred several miles from September's gasoline spill that interrupted Colonial Pipeline Co's main line flow for 12 days. The leak was the largest in two decades.

A small fire continued to burn at the blast site on Wednesday morning, a Colonial [COLPI.UL] spokesman said. The company is trying to complete repairs on the line and resume shipments as early as midday on Saturday.

Retail gas prices in Georgia, one of the worst-hit states during Sept. 9 outage, climbed about 3 cents to $2.19 a gallon on Wednesday, according to motorist advocacy group AAA. Georgia, Alabama and North Carolina have waived rules governing transport of fuels to ensure adequate supplies.

Colonial said on Wednesday it still aimed to reopen the vital supply artery by Saturday, but added that the timetable might change as it gets updated information.

Any delays to Colonial's restart plans will result in slightly higher prices at the pump, said Patrick DeHaan, senior petroleum analyst at GasBuddy.

"I'd say not near September's price increases, in which many areas spiked 15 to 30 cents per gallon. This time I'd say the outcome might be (increases of) 10 to 15 cents per gallon," DeHaan said.

Colonial said it was evaluating options for customers to move gasoline before the restart.

In September, the company temporarily shipped gasoline on its distillates line, which normally moves diesel and jet fuels, and restarted sections of the line before fully restoring service.

The pipeline can carry about 1.3 million barrels per day of gasoline from the Gulf Coast to the Northeast.

The Department of Energy began to assess the extent of fuel supply shortages caused by the accident, a department source said. The DOE advises the Department of Homeland Security on shortages in the event companies or state governments seek a waiver of the Jones Act to allow relaxation of rules on shipping of fuel by ships. There have not been any requests yet.

Pipeline safety experts said while regulators will investigate the incident, the pipeline could resume service sooner than it did in September due to fewer uncertainties about the cause.

Ramona Morris, regional director for the U.S. Occupational Safety and Health Administration, said the investigation into the blast would last six months.

Late Tuesday afternoon, a steady stream of tractor-trailers carrying heavy repair equipment and pickup trucks with workers rumbled through Helena, a town of 18,000. They went down a winding two-lane blacktop highway, turning off the dusty dirt road to the scene of the fire located in a densely forested area.

The full cause of the Colonial September spill has not been made public. A nine-member crew was working on repairs related to the September leak when an excavator struck the line, setting off the explosion, according to Colonial officials.

A spokesman for UAB hospital in Birmingham, Alabama, said four injured crew members were being treated. He declined to comment on their conditions, citing the families' request for privacy. Another crew member was treated and released.

Gasoline futures were down 2.5 percent by afternoon Wednesday after rising as much as 15 percent on Tuesday.

Cash gasoline markets in New York and the Gulf Coast began to rebalance on Wednesday.

Markets on the East Coast are relatively better positioned due to access to ports. By noon Tuesday, some 14 ships were provisionally booked to sail from Europe to the region, more than quadrupling shipping costs, traders and ship brokers said.

The explosion came amid opposition to pipeline construction by environmental and Native American groups. They are protesting the construction of an oil pipeline in North Dakota. President Barack Obama said late Tuesday the government is examining ways to reroute the line to address the concerns.

(Additional reporting by Jessica Resnick-Ault in New York and Timothy Gardner in Washington; Editing by Jeffrey Benkoe)