Buckeye, airlines settle NY jet fuel dispute

OREANDA-NEWS. Airlines will pay lower transportation rates for jet fuel across Buckeye Partners' pipelines in the New York City area under a settlement that resolves a years-long battle that upended pricing in the market for decades.

Under a deal reached last week Buckeye will improve infrastructure delivering jet fuel to John F Kennedy International Airport (JFK), make settlement payments to airlines and withdraw an application to use market-based price setting methods in the New York City market under the terms of the proposed settlement. Rates would decrease by 20pc to JFK and by 40pc to Newark International Airport, while pricing will shift to a new volume incentive program for JFK, Newark and LaGuardia Airports.

The pipeline operator said Federal Energy Regulatory Commissioners (FERC) could approve the agreement in the third quarter of this year.

Buckeye would increase capacity for jet fuel deliveries into JFK by cross-connecting Lines 601 and 602 within nine months of the settlement becoming effective. Airlines could take a share in the increased capacity by contributing up to 50pc of the total capacity cost. Jet fuel shipments across the Buckeye system out of New York harbor storage at Linden, New Jersey, will change to 37.57/bl to JFK, to 46.95?/bl to LaGuardia and to 12.62/bl to Newark on 1 July.

Settlement payments to each of the airlines were kept confidential but Buckeye set aside \\$40mn for such payments earlier this year.

Delta Air Lines, United Air Lines, Continental Airlines, Jetblue Airways and US Airways in 2012 challenged an experimental rate-setting system FERC approved more than 20 years ago. Regulators linked pipeline deliveries into the three airports to more competitive pipeline markets. Airlines alleged that Buckeye had under that system overcharged them by \\$52.6mn.

United Air Lines merged with Continental Airlines and US Airways merged with American Airlines since the case began.