Winter Weather Preparedness – Supply Chain Impact

Background:  Approximately 80% of refined products shipped via rail from Refinery to Anchorage.  This included several different products.  A key product was Jet fuel to the Anchorage airport (at that time the second largest freight airport in the United States).  The refinery supplied nearly 2/3 of the jet fuel to the airport.

Situation:  The Alaska Railroad was generally reliable, but a number of historical winter weather events had caused rail closures ranging from a few hours to several days.

The resulting impact to the Airport was a fuel shortage that delayed flights and significantly impacted travelers.  During these times refinery production was often curtailed due to shortage of storage capacity.

Study methodology:

• Review historical events to understand frequency and probability of different durations
• Review impact to the business – from a refinery perspective and from a terminal storage / key customer impact perspective.

Results of analysis:

• On average, a 3-4 day event would occur once every other year.
  • There were years with multiple events.
• With current storage capacity for Jet Fuel at the airport and in local terminals, this duration of outage would likely cause some disruption to the air freight business.
• Refinery min/max product storage range was unchanged at all times of year. If refinery was near max storage when rail transport was lost, production would be curtailed.

Modifications made:

• Eliminated a low profitability product during winter months, converted that storage tank to Jet fuel (in the Anchorage Terminal)
• Increased min/max for Jet fuel at the Anchorage terminal during winter months (6-7 months/year)
• Decreased maximum product storage at the refinery during the winter months.

• During following Winter outage (3+day rail), improved Winter Preparation plans and mitigation resulted in :
• Airport traffic was unaffected (key customers protected)
• Refinery production was unaffected (had sufficient room for additional product inventory)

IMPACT TO BUSINESS: $1-2 MILLION / DAY (~3 DAYS)