MEMORANDUM

To: Governor Daugaard From: Jason Glodt Date: June 22, 2012 RE: Request for Executive Order for Hours of Service Waiver to address Fuel Shortages

I have been informed by the Petroleum Marketers Association that they are experiencing fuel shortages and outages across South Dakota and the region. South Dakota has historically experienced fuel shortages during summer months when demand increases with the driving season. However, slight disruptions or changes in supply have the potential for fuel shortages in SD since we are at the end of the supply line. We do not yet know the specific reason for the outages. However, an energy update from Growmark Energy Risk Management states: We have record high Crude oil inventories and refineries are running normal levels, but our gasoline and diesel inventories are well below the 5 year average. The Magellan and Nustar sytems are experiencing outages and allocations in Kansas, Nebraska, South Dakota, and Iowa. We are still researching the issue to determine the reason for the decreased inventories. One plausible reason may be a significant increase in fuel demand. Due to the lack of available gasoline supply in South Dakota and the region, suppliers are now forced to travel further distances to obtain fuel. As a result, petroleum marketers have requested an Executive Order for an Hours of Service waiver to avoid fuel outages as has been done in the past. I have attached an Executive Order for your consideration. The Order would expire July 9th, however, you can extend it beyond that date if necessary. South Dakota is at the very end of the fuel pipeline systems that supply our state. There are seven terminals located on the east river pipelines which are supplied by refineries from the central and southern US. Nustar has five terminals on a pipeline and Magellan has two terminals on different pipelines. There is one west river terminal on a different pipeline which is operated by Rocky Mountain Pipeline and supplied by Rocky Mountain refineries that only supply 85 octane gasoline.

Outage Reports for 6/22/12 Nustar

Terminal Sioux Falls Mitchell Yankton Wolsey Aberdeen Supply Status Out of unleaded gas Out of unleaded gas; Out of diesel Low on unleaded Low on unleaded; Out of diesel Out of unleaded; Out of diesel Next Received morning of 6/25/12 morning of 6/25/12 ? ? - shortages will continue until Fall morning of 6/25/12

Magellan
Terminal Sioux Falls Watertown Supply Status Unleaded ran out 6/21, received 6/22- but likely out by tonight Out of unleaded; Out of diesel Next Received small batches over weekend ?- no forecast

Rocky Mountain Pipeline

Terminal Rapid City Supply Status Low on unleaded Next Received ? - Only 3 suppliers have allocation

As of 4:00pm today, I received a report from a supplier who said there were upwards of a 100 trucks waiting in line for gasoline at the Magellan terminal in Sioux Falls and the wait is between four and five hours (the Nustar terminal is out). Fuel is also being allocated (or rationed) to suppliers. The shortages are likely to continue through the summer. Terminals in our region outside of South Dakota are also experiencing similar shortages. Examples are below Outage Update-Iowa
Dubuque: out of unleaded Fort Dodge: out of unleaded Iowa City: unleaded low LeMars: out of unleaded and ULSD-D-unleaded back Monday? Mason City: out of premium gas Milford/MPL: out of unleaded; ULSD-X low Milford/NuStar: out of unleaded-back Wednesday? Sioux City: out of unleaded Waterloo: out of unleaded

Other Regional Terminals

- Norfolk, NE is out until Monday. - Marshall, MN is out. - Mankato, MN is out. - Fargo, ND is allocated heavily. - Alexandria, MN has some availability. - Jamestown, ND has 7 loads. No forecast for more.