Market analyst: Kinder Morgan switched from ethanol to crude “late last year”

Repost from PLATTS McGraw Hill Financial

More ethanol-to-crude rail facility conversions unlikely in California: analyst

Orlando, Florida (Platts)–24Mar2014

More conversions of California ethanol rail unloading terminals to crude service are unlikely, following Kinder Morgan’s switch of its Richmond, California, unloading facility, an analyst said Monday.

“The other big [ethanol] terminals aren’t as close to refiners, and there is a limited amount of ethanol capacity,” Stillwater Associates President David Hackett said on the sidelines of the American Fuel and Petrochemical Manufacturers Annual Meeting in Orlando, Florida.

Kinder Morgan late last year converted the terminal to crude service from ethanol service “after changes in the ethanol market made it attractive for us to look to other commodities,” spokeswoman Melissa Ruiz said Monday in an email.

The Richmond terminal is the only 100-car unit train crude-by-rail facility in California, she said.

“In order to handle crude oil, we had to file a new application with the Bay Area Air Quality Management District (BAAQMA) for permits, which we received last summer,” she said. “We began handling crude this past September, and the facility will serve Bay Area refiners.”

The terminal is located on the Burlington Northern Santa Fe rail yard in Richmond. The railed crude is trucked from the terminal, she said, noting that there are no pipelines or tank connections involved.

Ruiz declined to comment on the terminal’s current throughput or on which types of crude are received by the facility.

The rail terminal conversion comes after the leading US midstream company early last year scrapped its high-profile proposed Texas-to-California Freedom Pipeline on a lack of customer interest. The pipeline would have delivered 277,000 b/d of crude from the Permian Basin in West Texas to northern and southern California refining complexes.

Kinder Morgan said at the time that it would focus on providing crude-by-rail options for West Coast and Texas shippers.

Along the West Coast, refiners and midstream companies are planning to construct crude-by-rail unloading terminals, but are facing permitting delays opposition.

If California “doesn’t get crude by rail, their competitiveness will erode,” Hackett said during the Platts Barrel Talk panel discussion at the conference. “We do see some uptick in rail deliveries, but there is a lot of opposition to crude by rail in California with the environmental community.”

–Bridget Hunsucker, Edited by Katharine Fraser

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California cities’ crude-by-rail opposition makes national news

Repost from The Miami Herald

As oil shipments rise on rails, California cities fight to be heard

By Curtis Tate and Tony Bizjak
McClatchy  Newspapers                           
 A tanker truck is filled from railway cars containing crude oil on railroad tracks in McClellan Park in North Highlands on Wednesday, March 19, 2014. North Highlands is a suburb just outside the city limits of Sacramento, CA.
A tanker truck is filled from railway cars containing crude oil on railroad tracks in McClellan Park in North Highlands on Wednesday, March 19, 2014. North Highlands is a suburb just outside the city limits of Sacramento, CA.        Randall Benton    /     MCT 

SACRAMENTO, Calif. — As rail shipments of crude oil have risen in Northern California, so has opposition in many communities along rail lines and near the refineries they supply.

Concerned about the potential safety and environmental hazards of 100-car trains of oil rolling through population centers, leaders from Sacramento to San Jose say they’re banding together to present a unified voice for “up-line” cities: communities that could bear some of the highest risks as California turns toward rail shipments to quench its thirst for fuel.

“What I suspect will come out of this is more of a regional understanding and interest in the topic,” said Mike Webb, director of community development and sustainability in Davis.

The federal government regulates rail shipments, but the rules haven’t caught up to the surge in oil traffic on the nation’s rail network. That’s left local leaders at the forefront of pushing for changes in state and federal laws.

Last week, the city councils of Berkeley and Richmond voted to oppose crude shipments on rail lines through their towns. The resolutions call for state lawmakers and members of Congress to seek tougher regulations.

Several environmental groups filed a lawsuit last week against pipeline operator Kinder Morgan and the Bay Area Air Quality Management District. The groups said the agency quietly issued a permit to Kinder Morgan for a crude-by-rail facility in February without reviewing potential environmental and health impacts.

“We don’t accept that as a forgone conclusion,” said Diane Bailey, a senior scientist with the Natural Resources Defense Council, one of the groups in the lawsuit.

But it may be an uphill fight. State officials anticipate that within two years, California will receive a quarter of its petroleum supply by rail. That could potentially mean several trains of crude oil passing daily through Sacramento, West Sacramento and Davis.

The Sacramento Bee reported last week that crude oil had been transferred from trains to trucks at the former McClellan Air Force Base in Sacramento since last year without the knowledge of local emergency response officials and without a required air quality permit.

Webb said Davis’ goal is to be part of the review process to make sure the city’s concerns are heard.

“Our primary objective and interest is in the health and safety of our community,” he said.

A group of community activists in Benicia and Martinez has been trying to stop two oil refiners, Tesoro and Valero, from expanding their crude oil deliveries by rail. And they’re pressing local, state and federal officials to push for tougher oversight of crude oil shipments by rail following a series of derailments with catastrophic fires and spills.

They’re focused on two types of crude oil that are moving by rail in the absence of new pipelines. First is tar sands, a thick, gritty crude that’s produced in western Canada. Tar sands production generates more carbon dioxide emissions, environmentalists say, and is more difficult to clean up when spilled in water because it’s heavy and sinks.

The second is Bakken crude, extracted through hydraulic fracturing of shale rock. Most of the Bakken formation lies in North Dakota, and most of the oil produced there moves out of the state by rail. The oil has proved more volatile than conventional types.

Since last summer, three major derailments have involved Bakken crude. The first, in Lac-Megantic, Quebec, killed 47 people in an inferno that also leveled the center of the small lakeside town.

Subsequent derailments in Alabama and North Dakota, though not fatal, showed that disaster could strike again.

“People are afraid that anybody along the rail line could become the next Lac-Megantic,” said Andres Soto, a community activist in Benicia.

Part of the frustration at the local level is the lack of information about how much crude oil is being shipped on rail lines. The companies involved in transporting and refining oil are not required to provide much information on the shipments and usually don’t.

“There is so little oversight,” Bailey said. “This is a new area and people are scratching their heads, saying, ‘Wow, this isn’t covered.’”

West Sacramento Fire Chief Rick Martinez, who has experience fighting oil fires, said national attention on the issue may provide a platform for cities to push for better real-time information on what materials are coming through town, so emergency responders know what to expect as they head to a call.

“Is there way through technology to get more information to local agencies?” he asked. “We are trying to take advantage of the interest to pose the questions.”

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Will the Monterey Shale be an energy & economic boon for California?

Repost from MontereyOil.org – Sacramento Briefing
Background information: Drilling California: A Reality Check on the Monterey Shale

On March 27, 2014 “Drilling California” author J. David Hughes was joined by business leader and Next Generation co-founder Tom Steyer and Robert Collier, a research fellow with Next Generation, to discuss the prospects of developing California’s Monterey Shale during a panel in Sacramento.  A recording of the event can be viewed below.

This event was a joint effort of Post Carbon Institute, Physicians, Scientists and Engineers for Healthy Energy, and Next Generation.  For more information on the Monterey Shale, see “Drilling California: A Reality Check on the Monterey Shale” and Next Generation’s special report, “Drilling the Monterey Shale.”

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