Repost from Progressive Railroading [Editor: Skim through this one to see how Union Pacific is touting its safety record and buying the confidence of first responders and the public. There is, in fact, nothing that will make crude by rail a safe enterprise, and every reason on earth to abandon all investment in fossil fuels – sooner rather than later. – RS]
UP matches first-half safety ratio record, continues crude emergency response training at TTCI
7/31/2014 | Rail News: Union Pacific Railroad
Union Pacific Railroad employees achieved a 1.01 reportable safety incident rate in the first half, matching the best-ever rate achieved in first-half 2011, the Class I announced yesterday.
The injury rate is calculated using the number of injuries per 200,000 manhours, which is equivalent to the number of hours worked by 100 full-time employees in a year.
“The safety of our employees, customers and communities is our No. 1 priority, and each day Union Pacific employees embrace a safety mindset to keep themselves and others safe,” said UP Vice President of Safety, Security and Environment Bob Grimaila in a press release, adding that the Class I continues to work toward a commitment to zero injuries.
Bolstering crude-by-rail safety is part of that commitment, including proper emergency response techniques. During two three-day courses held earlier this month at the Transportation Technology Center Inc. (TTCI) in Pueblo, Colo., UP conducted training for 80 emergency response personnel from Arkansas, Arizona, California, Illinois, Iowa, Kansas, Missouri and Nebraska.
The training focused on sharpening the responders’ skills to better prepare them for any crude-by-rail incidents that might occur in or near their respective communities. The training covered a variety of safety subjects, including identification of tank-car types that transport crude, tank-car fittings and construction, chemical and physical properties of the different types of crude, and response precautions.
Hands-on exercises focused on assessing tank-car damage, ensuring on-site repairs, controlling oil releases from damaged cars and fire suppression techniques. Class members also participated in a simulated oil fire, which helped them understand how to work with railroad personnel in an emergency and how to work safely on railroad property.
UP also plans to conduct four additional crude emergency response courses in August, one in November and one in December at TTCI. The Class I annually trains about 2,500 local, state and federal first responders. Since 2003, the railroad has trained nearly 38,000 public responders and 7,500 private responders, such as shippers and contractors.
Basin operators increase interest in shipping oil by rail
By Mella McEwen. July 31, 2014
Billions of dollars have been pouring into the Permian Basin in recent years as pipelines rush to help producers move their crude and natural gas to market.
Despite the investment in new pipelines and gathering lines and expansion of existing lines, takeaway capacity remains tight and producers are increasingly turning to the railroads for relief.
Using trains to move crude to market is nothing new, points out Bruce Carswell, West Texas operations manager for Iowa Pacific Holdings. “There has been, over time, crude oil moving by rail out of the Permian Basin almost since the beginning” of oil production, he said.
The increase in pipeline construction has not kept pace with the increase in production from drilling activity, he said, and the railroads his company operators are seeing increased shipments across the board.
Judging by the ringing of his phone, Christopher Keene, president and chief executive officer of Rangeland Energy, says demand for moving Permian Basin crude by rail is growing. His Sugar Land-based company is in the process of constructing the Rangeland Integrated Oil System in the Delaware Basin. A rail terminal is under construction near Loving, New Mexico that will open in October with truck-to-rail transload operations. Initial capacity will be 10,000 barrels a day, eventually growing to high-speed unit train loading capacity of over 100,000 barrels a day. It will be served by the BNSF Railway.
Rangeland is also planning its RIO Pipeline, which will connect the new RIO Hub in Loving to the RIO State Line Terminal and then Midland, which will provide connections to various terminals and interstate pipelines to Cushing and the Gulf Coast.
Carswell’s company operates two railroads, the Texas-New Mexico from Monahans to Hobbs and Lovington and the West-Texas Lubbock, which runs from Lubbock to Seagraves and a line that runs from Levelland to Whiteface.
While new pipelines will come online later this year and into next year, Carswell said, “But my observation is they’re drilling a lot more wells, too.”
Producers, observed Khory Ramage, president of Ironhorse Energy Partners, didn’t expect as big an increase in production as has been seen.
“It just accelerated,” said Ramage, whose company is building a rail terminal at Artesia. The company, which he founded with brother Kyle, already has laid 7,000 feet of track and connected to the BNSF main line. The first phase of the development calls for 18,000 feet of track to accommodate rail cars unloading proppants. By the time development of the unit train terminal is done, there will be nine-and-a-half miles of track with a loop track to hold 200 loaded railcars at once.
“The Permian Basin may be a lot larger than the Bakken and Eagle Ford combined,” he said. “Bringing production into and out of the market is vital.” He reported that his company is talking to two different entities about moving their production.
Keene said his company “just landed the 800 pound gorilla out there in the Permian Basin,” a name he was not yet ready to announce.
The rising use of rail to move crude production has caught the public’s attention recently in the aftermath of the derailment in Canada that killed over 40 people as well as derailments that have resulted in spills. New safety regulations are being proposed by the federal government, something Carswell said the industry welcomes because it has been waiting for the federal government to approve new standards for awhile.
“There’s been a fair amount of effort to improve the safety aspect of moving any flammable liquid,” he said.
Keene said he is glad there is a conversation about safety and said he sees three areas where change is occurring or needed: Safer rail cars need to be designed, the railways themselves need to be maintained and speed in certain areas should be addressed.
“I’m a firm believer rail is here to stay,” Keene said, “if it’s done the right way, in a safe and environmentally friendly manner. I think the industry is going to continue getting better.”
For his part, Ramage sees a need for both rail and pipelines, saying there will always be options for rail. He saw the impact on rail demand with the rise in production from the Bakken in North Dakota and Wyoming. That prompted him and his brother to form Ironhorse.
Keene said the Delaware Basin is different in that the crude seems to want to move by pipeline, but when it can’t, for whatever reason, producers are turning to railroads.
Another benefit of railroads, Carswell said, is they offer producers flexibility as to where to send their commodities, especially given the price differentials. “This week, shipments may go to the Gulf Coast but next month they may go to the West Coast or the East Coast.”
“What’s predominantly driving this is the price differentials” between West Texas Intermediate-Midland, West Texas Intermediate Cushing and even Louisiana Light Sweet, Keene said, a gap that has reached as much as $20. “That’s huge,” he said.
Another driver, he said, is pipeline constraints, and even though significant new and expanded capacity is expected in the coming year, he said price differentials are still playing a role.
Ramage said flexibility is important, especially as traditional pipeline destinations like Cushing, Oklahoma and the Gulf Coast are becoming inundated with light sweet crude. In the 1990s, he noted, refineries were retrofitted to process heavier, more sulfur-laden crudes that were being imported, making them slower to respond to the rise of light sweet crudes from unconventional shale plays.
That quality, Keene said, is the third driver in rail demand. “A lot of the new crude is outside pipeline specifications” of 42 API Gravity, though some pipelines have inched that up to 44 API Gravity. Much of the crudes now coming from shale plays are 45 to 55 API Gravity, he said and can even be considered condensate or natural gasoline.
Producers then have three options, Keene said: Rail the crude to a splitter, where the condensate is split into different components like distillates and naphtha, send it by rail to Canada for use as diluents or send it by rail to coastal terminals where, hopefully, the government will classify it as stabilized condensates that can be exported overseas.
Allowing exports could be key to the industry’s future, Ramage said.
“The only concern is if the government doesn’t consider the importance of lifting the export ban,” he said. “We may see prices decrease and the energy revolution we’re experiencing slow down.
Repost from Energy Global [Editor: This article refers to “Brent crude oil.” Wikipedia: “Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. Brent Crude is extracted from the North Sea, and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation)….Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to price two thirds of the world’s internationally traded crude oil supplies.” – RS]
Valero Energy reports second quarter 2014 results
Valero Energy Corporation has reported financial results for the second quarter of 2014 (Q2). Net income from continuing operations attributable to Valero stockholders was US$ 651 million, US$ 1.22/share, compared to US$ 463 million, US$ 0.84/share, for the second quarter of last year.
Operating income for Q2 was approximately US$ 1.1 billion compared to US$ 805 million in the second quarter of 2013. The US$ 280 million increase in operating income was due primarily to higher refining throughput volumes and wider discounts relative to Brent crude oil for sour and certain North American light crude oils. These positive drivers were partially offset by weaker gasoline and distillate margins relative to Brent crude oil in most regions and higher natural gas costs in the second quarter of 2014 versus the second quarter of 2013.
Valero CEO and President Joe Gorder commented: “Valero delivered solid financial results for the quarter despite generally weaker product margins relative to Brent crude oil. We continued to execute our strategy to reduce feedstock costs by processing additional volumes of cost advantaged North American crude oil and investing in logistics assets to deliver those feedstocks to our refineries”.
Refining throughput volumes averaged 2.7 million bpd for Q2, an increase of 115 000 bpd from the second quarter of 2013. According to Valero, the increase in volumes was due primarily to less turnaround activity and higher utilisation rates spurred by the availability of discounted North American light crude oil on the US Gulf Coast.
“We increased North American crude oil consumption at our Quebec City refinery to 83% in the second quarter of 2014 from 8% in the second quarter of 2013, so we are progressing well toward our previously stated goal of reaching 100% by year-end. We also began processing Canadian bitumen through our new crude-by-rail unloading facility at our St Charles refinery”, Gorder said.
Ethanol operating income for Q2 was US$ 187 million compared to US$ 95 million in the second quarter of 2013. The US$ 92 million increase in operating income was mainly due to higher gross margin per gallon driven by lower corn costs as a result of abundant corn crop and lower industry ethanol inventories at the start of the quarter.
Gorder said: “Our ethanol investments have continued to be strong performers, delivering a total of US$ 430 million in operating income for the first half of 2014. We expect our eleventh ethanol plant, the Mount Vernon facility acquired in March of this year, to begin operating and contributing to the segment’s earnings in the third quarter”.
Capital expenditures for Q2 were US$ 806 million, of which US$ 240 million was for turnarounds and catalyst. Valero paid US$ 133 million in dividends on its common stock and US$ 228 million to purchase 4.0 million shares of its common stock. The company repaid US$ 200 million of debt that matured in April and ended the quarter with US$ 6.4 billion in total debt and US$ 3.5 billion of cash and temporary cash investments, of which US$ 382 million was held by Valero Energy Partners LP.
Valero expects 2014 capital expenditures, including turnaround and catalyst, to be US$ 3 billion, including approximately US$ 870 million allocated to logistics investments, most of which are expected to be eligible for drop-down into Valero Energy Partners LP in the future.
“Given the strong North American crude oil production growth, we continue to focus the majority of our strategic capital on light crude oil processing capability and logistics”, Gorder said. “We expect our refineries to benefit from access to lower cost crude oil and higher netback product export markets.”
America’s drilling boom means more freight trains are snaking through Chicago carrying oil, which can erupt into fireballs if the tank cars derail. A new federal proposal to make the cars safer should be enacted as quickly as possible, and any changes in the final rules should enhance safety, not weaken it.
On July 23, U.S. Transportation Secretary Anthony Foxx proposed phasing out tens of thousands of tank cars called DOT-111s that date back to the 1960s and that too easily rupture or get punctured in derailments. In the past six years, oil has spilled in 10 major derailments, many of them fiery. In the worst, 47 people died last year in Quebec. In April, 30,000 gallons of crude oil leaked into the James River amid a blazing derailment near downtown Lynchburg, Va.
Because more than 40 oil-carrying trains pass through metropolitan Chicago every week, the safety proposal is critical. Mayor Rahm Emanuel called it a “very important step to reduce the risk of catastrophic disasters in our cities.”
The weaknesses of older tank cars, which include about 78,000 of the 92,000 now in use, have been known for 25 years. But now there’s a new reason to worry about them. A boom in American oil production, largely due to hydraulic fracturing — or fracking — that extracts petroleum from places where oil pipelines don’t go, has led to a surge in oil-carrying freights. Nationwide, the number of oil carloads jumped from 9,500 in 2008 to 434,000 last year. Trains carrying crude often are longer than 100 tank cars and can carry more than a million gallons.
In May, the U.S. Department of Transportation issued an emergency order requiring railroads to notify local officials before trains carrying large quantities of crude pass through. Now, the department has proposed a range of additional safety options, including requiring new or retrofitted tank cars to have thicker shells, more effective brakes and roll-over protections. Tank cars that don’t meet the new standards would be phased out after two years if they carry the most flammable fuels, including ethanol and most grades of crude oil.
Foxx also is calling for speed limits on trains transporting the fuels, especially through highly populated areas, and testing of the liquids they carry.
The proposals will go through negotiations, including a public comment period, before the final rules come out. Not everyone will agree: Industry representatives, for example, think the proposed speed limits are too low and environmentalists think they are too high.
Fortunately, industry players, including the Association of American Railroads and the American Petroleum Institute, agree tank cars need to be safer. They have offered their own safety enhancements, which don’t go as far as those proposed by Foxx. For example, they want a three-year phase-out period instead of two and would select a design used on tank cars built since 2011 as the new, safer standard.
The final rules should take into account legitimate concerns of business and environmentalists, but the government shouldn’t significantly water down the safety proposals nor let negotiations drag on, putting off the day crude shipments get safer.
We don’t want to see any disastrous fireballs along the many rail lines running through Chicago and its suburbs.