Railroad lobbyists winning again, in FRA rulemaking

From an email from Dr. Fred Millar
[Editor:  Millar refers here to an excellent series of articles in the Washington Post, “Deadline for train safety technology undercut by industry lobbying“, “Rail-safety deadline extension hitched to must-pass bill on transit funding” and “Senate passes transportation funding stopgap bill and rail-safety extension“.  Dr. Fred Millar is a policy analyst, researcher, educator, and consultant with more than three decades of experience assessing the risks associated with transporting hazardous materials.  – RS]

Railroad lobbyists winning again, in FRA rulemaking

By Fred Millar, October 28, 2015

This week’s excellent Washington Post reports by reporters Halsey and Laris outlined US railroad lobbyists’ ability to secure a three-year delay in implementing the key railroad safety equipment demanded on the original 2015 deadline by Congress in the Rail Safety Act of 2008.  There is a parallel and highly related story, so far unwritten, on how the railroads and allied interests relentlessly gain even more decisive and long-lasting ways to advantage profits over safety.

Even when Congress roused itself to demand more safety as in the 2008 RSIA, the seemingly permanent Reaganite legacy of “starving the beast” of government regulatory agencies grinds on to render the regulations pitifully weak.  Now the timid and under-staffed Federal Railroad Administration is quietly piddling away the once-in-a-generation opportunity from the 2008 law to impose a significant modern safety improvement regime [already seen in many industries] on the mighty railroads.

The public and Congressional alarm at several high-profile fatal rail disasters that led to the 2008 Rail Safety Improvement Act prompted Congress to include a strong mandate on the Federal Railroad Administration to impose a 20th Century type of Risk Reduction Program regime on the railroads.

This surprising loss by railroad lobbyists in Congress – although they secured some weakening amendments – led to strenuous railroad efforts to prevent the FRA from crafting any strong regulations.  The out-gunned FRA effectively suffered a regulatory failure of nerve, and buried the rulemaking process out of sight for four years, gaining only a weak-tea and partial consensus from railroads and rail labor in FRA’s own ad hoc Working Group of industry insiders.  A couple of ill-attended public hearings drew no public attention.

The resulting proposed rule in 2015 had two major safety-weakening features: first, it gave the railroads a new secrecy pot to hide railroads’ own safety risk information from discovery in court proceedings on railroad negligence.  Trial lawyers, citizens and some officials alarmed about the appalling secrecy already granted to railroads, for example in their decisions to route ultra-hazardous crude oil trains through major cities, filed comments opposing this new secrecy grant.

More importantly, FRA proposed to impose on the railroads only “a streamlined version” of a modern Risk Reduction Program regime.  The comprehensive and robust one mandated by Congress would have required significant new efforts by FRA to approve and oversee railroads’ Risk Reduction Programs, and to ensure compliance.  FRA staffers no doubt felt they were not up to that task, so punted the responsibilities —  to each covered railroad to create its own safety regimes and to decide how to measure their own effectiveness, with no federal guidance.

As FRA then-Administrator Joseph Szabo declared shortly after the Lac-Mḗgantic Quebec crude oil train disaster killed 47 in July 2013,  “The movement of this product is a game changer,” [referring to] the sharp rise in trainloads of volatile crude oil from North Dakota and other places. “We have to rethink everything we’ve done and known in the past about safety.” 

Undermining the most significant Congressional rail safety mandates we may ever see is hardly the new beginning we need.

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    East coast refineries slash deliveries of Bakken crude oil

    Repost from Reuters
    [Editor:  Significant quote: “EIA data shows PES imported more than double the amount between January and July, with cargoes from Nigeria, Chad and Azerbaijan.”] 

    U.S. oil refiners look abroad for crude supplies as North Dakota boom fades

    By Jarrett Renshaw and Catherine Ngai, November 3, 2015 12:52pm EST
    Gasoline-making unit at a PBF Energy Inc refinery in Delaware City, Delaware August 21, 2015.  REUTERS/Charles Mostoller - RTX1P4UV
    Gasoline-making unit at a PBF Energy Inc refinery in Delaware City, Delaware August 21, 2015. REUTERS/Charles Mostoller

    PBF Energy Inc, one of the largest independent oil refiners in the United States, spent heavily in recent years to build the rail terminals at its Delaware City complex that it needed to take delivery of large loads of crude coming from North Dakota’s Bakken oil fields.

    But now it is considering eliminating those deliveries altogether, and replacing them with foreign crude imports, according to two sources familiar with the situation. It has even closed its small Oklahoma City office that was only opened in 2013 and had served as a hub for the company’s trading in North Dakota’s oil, the sources said.

    The sudden lack of interest in Bakken crude by PBF, which is run by Thomas O’Malley, one of the biggest names in the U.S. oil refining industry, reflects a dramatic recent change in the way East Coast refineries are sourcing the crude that they turn into everything from gasoline to heating oil and jet fuel.

    The boom in the output of oil from North Dakota’s shale has ebbed as producers have begun to cut back in the face of the plunge in prices by nearly 60 percent since the summer of 2014.

    North Dakota’s Bakken production peaked at 1.153 million barrels per day in June, and had fallen to 1.13 million barrels per day by August, according to state data.

    The supply restraint has made Bakken crude relatively more expensive after transport costs than oil shipped from Latin America, the Middle East and Africa, prompting East Coast refiners to return to a foreign crude diet they derided as unprofitable five years ago.

    Three companies that resuscitated failing oil refineries on the East Coast less than five years ago with the promise of cheap domestic oil are now looking overseas instead, four sources familiar with the plans told Reuters.

    Together, PBF, Philadelphia Energy Solutions Inc and Delta Airline’s Monroe Energy are expected to cut their Bakken crude intake to the lowest levels since 2013, according to two oil traders who are familiar with East Coast rail arrangements.

    PES, which bought a 335,000 barrel-a-day Philadelphia refinery that was slated for closure in 2012, has slashed its Bakken deliveries to just 17 trains in November from a peak of 100 trains a month during the summer, according to two sources familiar with the plant’s operations.

    The planned deliveries mark the lowest monthly volume since the company built a new rail terminal to take advantage of the Bakken revolution. EIA data shows PES imported more than double the amount between January and July, with cargoes from Nigeria, Chad and Azerbaijan.

    LOCKED INTO PAYING

    The price of Bakken hasn’t fallen as much as other oil, nearly wiping out the entire $6 a barrel discount to the U.S. benchmark that it traded at in January and sending refiners scrambling for other sources. Meanwhile, a glut of other crudes has made importing – including transport costs of $2 to $3 a barrel – much more attractive.

    Because bringing crude by rail from North Dakota to an East Coast refinery usually costs about $10 to $11 a barrel, without a deep discount for the oil, moving it across the country becomes unprofitable. As a result, Bakken crude is used in the U.S. Midwest and Canada where lower transportation costs make it a profitable option.

    East Coast refineries accounted for about 10 percent of nationwide imports of crude in July, according to the latest data from the U.S. Energy Information Administration. That is expected to rise as the Bakken shipments fall further, analysts and traders say.

    PBF had poured over $50 million into upgrading its Delaware City rail terminal and signed long-term volume commitments to unload at least 85,000 barrels per day from trains at a fixed $2 a barrel cost, regardless of whether it takes the oil. As a result, the company is locked into paying $170,000 a day.

    In a conference call late last week, PBF disclosed that it is only budgeting to take 25,000 barrels a day of Bakken oil delivered by rail at its East Coast refineries in 2016.

    The company’s spokesman Michael Karlovich said in an email that the company was transferring its single employee in the Oklahoma office to its headquarters in New Jersey, but declined to provide additional detail about the company’s Bakken strategy.

    PBF’s Delaware City refinery imported about twice as much crude in July as in January, bringing in cargoes from Colombia and Peru, according to data from the U.S. Energy Information Administration. The company’s Paulsboro, New Jersey, refinery increased its imports by 50 percent in the same period.

    PES declined to comment on the shifting crude slate, while Monroe Energy did not respond to requests for comment.

    The refiners had previously found that relying on crude from the likes of Colombia, Mexico and Saudi Arabia was unprofitable. But now it may be different provided Bakken crude remains relatively expensive and the U.S. economy doesn’t head into a downturn.

    That’s because the refiners are buoyed by increased U.S. fuel demand, partly because of the low oil prices. In 2010, demand was shrinking.

    Additionally, they are supported by the closure of underperforming refineries in the Atlantic Basin during the last downturn. And then there is the current availability of deeply discounted crude oil from overseas.

    “They are looking for the lowest cost supplies,” said Sandy Fielden, an analyst with RBN Energy. “A few years ago, that was North Dakota, but not today.”

    (Reporting By Jarrett Renshaw and Catherine Ngai; Editing by Jessica Resnick-Ault and Martin Howell)
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      VALERO CRUDE BY RAIL: City of Benicia publishes letters received on final day of public comments

      By Roger Straw, Benicia Independent Editor, November 2, 2015

      Highly significant letters received from State and regional government agencies and environmental organizations

      Public Comments on Valero RDEIR, Oct. 24-30 – The following links go to the City’s website – all are large PDF downloads.

      Public Comments index Oct. 24-30, 2015(2)INDEX TO PARTS 1 – 4
      The City of Benicia’s comment pages do not make it easy to find a letter from a particular agency, organization or individual. The only “index” provided is at the beginning of Part 1, and it does not show page numbers or Part numbers. CLICK THE IMAGE ABOVE OR HERE FOR A ONE-PAGE INDEX (PDF download).  (UPDATE:  Index notes about comments submitted by individuals added on 11/3/2015.)

      Also newly posted by the City:  Supplemental Documents for NRDC Comment on RDIER.  These lengthy documents are FULL of important supplemental information.

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        Dangerous energy gamble: Pipelines vs. rail

        Repost from the Washington Examiner
        [Editor: One significant quote among many: “In the last five years, 423 oil trains have crashed in the U.S. Since 2010, those crashes have cost about $45 million in damages. In just the first six months of 2015, 31 oil train crashes cost almost $30 million in damages…. It’s 5.5 times more likely that oil will be spilled during rail transport than from a pipeline, according to a study by the Fraser Institute, an independent Canadian think tank. The risk of deaths, injuries and spills are higher with rail and trucks since vehicles can hit other vehicles, they travel through population centers and the drivers can err. None of those factors exist for pipelines.” – RS]

        Dangerous energy gamble: Pipelines vs. rail

        By Kyle Feldscher, 11/2/15 12:01 AM
        Fire burns at the scene of a train derailment, near Mount Carbon, W.Va., on Feb. 16. Fires burned for nearly nine hours after the train carrying more than 100 tankers of crude oil derailed in a snowstorm. (AP Photo/WCHS-TV)

        Energy companies increasingly have turned to rail to ship crude oil during the fracking boom, but with train crashes becoming more frequent, they are pushing for construction of more pipelines beyond the Keystone XL.

        However, that effort is being stymied by the collapse of oil prices and concerns about pipeline safety.

        On Wednesday, Shell announced it would stop construction on a site in Alberta, Canada, that potentially holds 418 million barrels of bitumen oil. The company blamed the project’s expense in a time of cheap oil as well as a lack of pipeline infrastructure.

        It’s one example of low prices and lack of pipelines prompting companies to reconsider drilling for oil, especially in the Canadian tar sands, where it’s more expensive to drill. Pipeline transportation is typically cheaper than rail, which costs about $30 a barrel more.

        Fifty pipelines have been proposed to the Federal Energy Regulatory Commission this year. They would carry the light, sweet crude from shale regions as well as the natural gas that has helped make the U.S. the world’s energy leader. ”

        Because of the costs associated with [rail], it’s going to drive up the cost of oil and it’s going to be significantly higher than pipelines on a per barrel basis,” said Dan Kish, senior vice president for policy at the conservative Institute for Energy Research.

        Another calculation oil companies must make is the safety of their highly flammable product.

        In the last five years, 423 oil trains have crashed in the U.S. Since 2010, those crashes have cost about $45 million in damages. In just the first six months of 2015, 31 oil train crashes cost almost $30 million in damages, mostly due to a major crash in West Virginia.

        It’s 5.5 times more likely that oil will be spilled during rail transport than from a pipeline, according to a study by the Fraser Institute, an independent Canadian think tank. The risk of deaths, injuries and spills are higher with rail and trucks since vehicles can hit other vehicles, they travel through population centers and the drivers can err. None of those factors exist for pipelines.

        The August study also found oil and natural gas production is rising faster than existing American and Canadian pipelines can handle. Those pipelines would be even busier if production increased in the Canadian tar sands.

        Keystone XL, proposed by TransCanada in 2007, would be able to transport 830,000 barrels per day from the tar sands to the Gulf Coast to be refined. Due to the viscous nature of bitumen oil, it’s much easier to transport it by pipeline than by rail, experts say.

        When a train carrying oil derails, it’s often catastrophic.

        In West Virginia, oil burned for days after 26 oil tanker cars derailed in February. Nineteen of those cars caught on fire and oil spilled into a nearby river. The damages from that crash totaled more than $23 million.

        A train derailment in a Quebec community that killed 46 people in July 2013 prompted calls for better rail safety and led some to question whether to transport highly flammable oil at all.

        The State Department estimates rail transportation of oil is responsible for 712 injuries and 94 deaths per year, while oil pipelines are responsible for three injuries and two deaths per year.

        “For our society, we have to evaluate the value we place on human life and we should make that a priority,” said Diana Furtchgott-Roth, a conservative economist who is the director of the Manhattan Institute’s e21 program.

        “The families of those 46 people killed in Lac-Megantic would have been happy to have less oil and having the lives of their family members back.”

        Dangerous derailments led the Obama administration to introduce new regulations to make tanker cars safer. The rule, announced in May, requires improvements to braking systems, making tanker cars thicker and more fire resistant and new protocols for transporting flammable liquids.

        The number of crashes steadily increased during the last five years, as more trains shipped crude and natural gas, rising from nine crashes in 2010 to 144 crashes in 2014. But as the price of oil plummeted, the amount of crude oil being drilled and shipped leveled off in 2015, according to the Energy Information Administration.

        If drilling in the Canadian tar sands in Alberta were to pick up in earnest, State Department officials believe rail transport would lead to 49 more injuries and six more deaths per year. If that oil were to be moved by the Keystone XL pipeline, there would be one additional injury and no fatalities.

        Environmentalists, who have been fighting the Keystone XL, point to the State Department’s finding that pipeline spills are often bigger than those from trains and trucks.

        They also point to declining oil use and the collapse of prices as great excuses to leave it in the ground.

        Zach Drennen, legislative associate at the League of Conservation Voters, said with oil prices as low as they are, it’s economic folly for oil companies to drill in the Canadian tar sands. Without high oil prices, companies can’t afford to build pipelines. They also can’t afford to ship by rail.

        That is why green groups think oil companies could be willing to leave the oil in the earth.

        “If you look right now, a lot of oil companies are just deciding that’s not where they want to put their money at,” Drennen said.

        To Kish, environmentalists’ goal is to make it too expensive to drill.

        “They’re going to try and fight against every damn pipeline they can,” he said, “because if they can choke off production and delay construction of pipelines, it causes disruptions.”

        But Ken Green, senior director of natural resource studies at the Fraser Institute, said environmentalists’ dream of keeping oil in the ground isn’t feasible.

        “The oil in the ground has a market value and everyone knows what the market value is,” he said. “It’s not hard to calculate that market value … My assumption is sooner or later, that value will be sought.”

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