SF Chronicle: California refiners double volume of oil imported by rail

Repost from the San Francisco Chronicle

California refiners double volume of oil imported by rail

Lynn Doan  |  May 3, 2014

California, country’s biggest gasoline market, more than doubled the volume of oil it received by train in the first quarter as deliveries from Canada surged.

The third-largest oil-refining state unloaded 1.41 million barrels in the first quarter, up from 693,457 a year ago, data on the state Energy Commission’s website showed last week. Canadian deliveries made up half the total and were eight times the number of shipments a year earlier. Supplies from New Mexico jumped 71 percent to 173,081 barrels. Those from North Dakota slid 34 percent to 277,046.

Projects in works

West Coast refiners including Tesoro Corp. and Valero Energy Corp. are developing projects to bring in more oil by rail from reserves across the middle of the U.S. and Canada to displace more expensive supplies. Crude production in the federal petroleum district that includes California and Alaska, has dropped every year since 2002, while drillers are extracting record volumes from shale in states including North Dakota and Texas.

The surging flows of domestic oil to California “reflect a continuing improvement in crude-by-rail receiving facilities here,” said David Hackett, president of Stillwater Associates, an energy consultant.

Rail shipments still account for a small fraction of California’s oil demand. In February, the state imported more than 20 million barrels of crude from abroad, according to the U.S. Energy Information Administration.

Crude from North Dakota and Canada trades at a discount to Alaska North Slope oil, which rose 36 cents to $107.78 a barrel in early trading on Friday. Western Canada Select, a heavy, sour blend, gained 36 cents to $82.88. North Dakota’s Bakken crude also gained 36 cents to $95.28.

It costs $9 to $10.50 a barrel to send North Dakota’s Bakken oil by rail to California, according to Tesoro, the West Coast’s largest refiner.

Series of accidents

Trains are bringing more oil to California even as projects face more regulatory scrutiny after a series of accidents involving rail cars carrying fuel. The most recent was on Wednesday, when a CSX Corp. crude train derailed in Lynchburg, Va., igniting a fire that led to an evacuation. A derailment in Quebec in July killed 47 people.

The U.S. Transportation Department is studying changes to shipping oil by rail, and in February railroads agreed to slow such trains in urban areas. Canada ordered a phase-out of older tank cars last month.

Officials in Benicia said Thursday that they’re delaying until June an environmental report on a rail-offloading complex that Valero has proposed at its refinery in the North Bay city. The San Antonio company originally planned to finish the project by the end of last year.

Tesoro is six to eight weeks behind schedule in receiving regulatory permits for a rail-to-marine crude trans-loading terminal in Washington state, the company, also based in San Antonio, said Thursday. It now expects to receive the permits late this year or in early 2015, with construction taking about 12 months, Scott Spendlove, the chief financial officer, said on a conference call with analysts.

Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks.

Lynn Doan is a Bloomberg writer.
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    Earthjustice lawsuit against Kinder Morgan & BAAQMD – case overview

    Repost from EARTHJUSTICE … because the Earth needs a good lawyer …

    Challenging Crude-by-Rail Shipments to California’s Bay Area

    The City of Richmond, home to a Chevron refinery and tank farm, is already burdened by intense pollution caused by the fossil fuel industry.The City of Richmond in California’s Bay Area is already burdened by intense pollution caused by the fossil fuel industry.  Chris Jordan-Bloch / Earthjustice

    CASE OVERVIEW

    Earthjustice, on behalf of Communities for a Better Environment, the Asian Pacific Environmental Network, the Sierra Club, and the Natural Resources Defense Council, has filed a lawsuit against Kinder Morgan and the Bay Area Air Quality Management District to halt the shipment of highly explosive and toxic crude oil into the City of Richmond, a community already burdened by intense pollution caused by the fossil fuel industry.

    The Air District issued Kinder Morgan a permit to operate its crude-by-rail project in early February, without any notice to the public or environmental and health review.  The case asks the court to halt operations immediately while the project undergoes a full and transparent review under the California Environmental Quality Act (CEQA).

    Members of the Richmond community, perhaps even members of the BAAQMD’s Board of Directors, did not know that a permit to transport crude oil had been issued for over a month.  According to longtime resident of Richmond and CBE organizer Andres Soto, the community is tired of being blind-sided and ignored.

    Berkeley and Richmond city councils have voted to oppose crude-by-rail plans that involved trains running through their cities. The number of trains carrying crude oil around the country has risen dramatically in the last two to three years, due to the increased drilling in both the Alberta tar sands in Canada and the Bakken shale oil area of North Dakota.

    The California Public Utilities Commission, office of Rail Safety, released a report in November 2013 listing a number of alarming railway safety concerns associated with the increased movement of crude oil by rail through California. The report specifically identifies California’s railroad bridges as a significant rail safety risk.

    Bakken crude is extremely explosive and toxic. In January of 2014, the U.S. federal agency that regulates hazardous materials on the rails issued an alert, stating that Bakken crude may be more flammable than other types of crude. And in July of 2013, a train carrying crude oil derailed and exploded in a town in Quebec, Canada, killing 47 local residents and destroying most of the downtown area.

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      KQED video: panel discusses crude by rail in the Bay Area

      Repost from KQED Newsroom (via Youtube)
      [Editor: Note that the oil-by-rail portion of this video begins at 1:00 and goes to 11:00.  – RS]

      Concerns Over Crude by Rail

      May 2, 2014

      Proposals to transport crude oil on railroads throughout Northern California are fueling worries about health and safety. Just this week, a train carrying oil derailed in Virginia, sending a huge fireball into the air and forcing evacuations. Locally, many officials and residents from Davis to Pittsburg are opposed to plans to increase crude oil rail shipments.

      Guests:
      •Molly Samuel, KQED Science
      •Yvonne Addassi, CA Office of Spill Prevention & Response
      •Tom Vacar, KTVU News

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        For safe and healthy communities…