REUTERS: California planners reject Valero oil-by-rail project

Repost from Reuters – Markets

California planners reject Valero oil-by-rail project

By Kristen Hays, Feb 12, 2016 1:29pm EST

Feb 12 Valero Energy Corp’s proposed oil-by-rail project at its northern California refinery was quashed by local planners this week, the first such facility on the U.S. West Coast to end a years-long wait for permits with a rejection.

The Benicia Planning Commission late Thursday unanimously renounced Valero’s request to build the project at the conclusion of four consecutive public hearings dominated by scores of opponents.

Valero first proposed building the rail facility at its 145,000 barrels per day Benicia refinery to offload up to 70,000 bpd of inland U.S. and Canadian heavy crude three years ago.

Several other West Coast rail projects await such decisions by local or state governments. Those include Tesoro Corp’s proposed 360,000 bpd railport in Washington State – the largest in the nation – and Phillips 66′s newly-trimmed 25,000 bpd facility at its Santa Maria refinery in Arroyo Grande, California.

Others gave up with U.S. crude prices down more than 70 percent since mid-2014 on global oversupply. That decline squeezed discounts of inland U.S. crude to global crudes, eroding oil-by-rail’s profitability.

Global Partners LP last month laid off workers and said the company would drop crude handling at its ethanol terminal in Oregon in the fallout of the oil rout.

Valero can ask the Benicia City Council to override planners and approve a permit for the project. A spokeswoman said on Friday that the company would “evaluate our options for appeal.”

The staff for Benicia’s planners recommended approval.

When Valero first proposed the project, oil-by-rail was growing fast and U.S. and Canadian crudes were much cheaper than global crudes, even with added transportation costs of moving via train. Rail also gave West Coast refiners a way to tap those crudes as no major oil pipelines cross the Rocky Mountains.

Not anymore. Shipments originating on top U.S. railroads fell 23 percent by the third quarter last year from the peak of 1.02 million bpd in the third quarter of 2014, according to the American Association of Railroads.

The Tesoro project remains under review by a state council in Washington, which will hold hearings in June and July.

San Obispo County planners are expected to decide on the Phillips 66 project next month, the company said. Staff for those planners recommended rejecting the facility.

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