Tag Archives: BNSF

Bakken crude: Could pipelines replace the need for oil-by-rail?

Repost from Marcellus.com
[Editor: Significant quote by Rusty Braziel, analyst with RBN Energy: “By 2017 there should be enough pipelines to carry all North Dakota’s crude to market.”  See also “ND shipping only 47% of Bakken crude by train in June” – RS]

Bakken crude: Could pipelines replace the need for oil-by-rail?

By Zach Koppang, August 14, 2015
Image: Mary Schimke / Shale Plays Media
Image: Mary Schimke / Shale Plays Media

The transportation of Bakken crude is beginning to shift away from the railways and into pipelines as production levels off in the wake of last year’s price collapse and more oil and gas pipelines are brought online.

Rusty Braziel, analyst with RBN Energy, explained, “Since 2012 a combination of rail and pipeline has given Bakken producers ample crude takeaway capacity, but pipelines alone have not had sufficient capacity on their own.” Though, as production maintains a consistent rate, pipeline capacity is beginning to catch up. Braziel added, “By 2017 there should be enough pipelines to carry all North Dakota’s crude to market.”

Last week Continental Resources reported that it now ships over two-thirds of its Bakken crude by pipeline, reports Reuters. In the second quarter 2015, the company, North Dakota’s second-largest producer, pushed approximately 160,000 barrels of crude per day through Kinder Morgan owned pipelines. For comparison, it shipped nearly all of its oil by train in 2014. During a conference call, Continental CFO John Hart said, “Approximately 70 percent of our Bakken production is now delivered to market via pipeline.”

Director of RBN Energy Analytics Sandy Fielden said, “As soon as price differentials – especially between domestic benchmark West Texas Intermediate (WTI) and international benchmark Brent – narrowed, then barrels shifted back to pipelines to take advantage of their cheaper tariff rates. Yet significant crude volumes continued to be transported to market from North Dakota by rail because pipeline capacity could not handle the demand.” Recently, however, the planning and construction of new pipelines throughout the region has substantially increased overall shipping capacity, threatening the once booming business of BNSF Railway and others.

The trend is becoming more common as oil producing states, North Dakota included, begin to rely more heavily on pipelines rather than rail transport, which is vulnerable to weather, construction delays and bottlenecks. Transporting oil-by-rail has also become heavily scrutinized following a series of explosive, and sometimes deadly, oil train derailments. The most notable incident occurred in Lac-Megantic, Quebec, where a runaway oil train derailed and killed 47 people. The frequency and severity of derailments has led to increased scrutiny and regulation, much to the dismay of the rail industry.

As reported by Reuters, oil-by-rail shipments have decreased throughout the country by 13 percent in the past year, according to the latest American Association of Railroads data. Also indicative of the decreased interest in crude-by-rail shipments, and the far-reaching effects of the oil price decline, are the recent job cuts at one of the state’s largest rail transloading facilities.

However, Fielden explains, “Just because pipeline capacity is available doesn’t necessarily mean producers will prefer to use that capacity instead of rail.” Over 1 million barrels of oil per day continue to ride U.S. railways en route to refineries on the east and west coasts. Tesoro and BP, for example, opt to receive oil via rail due to the flexibility of the supply contracts when compared to pipeline shipments.

The RBN analysis reports that in theory, as new pipeline projects come online, all Bakken crude could be shipped to market via pipeline. Projects due to begin operating by the end of 2016 and throughout 2017 will expand takeaway capacity by 680,000 barrels per day. Fielden said, “The planning and buildout of a series of new pipelines out of North Dakota that (if they are all built) should increase capacity enough to provide space for all the barrels currently traveling to market from North Dakota by rail.”

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    North Dakota man relentless in push for safer oil by rail shipping

    Repost from the Billings Gazette
    [Editor: This is not a fluffy human interest story, but an important offering on the oil industry and regulators in North Dakota. Significant quote: “‘If you want to fix a problem, you go to the source of the problem,’ he said.  ‘You don’t prepare for something that doesn’t have to happen.’”  Another good quote: “Pressure to make North Dakota crude oil safe for interstate shipment is mounting on several fronts.”– RS]

    North Dakota man relentless in push for safer oil by rail shipping

    November 02, 2014, by Patrick Springer, Forum News Service
    Ron Schalow of Fargo
    Ron Schalow of Fargo has been an outspoken advocate of stabilizing Bakken oil to remove volatile gases before it is shipped by rail. | David Samson / Forum News Service

    FARGO, N.D. — Ron Schalow isn’t bashful about expressing his caustic opinions. He once wrote a book scolding President George W. Bush for failing to prevent the 9/11 terrorist attacks.

    Part of the title can’t be printed here, but the subtitle read, “The 9/11 Leadership Myth.”

    More recently, the Fargo man, a frequent writer of letters to the editor, has focused his attention on explosive Bakken crude oil and rail safety – an issue that has drawn national attention after a series of fiery train derailments, including an accident that killed 47 people in Canada and one late last year near Casselton.

    Schalow launched a petition drive originally called the “Bomb Train Buck Stops in North Dakota,” which he renamed the “Coalition for Bakken Crude Oil Stabilization,” a reference to the process for removing volatile gases.

    Improbable activist

    Schalow’s background makes him an improbable activist. His early career was spent managing restaurants and bars, with a stint as a minor league baseball manager.

    More recently, he worked for software companies including Microsoft in Fargo, but said he grew weary of corporate culture and office politics and turned to freelance work.

    He has assembled a loose network of people concerned about the crude oil stabilization issue, including local officials in Minnesota and other states, but laments he has found little support for his crusade in North Dakota.

    Still, North Dakota leaders have been under pressure from the federal government and other states, including Minnesota, to treat crude oil before shipping it around the country by rail to refineries.

    The North Dakota Industrial Commission is preparing new standards, likely to take effect Jan. 1, to “condition” crude oil before transport to address safety concerns. Separately, federal officials are drafting more stringent safety standards for tanker cars.

    “I think we have to take some responsibility over what’s going over the tracks into Minnesota and the rest of the country,” Schalow said. “It has a lot to do with this is a product that’s coming out of my state.”

    By his own admission, 59-year-old Schalow is not a consensus builder. A freelance writer for marketing clients, he isn’t a joiner by nature. Bespectacled, with a goatee, he is soft-spoken but adamant in expressing his views.

    He has peppered North Dakota officials, including petroleum regulators and the three-member Industrial Commission, with emails calling for action and asking who is in charge of what he sees as a vital issue of public safety.

    “I’ve badgered them relentlessly,” he said.

    He is dismayed by what he regards as a sluggish state response, even after an official “tabletop exercise” last June that estimated 60 or more casualties if an oil train derailed and exploded in Fargo or Bismarck.

    The exercise simulated a disaster similar to the blast that killed 47 and destroyed much of the town of Lac-Mégantic, Quebec, in July 2013.

    For Schalow, the key to ensuring the oil is safe is to remove the volatile gases before shipping. Anything else, in his view, is passing along a potentially deadly problem for others to face.

    “If you want to fix a problem, you go to the source of the problem,” he said. “You don’t prepare for something that doesn’t have to happen.”

    Derailments costly

    Dealing with an explosive derailment can be costly. New York officials estimated, for example, it would take $40,000 in foam to extinguish one tanker car.

    In the rail accident near Casselton last December, 20 tanker cars derailed, 18 of which were breached, unleashing a series of explosions and an enormous fireball. Intense heat kept the firefighters far from the flames, which they had to allow to burn out.

    No one was seriously injured or killed in the crash.

    “They can’t be prepared for combat explosions,” Schalow said, referring to the explosive fires that Bakken crude derailments have produced. “What would they do?”

    North Dakota officials in the governor’s office and Department of Mineral Resources declined to talk about Schalow’s advocacy, but said the state is moving ahead to improve the safety of crude oil transportation.

    “Gov. (Jack) Dalrymple takes rail transportation safety very seriously and he believes it’s important to have the public weigh in on this important issue,” said Jeff Zent, a spokesman and policy aide for the governor, the highest-ranking member of the Industrial Commission.

    “That’s why the Industrial Commission will announce further regulations aimed at improving the safety of oil rail transportation,” he added.

    “Our goal has always been to make crude oil as safe as possible for transport, within our jurisdiction,” said Alison Ritter, a spokeswoman for the North Dakota Department of Mineral Resources, which regulates oil and gas production.

    The department is also working with “the appropriate federal agencies to better communicate our role to make crude oil as safe as possible for transport,” Ritter said.

    In contrast to North Dakota, most crude oil in Texas is stabilized before shipment. Pipeline companies routinely require stabilization before accepting shale oil.

    “How hard is it to stand up and say I’m against trains blowing up in my town?” Schalow asked, referring to public officials’ initial reluctance to impose tougher standards.

    A recent Forum Communications poll found that 60 percent of respondents were concerned about the safety of shipping crude oil by rail, but there has been no real clamor from residents, Schalow said.

    “It’d be nice if someone stood up and defended me once or twice,” he said. As for holding a meeting of supporters, well, “Who would I call and who would dare show up? There’s no political will in this state except for that anonymous 60 percent.”

    In Minnesota, Gov. Mark Dayton has urged North Dakota to stabilize oil before loading crude onto trains. An estimated 50 North Dakota oil trains roll through Minnesota each week, many with 100 tanker cars.

    Pressure to make North Dakota crude oil safe for interstate shipment is mounting on several fronts.

    Other states, including New York and California, where refineries take Bakken crude, are considering safety requirements.

    “There’s a lot more angst across the country than there is here,” Schalow said, adding that most of his contacts are from other states, including New York, California and Washington state.

    “I think he’s a pretty straight shooter,” said Tim Meehl, mayor of Perham, Minn., who is concerned about oil trains traveling through his town. “I think everything he says has a lot of merit to it.”

    Meehl has not met Schalow, but saw him at a meeting in Moorhead earlier this fall attended by Dayton and local officials, and has exchanged emails with Schalow.

    “They don’t want to step on toes out there,” Meehl, a native of Oakes, N.D., said of North Dakota officials’ deference to oil interests. “We need the oil. We just need to do it in a safer way.”

    In North Dakota, residents and politicians seem reluctant to do anything that risks discouraging energy production, a powerful economic engine, Schalow said.

    ‘Quiet acceptance’

    “You can’t say anything that might impact business, no matter what,” he said, describing what he regards as North Dakota’s curious culture of quiet acceptance.

    Regulators aren’t alone in singling out oil tanker cars. BNSF announced last week that it will charge a $1,000 fee for each older crude oil tank car, more prone to puncture than newer models. By one estimate, that would add about $1.50 a barrel to the transportation cost.

    In Texas, energy companies have invested hundreds of millions of dollars to make crude safer to handle. The cost of stabilizing crude oil could trim potential revenue by perhaps 2 percent, according to the estimate of an unidentified industry executive interviewed by The Wall Street Journal.

    Schalow has been an outspoken critic of the Bush presidency and North Dakota leadership, but said he really has no allies in either political party.

    A conservative blogger once described him as a “truther” for his criticisms of Bush, whom he castigated for failing to take pre-emptive action against al-Qaida despite warning signs of their terrorist ambitions. Schalow dismisses the “truther” label as unfair, saying he offered no conspiracy theories in his book.

    He said the paperback sold 4,000 or 5,000 copies after it came out in 2006. No book is forthcoming on the issue of Bakken crude safety, but Schalow is unlikely to stop writing his letters, emails and Facebook posts.

    “I don’t think it’s a political issue,” he said. “I think it’s a public safety issue.”

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      Federal Inspector General to audit transport of volatile crude by rail cars

      Repost from The Chicago Sun Times
      [Editor: See the Inspector General’s audit announcement here and the PDF notice to the Federal Railroad Administrator here.  – RS]

      Federal IG to audit transport of volatile crude by rail cars

      Rosalind Rossi, October 29, 2014
      A CSX train from Chicago carrying crude oil derailed in April in Lynchburg, Va., forcing the evacuation of hundred.
      A CSX train from Chicago carrying crude oil derailed in April in Lynchburg, Va., forcing the evacuation of hundreds.

      A federal inspector general is launching an audit of whether hazardous materials are being carried safely over the nation’s rails — including highly-volatile Bakken crude that travels through the Chicago area.

      “Due to the public safety risk posed by increases in the transportation of hazardous materials by rail, we are initiating an audit assessing the Federal Railroad Administration’s (FRA) enforcement of hazardous materials regulations using inspections and other tools,” a memo on the website of the Office of Inspector General of the U.S. Department of Transportation said Wednesday.

      The memo specifically cited a fatal July 2013 Bakken oil train derailment in Lac Megantic, Canada, that “highlighted the importance of oversight of hazardous materials being transported by rail.” The Lac Megantic blast decimated more than 30 downtown buildings in the Canadian town and killed 47 people.

      At least eight rail lines carry Bakken crude through Illinois, according to the Illinois Emergency Management Agency. They are BNSF, Norfolk-Southern, Alton & Southern, CN, CSX, Indiana Harbor Belt, Union Pacific and Canadian Pacific. Maps provided by BNSF to the Illinois emergency agency indicated BNSF rails carry Bakken through Cook County.

      A candlelight vigil about what protestors called “bomb trains” was held July 10 at the BNSF terminal at 16th Street and Western Ave out of fear that black tank cars observed there with  placards indicating they held flammable petroleum were actually carrying Bakken crude. The protest was among those waged nationally to observe the one-year anniversary of the Lac Megantic disaster.

      “We saw 47 people killed in Lac Megantic,’’ Debra Michaud, an organizer of the Pilsen protest, said at the time. “A bomb train explosion in Pilsen or Little Village would be many times that.’’

      In April, a CSX train traveling from Chicago and loaded with crude oil derailed and exploded in Lynchburg, Va.. The incident shut down roads and bridges and forced the evacuation of hundreds. No one was injured or killed.

      The crash was among series of accidents across North America involving railroads’ crude oil shipments, which have surged dramatically as oil production rises in regions like North Dakota’s Bakken shale and western Canada.

      Wednesday’s inspector general memo noted that crude oil shipments have increased from 9,500 carloads in 2008 to 407,761 in 2013 — a more than 4000 percent jump.

      Mayors Karen Darch of Barrington and Tom Weisner of Aurora have been particularly vocal about the increasing transport of volatile crude and other dangerous products. They say their residents face frequent traffic jams caused by long trains carrying volatile liquids and worry about the sturdiness of tank cars holding such liquid.

      Some volatile fluids are being transported in the equivalent of the “Ford Pinto” of rail cars and such tankers should be upgraded, Darch has contended.

      Darch Wednesday welcomed the IG audit as a positive development.

      “We are all concerned about public safety risk and hopefully this report will have suggestions for further enhancing public safety,” Darch said.

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        Railroads oppose some oil train safety measures

        Repost from Politico

        Documents: Railroads want to hit brakes on some oil train safeguards

        By KATHRYN A. WOLFE | 6/13/14 5:08 AM EDT
        A fireball goes up at the site of an oil train derailment in Casselton, North Dakota, on Dec. 20, 2013.
        The report previews what the administration may be considering to stop crashes. | AP Photo: A fireball goes up at the site of an oil train derailment in Casselton, North Dakota, on Dec. 20, 2013.

        The railroad industry is warning the White House against some potential safety rules for trains carrying explosive crude oil, saying freight and passenger rail traffic could be disrupted for years if companies must obey 30 mph speed limits, install more sophisticated brakes and keep the trains manned at all times.

        The arguments, contained in documents posted after a meeting this week between railroad officials and the Office of Management and Budget, also offer a preview of what steps the Obama administration may be considering in response to oil train crashes that have struck the U.S. and Canada in the past year. Those include a disastrous July 6 explosion that killed 47 people in Lac-Mégantic, Quebec, after an engineer left a train packed with North Dakota crude oil parked on a steep incline with brakes that may not have been properly set.

        The Department of Transportation declined to comment on the documents. DOT submitted a draft rule proposal to OMB in April but has offered no details about what’s in it.

        Companies represented at Tuesday’s OMB meeting included the four major freight railroads — BNSF, Union Pacific, Norfolk Southern and CSX — as well as other industry groups and Amtrak, according to White House records.

        While Amtrak doesn’t haul crude oil, a BNSF handout arguing against lower speed limits said the passenger rail’s travel schedules on one 1,815-mile route could be lengthened by two hours if oil trains’ top speeds are lowered to 30 mph from 50 mph. That route stretches between Aurora, Ill., and Spokane, Wash., which BNSF called its primary route for crude oil.

        Slowdowns would cause “severe” impacts for the railroad’s operations, including both oil and grain shipments, BNSF said in the handout, calculating six-hour delays for freight trains along the same route. All told, the railroad said it would have to spend $2.8 billion to rebuild its lost shipping capacity during the next four years, while facing $630 million in additional annual expenses such as additional crew wages and lost productivity.

        The Association of American Railroads, the freight railroad industry’s main trade group, offered a similar document on the speed limit issue.

        None of the documents address the main issue people are expecting the DOT rule to address: increased safety requirements for the tanker cars that carry the oil.

        Oil train traffic across the U.S. has increased 40-fold since 2008 because of booming production in places like North Dakota and western Canada. It’s also become an increasingly contentious issue for communities from California and Washington state to Albany, N.Y., and Lynchburg, Va.

        The documents may not accurately reflect DOT’s undisclosed draft — the railroads may have been blindly making a case for what they don’t want to see happen. But they reveal that industry insiders have given thought to potential regulations that would go much further than the mostly voluntary measures DOT has imposed so far.

        Earlier this year, DOT announced that railroads had voluntarily agreed to restrict some oil trains to 40 mph in certain populous areas.

        But lowering the speed limit to 30 mph would harm “delivery capability” for BNSF’s oil customers, the railroad said in the document. To keep up with demand, it said, it would have to add an additional 11,280 tank cars to its crude oil fleet.

        In the other documents posted on OMB’s website:

        — A handout from CSX argues against requiring electronically controlled pneumatic braking systems, saying the technology is “expensive and only works if the entire train is equipped.” The company says the brakes would have “limited use and minimal safety impact.”

        As part of an existing voluntary agreement between the industry and DOT, railroads agreed to equip all trains pulling 20 or more carloads of crude oil with other types of advanced braking systems — either distributed power or two-way telemetry end-of-train devices.

        — And a final handout, whose authorship is unclear, argues against requiring that crude oil trains never be left unattended. It says “attending crude oil trains from origin to destination will increase congestion, require additional handling, and significantly drive up costs,” including $96 per hour for a two-person crew.

        It also says that “appropriate securement and security measures are already in place to ensure safe movement of crude oil shipments.”

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