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Reuters Exclusive: California getting more Bakken crude by barge than rail

Repost from Reuters
[Editor:  At the 9/11/14 Benicia Planning Commission meeting, John Hill, vice president and general manager of the Valero Benicia Refinery, stated that Bakken crude has been refined at Valero.  Commissioner Steve Young asked Hill to confirm his statement, which he did.  Young then asked the means of transport, and Hill replied “by barge.”  Our communities might well ask when, how much, and with what new volatile emissions output, etc….  – RS]

Exclusive: California getting more Bakken crude by barge than rail

By Rory Carroll, SAN FRANCISCO, Oct 23, 2014
A pumpjack brings oil to the surface  in the Monterey Shale, California, April 29, 2013.  REUTERS/Lucy Nicholson
A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013. REUTERS/Lucy Nicholson

(Reuters) – Shipments of Bakken crude oil from North Dakota to California by barge have quietly overtaken those by train for the first time, showing how the state’s isolated refiners are using any means necessary to tap into the nation’s shale oil boom.

While tough permitting rules and growing resistance by environmentalists have slowed efforts to build new rail terminals within California itself, a little-known barge port in Oregon has been steadily ramping up shipments to the state, a flow expected to accelerate next year.

From January through June, California received 940,500 barrels of the North Dakota crude oil from barges loaded at terminals in the Pacific Northwest, the highest rate ever, Gordon Schrempf, senior fuels analyst for the California Energy Commission, told Reuters.

Bakken crude transported to California on railcars, which has gained widespread attention after a series of fiery train derailments in North America, accounted for just 702,135 barrels over the same time period, according to published figures.

“We’re seeing marine transport of Bakken crude outpace rail for the first time,” Schrempf said. In 2013, rail shipments of 1.35 million barrels exceeded barge shipments of 1.33 million barrels. The year before, almost no crude arrived by barge.

Bakken shipments by barge and rail may only comprise a tiny portion of the crude California imports, at about 5,200 and 4,000 barrels per day respectively, with Alaska supplying over 20 times as much crude.

But companies, including refiner Tesoro Corp and logistics company NuStar Energy LP, have plans to significantly expand that volume with new terminals along the Pacific Northwest that would unload trains from North Dakota and pump the oil onto tankers.

They would help make California a major destination for Bakken oil, a trend that has drawn objections from environmental groups who have been seeking to stem the tide, often by blocking local permits to built oil-train offloading terminals.

“Bringing it in by barge gets you around cumbersome permitting and the growing citizen opposition to crude-by-rail,” said Lorne Stockman, research director of Oil Change International, a research and advocacy organization working on energy, climate and environmental issues.

To be sure, their objections may differ. The principle concern over transporting Bakken by rail is the risk that a derailment could cause a deadly explosion similar to the one in Lac Megantic, Quebec, last year that killed 47 people.

There is no suggestion that waterborne oil transportation poses similar explosive risks, although the environmental impact of a barge spill could be much greater.

“The barges are designed to carry the grade of oil that the Bakken is,” said Ted Mar, prevention branch chief for the state’s Office of Spill Prevention and Response and a former member of the Coast Guard.

That is small comfort to environmentalists, who oppose all forms of oil production, in particular shale crudes like Bakken, extracted through hydraulic fracking they fear contributes to global warming and poses a potential risk to water supplies.

“Our end goal is to leave these more dangerous, unconventional fuels in the ground,” said Jess Dervin-Ackerman, conservation manager for the San Francisco Bay Chapter of the Sierra Club.

SMALLER BUT CLOSER

With state production declining since the mid-80s, California’s refiners have increasingly relied on deliveries of crude by oceangoing tankers carrying 500,000 barrels or more from places like Alaska, Saudi Arabia, Ecuador and Iraq, which supplied two-thirds of their needs last year.

The refiners have been scrambling for several years to get better access to cheaper domestic shale oil by any means necessary, replacing costlier imports. But with the big shale fields to the east of the Rocky Mountains and a lack of major pipelines, it has not been easy.

The articulated tug barges (ATBs) now arriving are tiny by comparison to the tankers, carrying as little as 50,000 barrels.

Such shipments cost more than bringing Bakken directly to California by rail, but easily plug into existing port and terminal infrastructure – avoiding the need for new permitting that can take years.

While many are working to build out their own rail facilities, a handful of major rail-to-barge terminals along the Pacific Northwest coast that would ship over 500,000 bpd of Bakken crude have been in the works for several years. But most are incomplete, and several face delays.

One of the few exceptions is an idled ethanol terminal and processing plant in Clatskanie, Oregon, run by Global Partners LP. The facility, on a small canal that feeds into the Columbia River, began quietly transshipping oil from trains to barges in 2012 and is now receiving so-called “unit trains”, mile-long trains that only carry crude oil.

“Unit train volume into our Clatskanie terminal is up, and interest in the facility from prospective customers is at an all-time high,” Global Partners Chief Executive Eric Slifka said in August.

Global Partners did not respond to a request for comment.

Later that month, the firm received a new air permit from the Oregon Department of Environmental Quality that will allow it to ship as much as 1.84 billion gallons of volatile liquids, or some 120,000 bpd. It did not specify crude or ethanol.

Much of those shipments moved north to refineries in Washington, including BP’s Cherry Point in Puget Sound, and Phillips 66’s Ferndale facility. But both those plants are expanding their own facilities to bring more Bakken in by rail, likely curbing some demand for barges.

Top oil barge operator Kirby Corp, which runs vessels out of Clatskanie, is currently building two larger 185,000-barrel barges to deploy on the coast next autumn.

Environmentalists say they are monitoring the rise in Bakken-by-barge deliveries.

“This won’t pull our focus away from crude by rail, but rather expand the lens with which we look at dangers of Bakken entering our communities,” said the Sierra Club’s Dervin-Ackerman.

(Reporting by Rory Carroll, editing by Jonathan Leff and Marguerita Choy)
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    ForestEthics: switch to newer rail cars for crude still not safe

    Repost from ABC News
    [Editor: Significant quote: “Matt Krogh, of the group ForestEthics, which has sued the U.S. Department of Transportation over the shipment of volatile crude oil in older railroad tank cars, told The Associated Press on Saturday that there’s little evidence the newer tank cars will truly prevent explosive spills. He argued that the newer cars are tested at slower speeds than the speed at which most derailments occur, and he noted that it was one of the CPC-1232s that exploded in a fireball during a derailment in Lynchburg, Virginia, in April Krogh called switching to the newer cars ‘a red herring.’   ¶  ‘It’s a marginal improvement, but it’s nowhere near safe,’ he said. ‘They’re essentially grasping at straws to convince people that they can do it safely. I don’t think you can safely and profitably run trains of crude.'”  – RS]

    Refinery Switching to Newer Rail Cars for Crude

    BELLINGHAM, Wash. — Oct 11, 2014

    A refinery in northwest Washington state says it will no longer accept any volatile North Dakota crude oil unless it arrives on newer-model tank cars.

    By the first week of October, the BP Cherry Point facility had stopped using pre-2011 standard tank cars, known as DOT-111 cars, for the shipments, The Bellingham Herald reported ( http://is.gd/XmHxHN ).

    The change comes amid public concern about the safety of shipping crude by train. Since 2008, derailments of oil trains in the U.S. and Canada have seen the older 70,000-gallon tank cars break open and ignite on multiple occasions, resulting in huge fireballs. A train carrying Bakken-formation crude from North Dakota in the older tanks crashed in a Quebec town last year, killing 47 people.

    The National Transportation Safety Board, which recommended upgraded regulations for crude oil and ethanol cars in 2011, is working on updating rail safety standards and could require companies to phase out the DOT-111 cars for shipping crude oil during the next couple of years

    Cherry Point was already using newer, safer tank cars to receive about 60 percent of its crude oil, but expedited the switch to the newer cars in response to community concerns, BP spokesman Bill Kidd said. The refinery now uses a fleet of about 700 newer cars, called CPC-1232s.

    The newer cars have thicker shells, head shields on both ends and improved valve protection.

    But Matt Krogh, of the group ForestEthics, which has sued the U.S. Department of Transportation over the shipment of volatile crude oil in older railroad tank cars, told The Associated Press on Saturday that there’s little evidence the newer tank cars will truly prevent explosive spills. He argued that the newer cars are tested at slower speeds than the speed at which most derailments occur, and he noted that it was one of the CPC-1232s that exploded in a fireball during a derailment in Lynchburg, Virginia, in April.

    Krogh called switching to the newer cars “a red herring.”

    “It’s a marginal improvement, but it’s nowhere near safe,” he said. “They’re essentially grasping at straws to convince people that they can do it safely. I don’t think you can safely and profitably run trains of crude.”

    Trains carrying Bakken oil from North Dakota have been supplying Washington refineries at Tacoma, Anacortes and Cherry Point. Oil-train export terminals are proposed at Vancouver and Grays Harbor on the Washington coast.

    About 70 percent of the crude-oil rail cars that BNSF Railway currently moves through Washington state are already the newer design, railway spokesman Gus Melonas said.

    For two decades, the Cherry Point refinery received crude oil only by pipeline, Kidd said. It later added shipments by sea.

    But Alaskan crude oil has turned into the last type the refinery is interested in because of the higher price. Crude oil from mid-continent shale formations has become a cheaper option for the refinery, Kidd said.

    “It’s completely turned the industry on its head,” Kidd said. “Without access to crude by rail, this refinery cannot compete.”

    Refinery Manager Bob Allendorfer said the facility is always going to be progressive when it comes to safety. “Safety is always first, and you have to get it right,” Allendorfer said.

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      Washington refinery switching to newer rail cars for crude

      Repost from The Bellingham Herald

      BP Cherry Point will allow only newer-model train cars at its crude oil terminal

      By Samantha Wohlfeil, The Bellingham Herald, October 11, 2014


      BP Cherry Point has announced its rail terminal will no longer accept or unload any Bakken region crude oil from pre-2011 standard tank cars.By the first week in October, the facility had stopped using older DOT-111 cars for crude, BP spokesman Bill Kidd said.

      After several high-profile derailments in the last year, groups concerned about the safety of oil trains have rallied around a call to have companies trade in all old DOT-111 rail cars, which are used to carry a variety of hazardous and flammable liquids, for higher standard cars, like the CPC-1232.

      For decades the DOT-111 cars have been found more likely to puncture or burst. The National Transportation Safety Board, which recommended upgraded regulations for crude oil and ethanol cars in 2011, is working on updating rail safety standards.

      The newer cars have thicker shells, head shields on either end of the car and improved valve protection.

      BP Cherry Point, which received its first crude shipment from the Bakken region Dec. 26, 2013, was already using CPC-1232 tank cars to receive about 60 percent of its crude oil from that area and had planned to get about 400 more by the end of 2014, Kidd said.

      “But we expedited that in order to respond to community concerns,” Kidd said. “We pulled a lot of leverage to get to this point.”

      The refinery now uses a fleet of about 700 CPC-1232s.

      The NTSB could require companies to phase out the DOT-111 cars for crude oil shipping over the next couple of years.

      About 70 percent of the crude oil rail cars that BNSF Railway currently moves through Washington state are already the newer design, said Gus Melonas, BNSF spokesman for the Pacific Northwest.

      Transition to crude by rail

      For two decades the refinery received crude oil only by pipeline, later adding waterborne tanker service, Kidd said. But Alaskan crude oil has turned into the last type the refinery is interested in, due to price.

      Though many people did not see it coming, mid-continent shale formation crude oil has become a cheaper option and an advantage for the refinery, Kidd said.

      “It’s completely turned the industry on its head,” Kidd said. “Without access to crude by rail, this refinery cannot compete. … If there was a pipeline there wouldn’t be the big discount. Right now there is no other way to move it.”

      The Cherry Point rail terminal is made up of two complete loops that allow the refinery to hold up to two trains of about 120 cars – one full and one empty.

      It takes crews from BP contractor Savage Services about 18 to 20 hours to offload a train loaded with crude oil using gravity to drain one quarter of the train at a time, said BP Operations’ Ryan Kennedy, who oversees the rail terminal work. Once crews unload a train, it sits empty while BNSF sends a crew back to the facility to pick it up.

      The loop is about as flat as it gets, both for working purposes and safety, Kennedy said. A 0.25 percent grade keeps couplers between the cars tight when the trains are parked, and there is a slight grade at the entrance to/exit from the loop so in the event a train did get loose for whatever reason, it would not leave the refinery.

      A variety of safety precautions, like plastic liners built in under the rail loop and bins placed under each hose when the cars are hooked up for draining, are designed to prevent bad situations, Kennedy said.

      “There’s a lot of fat built in naturally, a lot of redundancy,” Kennedy said. “We secure the train above and beyond the minimum requirement. We’ve determined the standard for the longest train we could hold and we put on that many brakes for all trains, regardless of length.”

      BP’s terminal is permitted to receive an average of one unit train per day. It currently gets about 25 per month, Kennedy said.

      Refinery Manager Bob Allendorfer said the facility is always going to be progressive when it comes to safety.

      “Safety is always first, and you have to get it right,” Allendorfer said.

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