Tag Archives: Burlington Northern Santa Fe (BNSF)

Dakota Access pipeline to upend oil delivery in U.S. – Losers to include struggling oil-by-rail industry

Repost from Reuters

Big Dakota pipeline to upend oil delivery in U.S.

By Catherine Ngai and Liz Hampton | NEW YORK/HOUSTON, Aug 12, 2016 12:46pm EDT
Dead sunflowers stand in a field near dormant oil drilling rigs which have been stacked in Dickinson, North Dakota January 21, 2016. REUTERS/Andrew Cullen
Dead sunflowers stand in a field near dormant oil drilling rigs which have been stacked in Dickinson, North Dakota January 21, 2016. REUTERS/Andrew Cullen

It may seem odd that the opening of one pipeline crossing through four U.S. Midwest states could upend the movement of oil throughout the country, but the Dakota Access line may do just that.

At the moment, crude oil moving out of North Dakota’s prolific Bakken shale to “refinery row” in the U.S. Gulf must travel a circuitous route through the Rocky Mountains or the Midwest and into Oklahoma, before heading south to the Gulf of Mexico.

The 450,000 barrel-per-day Dakota Access line, when it opens in the fourth quarter, will change that by providing U.S. Gulf refiners another option for crude supply.

Gulf Coast refiners and North Dakota oil producers will reap the benefits. Losers will include the struggling oil-by-rail industry which now brings crude to the coasts.

The pipeline also will create headaches for East and West Coast refiners, which serve the most heavily populated parts of the United States and consume a combined 4.1 million barrels of crude daily. They will have to rely more on foreign imports.

The pipeline, currently under construction, will connect western North Dakota to the Energy Transfer Crude Oil Pipeline Project (ETCOP) in Patoka, Illinois. From there, it will connect to the Nederland and Port Arthur, Texas, area, where refiners including Valero Energy, Total and Motiva Enterprises operate some of the largest U.S. refining facilities.

“That’s a better and cheaper path than going out West and down through the Rockies,” said Bernadette Johnson, managing partner at Ponderosa Advisors LLC, an energy advisory based in Denver.

CHEAPER THAN RAIL

Moving crude by pipeline is generally cheaper than using railcars. The flagging U.S. crude-by-rail industry already is moving only half as much oil as it did two years ago: volumes peaked at 944,000 bpd in October 2014, but were around just 400,000 bpd in May, according to the U.S. Energy Department.

Rail transport has become less economical for East and West Coast refiners when compared with importing Brent crude, the foreign benchmark, because declining supply out of North Dakota made that grade of oil less affordable.

“If you look at the Brent to Bakken arb, it’s tight,” said Afolabi Ogunnaike, a senior refining analyst at Wood Mackenzie in Houston. “If you look at the spot rate, it’s uneconomical to move crude by rail right now.”

Ponderosa Advisors estimated that the start-up of the pipeline could reroute an additional 150,000 to 200,000 bpd currently carried by rail to the U.S. East Coast and Gulf Coast.

Crude imports into the East Coast are now on the rise, averaging 788,000 bpd this year, with nearly 960,000 bpd in July, the highest level in three years, according to Thomson Reuters data.

On the West Coast, refiners like Shell, Tesoro and BP may have to commit to some railed volumes for longer because of shipping constraints, although it will largely depend on rail economics. They also face declining output from California and Alaska.

Tesoro’s top executive Gregory Goff told analysts and investors last week he expects rail costs to drop as much as 40 percent from the current $9-to-$10 barrel cost to compete with pipelines, in order to move Bakken to its Anacortes, Washington, refinery.

CHANGING TIDES

Rail companies have been trying to adapt. CSX Corp, which runs a network of lines in the eastern part of the country, said it was evaluating potential impacts of the pipeline. BNSF Railway declined to discuss future freight movements, but said that at its peak, it transported as many as 12 trains daily filled with crude, primarily from the Bakken. Today, it is moving less than half of that.

In a recent earnings call, midstream player Crestwood Equity Partners said it was working to capitalize on the pipeline and not be dependent on loading crude barrels onto trains. That includes building an interconnection to its 160,000 barrel-per-day COLT crude rail facility in North Dakota.

As refiners bring in more barrels from overseas, Brent’s premium over U.S. crude will eventually widen. On Thursday, December Brent futures settled at a 97-cent premium to U.S. crude, one of its widest premiums this year.

Separately, Bakken crude, a light barrel, could rise further due to the additional competition, especially as production is still falling. Bakken differentials hit a six-month low earlier this week of $2.65 a barrel below WTI, according to Reuters data, but rose to a $1.80 a barrel discount by Thursday.

(Reporting by Catherine Ngai in New York and Liz Hampton in Houston; Editing by David Gregorio)
Share...

    BNSF, Union Pacific lawsuit: claims California’s new rail hazmat fee illegal

    Repost from Hazmat Magazine
    [Note: The complaint is available at http://src.bna.com/hm1. – RS]

    California’s new Rail Hazmat Fee Illegal Claims Railroads

    By J Nicholson, August 11, 2016

    As reported in Bloomberg BNA, California’s new fee on rail deliveries of crude oil and certain other hazardous materials is illegal, the nation’s two largest railroad companies said in a lawsuit ( BNSF Railway Co. v. California State Board of Equalization, N.D. Cal., No. 16-cv-04311-JCS, 7/29/16 ).

    Filed in federal court in San Francisco, the complaint challenges a newly approved regulation requiring railroad companies to collect from their customers $45 for each rail car carrying 25 specified hazardous materials into the state. To be paid to the state’s Board of Equalization, the fee is earmarked to help the state prepare for hazardous material incidents.

    The federal ICC Termination Act of 1995, the Hazardous Materials Transportation Act and the Railroad Revitalization and Regulatory Reform Act of 1976 preempt the fee implemented under S.B. 84, a budget bill enacted in 2015, the complaint said.

    Plaintiffs want an order blocking the state from collecting the fee.

    RAILWAY-TRACK

    “This hazmat charge defies federal law and economic logic,” the complaint filed July 29 by BNSF Railway Co. and Union Pacific Railroad Co. said. “If exclusive federal jurisdiction over the economic relationship between railroads and their customers means anything, it means that a State cannot establish the charges to be collected for rail transportation, order a railroad to collect them from its customers, and depress rail revenues and customer demand in the process.”

    Chemicals Covered by Fee

    California’s Office of Emergency Services adopted the fee regulation in June.  Expected to take effect later this year, the fee applies to rail cars containing acetonitrile, certain alcohols, anhydrous ammonia, ammonium hydroxide and calcium hypochlorite.  It also applies to chlorine, certain corrosive liquids, diesel fuel, environmentally hazardous substances, ethanol, gasoline, hydrogen peroxide, liquefied petroleum gas, liquefied gas, methanol, methyl ethyl ketone, nitric acid, petroleum crude oil, phenol, phosphoric acid, potassium hydroxide, propylene, sodium hydroxide, sulfuric acid, toluene and vinyl acetate.

    California’s fee only applies to rail deliveries, no other type of delivery of hazardous materials.  The Interstate Commerce Clause and the federal hazardous materials law forbid states from discriminating against interstate commerce, the complaint said.

    Benjamin J. Horwich of Munger, Tolles & Olson LLP is representing BNSF Railway.  Union Pacific’s counsel are from Sidley Austin LLP and include Carol Lynn Thompson and in-house attorney Melissa B. Hagan.

    A copy of the complaint is available at http://src.bna.com/hm1.

    Share...

      SACRAMENTO BEE: State seeks fee on dangerous chemicals crisscrossing California

      Repost from the Sacramento Bee

      State seeks fee on dangerous chemicals crisscrossing California

      By Tony Bizjak, July 22, 2016 6:00AM

      HIGHLIGHTS
      • California officials say the state isn’t prepared to handle hazardous materials spills
      • A new $45 fee on every rail car carrying dangerous substances will help beef up spill response

      Share...

        OIL TRAIN DISASTER PLANS: A burning need for the truth about oil train fires

        Repost from STAND.EARTH
        [Editor:  Highly significant. REQUIRED READING.  For a number of BenIndy articles addressing “Let it burn,” click here.  For “first responder training,” click here.  – RS] 

        Oil Train Disaster Plans: A burning need for the truth about oil train fires

        By Matt Krogh, May 13, 2016
        Don’t believe the hype: The scene of a crude oil derailment and fire is an uncontrollable fire. All firefighters can do is evacuate the area and wait for the fire to burn itself out.

        In the year since five fiery oil train disasters in the US and Canada brought national attention to the threat from trains hauling explosive crude oil, the rail industry has embarked on a high profile public relations exercise to reassure the public that deadly disasters can be averted by emergency responders. In fact, the reality of oil train accidents — and the unanimous opinion of fire officials and federal rail safety experts — proves that there is no fighting an oil train derailment and fire. The scene of a crude oil derailment and fire is an uncontrollable fire. All firefighters can do is evacuate the area and wait for the fire to burn itself out.

        Images from oil train firefighter training circulated by railroad and oil companies show firefighters standing close to burning tank cars, training hoses on small fires. But as Fairfield, Iowa, Fire Chief Scott Vaughan described in 2014, “If there was a spill or a fire, our big thing would be containment and evacuation,” he said. “We train for it, but training and actually doing are two different things.” Very simply, there is no controlling an oil train fire.

        In 2013 in Lac Megantic, Quebec, 47 people died when an oil train derailed and caught fire in the center of a small Canadian town. More than 1.5 million gallons of crude oil spilled in flowing “rivers of fire”, creating pool fires and filling sewers. Blocks away uncontrollable fires erupted from drains and manholes and more than 30 building were destroyed. Despite 1,000 firefighters responding from across Quebec and Maine the fire burned for two days.

        When an oil train derails at any speed over the puncture velocity of roughly 10 miles an hour (for a common CPC-1232 tank car) a dozen or so cars typically come off the tracks, decouple and are thrown from their wheels. If tank cars are punctured, possibly by something on the ground or the couplers on the ends of the cars, the crude (either Bakken or diluted tar sands, both highly volatile) can easily self-ignite or find an ignition source.

        Observations published by FEMA from County Emergency Manager Dave Rogness on the oil train explosion that rocked the small town of Casselton, ND, describe the derailment and the size of the spill:

        On December 30, 2013 in Casselton, a BNSF westbound train with 112 grain cars went off the tracks. Thirteen of the cars derailed, and one fell on the eastbound tracks. Within two minutes, a BNSF eastbound crude oil train hit that car. That caused two front locomotives, a hopper car, and twenty cars on the eastbound train to derail, and 18 of them ruptured, exploded, and released 450,000 gallons of Bakken crude oil.

        First responders to the Casselton accident were forced to pull far back from the scene because of the intense heat:

        The command post was originally set up one-quarter mile from the scene, but they had to pull back to a half mile because it was too hot for the responders even inside their rigs.

        A similar situation occurred in Galena, Illinois, where the fire from the March 2015 derailment burned for days. First responders, who unloaded emergency equipment nearby to fight the fire, were forced to abandon $10,000 in equipment on the scene when they pulled back to a safe distance.

        The DOT Emergency Response Guidebook is quite clear on the initial response to a single tank car disaster: “If tank, rail car or tank truck is involved in a fire, isolate for 800 meters (1/2 mile) in all directions” But this direction is for a single tank car, and oil train disasters almost always involve many more than one car.

        Emergency response to oil trains traveling across the US and Canada is left to municipal fire departments. Few fire departments have the manpower, training, or equipment to respond to more than a single burning 10,000-gallon tank truck of crude. An oil train tank car carries triple that, and most oil train disasters involve way more than a single tank car. As North Dakota Emergency Manager Rogness describes:

        “There were few options for fighting the fire. Water should not be put on exploding crude oil. Firefighters did not have enough foam in four counties together to put the fire out, plus the foam would freeze in the cold. Dry chemicals were not available. The only choice was to let it burn, which BNSF responders said would take about 12 hours. It took more than 24. Political leaders were skeptical of the strategy.

        In fact, federal guidelines for emergency responders for oil train fires state very clearly that the only option is to let the oil burn itself out.

        In the event of an incident that may involve the release of thousands of gallons of product and ignition of tank cars of crude oil in a unit train, most emergency response organizations will not have the available resources, capabilities or trained personnel to safely and effectively extinguish a fire or contain a spill of this magnitude.

        In 2015 in Mount Carbon, West Virginia, tens of thousands of gallons of burning crude escaped punctured cars, flowing into the nearby river and forming a pool fire under other tank cars. Under the intense heat those additional cars began to rupture and explode. A report on oil train safety by the Interagency Board, which coordinates local, state and federal agencies on emergency response, described the situation on the ground during the 2015 West Virginia oil train accident:

        During the derailment sequence, two tank cars were initially punctured releasing more than 50,000 gallons of crude oil. Of the 27 tank cars that derailed, 19 cars became involved in the pileup and post-accident pool fire. The pool fire caused thermal tank shell failures on 13 tank cars that otherwise survived the initial accident.

        Emergency responders at the Mount Carbon, WV incident reported the first thermal failure about 25 minutes after the accident. Within the initial 65 minutes of the incident, at least four tank car failures with large fireball eruptions occurred. The 13th and last thermal failure occurred more than 10 hours after the accident.

        With oil trains continuing to run across North America, it’s a question of when, not if, we will experience the next fatal oil train accident. As Christopher A. Hart of the National Transportation Safety Board explained in January 2016, “We have been lucky thus far that derailments involving flammable liquids in America have not yet occurred in a populated area… But an American version of Lac-Megantic could happen at any time.”

        Realistic oil train disaster preparations would not involve firefighters spraying tank cars for cameras. The first, most important step would be to recognize — as emergency responders across the country freely admit — that no municipal fire department can control an oil train fire.

        An upcoming Department of Transportation rulemaking is intended to provide oil train information and preparedness (materials and training) for first responders around the country. Unfortunately, that new rule has been delayed for years and the draft rules are not expected until late 2017. It will be years before the final rules are released, leaving dangerous tank cars, volatile crude, and unprepared communities to bear the risks of oil train traffic.

        And thorough reporting by DeSmog Blog on the weak existing regulatory standards and the oil and rail industry’s failure to meet them demonstrates, there have been no improvements in the safety of the 100,000 unsafe tank cars in the US fleet. The steps oil shippers have promised to improve the safety of oil trains are as hollow and inadequate as the promise of firefighters dousing burning oil tank cars.

        Real emergency preparedness for oil trains would involve preparing for massive amounts of spilled crude oil by developing evacuation protocols for the 25 million Americans who live in the oil train blast zone. It would include modeling the flow of burning crude, likely toxic plumes and wildfires. It would also require much better information sharing and coordination with emergency officials on oil train hazardous cargo, routes, and scheduling, information which railroads have strongly resisted sharing.

        According to the National Fire Protection Association 69 percent of the 1.1 million firefighters in North America serve in volunteer fire departments. They are not trained or equipped for effective oil train emergency response – in fact, the scale and danger of an oil train fire puts our emergency responders, like the millions who live along the tracks, at unacceptable risk. The railroads are providing some highly touted emergency training to a tiny sliver of this massive force, but the reality is that these efforts are staged to misinform the public, not prepare emergency responders.

        Federal emergency response guidance and fire chiefs have long recognized that there is no effective emergency response to a crude oil derailment fire event. If even one tank car of crude oil is involved in a fire, federal guidelines are clear that firefighters should pull back half a mile and let it burn. And that is another good reason that oil trains are too dangerous for the rails.


        Many thanks to Fred Millar for his research and analysis.


        [Editor:  For a number of Benicia Independent articles addressing “Let it burn,” click here.  For “first responder training,” click here.  – RS] 

        Share...