Tag Archives: Fugitive Emissions

California Crude Trains: How Much Oil Is Actually Coming In and Where Is It Coming From?

Repost from North American Shale Blog
[Editor: Notwithstanding the disparaging remarks about crude-by-rail opponents and politics in California, this is an interesting report by a pro-industry analyst.  – RS]

California Crude Trains: How Much Oil Is Actually Coming In and Where Is It Coming From?

California has become ground zero for legal opposition to crude-by-rail projects. Opponents decry derailments, toxic vapors, and other ills.[i]  Yet despite the dire images painted by crude-by-rail’s opponents, the reality on the ground in California has been quite mundane thus far. The high-water mark to date for California railborne crude supplies was approximately 39 thousand barrels of oil per day (kbd) in December 2013 (Exhibit 1).

To put this number in perspective, California refineries typically process an average of around 1.7 million barrels per day of crude – meaning that at the crude-by-rail peak, only about one barrel in 50 of the state’s crude supply came in by rail.[ii]  Presently, the number is closer to one barrel in 100 – certainly not the overwhelming flood of trains opponents fear. And to that point, even supplying one-quarter of California’s total crude oil needs would only require about six to seven crude oil unit trains per day. To put this in context, the Colton Crossing east of Los Angeles by itself can see more than 100 freight trains per day.[iii]

Exhibit 1: California Crude by Rail Sources

exhibit 1
Source: California Energy Commission, Alberta Office of Statistics and Information

Where California’s Railborne Oil Imports Come From

For much of the past six years, light, low-sulfur Bakken crude and heavier, higher-sulfur Western Canadian Select (“WCS”) dominated rail imports into California. Canadian supplies show a clear correlation with how cheap WCS is relative to Maya, a heavy crude oil from Mexico that is shipped by tanker and offers a proxy for what heavy, sour, waterborne crude oil imports into California will cost. The spread between WCS and Maya prices matters because it only makes sense for refiners to purchase WCS barrels if they are sufficiently discounted that the buyer still comes out ahead after adjusting for rail transport costs, which can amount to approximately $20/barrel for manifest trains and $15/barrel for oil moved on unit trains.[iv]

For reference, “manifest trains” are mixed cargo trains where a 100-car freight train might include 20 or 30 tanker cars carrying oil. Unit trains, on the other hand, carry only one type of freight, meaning that all 100 to 120 cars carry crude oil. This maximizes economies of scale and significantly reduces transportation costs. Shipments of Canadian crude oil into California traditionally rode on manifest trains, but in November 2014, Union Pacific brought its first unit train of crude oil from Western Canada into California, to a terminal near Bakersfield.[v] The route is currently dormant as WCS crude’s discount to Maya was less than $10 per barrel in January 2015, according to official price data, making it uneconomical to import the Canadian oil by rail.[vi] Unit trains’ lower costs relative to the previously used manifest trains will likely have oil trains rolling from Alberta to California once again if the WCS discount widens to around $15 per barrel.

California has also seen increased supplies of light, low-sulfur crude oil from New Mexico in recent months. The most likely explanation for this is that continued strong oil production in Texas, New Mexico, and the Midcontinent are inundating the Gulf Coast with light, sweet barrels. Indeed, this author’s models using official Energy Information Administration data strongly suggest that Gulf Coast refineries have hit a physical “wall” where they are not able to sustainably use more than 65 percent domestic crude oil to supply their plants, because facilities designed for heavier, higher-sulfur oils cannot run at maximal efficiency with light, low-sulfur crude feedstocks.[vii] This crowded market reduces the potential realized value of crude to certain Permian Basin producers and makes California attractive as a clearing destination because crude can be railed from the Permian Basin to California for as little as $7-8/bbl, according to Tesoro.[viii]

What the Future May Hold

The bottom line is that California’s existing crude-by-rail terminal capacity is massively underutilized at present. The state’s two largest facilities alone – Kinder Morgan’s terminal at Richmond and new terminal near Bakersfield – can offload more than 140 kbd at full capacity. In comparison, crude-by-rail import volumes were less than 20 kbd in December 2014, the last month for which data are available (Exhibit 2). 

Exhibit 2: California Crude by Rail Capacity vs. Actual Import Volumes

exhibit 2
Source: California Energy Commission, Company Reports

Current terminal capacity is sufficient for approximately two unit trains per day of crude – 140 to 150 kbd – to enter the state. California’s fickle politics make forecasting crude-by-rail volumes a tough exercise. That said, this author believes that if oil prices recover to at least $75/bbl, California’s railborne crude imports will likely exceed 200 kbd by early 2016. Under those conditions, existing terminals would increase their capacity utilization and larger price differentials would attract additional Canadian heavy crude, as well as Bakken and other light, sweet grades from the Rocky Mountain states and the Permian.


[i] “GROUPS SUE TO STOP DAILY 100-CAR TRAIN DELIVERIES OF TOXIC CRUDE OIL TO BAKERSFIELD TERMINAL,” Earthjustice, January 29, 2015, http://earthjustice.org/news/press/2015/groups-sue-to-stop-daily-100-car-train-deliveries-of-toxic-crude-oil-to-bakersfield-terminal; See also Alexander Obrecht, “Environmental Groups Ramp Up the Crude-by-Rail Fight in the Courtroom,” BakerHostetler North America Shale Blog, October 6, 2014, http://www.northamericashaleblog.com/2014/10/06/environmental-groups-ramp-up-the-crude-by-rail-fight-in-the-courtroom/
[ii] “FACTBOX – California crude sources and oil-by-rail projects,” Reuters, July 21, 2014, http://af.reuters.com/article/energyOilNews/idAFL2N0PM26S20140721
[iii] “Colton Flyover Supports L.A.-Area Business,” Union Pacific Railroad, September 5, 2013, http://www.uprr.com/newsinfo/community_ties/2013/september/0905_colton.shtml
[iv]Yadullah Hussein, “Oil-by-rail economics suffers amid narrowing spreads,” Financial Post, February 9, 2015, http://business.financialpost.com/2015/02/09/oil-by-rail-economics-suffers-amid-narrowing-spreads/?__lsa=c711-5acd
[v] Bruce Kelly, “UP begins Canada-to-California CBR service,” Railway Age, November 25, 2014, http://www.railwayage.com/index.php/tag/CBR/feed.html
[vi] “Heavy Crude Oil Reference Prices, Monthly,” Alberta Office of Statistics and Information, https://osi.alberta.ca/osi-content/Pages/OfficialStatistic.aspx?ipid=941 (last accessed March 18, 2015)
[vii] Detailed explanation of models available; please contact author at gcollins @ bakerlaw.com.
[viii] Company investor presentation, September 2014, “Rail Costs to Clear Bakken,” slide 11, http://phx.corporate-ir.net/phoenix.zhtml?c=79122&p=irol-presentations
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    Fenceline Communities Face an Ongoing Invisible Assault of Toxics Emanating from Refineries

    Repost from NRDC Switchboard – Diane Bailey’s Blog
    [Editor: In the flurry of warranted high emotion over potential catastrophic derailments and explosions, we risk neglecting the far more widespread and lasting disaster of public health and harm to the environment caused by the production, refining and burning of fossil fuels.  This by our friend Diane Bailey should be required reading for everyone, and especially for those of us living in “fenceline” communities.  – RS]

    Fenceline Communities Face an Ongoing Invisible Assault of Toxics Emanating from Refineries

    By Diane Bailey, ‎November ‎18, ‎2014
    Diane Bailey
    Diane Bailey, Senior Scientist, Natural Resources Defense Council

    Drive past the other-worldly refinery landscape in Deer Park, Texas and you have to lunge for the recirc button to avoid the sickeningly-sweet chemical odors. That’s not an option for the more than 200,000 people living along the petrochemical complex of the Houston Ship Channel; they can’t press a recirc button to avoid exposure to those chemical fumes. Such is the problem for hundreds of thousands of Americans living in refinery fenceline communities that are often plagued by foul odors and safety risks.

    Houston_Ship_Channel_Galena.jpg

    Photo: U.S. Army Corps of Engineers

    Of much greater concern though, are the invisible impacts of the toxic chemicals emanating from all the towers, pipes and tanks of refineries. Called “fugitive emissions,” these are chemicals that leak or escape not just during accidents, but also during every day operations. For many facilities, chemicals are leaking in greater quantities than from exhaust pipes where they are tracked and reported. Here is a summary of what these chemical pollutants are, health impacts that refinery fenceline communities face, and what can be done about it.

    The Chemicals That Leak Across Fencelines

    Oil refineries release several hundred hazardous air pollutants. Many of these chemical pose serious health hazards even at very low levels of exposure, and some can build up in the environment contaminating fish, soil and even household dust. These chemicals contribute to a wide range of serious health impacts including asthma and respiratory illnesses, developmental impacts like IQ loss, cancer, heart disease, reproductive system impacts including birth defects, damage to a range of organs including the kidneys and liver, and even premature death. Check out a list of fourteen notorious chemicals emanating from refineries below.

    The thing about these chemicals leaking out of refineries – you never know if you’re exposed to them, when and how much. Back in 1999, a few visits to Port Arthur, Texas, home of three large refineries, made me wonder about this; each time I left with a sticky residue on the car, a splitting headache and blurred vision. People reported their kids having rashes all the time. This made a little more sense after rooting through a room at the local branch of the Texas environmental agency (TCEQ) filled with cardboard boxes of records for each of the plants documenting refinery upsets, unplanned releases and accidents, seemingly on a weekly basis.  The plants were spewing chemical fumes “by accident” all the time.

    Whiting Indiana beach near refinery.jpg

    Photo: Whihala Beach – Whiting, Indiana, by David Wilson under Creative Commons licensing.

    Despite the stacks of paperwork though, it was still a mystery who was exposed to what and how much.  One thing was for sure though, a quick look through census data showed that the neighborhoods closest to the refineries and chemical plants were 99 percent non-white and the percent of non-whites in communities much farther away was dramatically lower. Where did the plant managers and other execs live?  This situation is sadly not unique to Port Arthur. It plays out in refinery towns across the U.S. creating hotspots of disproportionate pollution and “cancer alleys” in low income communities of color.

    Health Impacts Documented in Refinery Fenceline Communities

    Community health surveys have long indicated significantly increased illness and health impacts among residents living near refineries and petrochemical complexes. The surveys are validated by the dozens of rigorous peer reviewed studies that have documented community health impacts of pollution from petroleum refineries, finding increased rates of cancer, preterm births, asthma related hospitalizations, and increased mortality in communities around refineries.

    • Cancer: Many studies have found elevated rates of leukemia and lymphomas in residents living close to petrochemical plants.  One major recent study in the industrial heartland of Alberta, Canada, where many refinery/oil upgrading operations are located, found greatly elevated pollutant levels and notably higher rates of leukemia and non-Hodgkin lymphoma compared to neighboring counties.  Scores of other studies have found higher rates of cancer among residents who live closer to refineries (brain, lung, liver, bone, bladder, stomach, kidney and urinary, and other types of cancer).
    • Asthma: Several studies show increased asthma prevalence, emergency room visits for asthma, respiratory symptoms as well as significantly lower lung function among children and residents living close to refineries.
    • Birth Defects: In 2006, the Texas Department of State Health Services found that Corpus Christi, home of “Refinery Row,” had a birth defect rate that was 84 percent higher than the rest of Texas. A follow-up study found that mothers living near refineries and chemical plants had babies with high rates of life-threatening birth defects.
    • Premature Deaths: A recent major study of air pollution related mortalities in the U.S. found that out of over 5,000 cities evaluated, Donaldsonville, Louisiana has the highest mortality rate from air pollution. Nine refineries in the area contribute to the roughly 81 deaths from cardiovascular disease and lung cancer per 100,000 people.

    Wilmington Refinery.jpg

    Photo: Wilmington Refinery, Universal Images Group via Getty Images

    What Can We Do About it?

    This spring, U.S. Environmental Protection Agency is slated to finalize a new refinery rule that could be a major step in reducing pollution and monitoring for leaks. Please support this rule by telling Congress to protect our environmental policies instead of interfering with them.

    However, despite the critical need for this rule, the phase in will take many years even if it does get finalized according to a court-ordered schedule. In the meantime we are calling on local authorities to act swiftly to reign in refinery pollution beginning with a 20 by 2020 pledge in the Bay Area. The good news is that the Bay Area Air District voted on October 15th to adopt a policy to prevent increases in refinery emissions that an influx of dirtier, extreme crude oil could cause; and to plan for a 20 percent emission reduction from all refineries by 2020.

    The Bay Area refinery clean up policy goes back to the air district board for further consideration on December 17th, in time to provide a happier holiday for fenceline communities… that is, if the Grinch-like oil industry, claiming that it can’t afford to clean up, doesn’t stop it. The air district needs to hear your support to keep the refinery clean up policy on track.  The massive flaring events last week at the Tesoro refinery turned the sky in Martinez orange, reminding everyone for miles how badly we need refinery clean-up policies.

    tesoro flares.jpg

    Photo: Martinez Environmental Group

    Refinery fenceline communities continue to suffer the ill effects of pollution every day despite ample technology to clean up the mess and a wealthy industry that can surely afford the upgrades.  And we are all fenceline communities when it comes to climate change. Given the stark warning issued earlier this month from the world’s leading scientists in the IPCC report on climate change, noting that we will face “severe, pervasive and irreversible impacts” if we do not act now, it is high time to reign in the super-polluting refining industry.

    14 Notorious Refinery Pollutants

    1. Benzene is a known carcinogen (cancer causing agent), associated with childhood leukemia in particular. High exposures can impact the central nervous system leading to drowsiness, dizziness, irregular heartbeat, nausea, headaches, and depression; reproductive impacts, such as smaller ovaries; and potentially developmental effects such as low birth weight, delayed bone formation, and bone marrow damage.
    2. Toluene is especially harmful to people with asthma. It poses reproductive hazards and can cause headaches, impaired reasoning, memory loss, nausea, impaired speech, hearing, and vision, and over the long term, damage to the liver and kidneys.
    3. Ethylbenzene is a carcinogen. Chronic, low-level exposure can result in kidney damage and hearing loss.
    4. Xylenes can cause difficulty breathing, damage to the lungs, impaired memory, and possible damage to the liver and kidneys. Long term exposure is associated with multiple impacts to the nervous system, blood cell abnormalities, abnormal heartbeat, liver damage, genetic mutations, reproductive system effects, and death due to respiratory failure.
    5. Polycyclic aromatic hydrocarbons (PAHs) are a group of over 100 different tar-like chemicals, some of which are mutagens, carcinogens, and developmental toxicants.  PAHs can cross the placenta and harm an unborn fetus, contributing to fetal mortality, increased cancer risk and birth defects. PAHs are also associated with asthma-related symptoms and developmental and cognitive impairment, including lower IQ.
    6. Hydrogen Cyanide exposure at high levels swiftly harms the brain and heart, beginning with rapid breathing, followed by convulsions, and loss of consciousness, and can even cause coma and death. More commonly, low level exposure is associated with breathing difficulties, chest pain, vomiting, blood changes, headaches, and enlargement of the thyroid gland.
    7. 1,3-butadiene causes inflammation of nasal tissues, changes to lung, heart, and reproductive tissues, neurological effects and blood changes; it is a carcinogen associated with cancers of the blood and lymphatic system, and it may also cause birth defects.
    8. Formaldehyde is a carcinogen that can cause asthma or asthma-like symptoms, neurological effects, increased risk of allergies, eczema and changes in lung function.
    9. Arsenic is a carcinogen that poses reproductive and other hazards. In children, in particular, arsenic can cause skin lesions, neurodevelopmental effects like lower IQ, lung disease, and reproductive effects including lower birth weight, spontaneous abortion, and neonatal death.
    10. Chromium (VI) or hexavalent chromium is a carcinogen, primarily affecting the lungs, but also the stomach and intestinal tract. Additional effects include: increased risk of respiratory illness such as pneumonia and bronchitis, gastrointestinal effects including lesions of the stomach and small intestine, hematological effects like anemia, and reproductive effects to males, including lower sperm count and histopathological changes, and complications during pregnancy and childbirth.
    11. Lead is a well-known toxic heavy metal that is particularly hazardous to children, severely impacting development and cognitive functioning, resulting in lower IQ scores, attention deficit problems and other behavioral impacts. Lead exposure is also associated with other neurological, hematological, and immune effects; cancer; cardiovascular and renal effects in adults; and reproductive effects, such as lower sperm counts and spontaneous abortions. There is no safe level of exposure to lead.
    12. Mercuryis a highly neurotoxic contaminant that can bio-accumulate in food such as fish. Health effects of mercury include neurological, developmental, and behavioral problems, such as lower IQ, attention deficit hyperactivity disorder (ADHD), and impaired memory and motor skills. Exposure is also associated with cardiovascular effects including increased risks of heart attacks, increased blood pressure, and thickening of arteries.
    13. Nickel is associated with chronic dermatitis, respiratory impacts and potentially also reproductive impacts. Various nickel compounds are carcinogenic and can also have cardiovascular effects in particulate form.
    14. Hydrogen fluoride or Hydrofluoric acid (HF) is a fatal poison that is highly corrosive and can burn skin or lungs on contact, though symptoms of exposure can be delayed for days. Chronic exposure can lead to lung disease and damaged vision. Other health impacts include nausea, vomiting, gastric pain, low blood pressure, irregular heartbeat, seizures, fluid build-up in the lungs, lung collapse and ultimately death, particularly in situations of accidental release.
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