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US running out of room to store oil; price collapse next?

Repost from The Associated Press

US running out of room to store oil; price collapse next?

By Jonathan Fahey, AP Energy Writer, Mar 4, 1:01 PM EST
Older and newly constructed 250,000-barrel capacity oil- storage tanks north of Cushing, Okla. Extra crude is flowing into storage tanks now, especially in Cushing. (Michael Wyke/AP)
Older and newly constructed 250,000-barrel capacity oil- storage tanks north of Cushing, Okla. Extra crude is flowing into storage tanks now, especially in Cushing. (Michael Wyke/AP)

NEW YORK (AP) — The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months.

For the past eight weeks, the United States has been producing and importing an average of 1.1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country’s main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, according to the Energy Department.

If this keeps up, storage tanks could approach their operational limits, known in the industry as “tank tops,” by mid-April and send the price of crude – and probably gasoline, too – plummeting.

The supply growth may even be speeding up.  U.S. crude supplies rose 10.3 million barrels last week, the government said Wednesday, the largest weekly increase since October 2002.

“The fact of the matter is we are running out of storage capacity in the U.S.,” Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York.

Morse has suggested oil could fall all the way to $20 a barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting losses, would stop pumping oil until the glut eased. Gasoline prices would fall along with crude, though lower refinery production, because of seasonal factors and unexpected outages, could prevent a sharp decline.

The national average price of gasoline is $2.44 a gallon. That’s $1.02 cheaper than last year at this time, but up 37 cents over the past month.

Other analysts agree that crude is poised to fall sharply – if not all the way to $20 – because it continues to flood into storage for a number of reasons:

– U.S. oil production continues to rise. Companies are cutting back on new drilling, but that won’t reduce supplies until later this year.

– The new oil being produced is light, sweet crude, which is a type many U.S. refineries are not designed to process. Oil companies can’t just get rid of it by sending it abroad, because crude exports are restricted by federal law.

– Foreign oil continues to flow into the U.S., both because of economic weakness in other countries and to feed refineries designed to process heavy, sour crude.

– This is the slowest time of year for gasoline demand, so refiners typically reduce or stop production to perform maintenance. As refiners process less crude, supplies build up.

– Oil investors are making money buying and storing oil because of the difference between the current price of oil and the price for delivery in far-off months. An investor can buy oil at $50 today and enter into a contract to sell it for $59 in December, locking in a profit even after paying for storage during those months.

The delivery point for most of the oil traded in the U.S. is Cushing, a city of about 8,000 people halfway between Oklahoma City and Tulsa at an intersection of several pipelines. The city is dotted with tanks that can, in theory, hold 85 million barrels of oil, according to the Energy Department, though some of those tanks are used for blending or feeding pipelines, not for storing oil.

The market data provider Genscape, which flies helicopters equipped with infrared cameras and other technology over Cushing twice a week to measure storage levels, estimates Cushing is two-thirds full.

Hillary Stevenson, who manages storage, pipeline and refinery monitoring for Genscape, says Cushing could be full by mid-April. Supplies are increasing at “the highest rate we have ever seen at Cushing,” she says.

Full tanks – or super-low prices – are not a sure thing. New storage is under construction at Cushing, and there are large storage terminals near Houston, in St. James, Louisiana, and elsewhere around the country that will probably begin to take in more oil as prices fall far enough to cover the cost of transporting the oil.

Also, drillers are quickly cutting back because oil prices have plummeted from $107 a barrel in June. And demand is showing signs of rising.

Despite the enormous increase in crude stocks reported Wednesday, inventories of gasoline did not rise and diesel fuel inventories have fallen slightly over the past two weeks. That leads some to conclude that demand for crude could soon pick up, easing the surplus somewhat.

But many analysts believe oil prices will fall through the spring, before summer drivers start to relieve the glut.

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    Buffalo’s Bomb Trains

    Repost from ArtVoice, Buffalo, NY
    [Editor: Professor Niman has written a thorough examination of crude-by-rail issues.  The local (Buffalo NY) perspective is no drawback.  This is an excellent reference article no matter where you are.  For example, if/when Benicia approves a permit for Valero’s proposed Crude By Rail project, everyone uprail from here can expect to be the new Buffalo.  – RS]

    Buffalo’s Bomb Trains

    By Michael I. Niman, February 26, 2015
    With one third of Buffalo’s population living in a disaster evacuation zone, the local media’s silence is deafening.

    They span over a mile long containing up to 140 tank cars and as much as 4.5 million gallons of some of the nastiest forms of crude oil on earth, pumped from “extreme” extraction operations in North America’s new oil boomtowns. They cross rivers and transverse open plains, wilderness forest and some of the most densely populated urban areas in the country. Occasionally, with alarmingly increasing frequency, they careen off into rivers, catch fire and explode, or both. When spilled in water, their heavy oil exterminates river ecosystems. When they blow up, they release the fires of hell, with one oil train accident in 2013 wiping out most of the town of Lac-Mégantic, Quebec, killing 47 people and gutting its downtown. That’s when folks started referring to these explosive steel snakes as “Bomb Trains.”

    This is one of the dark sides of North America’s fossil energy boom—the backstory on cheap fuel. The uptick in oil production comes from using extreme means to recklessly drill oil, using carbon-intensive methods like fracking to extract environmentally dangerous low grade oils such as Bakken crude from Montana and North Dakota. This oil, pumped from the dolomite layer of the Bakken geological formation, which also underlies portions of the Canadian provinces of Saskatchewan and Manitoba, is more volatile than conventional oils, with a lower flashpoint for explosion. When rail cars started to blow in Lac-Mégantic, The National Post reported a blast radius of over one half mile.

    The United States National Transportation Safety Board estimates that about 400,000 barrels a day of this oil make the trip to Atlantic Coast refineries, with 20 to 25 percent moving through the port of Albany. Much of this Albany-bound oil moves across New York utilizing rail lines passing though the hearts of Buffalo, Rochester, Syracuse and Utica. Oil from Canada crosses the Niagara river, entering the US both in Niagara Falls, and via Buffalo’s 142 year old International Railroad Bridge, as well as taking a northern route, dropping down from Quebec on tracks passing through the Adirondack Park, including about 100 miles of Lake Champlain watershed shoreline. Non Albany-bound oil, such as some shipments from Buford, North Dakota to Houston, Texas, also take an unlikely route through Buffalo.

    Though much of this oil winds up moving through New York State, federal law limits the state’s authority to regulate it. While crude oil can be stabilized to make it less volatile in transit, whether or not it receives such treatment is up to the discretion of regulators in the state that produces it—not necessarily the states through whose cities it will roll. Most of the explosive Bakken crude coming our way originates in North Dakota, where the energy industry all but owns the legislature, fertilizing the state’s anti-regulatory zeitgeist with a healthy dose of cash. The end result is, whatever passes for a state government in North Dakota fails to meet even Texas’s modest safety standards for anti-explosive fuel stabilization.

    The Association of American Railroads reports that, thanks to the Bakken and Tar Sands oil booms, the amount of oil moving across the country by train has increased 45 fold (4,500 percent) from 2008 through 2013, with the volume continuing to increase through 2014 and 2015. As a result, more oil spilled from oil trains in the U.S. in 2013 than in the preceding 37 years. The number of accidents increased in 2014, and seems to be steadily increasing this year, with oil trains derailing and blowing up last week in West Virginia and northern Ontario. The Associated Press reports that the U.S. Department of Transportation now predicts an average of ten derailment accidents a year involving crude oil or ethanol tank cars over the next twenty years, “causing more than $4 billion in damage and possibly killing hundreds of people if an accident happens in a densely populated part of the U.S.” It’s no longer a matter of “if” there will a catastrophic oil train derailment.

    Both the New York State Office of Fire Prevention and Control, and the United States Department of Transportation recommend evacuating a one half mile perimeter around accidents involving railroad tanker cars carrying flammable liquids. Karen Edelstein, a researcher and the New York Program Director for the FracTracker Alliance, mapped oil train routes across the state, adding overlays for this evacuation zone, and for schools and hospitals. Her data shows that statewide, there are 502 public schools situated within potential evacuation zones. In Buffalo, about one third of the population live within one half mile of these bomb train routes, and 27 public schools and eight private schools lie within potential evacuation perimeters as well. This includes PS 42, which serves students with disabilities, and is located adjacent to the track. Sister’s Hospital and the Buffalo Zoo are well within this perimeter, which skirts the Buffalo State and Erie County Medical Center campuses. If we freak out when it snows, how well are we going to handle what appear to be atomic fireballs, should one of these trains blow up?

    While the profits from this oil boom have been privatized, much of the cost associated with reckless extraction have been externalized, meaning dumped on the public. Aside from the obvious environmental costs that we and future generation will have to bear, are the less visible emergency preparation costs that every school, hospital and municipality within a half mile of bomb train routes must now cover. In Buffalo, this means 35 schools need to work with local emergency services providers to develop plans to quickly evacuate students not just from buildings, but from neighborhoods, all with a possible backdrop of explosions, sirens and billowing smoke.

    While it’s not statistically likely that a train will explode in Buffalo or any other specific place, it is a certainty that trains will keep exploding with increasing frequency across the U.S. and Canada. This means that cash strapped municipalities across the continent will have to develop plans to address a catastrophe we know for certain will befall some of our communities.

    Addressing this risk involves not just planning to respond to it, and maintaining an emergency response network capable of responding, but also working to prevent such a catastrophe. A report from the Cornell University Community and Regional Development Institute points out that this involves a multitude of responsibilities, such as monitoring surface rail crossings to prevent vehicle train collisions that can lead to a derailment. Such responsibility, the report notes, usually falls to local police forces that often lack the personnel to do this. Likewise, federal regulators lack the personnel to inspect the nation’s rail infrastructure, and state Departments of Transportation lack the resources to adequately inspect bridges crossing railroad tracks. All of these costs fall not on the oil or railroad industries, but on government agencies, with much of this work not being done due to budget constraints.

    What little planning there is to deal with an oil train explosion is alarming to read. A three car fire requires, according to the New York State Office of Fire Prevention and Control , 80,000 gallons of water for laying down a fire retardant foam blanket and cooling adjacent rail cars. Hence, the state recommends, if there is “NO life hazard and more than 3 tank cars are involved in fire OFPC recommends LETTING THE FIRE BURN unless the foam and water supply required to control is available” [sic.]. The wording here is ominous, with the availability of the required foam and water not being the default expectation, but instead, simply a possibility. This language is there for a reason, however. The Auburn Citizen, in central New York, quotes Cayuga County Emergency Management Office Director Brian Dahl, who, in response to a question about his county’s ability to respond to an oil train fire, unequivocally states, “The amount of foam and water you would need, there’s just not enough in central New York.”

    While oddly inferring that maybe you should put the fire out if you have adequate foam and water, even if there is no “life hazard,” the state’s instructions don’t mention what to do if there is a life hazard, but no foam or water. Also troubling is their inference that if more than three cars are on fire you should just give up. Last week’s fires in Ontario and West Virginia saw seven and fourteen cars ablaze respectively, with each fire burning for over 24 hours. In all caps, the state’s instructions warn responders,

    “All resources must be available prior to beginning suppression.”

    It doesn’t give any suggestions as to what to do if you can’t move the water to the fire, or have the foam necessary to smother a dragon. None of the suggested responses are tolerable should an oil train explode in an urban environment.

    See FracTracker’s map of Buffalo’s evacuation zone: tinyurl.com/NYS-derailment-risks.

    Dr. Michael I. Niman is a professor of journalism and media studies at SUNY Buffalo State. His previous columns are at artvoice.com, archived at www.mediastudy.com, and available globally through syndication.
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      Low oil prices chill a once-hot oil town in North Dakota

      Repost from The Christian Science Monitor
      [Editor: Significant quotes: “The cost of getting oil out of the ground is high here. Unless the price of oil tops $73 a barrel, producers in Divide County can’t break even.”  …and… “In Bakersfield, Calif., Canadian oil company Ensign Energy Services Inc. has already laid off 700 workers.” – RS]

      Low oil prices chill a once-hot oil town in North Dakota

      Just months ago Crosby, N.D., a small town on the Canadian border, was booming. Now it’s hunkering down to ride out the oil bust that has the US energy industry reeling. 

      By Jared Gilmour, January 24, 2015
      Josh Young and his daughter Ava walk past the post office in Crosby, N.D., where falling prices have turned an oil boom into a bust. | Andrew Cullen/Special to The Christian Science Monitor

      Crosby, N.D. — An empty strip of gravel – lined with streetlights and unused utility hookups – runs next to the highway, south of a once-booming oil town.

      A few years ago, city officials anticipated oil field companies and other businesses would fill up the 230-acre strip. The city spent $1.7 million on the land, with another $9 million coming from state oil impact grants. There was talk of 300 housing units popping up in the fields behind the commercial street. The former mayor said the 1,300-person town was preparing to potentially double or triple in size.

      But there is only one building along the road today. At night the streetlights shine on the gravel, illuminating flurries of snow that semi trucks have whipped off the nearby highway down onto the deserted street. To the south, farmland rambles into the middle distance, dotted with nodding pump jacks extracting oil, flares burning off gas, and idle, darkened drilling rigs.

      “The year they proposed this they could have gotten quite a bit of commerce in there – but now? It’s like a street to nowhere. You’ve got streetlights on and nobody’s home,” says Cecile Krimm, editor of the county’s newspaper, The Journal.

      Emptiness along the newly built road is a portrait of the “echo economy” – an America that looks at plummeting oil prices not as a sign of savings at the pump, but as potential trouble ahead. They are towns as remote as Crosby, where the recent oil boom drove rents to San Francisco levels, or as familiar as Houston, a metropolis bracing for as many as 75,000 layoffs.

      This is the country’s echo economy. While the rest of the country struggled through a recession, these beneficiaries of the shale boom helped prop up the economy. The oil and gas industry created more than 100,000 US jobs between 2007 and 2013 – a 40 percent increase in US energy industry jobs and a 1 percent boost in total US employment. But as the national economy has found firmer footing, the drop of oil prices to five-year lows has begun to turn the tables on towns like Crosby.

      In many ways, this lonely swath of North Dakota is a bellwether for America’s energy economy. Twenty-two of the 65 American counties that had fully recovered from the recession by 2014 were in or bordering North Dakota, according to a study by the National Association of Counties. Only Texas (with 24) accounted for more. So when Crosby’s once-bustling Main Street is less harried than it once was, and when fewer landmen are crowding into the rotunda of the county courthouse to scour mineral rights records for Divide County, it is a hint that oil-dependent towns from Ohio to California might soon be feeling the pinch.

      For Crosby, the oil boom of the past decade has come with a catch: The cost of getting oil out of the ground is high here. Unless the price of oil tops $73 a barrel, producers in Divide County can’t break even. For years, that’s hardly been a problem, with oil consistently trading for more than $100 a barrel. As of mid-January, however, US crude is below $50 a barrel.

      Oil production is costly in Crosby because it sits on the very fringe of North Dakota’s oil-rich Bakken region. The Bakken is essentially a bowl beneath North Dakota’s northwestern quadrant with more oil concentrated in the center where the bowl is deepest. Crosby is perched on the frigid northern rim, a few miles from Canada.

      Being at the rim means less oil.

      “We’re on the edge, and that won’t be to our advantage if oil prices continue to go down,” says Bert Anderson, Crosby’s affable mayor for most of the past 30 years.

      Oil has revived his town, Mayor Anderson says, sitting in a sturdy wooden chair and peering at Main Street through the window of his shop, Bert’s Woodworks. The surroundings are a portrait of the modest farming town Crosby once was. Newspaper clippings from The Journal yellow on the door that opens to the back room, and a rainbow of paint chips hang on one wall. On another wall are a series of bald eagle prints next to a portrait of Cosmo Kramer from “Seinfeld.”

      For now, Anderson is confident oil prices will rebound. Almost everyone in Crosby is optimistic. Anderson notes that several vacant lots along the empty road south of town are sold. They’re just waiting for development.

      And even as drilling slows down, Anderson is grateful for how the boom reversed Crosby’s trajectory of decline and depopulation.

      Before the boom, Anderson says, “Crosby was tearing down houses.” The population was dwindling. There was even a December when the city ran out of money before the end of the year, and had to take out a loan to make payroll.

      Now, with rents rivaling those in San Francisco and new housing crowding the outskirts of town – from two-story tan condos to an RV park where newcomers camp out in “winterized” RVs – “we don’t have that problem anymore,” Anderson says.

      But what if oil prices stay low? For years, Crosby has watched from afar as construction booms in Nevada, Arizona, and Florida went bust in the housing crisis, leaving unwanted and overvalued homes. Crosby isn’t there yet. A temporary slowdown could bring sky-high rents back to earth and give the town time to catch up on construction projects, Anderson says.

      Still, oil prices are notoriously unpredictable. Most analysts say it’s unlikely that the US oil boom, fueled by the hydraulic fracturing of shale, will stop altogether. But oil prices stuck at $50 a barrel would challenge towns that live in the echo economy the shale boom has created, both in the Bakken and beyond.

      Sweetwater, Texas, for one, is already facing Crosby-like problems. Expecting oil workers to flood its shale fields, the town spent nearly $50 million renovating its courthouse, building a law enforcement center, and improving the hospital. With the collapse of oil prices, however, those plans have not come to fruition, leaving the town of 11,000 facing layoffs and budget cuts.

      “Here we are trying to figure out, is this a six-month problem or is it all over?” said Greg Wortham, head of the Cline Shale Alliance, which was formed to prepare the region for oil workers, to The Associated Press.

      In Bakersfield, Calif., Canadian oil company Ensign Energy Services Inc. has already laid off 700 workers. Even in Ohio – hardly an oil mega-producer – U.S. Steel has warned of layoffs for 614 workers at a pipe plant, citing low oil prices.

      In the Bakken, falling oil prices mean producers retreat to safer areas, like the counties at the epicenter of the Bakken boom: “places like McKenzie County and Dunn County, where break-even prices are $30 and $29, respectively,” says Alison Ritter, a spokeswoman for the North Dakota Department of Mineral Resources.

      That could spell trouble for Crosby, which has invested millions in new infrastructure – from a multimillion-dollar hospital expansion to new housing for recently hired schoolteachers. And it’s unclear just when prices will rise, or at what range they’ll settle and find equilibrium.

      “That’s just how oil works. Everyone’s seen it happen multiple times,” says Matt Nystuen, an oil rig worker whose jacket and hat, worn atop a mat of blond hair, give away his employer, Ensign Energy Services, before he can with his “Fargo”-worthy accent.

      Mr. Nystuen was three years out of high school when an oil price slump during the recession slowed drilling. “I saw all of my friends lose their jobs,” he says.

      Prices rallied, with oil trading at over $100 a barrel until this summer. Then crude oil production in Libya and Iraq began picking up and US production also surged, filling the global market with a glut of crude. At the same time, demand was down in recession-racked Europe and Asia, and the Saudi-led Organization of the Petroleum Exporting Countries decided to maintain production levels to hold their market share and drive down prices. Many interpreted it as an effort to drive US shale drillers, who rely on high prices, out of business.

      All that pushed prices down, and when they began falling, the rig count in Divide County tumbled, too – from 12 in the late summer to just three active rigs in December. Prospects for the first half of 2015 are dimmer: Continental Resources alone, a major player in the Bakken, has slashed its 2015 capital expenditures budget from $5.2 billion to $2.7 billion.

      In late December, Nystuen received his own surprise: He was laid off from his job on a rig in Divide County.

      In Houston, the story is the same. Since 2011, Houston has added 100,000 new jobs every year on the strength of the energy economy, according to Forbes. By 2016, it could have lost 75,000 over two years, writes Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business.

      “Given Houston’s dependence on oil exploration and production, there is never a good time to see oil prices fall as far and fast as they have in recent months,” his study says. But a construction boom in the city and the improvement of the national economy should help, it adds.

      In Crosby, the situation is not yet dire, either. Since oil production slowed, the town has gotten sleepier. It’s more like it was in the decades before oil transformed Crosby from an idyllic farm town into a boomtown, says Ms. Krimm, the newspaper editor.

      Signs advertising available lots are posted in the fields that abut the empty new street. And companies have begun layoffs, though Nystuen found a new job within days. All the same, he doesn’t expect to stay in the industry long – maybe a couple years.

      If the boom ends, he says he’d happily move on to something else. For him and for so many others in Crosby, the oil wealth is useful so long as it lasts. The boom has its drawbacks: There’s crime, pollution, and the soaring rents. Above all, there’s an uneasy sense that Crosby has lost the charm of a windswept prairie outpost where doors were never locked.

      But that place had been vanishing, anyway. All things considered, an oil boom – no matter how long it lasts – seems better than nothing. “You get it while the getting’s good,” Nystuen says.

       

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        San Luis Obispo Refinery Wants Oil by Train

        Repost from The Santa Barbara Independent

        SLO Refinery Wants Oil by Train

        Phillips 66 Runs into Public Resistance over Proposal to Lay New Tracks and Unload More Canadian Crude

        By Natalie Cherot, January 23, 2015

        Courtesy PhotoA slow-moving pipeline moves a haul of crude oil to a refinery just north of the Santa Barbara County border. Stand on the nearby coast’s 18,000-year-old sand dunes and look away from the sea, and a perfect view emerges of the expansive Phillips 66 Santa Maria Refinery. The name is a misnomer. The San Luis Obispo facility on the Nipomo Mesa is 17 miles northwest from the City of Santa Maria. Directly south is the Santa Maria River.

        Golden Sierra Madre mountains shimmer in the distance, and hearty sage scrub surrounds its perimeter alongside grazing cattle. The night sky around the facility is never dark; its aquarium lights border on festive. The illumination is necessary because the refinery is open 24 hours a day, 365 days a year. It begins the process of turning crude into a finished product like gasoline, diesel, or jet fuel, and pumps the semi-refined batches 200 miles north to the San Francisco Bay Area plants for finishing.

        With oil prices dropping and California supplies both dwindling and facing harsh competition from North Dakota, much speculation swirls on the question of what kind of oil will arrive to the refinery on the dunes in the coming years. Right now it is “mostly used for California-produced oil,” said Phillips 66 spokesperson Rich Johnson.

        But as of 2013, Phillips 66’s newest product is Canadian tar sands, a thick, gooey combination of clay, sand, water, and viscous bitumen. It’s hard to control and expensive to process. The Kearl Lake tar sands field cuts through Alberta’s boreal forest and wetlands, and has been turned into a mined landscape. An estimated 170 billion more barrels are still available for the taking.

        In the summer of 2013, Phillips 66 submitted permit applications to San Luis Obispo County’s Planning Commission to add 1.3 miles of train track to its Santa Maria Refinery’s existing rail spur so crude can be delivered by train rather than by pipe. The proposed upgrades, which include five parallel tracks, an unloading facility, and new on-site pipelines, wouldn’t increase the amount of crude processed at the facility — volume is capped by the county’s Air Pollution Control District — but they reflect an increasing amount of oil train traffic across the country. BusinessWeek.com reported that it’s tripled in the last four years.

        According to the project’s draft Environmental Impact Report (EIR), the facility would be able to handle five train unloads a week for a maximum of 250 a year. Each train with about 80 tanks on board would carry between 1.8 million and 2.1 million gallons of crude.

        A first draft of the EIR — which indicated that both Canadian tar sands and North Dakota Bakken formation crude would be carried on the trains — was published that fall and received 800 public comments. The massive amount of feedback, much of it negative, prompted the Planning Commission to delay a final decision on the project. The commission issued a second 889-page draft EIR in October 2014, and a few weeks from now, a public comment period will take place. The date has not been finalized.

        The biggest contention in the first draft was about Bakken crude. “The bottom line is Bakken Crude likes to burn and it will not take much to get it going,” wrote Paul Lee, battalion chief for the California Department of Forestry and Fire Protection in a letter to the San Luis Obispo Planning and Building Department. For preparation of the second draft EIR, Phillips 66 requested the county “delete statements suggesting that the Bakken oilfield as the most likely source of crude oil.” The new draft EIR states no Bakken will arrive by rail. Phillips’s spokesperson Rich Johnson said the refinery can’t handle the sweeter, lighter Bakken crude, as it specializes in the ultra-heavy tar sands.

        Four accidents involving Bakken crude are mentioned in the latest report. A 30,000-barrel spill occurred in April 2014 in Lynchburg, Virginia, when a transport train derailed and erupted into flames. In November 2013, a train jumped the tracks in Aliceville, Alabama. Twelve tanker cars of Bakken spilled and caught fire. The next month, another oil train crashed in Casselton, North Dakota, where 20 cars of Bakken exploded and burned for 24 hours. Forty-seven people died when a train carrying the crude derailed and exploded in Quebec on July 2013.

        The Pipeline and Hazardous Materials Safety Administration has issued a warning to move transportation of Bakken oil away from highly populated areas because of explosion risks. “Most think that Crude will not get going unless it gets warmed up first and in some cases that is correct, [but] Bakken Crude does not need to be aggravated to burn or even explode,” wrote Lee. “The NTSB (National Transportation Safety Board) is concerned about its ability to explode so much in fact that there is a recommendation to have rail avoid populated areas.”

        Phillips 66’s rail expansion plan is part of larger national strategy to better accommodate tar sands coming out of the ground quicker than the current system of pipelines can handle. “Our real challenge that we have, or opportunity that we have, is to get advantaged crudes to the East Coast and West Coast,” said Greg Garland, chairman and CEO of Phillips 66, at the Barclays CEO Energy-Power Conference last year. “So we’re working that in terms of moving Canadian crudes down into California or building rail facilities.”

        Two thousands miles north in Alberta, Canada, the contentious Keystone XL pipeline would transport tar sands through Montana, Nebraska, Illinois, Oklahoma, and Houston. The pipeline’s foes claim the fuel is too emission-intensive and corrosive to pipelines. Supporters say if the Keystone XL is blocked, tar sands will come by the more dangerous transportation methods of boat or rail. Recent Philips 66 literature states: “Until new pipeline projects come online, rail is in many cases the easiest and most cost efficient way to get advantaged crude to some of our refineries.”

        Trains coming and going from Santa Maria Refinery would travel the path of the Union Pacific Rail, on tracks shared by Amtrak. They would make the journey north through the Nipomo Mesa, up the precarious Cuesta Grade through Paso Robles, Salinas, and San Jose. Then they head through Richmond, then Berkeley. Richmond and Berkeley city councils recently passed resolutions calling for stricter regulations on crude oil trains.

        The paths of the trains coming from the south — and carrying crude from any number of sources — are unclear and not ironed out in the draft EIR, but they would likely go through Ventura and Santa Barbara counties. A potential path indicated in the report heads through downtown Moorpark at the eastern edge of Ventura County after it passes through Simi Valley, but that potential route may have hit a glitch.

        On December 17, the Moorpark City Council voted to send a letter to the San Luis Obispo Planning Commission opposing Phillip 66’s proposal because of its potentially hazardous risks. “I feel strongly that we need to show a little bit of leadership here as a city to formally object to this,” said one councilmember. “Hopefully other cities along this track will as well.” According to the report, once the trains leave Moorpark they could head through Camarillo to Ventura and along the coast to Carpinteria, Santa Barbara, and Goleta.

        Johnson does not see much long-term job growth — or even stability — at the refinery given its current pipeline setup and a recent dip in statewide supplies. To stay competitive, company officials have argued, the refinery needs to revamp its intake methods so it can accept crude from other sources. “We are trying to keep the jobs we have,” Johnson said of the 200 people working at the plant. “Oil production in California is on the decline.” Rumors of a too-twisted and warped Monterey Shale formation from years of tectonic activity became a public reality in May when the government agency, Energy Information Administration, downgraded a predicted 13.7 billion barrels of recoverable oil to 600 million.

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