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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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    REUTERS FACTBOX – California crude sources and oil-by-rail projects

    Repost from Reuters

    FACTBOX-California crude sources and oil-by-rail projects

    Mon Jul 21, 2014

    HOUSTON, July 21 (Reuters) – California refiners remain far behind peers elsewhere in the country in replacing expensive imports with cheaper North American crudes from a new production boom.

    No major crude pipelines cross the Rocky Mountains, leaving the isolated region dependent on rail to tap the burgeoning bounty in Texas, North Dakota and other growing oilfields.

    More than half of the 1.7 million barrels of crude processed by California refineries each day is imported, largely from Saudi Arabia, Ecuador, Iraq and Colombia. The rest comes from California and Alaska, where output is declining.

    Several refiners and logistics or pipeline companies are trying to tap U.S. and Canadian crude via rail, but California’s tough regulatory environment and growing opposition in light of fiery crude train crashes elsewhere could halt current projects and stop new ones from starting up.

    Tesoro Corp and Savage Companies are proposing a 360,000 barrels per day railport at the Port of Vancouver in Washington that, if approved, could potentially replace more than 40 percent of California’s imported crude. Once railed to Vancouver, crude would be loaded onto barges or ships bound for West Coast refineries.

    Here is a rundown of California’s crude slate and existing and pending oil-by-rail projects:

    CALIFORNIA CRUDE
    California’s 1.7 million barrels per day (bpd) of crude processed in 2013 came from these three main sources:
    * Imports: 875,564 bpd, 51 percent of the total
    * California, 631,441 bpd, 37 percent
    * Alaska, 201,720 bpd, 12 percent
    The non-California supply arrives via ships or barges except negligible oil-by-rail shipments, which reached 15,715 bpd in the first quarter of 2014.
    That is less than 2 percent of the overall 873,967 bpd that originated on top U.S. railroads throughout the United States in the same period.
    By comparison, in 2003 a little more than one-third of the 1.8 million bpd of crude processed in California came from imports:
    * Imports, 636,923 bpd, 34 percent
    * California, 792,920 bpd, 42.5 percent
    * Alaska, 438,805 bpd, 23.5 percent
    Source: California Energy Commission
    CaliforniaCBR

    (Reporting By Kristen Hays, editing by Peter Henderson)

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      US “Not Immune” to Oil Price Hike

      Repost from Oil Change International
      [Editor: Significant quote: “Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.”  – RS]

      US “Not Immune” to Oil Price Hike

      Andy Rowell, June 16, 2014

      Crisis_in_Iraq_leading_to_higher_gas_pricesFor years the American oil industry has argued that the ongoing U.S. oil boom will bring about “energy independence” and drive gasoline prices  down. Americans are supposed to be enjoying an era of cheap, plentiful energy.

      As the oil industry has set about fracking America, decades of declining production has been reversed in just a handful of years. The US is now the world’s largest producer of oil and gas.

      The oil industry has persuaded or forced communities across North America to compromise their water supplies and their health to allow the fracking revolution with the promise of lower prices and energy security.

      So American consumers should apparently be appreciating the impact of the country’s shale revolution as crude oil and condensates production has just surpassed its previous peak, reached way back in 1970. A 44-year old record has just been broken.

      Not so. As the Energy Policy Information Centre pointed out, at the end of last month. “Despite all the promise of the oil boom, for most Americans, its economic benefits remain an abstract concept in the absence of relief at the gas station.”

      The sad truth is that despite the US economy being half as “oil intense” compared to the 1970s – as measured by barrels of oil consumed per $1,000 of GDP –  American households and businesses still spend a staggering 900 billion dollars annually on petroleum.  The average American household dedicates around 5.3% of its spending to petroleum, with the burden felt much more heavily by low income households.

      And here comes the real irony. Despite the US reaching a record production peak, last week the price of Brent crude rose 4 per cent, its biggest one-week rise since July last year. Wholesale US gasoline rose with it and thus US consumers will notice higher pump prices probably as soon as this week (see chart).

      FT RBOB Gasoline 10 days to June 16Source: Financial Times

      And the reason is the ongoing turmoil in Iraq. The escalating violence there is threatening supplies from OPEC’s second largest producer, which produces in excess of 3 million barrels of oil a day.

      Bloomberg is quoting Societe Generale saying that if the violence escalates and production is affected, Brent crude may jump from its current position of $113 to $120 or even $125. It may go even higher.

      “This is a serious situation in terms of the global oil market,” Victor Shum, a vice president at IHS Energy Insight in Singapore, told Bloomberg. “This situation in Iraq really threatens potential supply growth going forward.”

      So far the fighting has not spread to the south, where the US Energy Information Administration estimates that three-quarters of Iraq’s crude output is produced. But if the Southern oil fields fall, the global oil price could skyrocket to unprecedented levels.

      What this shows, as Ed Crooks, points out in today’s Financial Times is that, despite its own fracking revolution, “the US is not immune to the effects of disruption in world markets.”

      Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.

      The boom that is needed in order to truly insulate the American economy from the relentless turmoil in oil producing countries is a boom in efficiency, public transit, smart growth and electric vehicles. These technologies and policy initiatives are here now and ready to go, but the political and financial weight behind them has been overshadowed by the lure of oil boom riches.

      Instead of “All of the Above“, we need energy policies that will help American’s reduce the amount of oil they need to buy, at any price.

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