More ethanol-to-crude rail facility conversions unlikely in California: analyst
Orlando, Florida (Platts)–24Mar2014
More conversions of California ethanol rail unloading terminals to crude service are unlikely, following Kinder Morgan’s switch of its Richmond, California, unloading facility, an analyst said Monday.
“The other big [ethanol] terminals aren’t as close to refiners, and there is a limited amount of ethanol capacity,” Stillwater Associates President David Hackett said on the sidelines of the American Fuel and Petrochemical Manufacturers Annual Meeting in Orlando, Florida.
Kinder Morgan late last year converted the terminal to crude service from ethanol service “after changes in the ethanol market made it attractive for us to look to other commodities,” spokeswoman Melissa Ruiz said Monday in an email.
The Richmond terminal is the only 100-car unit train crude-by-rail facility in California, she said.
“In order to handle crude oil, we had to file a new application with the Bay Area Air Quality Management District (BAAQMA) for permits, which we received last summer,” she said. “We began handling crude this past September, and the facility will serve Bay Area refiners.”
The terminal is located on the Burlington Northern Santa Fe rail yard in Richmond. The railed crude is trucked from the terminal, she said, noting that there are no pipelines or tank connections involved.
Ruiz declined to comment on the terminal’s current throughput or on which types of crude are received by the facility.
The rail terminal conversion comes after the leading US midstream company early last year scrapped its high-profile proposed Texas-to-California Freedom Pipeline on a lack of customer interest. The pipeline would have delivered 277,000 b/d of crude from the Permian Basin in West Texas to northern and southern California refining complexes.
Kinder Morgan said at the time that it would focus on providing crude-by-rail options for West Coast and Texas shippers.
Along the West Coast, refiners and midstream companies are planning to construct crude-by-rail unloading terminals, but are facing permitting delays opposition.
If California “doesn’t get crude by rail, their competitiveness will erode,” Hackett said during the Platts Barrel Talk panel discussion at the conference. “We do see some uptick in rail deliveries, but there is a lot of opposition to crude by rail in California with the environmental community.”
Sacramento officials kept in dark about crude oil transfers at rail facility
By Curtis Tate and Tony Bizjak McClatchy Washington Bureau
Last modified: 2014-03-29T04:26:30Z
Published: Friday, Mar. 28, 2014 – 9:00 pm
Last Modified: Friday, Mar. 28, 2014 – 9:26 pm
Randall Benton / email@example.com
Tanker cars containing crude oil wait on railroad tracks in McClellan Park in North Highlands on March 19.
SACRAMENTO, Calif. — Since at least last September, trains carrying tank cars filled with crude oil have been rolling into the former McClellan Air Force Base, where the oil is transferred to tanker trucks that take it to Bay Area refineries.
Until this week, Sacramento’s InterState Oil ran the operation without a required permit. Local fire and emergency officials who would be called upon to respond in case of a spill or fire weren’t informed it was happening. The McClellan transfers include at least some Bakken crude, extracted from shale by hydraulic fracturing, which regulators say is particularly flammable.
Jorge DeGuzman, supervisor of permitting for the Sacramento Metropolitan Air Quality Management District, said an inspector first discovered in the fall of 2012 that InterState Oil was unloading ethanol from rail cars at McClellan without a permit. The company then applied for a permit and received it in October 2012.
Last September, another inspection revealed that InterState was transferring crude oil from rail cars to trucks taking their loads to Bay Air refineries; again without a permit.
The company was not fined, and continued the ethanol and crude operations during the permitting process. The crude oil permit was approved this week.
Fuel transfer operations such as the one at McClellan have popped up in California and other states amid an energy boom driven by hydraulic fracturing of shale oil formations in North Dakota and elsewhere. While the oil furthers economic growth and energy independence, it’s also bringing unforeseen safety risks to communities, catching many state and local officials off guard.
“As long as it’s not stored, I don’t think it’s required for them to inform me,” said Steve Cantelme, Sacramento’s chief of emergency services. Still, he said, “I would like to know about it.”
State and local governments have scant jurisdiction over the movement of goods on rail lines, which is generally a matter for the federal government.
Federal regulators and the rail industry have taken voluntary steps to improve the safety of such shipments, including reduced speeds, more frequent inspections and using safer routes. They’re also working on a safer design for tank cars. But some state and local officials feel the response hasn’t matched the risk they face.
Fiery derailments in Alabama, North Dakota and Canada in the past several months have raised safety and environmental concerns about rail shipments of crude. On July 6, a 72-car train of crude oil from North Dakota broke loose, rolled down a hill and derailed in the lakeside village of Lac-Megantic, Quebec. The unusually volatile oil fed a raging fire and powerful explosions that leveled the center of town. Of the 47 people who were killed, five vanished without a trace.
The issue has received limited attention in California because the state has continued to rely on its traditional petroleum supply, which arrives on marine tankers.
But that’s changing. In December 2012, the state received fewer than 100,000 barrels of oil by rail. A year later, it was receiving nearly 1.2 million, according to the California Energy Commission.
“It potentially could be a fatal issue here in Sacramento,” Cantelme said.
The state projects that within two years, California could receive a quarter of its petroleum supply by rail. That would mean at least six trains of 100 tank cars every day, or 500,000 barrels of oil, passing through the capital. The capacity of the proposed Keystone XL pipeline is 830,000 barrels.
InterState officials declined a request by The Sacramento Bee to observe the McClellan operations. The company also declined to answer questions The Bee sent last week about the facility, including how frequently the transfers take place and what safety precautions are taken.
In an emailed statement, the company’s president, Brent Andrews, said InterState has “the highest regard for safety procedures” and is “very thorough in our education and training with our employees.”
InterState’s new permit allows it to transfer about 11 million gallons of crude oil and ethanol a month at McClellan.
“That’s a lot,” said Darren Taylor, assistant chief of operations at the Sacramento Metropolitan Fire Department.
Neither McClellan Business Park, where the operation takes place, nor Patriot Rail, the short line railroad that switches the cars there, were required to verify that InterState had the necessary permits.
Another company, Carson Oil, was unloading ethanol at McClellan without a permit, but has since received one. Carson, based in Portland, Ore., is also seeking a permit to unload crude oil at McClellan in hopes of securing a contract. Carson did not return phone messages and emails requesting comment.
“If we don’t see anything alarming, we don’t shut a business down just because they missed some paperwork,” DeGuzman said. “The inspector felt it was a paperwork procedure.”
The McClellan operation straddles the boundary between Metropolitan Fire’s jurisdiction and that of the Sacramento Fire Department. Both departments could be involved in an emergency response to the site.
After a reporter told him about the facility last week, Dan Haverty, the city fire department’s interim chief, sent his battalion chief and a hazardous materials inspector to McClellan, where they reported finding 22 tank cars loaded with crude oil.
Haverty said far more hazardous commodities move by rail through Sacramento, including toxic chemicals, such as chlorine and anhydrous ammonia, and that his department has planned and trained for emergencies involving those materials.
Taylor said he was “comfortable and confident” in his department’s capabilities.
But Niko King, Sacramento’s assistant fire chief, said he didn’t have a lot of information on what was coming through the region by rail and new risks his department might face.
“I don’t want to say we’re in front of the curve,” he said. “We’re definitely reacting.”
The U.S. Department of Transportation has required that petroleum producers test and properly label and package Bakken oil before it is transported. But once the oil reaches its destination, whether a refinery or a transfer facility, such as the one in Sacramento, it’s handled no differently than conventional crudes.
The McClellan operation falls outside of some agencies’ jurisdiction. The Sacramento County Environmental Management Department regulates crude oil storage facilities, but McClellan isn’t considered one.
“We regulate the stuff that’s there” for more than 30 days, said Elise Rothschild, chief of the department’s Environmental Compliance Division, “not the stuff in transit.”
The railroads bringing crude oil to Sacramento, meanwhile, are not required to tell local officials that they’re doing so. One of them, BNSF Railway, is the nation’s largest hauler of crude oil in trains, mostly from North Dakota.
Earlier this month, CSX, the largest railroad on the East Coast, reached an agreement with Pennsylvania’s emergency management agency to share information on the shipment of hazardous materials on its network, including crude oil.
But the agreement requires state officials not to make the information public. It is possible to determine where shipments are going, however. BNSF, for example, lists Sacramento as one of its crude-by-rail terminals on a marketing website. A Sacramento Bee photographer who visited the McClellan site recently found crude oil being transferred from rail cars to trucks, activity that was plainly visible.
Cantelme said he’s begun in recent weeks to organize a regional task force with other local officials and the state Office of Emergency Response in an effort to better understand the risks of such operations and develop a coordinated response plan.
“This is preliminary for us,” he said. “We’re just now getting into it.”
A McClatchy analysis of federal data showed that more than 1.2 million gallons of crude oil spilled from trains in 2013 alone. In contrast, fewer than 800,000 gallons had been spilled nationwide from 1975 to 2012.
“Nobody saw this incredible increase in volume,” said Tom Cullen, administrator of the oil spill prevention office in the California Department of Fish and Wildlife. In his January budget proposal, Gov. Jerry Brown proposed increasing funding for the Office of Oil Spill Prevention and Response and shifting its focus from marine spill to inland spills.
Other states where crude oil shipments have increased are taking action.
In January, New York Gov. Andrew Cuomo directed several state agencies to review safety procedures and emergency response plans. That state’s capital, Albany, has become a hub for rail shipments of North Dakota and Canadian oil for East Coast refineries. Earlier this month, Albany County placed a moratorium on the expansion of a train-to-barge facility blocks from state offices until the completion of a health study.
Washington lawmakers considered several measures to address increased oil shipments, including a 5-cents a barrel tax on crude oil shipped by rail into the state, but the efforts died before the session adjourned last week.
Activists in the Bay Area cities of Benicia, Richmond and Martinez are fighting the expansion of crude oil deliveries to local refineries. Earlier this month, Elizabeth Patterson, the mayor of Benicia, called on Brown to sign an executive order similar to Cuomo’s.
Tate reported from Washington. Bizjak of the Sacramento Bee reported from Sacramento.