Repost from Bloomberg Business News [Editor: A local resident observed that the photo below was taken at the docks here in Benicia, California — home of Valero Benicia Refinery. The Bloomberg story says that the contaminated oil originated with Chevron and was stored at Plains All American in Martinez. But maybe there’s more to the story? Maybe Valero was an additional source or storage facility for the ship’s contents? My source says that the tanker Hellespont Protector has been seen about twice over the last few months, and is a new one around here. (Background on current efforts of the oil industry to overturn the 1975 U.S. crude-export ban.) – RS]
Contaminated Oil That No One Wants Is Heading to Asia
By Lynn Doan and Dan Murtaugh, April 26, 2015 4:00 PM PDT
One million barrels of oil. Enough to fill more than 60 Olympic-sized swimming pools. And there it sat in tanks outside San Francisco — for three years — despite crude prices that topped $100 a barrel.
This isn’t the prized “light, sweet” kind of crude that is pumped out of the ground in Texas, or even the thick, sticky stuff from Alberta’s tar sands. Rather, it’s what’s known as “orphaned oil” that is so contaminated with organic chlorides that it can corrode the insides of even the biggest refineries.
Now, it’s on the move — and guessing exactly where is turning into a sort of parlor game for some in the oil market. All that is known is that Chevron Corp., which flushed the oil from a pipeline in September 2012 and has seen its value drop by $50 million since then, is loading it onto two tankers bound for Asia.
“It’s really kind of a bizarre incident,” said Gordon Schremp, a senior fuels specialist at the California Energy Commission who was notified by industry representatives of the planned exports.
It’s a rare shipment, considering most crude is barred from leaving U.S. borders. It just so happens that an exemption has been in place since 1992 allowing limited amounts of California oil to leave the country.
The only reason exports don’t happen very often is because California’s refiners keep almost all the state’s oil for themselves.
The saga began on Sept. 17, 2012, when Chevron told shippers that its pipeline delivering California crude to San Francisco-area refiners was contaminated. Chevron ended up pushing an estimated 1 million barrels through the pipe to get rid of the chlorides.
And so the tainted oil sat in tanks at a Plains All American Pipeline LP terminal in Martinez until this month, when all the red tape, including getting an export license from the Commerce Department, was finally cut, Schremp said.
When the contamination was discovered, heavy crude from California’s San Joaquin Valley cost $97 a barrel. It’s now $46. The difference, multiplied by 1 million barrels, is more than $50 million. And that’s not counting the cost of storing the oil for more than two years, which could add millions more.
West Texas Intermediate futures, the benchmark for U.S. crude, rose 9 cents to $57.24 a barrel at 11:53 a.m. local time on the New York Mercantile Exchange. Prices dropped about 44 percent in the past year.
Kent Robertson, a spokesman for Chevron, declined to comment on the exports. Brad Leone and Meredith Hartley, spokesmen for Plains, didn’t respond to requests for comment.
Oil tanker Hellespont Protector, one of the two vessels chartered to carry the crude, was anchored in the San Francisco Bay on Friday, shipping data compiled by Bloomberg show. The other, Energy Champion, is headed for Qingdao, China, a place with no refineries. It may be a stopover, or it may not be headed to a refinery at all.
Schremp, who wasn’t told where the outcast barrels are headed, said they could be used as fuel for large ships or burned in a power plant.
If refiners know about the contamination ahead of time, they can blend in additives as a cure, but it’s an expensive solution that erodes the value of the crude, said David Hackett, president of energy consultant Stillwell Associates LLC in Irvine, California.
Wherever it lands, chances are it’ll be the first and last California oil that Asia sees for a while. California crude prices have been getting stronger and refiners across the Pacific have been flooded with supplies from much closer by.
Asked whether the rare cargoes are a bellwether for future exports of California oil, Schremp said, “It’s not like it makes perfect economic sense to move barrels that way into the world market — this was an export of circumstance.”
A Growing Risk: Oil Trains Raise Safety and Environmental Concerns
By Cory Golden, in the February 2015 issue of Western City
More and more often, trains snake down through California from its northern borders, with locomotives leading long lines of tank cars brimming with volatile crude oil.
Rail remains among the safest modes of transport, but the growing volume of crude being hauled to California refineries — coupled with televised images of fiery oil train accidents elsewhere — have ratcheted up the safety and environmental concerns of city officials and the residents they serve.
Local and state lawmakers have found that their hands are largely tied by federal laws and court rulings pre-empting new state and local regulation of rail traffic.
Growing Volume and an Increasing Number of Accidents
Until recently, California’s refineries were served almost entirely through ports. An oil boom in North Dakota and Canada from the Bakken shale formation and a lack of pipeline infrastructure have led to a dramatic increase in oil-by-rail shipments nationwide.
Oil imports to California by rail shot up 506 percent to 6.3 million barrels in 2013 (one barrel equals 42 gallons). That number will climb to 150 million barrels by 2016, according to the California Energy Commission.
The surge represents an “unanticipated, unacceptable risk posed to California,” said Paul King, deputy director for the California Public Utilities Commission’s Office of Oil Rail Safety, during a Senate hearing last year.
As the volume of oil being transported by rail has swelled, derailments in the United States and Canada have also increased. Despite $5 billion in industry spending on infrastructure and safety measures — with half of that for maintenance — railroads spilled more crude in the United States during 2013 than in the previous four decades combined, according to an analysis of federal data by McClatchy DC News.
Railroads continue to boast a better than 99 percent safety record, and most spills have been small, but with each tank car holding more than 25,000 gallons of oil, the exceptions — including eight mishaps in 2013 and early 2014 — have been dramatic and devastating, none more so than an accident in July 2013. That’s when 63 cars from a runaway train exploded, leveling much of Lac-Mégantic, Quebec, and killing 47 people.
So far, California has been spared a major crude oil accident, but the number of spills here is climbing: from 98 in 2010 to 182 in 2013, according to the California Office of Emergency Services (OES).
Trains carrying Bakken crude travel south through Northern California, turning from the western slope of the Sierra Nevada and rumbling through the hearts of cities large and small. The trains pass within blocks of the state Capitol, hospitals and schools and through sensitive ecological areas such as the Feather River Canyon and Suisun Marsh.
Lethal Accidents Spur a Push for Increased Safety Measures
The Lac-Mégantic accident and others that have followed have led to a push for change at the federal level. Two agencies of the U.S. Department of Transportation (DOT), the Federal Railroad Administration and Pipeline and Hazardous Materials Safety Administration, shoulder responsibility for writing and enforcing railroad safety regulations.
In early 2014, the DOT and railroad industry announced a series of voluntary steps to increase safety. The DOT released a comprehensive rule-making proposal in July 2014, calling for structurally stronger tank cars, new operating requirements, speed restrictions, enhanced braking controls and route risk assessments, and a classification and testing program for mined gases and liquids.
The DOT proposal calls for phasing out within two years older model tank cars, called DOT-111s, long known to be vulnerable to rupturing in a crash. The National Transportation Safety Board, which investigates accidents, first urged replacing or retrofitting them in 1991.
In September 2014, the American Petroleum Institute and Association of American Railroads jointly asked the DOT for more time — up to seven years to retrofit tank cars.
Another safety measure, called positive train control (PTC), makes use of global positioning systems. It is intended to prevent collisions, derailments due to high speeds and other movements that could cause accidents, like a train using track where maintenance is under way. PTC can alert train crews to danger and even stop a train remotely.
Following a 2008 Metrolink crash in Los Angeles that killed 25 people — caused when an engineer missed a stop signal and collided with a Union Pacific freight train — Congress mandated PTC implementation on 60,000 miles of track nationwide. Large railroads have spent $4.5 billion to implement the technology, but the industry says it cannot meet its 2015 deadline.
Among the members of California’s congressional delegation demanding stricter regulations are Senators Dianne Feinstein and Barbara Boxer, who have called for more information to be released to first responders on train movements.
Sen. Feinstein also wrote a letter that urged the DOT to include pneumatic brakes, which can greatly reduce stopping distances, in its planned review of tank car design, and to extend the PTC requirement to any route used by trains carrying flammable liquids near population centers or sensitive habitat.
Meanwhile, Industry Continues to Grow
The growth in domestic crude oil is reflected in projects that include seven proposed, completed or under-construction expansions that together would have a maximum oil-by-rail capacity of 561,000 barrels per day at Bakersfield, Benicia, Pittsburg, Santa Maria, Stockton and Desert Hot Springs (see “Increasing Refinery Capacity” below).
As of December 2014, the Kinder Morgan Inc. facility in Richmond was the only refinery that could receive unit trains, which are trains with 100 or more tank cars carrying a single commodity and bound for the same destination.
InterState Oil Co. had its permit to offload crude at McClellan Park, in Sacramento County, revoked in November 2014 by the Sacramento Metropolitan Air Quality Management District. The district said it had issued the permit in error and that it required a full review under the California Environmental Quality Act.
Refineries in Bakersfield, Vernon, Carson and Long Beach were receiving crude deliveries from manifest trains, which carry a mix of cargo.
Safety Efforts Focus on Planning, Preparedness and Response
The Federal Rail Safety Act of 1970 authorized the U.S. secretary of transportation to create uniform national safety regulations. States are allowed to adopt additional, compatible rules if they do not hinder interstate commerce and address a local safety hazard. Courts have consistently ruled against almost all attempts by states to use the local safety hazard exception, however.
Thus, unable to regulate train movements, California lawmakers and agencies have pursued three main courses of action: planning, preparedness and response.
In the Golden State, the California Public Utilities Commission (CPUC) shares authority with the federal government to enforce federal safety requirements, and OES and local agencies lead emergency response. In 2014, Gov. Jerry Brown expanded the Department of Fish and Wildlife’s Office of Spill Prevention and Response to include inland areas.
The Legislature approved a Senate Joint Resolution, SJR 27 (Padilla), urging the DOT to safeguard communities and habitat, strengthen the tank car fleet, mandate the earlier voluntary safety agreement with railroads and prioritize safety over cost effectiveness.
Recent legislation includes AB 380 (Dickinson, Chapter 533, Statutes of 2014), which calls for increased spill-response planning for state and local agencies and requires carriers to submit commodity flow data to OES, and SB 1064 (Hill, Chapter 557, Statutes of 2014), which seeks to improve accountability and transparency regarding CPUC’s responses to federal safety recommendations.
The FY 2014–15 state budget also allocated $10 million to the CPUC, which planned to add seven more track inspectors, and authorized the state oil spill prevention fund to be used for spills in inland areas. In addition, the budget expanded the 6.5 cent per-barrel fee to include all crude oil entering the state.
The 10 state agencies that have some hand in rail safety and accident response have formed the Interagency Rail Safety Working Group. It issued a report last June that called for, among other things, older tank cars to be removed from service, stronger cars, improved braking, PTC and better markings on cars so that firefighters know how to proceed in an accident.
Speaking to Richmond residents in December 2014, Gordon Schremp, senior fuels specialist for the California Energy Commission, welcomed the moves to increase safety at the federal level. All indications were that railroads were complying with new measures like lower speed limits, he said.
“Does it mean there will be zero derailments? No, but the goal is to get there,” said Schremp.
Local government officials face a daunting challenge when it comes to disaster response.
The Interagency Rail Safety Working Group also found that, as of June 2014, there were no hazardous materials response teams in rural areas of Northern California and units in other areas of the state lacked the training and equipment needed to take a lead role. Forty percent of the state’s firefighters are volunteers.
“Training is of the utmost importance,” said Deputy Chief Thomas Campbell, who oversees the Cal OES Hazardous Materials Programs. “We understand that local governments are limited in finances and that it’s difficult to get firefighters out of rural communities to train because they are volunteers.”
Some Local Communities Oppose Expansion
At the local level the proposed expansion of California refineries sometimes has run into heated opposition.
After news reports revealed that Bakken crude was being transported into the City of Richmond, City Manager Bill Lindsay wrote a letter to the Bay Area Air Quality Management District in November 2014 calling for it to revoke energy company Kinder Morgan’s permit to offload the crude there. That followed a lawsuit filed by environmental groups to revoke the permit — a suit tossed out by the judge because it was filed too late.
Elsewhere, a proposal by Valero Energy Corp. would bring 1.4 million gallons of crude daily to its Benicia refinery. The proposal has been met with letters questioning the city’s environmental and safety analysis from senders that have included the CPUC, Office of Spill Prevention and Response, the Sacramento Area Council of Governments, the Capitol Corridor Joint Powers Authority and cities along the rail line, including Davis and Sacramento. The Union Pacific Railroad has responded by stressing federal pre-emption of rail traffic.
Even as those proposals played out, a pair of derailments in Northern California underscored the importance of the debate. While neither spill involved crude oil or hazardous materials, both served as a warning of the need for California to improve its emergency response capability. Eleven cars carrying freight derailed and spilled into the Feather River Canyon near Belden on Nov. 25, 2014. Three days later, one car tumbled off the tracks near Richmond. The cars were loaded with corn in the first instance and refrigerated pork in the second.
The League continues to closely monitor developments in oil by rail. In September 2014 the League made recommendations to the DOT on the federal rule-making governing rail safety. The recommendations included providing more information and training to first responders, mandating speed limits and stronger tank cars, and using all available data to assess the risks and consequences of crude oil transport. Two months later, the National League of Cities passed a resolution stressing many of the same safety measures.
League of California Cities staff conducted a series of webinars during fall 2014 to better acquaint members with the oil-by-rail issue, and its Public Safety and Transportation policy committees took up the subject in January 2015 meetings.
Increasing Refinery Capacity
The California Energy Commission is tracking the following projects, which would dramatically increase the oil-by-rail capacity of refineries:
Plains All American Pipeline LP in Bakersfield, which took its first delivery in November 2014, has a capacity of 65,000 barrels per day (bpd);
Alon USA Energy Inc. in Bakersfield, under construction, will be able to receive 150,000 bpd;
Valero Energy Corp. in Benicia, which is presently undergoing permit review, would have a 70,000 bpd capacity;
WesPac Energy-Pittsburg LLC in Pittsburg, undergoing permit review, could receive up 50,000 bpd by rail and 192,000 bpd through its marine terminal; and
Phillips 66 in Santa Maria, undergoing permit review, could accept 41,000 bpd.
In addition, Targa Resources Corp. at the Port of Stockton is planning an expansion that would enable it to receive 65,000 bpd. And Questar Gas Corp. is planning a project that could see it offload 120,000 bpd near Desert Hot Springs, then send it through a repurposed 96-mile pipeline to Los Angeles.
Photo credits: Ksb/Shutterstock.com; Steven Frame/Shutterstock.com.
Environmentalists sue to stop crude-by-rail terminal in California
By Rory Carroll, Jan 29, 2015
Environmental groups on Thursday sued a California regulator that permitted trains carrying crude oil to begin making deliveries at a terminal in Bakersfield, arguing the permit was issued in secret and the volatile crude could cause explosions.
The plaintiffs asked the California Superior Court to stop operations at the newly opened Bakersfield Crude Terminal in Taft until a full environmental review is conducted. The terminal, located in Kern County, began receiving crude in November from North Dakota and Canada and is owned by Plains All American Pipeline LP.
In their complaint, the groups point to emails obtained through a public records request that they say show the San Joaquin Air Pollution Control District helping the company avoid environmental and public reviews of the project.
The terminal can currently receive one 100-car unit train a day carrying crude from the Bakken shale formation as well as heavier tar sands crude from Canada. The terminal will ultimately expand to receive two unit trains per day, carrying as much as 61 million barrels of crude a year, making it one of the state’s largest crude-by-rail terminals, the groups said.
Crude oil shipments by rail in California have jumped in recent years as producers seek to move cheap, landlocked crudes from North Dakota and Canada to refineries along the West Coast.
The increase has raised environmental and safety concerns due to a series of fiery derailments, most notably the Lac-Mégantic rail disaster in Quebec in July 2013, which killed 47 people.
“The Bakersfield Crude Terminal evaded both state and federal environmental review and was permitted largely in secret. Given the potentially catastrophic damage from derailments of these tank cars full of volatile crude, these permits must be cancelled,” said Vera Pardee, senior attorney for the Center for Biological Diversity, one of the five environmental groups who are plaintiffs in the case.
Annette Ballatore-Williamson, an attorney for the air district, said the lawsuit misrepresents the nature of the permit, which only covered the construction of a couple storage tanks that emit about a half a pound of air pollution per day.
The facility and the rail terminal underwent significant environmental review and analysis by Kern County several years ago, she said.
“The problem from (the plaintiff’s) perspective is the statute of limitations on their claim against Kern County expired quite some time ago so now they are just looking for a target,” she said.
(Reporting by Rory Carroll; Editing by Andrew Hay and Lisa Shumaker)
Repost from The Sacramento Bee [Editor: Significant quotes: “…UP said new shipments into California from Canada started in late November, running through Idaho, Washington and Oregon…. The trains from Canada likely carry tar sands…. the trains from Canada appear to be traveling on the UP line that runs parallel to Interstate 5 through Northern California, which almost certainly takes them on one of several rail lines through Sacramento…. The new shipments are the first “unit” – or all-oil – trains to enter the Western U.S. from Canada, according to a report in Railway Age. Crude from Canada has been coming into California sporadically and in smaller shipments for more than a year, Railway Age reported.” See also Railway Age, UP begins Canada-to-California CBR service. – RS]
New crude oil trains from Canada arrive in California
By Tony Bizjak, 12/08/2014
In a sign that crude oil train shipments to California refineries are on the rise, Union Pacific railroad officials confirmed last week they are now transporting full trains of Canadian oil through Northern California on a route that likely cuts through central Sacramento.
State rail-safety inspectors shadowed the initial trains outside of Bakersfield and reported the mile-long trains were traveling at slow speeds, most likely out of caution, just days after a UP corn train derailed in the Feather River Canyon and spilled feed into the river.
The Canadian imports are the second set of all-oil trains now believed to be coming through the capital on a regular basis. A Bakken oil train comes through midtown Sacramento once or twice a week en route to Richmond in the Bay Area.
Several more oil trains may join them in the next year. Valero Refining Co. has applied for permission to run two 50-car oil trains a day through Sacramento to its plant in Benicia, and Phillips 66 has plans to run oil trains five days a week into its refinery in San Luis Obispo County, some from the north and some via southern routes.
State officials say the Canadian trains are heading to a newly opened transfer station outside Bakersfield, where the crude oil is expected to be piped to coastal refineries. The station, operated by Plains All American Pipeline, a Texas company, is the first of several crude-by-rail facilities planned for California in the next few years. Combined, they would give oil companies the ability to receive up to 22 percent of the state’s imported crude oil by rail instead of by marine shipment.
The increase nationally in train transport of North American crude has helped push international oil prices down dramatically in recent months. It also has raised concerns about the risk of derailments and oil spills. Sacramento officials have called on oil and rail companies and federal regulators to increase safety measures to protect against spills, including requiring stronger tank cars.
Citing safety issues of their own, rail companies have generally declined to disclose where and when rail shipments are happening. But in an email to The Sacramento Bee last week, UP said new shipments into California from Canada started in late November, running through Idaho, Washington and Oregon.
“We expect to run crude trains on this route moving forward,” UP’s Aaron Hunt wrote.
The trains from Canada likely carry tar sands, also called bitumen, which is considered less flammable than the Bakken oil from North Dakota. Bakken oil has been involved in a several major rail explosions in the last few years, including one that killed 47 people in a Canadian town. State safety officials say tar sands, viscous and heavy, are a threat to waterways because the material can sink, making spills hard to clean. A bitumen spill from a ruptured pipe forced closure of 35 miles of the Kalamazoo River in Michigan in 2010 and required $1 billion in cleanup costs over a three-year period.
The state recently called on railroads to provide plans that show that they have the wherewithal to clean oil spills on state waterways. Officials with the state Office of Spill Prevention and Response say tar sands may require particular equipment. “Businesses that transport heavy oils are required to have response resources necessary to address these types of spills,” state spokesman Steve Gonzalez said in an email. “Contractors must be able to locate, contain and clean up a spill that has sunk to the bottom of the water. Some of these responses include sonar, containment boom, dredges and pumps.”
Rail shippers point out that derailment numbers overall have been decreasing nationally for decades and that the industry now runs oil trains at slower speeds at times.
State Public Utilities Commission officials say they sent inspectors out near Bakersfield to monitor the first Canadian oil train, and another train headed to Bakersfield from the south, and noted that the trains were traveling slower than normal.
“The first run is a critical run. If anything goes wrong, we want to be there,” PUC rail safety chief Paul King said. “There might be compliance issues. We want to see how it interfaces with traffic, what speeds they decided to go.”
King said the trains from Canada appear to be traveling on the UP line that runs parallel to Interstate 5 through Northern California, which almost certainly takes them on one of several rail lines through Sacramento. Rail officials have declined to say which lines the oil trains use.
In May, the U.S. Department of Transportation required railroads to notify state officials of large shipments of Bakken oil. Many states ultimately made the information available through public records requests, against the wishes of the railroads. However, railroads are not required to report oil shipments from Canada or other non-Bakken domestic sources.
The new shipments are the first “unit” – or all-oil – trains to enter the Western U.S. from Canada, according to a report in Railway Age. Crude from Canada has been coming into California sporadically and in smaller shipments for more than a year, Railway Age reported.