Tag Archives: Wall Street Journal

Does zero Bakken crude for Irving Oil indicate a trend?

Repost from Railway Age
[Reference:  see the 8/20/15 Wall Street Journal article, Canada’s Largest Refinery Shifts from Bakken Shale Oil to Brent Crudes.  – RS]

Does zero Bakken crude for Irving Oil indicate a trend?

By  William C. Vantuono, Editor-in-Chief, August 28, 2015
Irving Oil Ltd. Saint John, N.B. refinery
Irving Oil Ltd. Saint John, N.B. refinery

Irving Oil Ltd., operator of Canada’s largest crude oil refinery, has stopped importing crude oil sourced from the Bakken shale formation in North Dakota and shipped by rail in favor of cheaper crudes from such producers as OPEC, “reflecting a shift in crude costs affecting East Coast refiners during a global slump in oil prices,” the Wall Street Journal recently reported.

The 320,000-barrel-a-day refinery in Saint John, N.B., one of the biggest by volume in North America, had been receiving 100,000 barrels a day by rail, a high reached two years ago that was only temporarily affected by the Lac Mégantic disaster. (The Montreal, Maine & Atlantic crude oil train that derailed on July 6, 2013, claiming 47 lives, was bound for the refinery). Today, CBR shipments the refinery are zero, a move “that reflects shifting economics in the energy industry even as the price of oil—including Bakken crude—has slumped to six-year lows,” said the WSJ. “About 90% of the crude oil Irving currently buys is shipped by sea from such producers as Saudi Arabia and those in western Africa, with the remainder coming by rail from such western Canadian oil-sands operators as Syncrude Canada Ltd. and Royal Dutch Shell PLC. A year ago, Bakken crude made up about 25% of Irving’s feedstock and in 2013 it supplied nearly one-third of its procurement volume, or about 100,000 barrels a day. ‘The Bakken price has gone up’ relative to other crudes when CBR costs are factored in,’ [an Irving Oil executive] said.”

“A once-yawning gap, between the cost of oil produced in North America and overseas crudes priced at the Brent global benchmark, has narrowed since 2013,” the WSJ noted. “Refiners on North America’s east coast can now import crude shipped by sea for less than the cost of shipping it by rail from shale oil producers in North Dakota and elsewhere in the U.S.”

Production of U.S. shale oil, especially that from the Bakken, led to CBR shipments increasing exponentially due to a lack of pipelines. CBR is more expensive than by shipping by pipeline and even by ship, and fewer refiners are willing to pay a premium for CBR. <p< Whether Irving Oil’s decision to abandon Bakken crude for a single refinery reflects a broader trend that will affect CBR movements remains to be seen. Two other refiners have followed suit, but the situation may not be permanent.

“Refiners PBF Energy Inc. and Phillips 66 both said they increased procurement of overseas crudes at the expense of CBR in the second quarter, though they signaled it is unclear if that will continue throughout the rest of the year,” the WSJ reported. “‘Our ability to source sovereign waterborne crudes was far more economic to the East Coast facilities, and that’s what we did,’ PBF Energy CEO Tom Nimbley said in late July. Phillips 66 CEO and Chairman Greg Garland told investors last month, ‘We actually set [crude-by-rail] cars on the siding. We brought imported crudes in the system.’ But, he added, ‘I’d say given where our expectations are for the third quarter, I’d say cars are coming off the sidings, and we’re going to import less crude.’”

CBR traffic has dropped substantially compared to last year, “reflecting both the worsening economics of CBR and better pipeline access to refineries on the Gulf of Mexico,” the WSJ noted. According to Association of American Railroads figures, U.S. Class I railroads originated 111,068 carloads of crude oil in the second quarter of 2015, down 2,201 carloads from the first quarter and some 21,000 fewer carloads than the peak in 2014’s third quarter.

 

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    Northern California Representatives call for no delay in or weakening of new oil-by-rail safety standards

    Repost from The Benicia Herald
    [Editor: In an otherwise excellent report, this story fails to mention that Benicia’s own Representative Mike Thompson and 5 other Northern California legislators joined with Reps. Garamendi and Matsui in signing the letter.  Note as well that the fires in the West Virginia explosion burned for nearly 3 days (not 24 hours per this article).  See also Rep. Garamendi’s Press Release.  A PDF copy of the signed letter is available here.  See also coverage in The Sacramento Bee.  – RS]

    Garamendi calls for no delay in oil-by-rail safety improvements

    By Donna Beth Weilenman, March 4, 2015

    U.S. Rep. John Garamendi, D-Fairfield, is urging the Department of Transportation to issue stronger safety standards for transporting oil by train “without delay.”

    Garamendi, a member of the House Committee on Transportation and Infrastructure, made his call in a letter he authored after working with U.S. Rep. Doris Matsui, D-Sacramento, and circulated among members of the House.

    He said the letter responds to news that the DOT may consider weakening oil train safety regulations and delaying a deadline for companies to comply with certain safety guidelines.

    He said he also has been making his appeal to DOT officials in person as well as in committee hearings and in speaking with reporters, urging the department to adopt stronger safety measures designed to protect communities near rail lines.

    He said several key intercontinental rail lines that reach West Coast ports and refineries lie within his Third District.

    Those rail lines go through Fairfield, Suisun City, Dixon, Davis, Marysville and Sacramento, he said.

    Garamendi is the leading Democrat on the House Committee on Transportation and Infrastructure’s Subcommittee on the Coast Guard and Maritime Transportation.

    He pointed to a February accident in West Virginia in which a train carrying crude oil derailed and exploded, and said that was just the latest in a series of more frequently occurring incidents.

    That accident happened in Fayette County, in which Garamendi said 28 tanker rail cars in a CSX train went off the tracks and 20 caught fire, accompanied by explosions and 100-yard-high flames.

    Nearby residents were evacuated, and the fires burned for 24 hours.

    West Virginia’s governor, Earl Ray Tomblin, issued a statement saying the train was carrying Bakken crude from North Dakota to Yorktown, Va. The train had two locomotives and 109 rail cars, according to a CSX statement.

    CSX originally said one car entered the Kanawha River, but later said none had done so.

    The company reported at least one rail car ruptured and caught fire. One home was destroyed, and at least one person was treated for potential inhalation of fumes.

    The rail line said it was using newer-model tank cars, called CPC 1232, which are described as tougher than DOT-111 cars made before 2011. Garamendi confirmed that.

    He also said the train was traveling at 33 mph, well below the 50-mph speed limit for that portion of the track.

    According to a report by the Wall Street Journal and a statement from the North Dakota Industrial Commission, the oil contained volatile gases, and its vapor pressure was 13.9 pounds per square inch. A new limit of 13.7 pounds per square inch is expected to be set by North Dakota in April on oil carried by truck or rail from the Bakken Shale fields, though Brad Leone, a spokesperson from Plains All American Pipeline, the company that shipped the oil, said his company had followed all regulations that govern crude shipping and testing.

    A few days before, another Canadian National Railways train derailed in Ontario.

    “Families living near oil-by-rail shipping lines are rightfully concerned about the safety of the trains that pass through their communities,” Garamendi said.

    “For that reason, I have repeatedly called on the Department of Transportation to use all the tools at their disposal to ensure that these shipments are as safe and secure as possible.”

    He said he also wants the DOT to act quickly.

    “Every day that strong and effective rules are delayed is another day that millions of Americans, including many in my district, are put at greater risk.

    “While the Department has made this a priority, they must move with greater urgency to address this matter.”

    He and Matsui have written Timothy Butters, acting administrator of the Pipeline and Hazardous Materials Safety Administration, and Sarah Feinberg, acting administrator of the Federal Railroad Administration, expressing “our strong concern that despite increased train car derailments and an overall delay in the issuance of oil-train safety regulations, the Department of Transportation may be considering a revision that could delay the deadline for companies to comply with important safety guidelines, including upgrading CPC-1232 tank cars to new standards.”

    Citing the frequency of derailments, they wrote that such measures as stabilizing crude and track maintenance before transport should be added to those standards. “Any weakening of the proposed rule would be ill-advised,” they wrote.

    The two wrote that the West Virginia accident was the third reported in February.

    In addition to that one and the Ontario accident, another train carrying ethanol derailed and caught fire in Iowa.

    “These are in addition to recent derailments in Northern California’s Feather River Canyon, Plumas County, and Antelope region where three train cars derailed earlier this year while en route from Stockton to Roseville,” they wrote.

    The two said the need for safer train cars “has long been documented and is overdue.”

    They said the DOT began updating rules in April 2012. Meanwhile, from 2006 to April 2014, 281 tank cars derailed in the United States and Canada.

    They wrote that 48 people died and nearly 5 million gallons of crude oil and ethanol were released.

    “Serious crude-carrying train incidents are occurring once every seven weeks on average, and a DOT report predicts that trains hauling crude oil or ethanol will derail an average of 10 times a year over the next two decades, causing billions of dollars in damage and possibly costing hundreds of lives,” they wrote.

    In the wake of “this alarming news,” they wrote of their “great concern” that Pipeline and Hazardous Materials Safety Administration failed to meet its Jan. 15 deadline to release a final rule on crude-by-rail regulations.

    They urged the DOT to maintain the timeline that gives companies two years to retrofit cars and to have provisions in place or additional regulations drafted to require stabilization of crude as well as better track maintenance technology.

    “We understand that more than 3,000 comments to the rule were analyzed and we commend the DOT for its work with industry thus far on information sharing, slower speeds, and reinforced railcars, but the multi-pronged solutions for this important safety issue must be implemented as quickly as possible,” they wrote.

    “We also believe that DOT should issue a rule that requires stripping out the most volatile elements from Bakken crude before it is loaded onto rail cars.

    “This operation may be able to lower the vapor pressure of crude oil, making it less volatile and therefore safer to transport by pipeline or rail tank car,” they wrote.

    In addition, they wrote that greater priority must be placed on track maintenance and improvement.

    “We need safer rail lines that are built for the 21st century, including more advanced technology in maintaining railroad tracks and trains so that faulty axles and tracks do not lead to further derailments,” they wrote.

    Saying 16 million Americans live near oil-by-rail shipping lanes, Garamendi and Matsui wrote that if “dangerous and volatile crude” is to be shipped through municipalities and along sensitive waters and wildlife habitat, “the rail and shipping industries must do more.”

    The two praised the National Transportation Safety Board for investigating the accidents thoroughly.

    But they added that those living near crude-by-rail tracks “should not have to live with the fear that it is only a matter of time.”

    Instead, they wrote, the DOT should work toward “release of a strong and robust safety rule as soon as possible.”

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      MINNESOTA PUBLIC RADIO: Seven things you need to know about oil-by-rail safety

      Repost from Minnesota Public Radio (MPR)

      7 things you need to know about oil-by-rail safety

      By Emily Kaiser, Feb 26, 2015
      Derailment in Mount Carbon, West Virginia
      This aerial Feb. 17, 2015 file photo photo made available by the Office of the Governor of West Virginia shows a derailed train in Mount Carbon, West Virginia. Steven Wayne Rotsch | AP file

      Last week’s oil train derailment in West Virginia launched a national conversation about the safety of shipping oil by rail. It’s a topic we’ve been hearing about over the past couple years, especially here in Minnesota, where Bakken oil crisscrosses the state’s rail lines in large volume.

      It’s a complex topic combining federal policy with scientific questions. The Wall Street Journal’s Russell Gold has been following the issue closely and spoke to MPR News’ Tom Weber to explain what you need to know.

      Here are 7 things you should know about oil transport by rail:

      1. The most misunderstood part of crude oil transport by train: It’s very explosive.

      “The kind of oil that’s being taken out of the ground in North Dakota and put into these tanker cars is a much lighter oil,” Gold said. “It is a very gassy oil; it has a lot of ethanes, and butanes and propanes dissolved in it. It really does explode and that’s really what’s causing the problems.”

      When a set of tanker cars goes up in flames, it can cause 20-story-tall fireballs.

      Footage from the West Virigina derailment last week:

      2. The amount of crude oil carried by train has increased exponentially in less than a decade.

      According to the American Association of Railroads, there were 9,500 rail cars carrying crude in 2008. Last year is was 400,000.

      We’ve been moving small amounts of crude by rail for years, but it was one or two cars in long train, Gold said. Now we see 100 to 120 tanker cars all filled with crude oil. That’s 70,000 barrels of crude per train, he said.

      3. Once the crude oil is extracted in North Dakota, it has to be transported to the country’s major refineries on the coasts.

      Refineries are built to utilize the gases removed from the product. If it was stabilized near the extraction site, North Dakota would have to find a way to use or dispose of the ethane and propane gases that make the oil explosive.

      4. Railroads have become “virtual pipelines” for oil.

      From a Gold WSJ article:

      While these virtual pipelines can be created in months, traditional pipelines have become increasingly difficult to install as environmental groups seek to block permits for new energy infrastructure.

      “What we are seeing on rail is largely due to opposition to and uncertainty around building pipelines,” said Brigham McCown, who was the chief pipeline regulator under President George W. Bush . Pipelines, he adds, are far safer than trains.

      5. Pipeline leaks and spills are environmental problems. Oil train derailments are public safety issues.

      When you have a tank car that derails and starts losing it’s very gassy oil, it’s going to burst into fire rather than leak into waterways, Gold said.

      6. If you live close to these rail lines, get in touch with local first responders.

      Gold recommends checking with emergency responders nearby and ask if they are properly trained to handle a crude oil train derailment. Make sure your fire chief is in contact with the rail companies to know when major shipments come through your area. Push for decreasing train speed limits and increased track inspection.

      7. Can we make the tanker cars safer? Gold gave us the latest:

      MPR News Producer Brigitta Greene contributed to this report.

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