Tag Archives: Washington State

Oil Train Insurance: Washington State and the Billion Dollar Disaster

Repost from STAND

Oil Train Insurance: Washington State and the Billion Dollar Disaster

By Alex Ramel, extreme oil campaign field director, March 28, 2016
WA Dept of Ecology

Washington is now one of only two states that requires railroads to disclose whether they have sufficient insurance to cover a “reasonable worst case spill.” This is a step in the right direction. But the new rule falls far short of requiring enough insurance to cover a catastrophic oil train derailment, spill and explosion.

The new State rule requires that any major rail company operating in Washington — today, only BNSF — report whether they have sufficient financial resources or insurance to cover the costs of an oil train spill of around $700 million (smaller railroads have smaller requirements). That’s better than nothing, which is what most states have. But it’s not nearly enough.

The deadly Lac Megantic oil train disaster cost more than $1 billion (see page 98 in the federal regulations) and the cost of rebuilding is more like $2.7 billion. As terrible as the Lac Megantic disaster was, and it was a heartbreaking catastrophe, a worst case oil train disaster in Washington could be even much worse.

Washington State’s failure to require railroads to pay the full and true cost of doing business in Washington is an even greater concern if it becomes a precedent in other states. The confusing, undefined phrase “reasonable worst case” appears to have already been copied into a proposed bill in the New York State Assembly.

The federal Pipeline and Hazardous Materials Safety Administration suggested that a disaster inside a major city could cost $12.6 billion (see page 110). What could a $12 billion derailment look like? BNSF runs oil trains within 20 yards of Safeco Field in downtown Seattle during Mariners games when fans are in the stands.

Insurance monetizes risk, assigning a direct cost to risky behavior and assigning financial value to safety. What would your homeowners insurance company do if you wanted to unload oil tanker trucks in your driveway? They would raise your rates (astronomically) or cancel your policy. Railroads, which operate without requirements to carry adequate insurance, make decisions about assuming risk without an important financial feedback loop. If railroads had to be properly insured for the risk to life, property, and the environment from oil trains, there would be far fewer or zero oil trains.

Last year BNSF was fined for 14 spills and leaks and for failing to report problems along the track in Washington. The summer before that three oil tank cars tipped over in downtown Seattle. Over the last two years four BNSF oil trains have derailed and either spilled or exploded in Casselton, ND, Galena, IL, Heimdal, ND, and Culbertson, MT. Under usual circumstances a safety record like that should lead to a very awkward conversation with an insurance agent. And an already expensive, high-risk policy should get even more expensive. But BNSF doesn’t seem to carry enough insurance to cover the real cost of an oil train disaster, and they don’t seem to care.

BNSF has already intimated that they don’t think that the state should be able to require insurance, and it is likely that the company will challenge the rule. The railroad wants the cost of insurance and the calculation of possible damages kept off of their books. That means that in addition to living with the risk, the public is also asked to shoulder the cost. That’s the most unreasonable proposition yet.

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    Sacramento: Oil firms challenge state over clean fuel

    Repost from SFGate

    Clean fuels shaping up as fight of the year in Sacramento

    New battle lines drawn in fight over low-carbon policy
    By Laurel Rosenhall, CALmatters, Mar 5, 2016 Updated: 3/6/16 3:33pm
    A pending fight over low-carbon fuel standards could hinge on how they affect the state’s cap-and-trade system for carbon emissions. Photo: Ted S. Warren, AP
    A pending fight over low-carbon fuel standards could hinge on how they affect the state’s cap-and-trade system for carbon emissions. Photo: Ted S. Warren, AP

    A Harvard economist known globally for his work on climate change policy sat in the Sacramento office of the oil industry’s lobbying firm recently, making the case that California is fighting global warming the wrong way.

    The state has a good cap and trade system, Robert Stavins said, but some of its other environmental policies are weakening it. He pointed to a rule known as the low carbon fuel standard, which is supposed to increase production of clean fuels.

    Environmental advocates consider it a complement to the cap and trade program that makes industry pay for emitting carbon; Stavins had other words.

    “It’s contradictory. It’s counter-productive. It’s perverse,” he said. “I would recommend eliminating it.”

    California’s low carbon fuel policy is shaping up as a major fight this year for the state’s oil industry, an influential behemoth that spent more than $10.9 million lobbying Sacramento last year, more than any other interest group.

    “There’s a storm coming,” biofuels lobbyist Chris Hessler told a roomful of clean energy advocates at a recent conference on low carbon fuels. “If we don’t meet this attack vigorously, we’re all going to be in a lot of trouble.”

    NEW BATTLE LINES

    The oil industry was front and center in the biggest fight to hit the state Capitol last year: a proposal to cut California’s petroleum consumption in half over the next 15 years to slow the pace of climate change. The industry won its battle when lawmakers stripped the oil provision from Senate Bill 350.

    But California’s larger oil war is far from over, and the newest battle lines are beginning to emerge.

    Gov. Jerry Brown is plowing ahead with plans to cut vehicle oil use in half through executive orders and regulations like the low carbon fuel standard. The standard requires producers to cut the carbon intensity of their fuels 10 percent by 2020. To reach the standard, refineries will have to make a blend that uses more alternative fuels — like ethanol — and less oil.

    The program was adopted in 2009 but was locked in a court battle for years. California regulators prevailed, and took action last year to resume the program. Now producers must start changing the way they formulate their fuel or buy credits if their product is over the limit.

    That’s led to higher costs for fuel makers, which they are passing on to consumers at a rate of about 4 cents per gallon, according to the California Energy Commission. But the price is likely to keep increasing, the oil industry warns, as it gets tougher to meet the standard that increases over time.

    Which is where Stavins’ argument comes in. It goes like this: the cleaner fuels required by the low carbon fuel standard will emit less greenhouse gas. That will reduce the need for fuel producers to buy permits in the cap and trade system (which makes industry pay for emitting climate-warming pollution) and create additional emissions by allowing other manufacturers to buy the pollution permits.

    Less demand will also depress prices on the cap and trade market.

    Stavins is the director of Harvard’s Environmental Economics Program and part of the Intergovernmental Panel on Climate Change, a prestigious group of experts who review research for the United Nations.

    He’s also an advisor to the Western States Petroleum Association, which paid him to make the trip to Sacramento, where he talked with reporters before a day of meetings with lawmakers and business leaders.

    Environmental advocates and California clean air regulators reject his view. They say the fuel standard works in harmony with other carbon-reducing programs and it’s an important piece of California’s effort to achieve its climate change goals.

    “One of the major goals of the low carbon fuel standard… is to drive innovation of new and alternative low carbon fuels,” said Stanley Young, spokesman for the California Air Resources Board. “The cap and trade program on its own cannot do that.”

    Alternative fuel producers gathered in a ballroom near the Capitol days after Stavins’ visit to Sacramento. During a presentation on the rising price of low carbon fuel credits, Hessler, the biofuels lobbyist, warned that the program is coming under “political attack.”

    He defended the fuel standard by saying the regulation limits the price of the credits, and the cost to consumers will be kept down as some fuel producers make money by selling credits to others. He urged conference participants to share his information with California policymakers to counter opposition to the low carbon fuel standard.

    “We’ve got to be ready for this,” Hessler said.

    HOW THINGS COULD GO DOWN

    A fight last year over a low carbon fuel standard in the state of Washington may provide some clues about how things could go down here.

    There, Democratic Gov. Jay Inslee proposed a low carbon fuel standard but failed to earn enough support for it in the Legislature. The fuel standard became a bargaining chip for Republicans in negotiations about funding for transportation infrastructure.

    Here in California, lawmakers and Gov. Brown are also negotiating a plan to pay for a backlog of repairs to state roads and highways. Brown has pitched spending $36 billion over the next decade with a mix of taxes and other revenue sources.

    Republican votes are necessary to reach the two-thirds threshold for approving new taxes. So far, Republicans have balked at the plan, with some suggesting that the fuel standard should be included in the negotiations.

    “As we’re having the discussions about transportation funding in general in California, and transportation taxes in particular, this ought to be part of the discussion,” said Assemblyman Jay Obernolte, R-Hesperia.

    It’s a message echoed by the president of the Western States Petroleum Association, which advocated against the low carbon fuel standard in Washington.

    Catherine Reheis-Boyd said she wants California lawmakers to “take a very hard look” at the low carbon fuel standard as they consider the future of climate change policies and the desire to repair the state’s roads.

    “All those things interplay,” Reheis-Boyd said. “That’s a big conversation. I think people across the state are willing to have it, and I think we’re at a pivotal point to have it this year.”

    CALmatters is a nonprofit journalism venture dedicated to explaining state policies and politics. For more news analysis by Laurel Rosenhall go to https://calmatters.org/newsanalysis/.
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      House bill could shield oil train spill response plans from disclosure

      Repost from McClatchyDC

      House bill could shield oil train spill response plans from disclosure

      By Curtis Tate, October 16, 2015
      Oil burns at the site of a March 5, 2015, train derailment near Galena, Ill. A bill in Congress would require railroads to have comprehensive oil spill response plans, but would also give the Secretary of Transportation the ability to exempt the details from disclosure. Oil burns at the site of a March 5, 2015, train derailment near Galena, Ill. A bill in Congress would require railroads to have comprehensive oil spill response plans, but would also give the Secretary of Transportation the ability to exempt the details from disclosure. EPA

      HIGHLIGHTS

      • Six-year transportation bill includes section on oil trains
      • Obama administration supports public notifications of oil spills, etc.
      • Future transportation secretary could be empowered to protect data

      WASHINGTON – A House of Representatives bill unveiled Friday could make it more difficult for the public to know how prepared railroads are for responding to oil spills from trains, their worst-case scenarios and how much oil is being transported by rail through communities.

      The language appears in the House Transportation and Infrastructure Committee’s six-year transportation legislation, which primarily addresses federal programs that support state road, bridge and transit projects. But the legislation also includes a section on oil trains.

      The U.S. Department of Transportation is working on a rule to require railroads shipping oil to develop comprehensive spill response plans along the lines of those required for pipelines and waterborne vessels. It would also require them to assess their worst-case scenarios for oil spills, including quantity and location.

      The House bill would give the secretary of transportation the power to decide what information would not be disclosed to the public.

      The secretary would have discretion to withhold anything proprietary or security sensitive, as well as “specific response resources and tactical resource deployment plans” and “the specific amount and location of worst-case discharges, including the process by which a railroad carrier determines the worst-case discharge.”

      The House bill defines “worst-case discharge” as the largest foreseeable release of oil in an accident or incident, as determined by the rail carrier.

      Four major oil train derailments have occurred in the U.S. since the beginning of the year, resulting in the release of more than 600,000 gallons, according to federal spill data.

      Numerous states have released information on crude by rail shipments to McClatchy and other news organizations. DOT began requiring railroads to notify state officials of such shipments last year after a train derailed and caught fire in Lynchburg, Va.

      The disclosures were opposed by railroads and their trade associations, which asked the department to drop the requirement. The department tried to accommodate the industry’s concerns in its May final rule on oil train safety by making the reports exempt from disclosure. But facing backlash from lawmakers and emergency response groups, the department reversed itself.

      Transportation Secretary Anthony Foxx, and Sarah Feinberg, the acting chief of the Federal Railroad Administration, said the department would continue the disclosure requirement and make it permanent. But a new administration could take a different approach.

      “We strongly support transparency and public notification to the fullest extent possible,” Feinberg said in July.

      In May, Washington Gov. Jay Inslee signed a bill that would require railroads operating in the state to plan for their worst-case spills.

      In April, BNSF Railway told state emergency responders that the company currently considers 150,000 gallons of crude oil, enough to fill five rail tank cars, its worst-case scenario when planning for spills into waterways. A typical 100-car oil train carries about 3 million gallons.

      Washington state requires marine ships that transport oil to plan for a spill of the entire cargo.

      The Federal Emergency Management Agency conducted a mock derailment in New Jersey in March in which 450,000 gallons of oil was released.

      California passed a similar bill last year, but two railroads and a major trade association challenged it in court, claiming the federal laws regulating railroads preempted state laws. A judge sided with the state in June, but without addressing the preemption question.

      The House Transportation Committee will consider the six-year bill when lawmakers return from recess next week. The current legislation expires on Oct. 29, and the timing makes a short-term extension likely.

      After the committee and the full House vote on the bill, House and Senate leaders will have to work out their differences before the bill goes to the president’s desk.

      Samantha Wohlfeil of the Bellingham (Wash.) Herald contributed.
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