Category Archives: Clean-up costs

Washington state requires railroads to show they could afford ‘worst case’ oil train spill

Repost from the Bellingham Herald

Washington asks if railroads could afford $700M oil train spill

By Samantha Wohlfeil, February 13, 2016 6:28 AM
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America.
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America. Paul Chiasson Associated Press

HIGHLIGHTS
•  Three new rail safety rules scheduled to take effect March 11
• Railroads must show they have means to pay for a ‘reasonable worst case spill’
• Railroads disagree with new rule methods and question state authority

Railroads that haul oil trains through Washington state will need to report whether they could afford around $700 million to pay for a derailment and spill, under a recently finalized state rule.

As announced Feb. 9, the requirement is one of three oil train safety rules the state Utilities and Transportation Commission crafted as required under legislation that state lawmakers passed in 2015.

The new rules, which take effect March 11:

▪ Require signs with basic safety information be posted at private rail crossings along routes that carry full or empty oil trains.

▪ Allow certain cities such as Bellingham, Aberdeen, Spokane, Tacoma, and Richland to opt into a state rail crossing inspection program to get free assistance with inspections.

▪ Require railroads to include financial information in their annual report to the UTC to show if they could address a “reasonable worst case spill” of oil.

Reasonable worst case

The portion of the rule most heavily scrutinized during a months-long comment process was the requirement to show financial ability to pay for a reasonable worst case spill. The rule required commission staff to first define what a “reasonable” worst case spill looks like, and second, calculate what cleaning that up might cost.

THEY DIDN’T WANT THE WORST CASE. THEY WANTED SOMETHING REASONABLE.
Jason Lewis, Utilities and Transportation Commission transportation policy adviser

Railroads objected to the proposed spill scenarios, and argued that the requirement to show whether they could afford cleanup was pre-empted by federal law.

Johan Hellman, on behalf of BNSF, wrote Sept. 21, 2015, that the company was concerned with a draft that had defined the reasonable worst case spill as half the train’s contents, and had set minimum cleanup costs at $400 per gallon.

“We find both the definition and the minimum cost to be greatly exaggerated,” Hellman wrote.

The worst case calculation was refined to be based on the fastest speed an oil train travels, but both BNSF and Union Pacific Railroad continued to object to the requirement.

In a Dec. 7 letter to the commission, Melissa Hagan argued on behalf of Union Pacific that requiring the railroad to detail the insurance it carries, along with its ability to pay for the reasonable worst case cleanup, would “compromise the integrity of Union Pacific’s confidential business records” and was “blatantly discriminatory.”

Other people who commented said the rule didn’t go far enough in its estimates for how much oil could spill and how much those damages could cost.

State Sen. Christine Rolfes, D-Kitsap County, told the commission she thought the reasonable worst case spill amount was “far too conservative” and the estimated cleanup cost seemed “excessively low.”

Dale Jensen, spill prevention preparedness and response manager for the state Department of Ecology, also wrote to say an estimated $400 per gallon cleanup cost would cover only a “portion of the overall costs of an oil spill” and “in the event of a worst case spill, the true cost of damages incurred could certainly exceed the level established within the proposed rule.”

The commission agreed with Jensen but said the legislation refers to a “reasonable” worst case, not an absolute worst case spill.

Calculating the reasonable worst

In crafting the rule, commission staff looked to federal rule-making by the Pipeline and Hazardous Materials Safety Administration and Federal Railroad Administration, and to the actual worst derailment of ethanol or crude oil in North America, which happened in Lac-Megantic, Quebec.

“Quebec was a terrible tragedy that really put a lot of these types of regulations more in the public eye,” said Jason Lewis, who helped craft the rule as transportation policy adviser for the commission.

In Quebec, a parked, unmanned 72-car train loaded with Bakken crude oil rolled downhill, reaching 65 mph before crashing into the downtown and killing 47 people in July 2013. Sixty-three cars derailed and about 1.6 million gallons of oil leaked.

THE WORST OIL TRAIN DERAILMENT IN NORTH AMERICA OCCURRED IN LAC-MEGANTIC, QUEBEC, WHERE 63 CARS OF A 72-CAR BAKKEN CRUDE OIL TRAIN DERAILED AT 65 MPH, KILLING 47 PEOPLE.

Although Quebec is the worst oil train derailment to date, Washington state legislators specifically asked the commission to find a “reasonable” worst case scenario for the financial reporting requirement, Lewis said.

“They didn’t want the worst case. They wanted something reasonable,” Lewis said. “It’s an ambiguous term that we really had to work to define.”

The commission looked to other state rules and used PHMSA and FRA logic to scale down from the incident in Quebec, Lewis said.

The final rule says to take the maximum oil train speed (usually 45 to 50 mph), divide it by 65 (the speed in Quebec), and account for kinetic force to get the estimated percentage of the train’s cargo they should be prepared to clean up.

To illustrate, assume the longest BNSF crude oil unit train transported in 2015 was 110 tank cars and that those trains go 45 mph at their fastest.

Under the new formula, the railroad needs to show whether it has the means to pay for a theoretical spill of 47.9 percent of that oil.

Each tank car has a maximum volume of 30,000 gallons, so the train could carry at most about 3.3 million gallons.

At a cleanup cost of $400 per gallon, the new guidelines want to know if the railroad could pay $632.3 million.

If that train were to go 50 mph at its fastest, the reporting amount would be closer to $781 million.

$632.3 million to $781 million
Amount railroads need to show they could pay for a spill in Washington state if their fastest 110-car oil train goes 45 to 50 mph

UTC staff also took into account that supertanker vessels that can carry 84 million gallons of oil through Puget Sound are required to get certificates of financial responsibility through Ecology that cap out at $1 billion, Lewis said.

“If we went much higher in terms of total release or cost of cleanup, it would be difficult to justify a higher cap,” Lewis said.

BNSF challenged similar legislation in California, claiming in court that federal rules pre-empt state laws that try to regulate rail.

When asked whether BNSF would similarly challenge Washington’s rules or still had concerns about the worst case scenarios, BNSF spokeswoman Courtney Wallace wrote that BNSF was committed to work in good faith with Washington to promote safety.

WE HAVE NEVER EXPECTED TAXPAYERS TO ASSUME THE EXPENSE OF A CLEANUP AFTER A DERAILMENT, AND WE STAND BY THE PRACTICES THAT HAVE ALLOWED US TO KEEP THAT RECORD TO DATE.
Courtney Wallace, BNSF spokeswoman

“Nothing is more important to us than safely moving all of the commodities we carry, including crude oil. BNSF is a common carrier and our operations are governed by the Interstate Commerce Commission Termination Act, which generally pre-empts state and local regulations of railroads,” Wallace wrote to The Bellingham Herald.

“BNSF has a strong record of corporate responsibility,” Wallace wrote. “We have never expected taxpayers to assume the expense of a cleanup after a derailment, and we stand by the practices that have allowed us to keep that record to date. BNSF is financially sound with a long history, substantial assets and a track record of being a responsible corporate citizen.”

Because the rule only requires railroads to show whether they could afford that level of spill in their annual report to the commission, rather than requiring they carry a certain level of coverage, the commission believes the rule does not conflict with federal laws.

Annual reports from the railroads are due to the UTC in May.

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Dangerous energy gamble: Pipelines vs. rail

Repost from the Washington Examiner
[Editor: One significant quote among many: “In the last five years, 423 oil trains have crashed in the U.S. Since 2010, those crashes have cost about $45 million in damages. In just the first six months of 2015, 31 oil train crashes cost almost $30 million in damages…. It’s 5.5 times more likely that oil will be spilled during rail transport than from a pipeline, according to a study by the Fraser Institute, an independent Canadian think tank. The risk of deaths, injuries and spills are higher with rail and trucks since vehicles can hit other vehicles, they travel through population centers and the drivers can err. None of those factors exist for pipelines.” – RS]

Dangerous energy gamble: Pipelines vs. rail

By Kyle Feldscher, 11/2/15 12:01 AM
Fire burns at the scene of a train derailment, near Mount Carbon, W.Va., on Feb. 16. Fires burned for nearly nine hours after the train carrying more than 100 tankers of crude oil derailed in a snowstorm. (AP Photo/WCHS-TV)

Energy companies increasingly have turned to rail to ship crude oil during the fracking boom, but with train crashes becoming more frequent, they are pushing for construction of more pipelines beyond the Keystone XL.

However, that effort is being stymied by the collapse of oil prices and concerns about pipeline safety.

On Wednesday, Shell announced it would stop construction on a site in Alberta, Canada, that potentially holds 418 million barrels of bitumen oil. The company blamed the project’s expense in a time of cheap oil as well as a lack of pipeline infrastructure.

It’s one example of low prices and lack of pipelines prompting companies to reconsider drilling for oil, especially in the Canadian tar sands, where it’s more expensive to drill. Pipeline transportation is typically cheaper than rail, which costs about $30 a barrel more.

Fifty pipelines have been proposed to the Federal Energy Regulatory Commission this year. They would carry the light, sweet crude from shale regions as well as the natural gas that has helped make the U.S. the world’s energy leader. ”

Because of the costs associated with [rail], it’s going to drive up the cost of oil and it’s going to be significantly higher than pipelines on a per barrel basis,” said Dan Kish, senior vice president for policy at the conservative Institute for Energy Research.

Another calculation oil companies must make is the safety of their highly flammable product.

In the last five years, 423 oil trains have crashed in the U.S. Since 2010, those crashes have cost about $45 million in damages. In just the first six months of 2015, 31 oil train crashes cost almost $30 million in damages, mostly due to a major crash in West Virginia.

It’s 5.5 times more likely that oil will be spilled during rail transport than from a pipeline, according to a study by the Fraser Institute, an independent Canadian think tank. The risk of deaths, injuries and spills are higher with rail and trucks since vehicles can hit other vehicles, they travel through population centers and the drivers can err. None of those factors exist for pipelines.

The August study also found oil and natural gas production is rising faster than existing American and Canadian pipelines can handle. Those pipelines would be even busier if production increased in the Canadian tar sands.

Keystone XL, proposed by TransCanada in 2007, would be able to transport 830,000 barrels per day from the tar sands to the Gulf Coast to be refined. Due to the viscous nature of bitumen oil, it’s much easier to transport it by pipeline than by rail, experts say.

When a train carrying oil derails, it’s often catastrophic.

In West Virginia, oil burned for days after 26 oil tanker cars derailed in February. Nineteen of those cars caught on fire and oil spilled into a nearby river. The damages from that crash totaled more than $23 million.

A train derailment in a Quebec community that killed 46 people in July 2013 prompted calls for better rail safety and led some to question whether to transport highly flammable oil at all.

The State Department estimates rail transportation of oil is responsible for 712 injuries and 94 deaths per year, while oil pipelines are responsible for three injuries and two deaths per year.

“For our society, we have to evaluate the value we place on human life and we should make that a priority,” said Diana Furtchgott-Roth, a conservative economist who is the director of the Manhattan Institute’s e21 program.

“The families of those 46 people killed in Lac-Megantic would have been happy to have less oil and having the lives of their family members back.”

Dangerous derailments led the Obama administration to introduce new regulations to make tanker cars safer. The rule, announced in May, requires improvements to braking systems, making tanker cars thicker and more fire resistant and new protocols for transporting flammable liquids.

The number of crashes steadily increased during the last five years, as more trains shipped crude and natural gas, rising from nine crashes in 2010 to 144 crashes in 2014. But as the price of oil plummeted, the amount of crude oil being drilled and shipped leveled off in 2015, according to the Energy Information Administration.

If drilling in the Canadian tar sands in Alberta were to pick up in earnest, State Department officials believe rail transport would lead to 49 more injuries and six more deaths per year. If that oil were to be moved by the Keystone XL pipeline, there would be one additional injury and no fatalities.

Environmentalists, who have been fighting the Keystone XL, point to the State Department’s finding that pipeline spills are often bigger than those from trains and trucks.

They also point to declining oil use and the collapse of prices as great excuses to leave it in the ground.

Zach Drennen, legislative associate at the League of Conservation Voters, said with oil prices as low as they are, it’s economic folly for oil companies to drill in the Canadian tar sands. Without high oil prices, companies can’t afford to build pipelines. They also can’t afford to ship by rail.

That is why green groups think oil companies could be willing to leave the oil in the earth.

“If you look right now, a lot of oil companies are just deciding that’s not where they want to put their money at,” Drennen said.

To Kish, environmentalists’ goal is to make it too expensive to drill.

“They’re going to try and fight against every damn pipeline they can,” he said, “because if they can choke off production and delay construction of pipelines, it causes disruptions.”

But Ken Green, senior director of natural resource studies at the Fraser Institute, said environmentalists’ dream of keeping oil in the ground isn’t feasible.

“The oil in the ground has a market value and everyone knows what the market value is,” he said. “It’s not hard to calculate that market value … My assumption is sooner or later, that value will be sought.”

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BENICIA HERALD LETTER: The high-risk cost of crude by rail

Repost from the Benicia Herald
[Editor:  An excellent perspective on the economic risks that local communities take on when they permit crude by rail.  No link is provided for this letter because the Benicia Herald does not publish Letters in its online edition.  (Yes, I still remember how to type! ) – RS]

The high-risk cost of crude by rail

By Kat Black, August 26, 2015

For the past few years, I have been listening to the Valero Benicia Refinery representatives and supporters of the refinery’s proposed Crude-by-Rail Project make statements supporting the project because of the large tax revenue Valero provides for the city of Benicia.  But when did tax revenue override health and safety?  Valero’s most recent propaganda cites the loss of over $300,000 per year because of the delay in the project, and further cites that as loss of pay for police and paramedics.   Notwithstanding that that particular claim is completely unsubstantiated, the people and business owners of the city of Benicia are entitled to due process under the California Environmental Quality Act (CEQA), regardless of the time it takes.  This is the law.  To say Benicia is losing money because of CEQA is a simple propaganda ploy, an effort to make people believe they are less safe because the project has not yet been approved.  Why else would they quote police and paramedics?  Why didn’t they quote the library or other services?

There has been a lot of press on crude train derailments and explosions over the past few years.  We need to consider what the cost would be if this project is approved and a subsequent explosion were to happen, as has already happened in the U.S. and Canada.  If you are a property or a business owner, your property value would very likely decrease.  There is a local precedent for this: In August, 2012, there was a large explosion and fire at the Chevron refinery in Richmond.  In 2013, the County Assessor increased property values for all cities in Contra Costa County except Richmond, where property values were lowered.  The Assessor specifically cited the Chevron explosion as the precise reason for the devaluation.  The City of Richmond was subsequently hit with a $2.5 million deficit for the loss of property tax revenue.

Do you want to risk the devaluation of your property or the property tax revenue for the City?  The risks are just too high.  Stop Valero’s dangerous Crude-by-Rail Project!

Katherine Black
Benicia Resident

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