Category Archives: Crude By Rail

Crude oil by rail or pipeline? New studies explore the question

Repost from Midwest Energy News 
[Editor: You may be tempted to quit reading at “But if one assumes oil will be extracted and refined for the foreseeable future…”  But the article gets really interesting after that.  Keep going!…  – RS]

Crude oil by rail or pipeline? New studies explore the question

By Kari Lydersen, September 28, 2017
An oil train passes through the Pilsen neighborhood of Chicago in 2015. | PHOTO BY Kari Lydersen / Midwest Energy News

Recent years have seen massive standoffs over oil pipeline construction and smaller but persistent protests against the transport of oil by train, or what opponents call “bomb trains.”

Protesters often highlight the catastrophic risks if pipelines rupture near aquifers or sacred lands, or if trains derail in cities. And many argue that oil should not be extracted at all, especially through fracking tight shale deposits or mining viscous tar sands.

But if one assumes oil will be extracted and refined for the foreseeable future, two new studies offer insight into the economics, health impacts and risks of pipelines versus crude oil by rail, or CBR.

Transporting oil by rail is often viewed as a stopgap measure until more pipelines are built. But in a paper published this month, public policy professor Ryan Kellogg and business professor Thomas Covert at the Energy Policy Institute at the University of Chicago found that CBR actually plays a crucial role in the oil economy, similar to the role that peaker plants play in our country’s electric system.

That is, CBR is a flexible way to get oil to and from different locations on relatively short notice, responding to market demands.

Pipelines are regulated by the federal government in a way similar to utilities in regulated states, Kellogg notes, meaning that the government oversees their pricing structure and they cannot earn more than a certain rate of return. Oil shippers also enter into long-term contracts with pipeline companies, meaning they have to speculate about future oil prices and demand.

Shipping oil by rail can be more financially attractive for everyone involved since it does not require long-term contracts, there is no regulated rate of return for railroad companies and rail offers more options for where oil is picked up and delivered.

“Putting aside the environmental issues, pipeline and rail work well when paired together,” Kellogg said. “Think of pipelines — once you have the upfront investment done, they are a very low-cost, very reliable way of moving oil from point A to point B. What rail is very good at is responding to conditions as the oil market changes. When the oil market says, ‘Hey there’s a bunch of oil coming out of location C,’ rail is relatively easy to ramp up and get going, or ramp down if there’s a market downturn.”

Hidden health impacts

But shipping oil by rail has serious public health impacts, according to a study by Karen Clay, professor of economics and public policy at Carnegie Mellon University. And she’s not talking about the risk of derailments.

In a paper released this month, Clay quantified the air pollution and greenhouse gas cost of diesel emissions from oil trains going from North Dakota in 2014, when production was high and about half of Bakken oil was shipped by rail. She found that the air emission costs of CBR were twice the cost of oil train accidents. While accidents like the Lac Megantic tragedy generate massive attention and fear, they are relatively rare, whereas the emissions from oil trains impact scores of people who live in urban areas like Chicago and Clay’s home, Pittsburgh.

“The relative magnitudes are really different,” Clay said. “Certainly if a crude oil train blew up in Chicago, it could do billions worth of damage. Air pollution happens every day, it seems kind of invisible, people think it’s not that important, but it is important. It’s about the difference between actual risk and perception of risk — humans are very bad at assessing risk.”

Clay found that the environmental and health costs of transporting oil by rail are double the cost by pipeline. And the air pollution and greenhouse gas emissions driven by pipelines also have a greater cost than pipeline spills and accidents — eight times greater.

She quantified the emissions from power plants needed to power the pumping stations along pipelines, calculating the health and other costs based on the fact that these power plants are typically located in sparsely populated areas, as opposed to the trains which pass through dense urban areas often including minority and low-income communities with environmental justice issues.

Economic levers

Kellogg wrote that the Dakota Access Pipeline would have likely been built to carry 29,000 to 74,000 more barrels of oil a day beyond its capacity of about 450,000, if CBR had not been available. In a pipeline with a fixed diameter, more oil can be shipped by adding more pumping stations along the route, or by “twinning” — adding parallel pipelines within the same right-of-way.

“When rail traffic was getting quite large, you saw the cost of shipping by rail go up,” Kellogg said. “The cost of logistics, renting out rail cars to hold the actual crude oil, those costs noticeably go up.”

Since pipelines deliver oil through long-term contracts, and the Federal Energy Regulatory Commission (FERC) caps the maximum rate a pipeline can charge, a pipeline can’t raise its rates when demand for its service is high.

“A pipeline can get congested during peak times so you can’t get any more oil through it, but the rate still can’t increase above that maximum regulated rate,” said Kellogg. “So the fact that pipelines can become congested creates the opening for rail to come in and help move the extra oil.”

Both Clay and Kellogg said that if the true cost of oil-by-rail was calculated into the fees that oil shippers are charged, the economics of oil transport might change. Kellogg’s paper predicted that baking the cost of railroad air emissions into shipping prices would raise CBR costs by $2 a barrel.

If shipping by rail got more expensive, there might be more demand for pipelines, and also alternate ways of moving oil. For example, shipping it by rail or pipeline to the Gulf of Mexico then by ship to the U.S.’s East Coast, rather than by rail cutting through the heartland.

Railroads are currently required to install cleaner diesel engines on new locomotives. Meanwhile, advocates have called for replacing older locomotives more rapidly and using electric locomotives in populated areas. Kellogg noted that railroad safety measures in the wake of Lac Megantic could also raise CBR shipping prices, and might shift more business to pipelines.

The future of crude-by-rail

Kellogg’s paper notes that between 2010 and 2014, oil shipments by rail grew from virtually nothing to 750,000 barrels a day, representing a tenth of total domestic oil production. This was largely because of spiking production in the Bakken shale.

Oil shipments by both pipeline and train have declined precipitously since oil prices starting dropping in 2014. But Clay said people should not stop thinking about the risks and economics of CBR even though they aren’t seeing as many oil trains. If oil prices rise and production ramps up, oil trains could proliferate once again.

Given that pipelines result in far fewer public health impacts than rail, Clay also advocates the possibility of shipping other petroleum-related compounds like butane, propane and ethanol by pipeline, rather than train.

“It’s just trying to get people engaged with the idea that this other stuff also has air pollution risk and accident risk,” Clay said. “Maybe the spill and accident risks are lower, but the air pollution risks are the same on a per ton basis over similar routes. This is a broader issue about anything that could be shipped by pipeline instead of rail.”

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Mayor wants to know when trains carry hazardous goods through his town

Repost from the Vancouver Sun

Mayor wants to know when trains carry hazardous goods through his town

By Glenda Luymes, September 21, 2017 8:04 PM PDT

The train tracks running through Vanderhoof helped build the community on the banks of the Nechako River. But some fear they could one day ruin it.

When local politicians meet for the annual Union of B.C. Municipalities conference in Vancouver next week, they’ll consider a resolution drafted by the District of Vanderhoof calling on Transport Canada to order railways to provide “up-to-the-minute” information on hazardous goods being transported through their communities.

The information would enable first responders to safely address derailments and spills, explained Vanderhoof chief administrative officer Tom Clement.

“If we don’t know what trains are carrying, how can we respond?” he asked.

While Canadian railways are required to provide reports on what trains carry, they are usually produced several months after the fact, leaving municipalities to guess what might be rolling through town on any given day.

According to a report by Canadian National Railway (which operates the line through Vanderhoof), shipments of dangerous goods accounted for three per cent of the total CN shipments in B.C. in 2016. Liquefied petroleum gases, diesel fuel and sodium hydroxide made up more than half of all dangerous shipments.

Like many, Vanderhoof Mayor Gerry Thiessen was shocked by the Lac-Mégantic rail disaster. On July 6, 2013, a 74-car freight train carrying crude oil operated by the United States-based Montreal, Maine and Atlantic Railway derailed in the small Quebec town. Fire and several explosions killed 47 people.

But it was a smaller incident — a minor derailment near Vanderhoof several years ago — that first got the mayor thinking about the safety of his community.

“Someone from the Prince George press called our fire chief to ask about the accident. They wanted to know what the cars were carrying. We had no idea,” he said.

With a volunteer fire department made up of “local dads and moms,” Thiessen realized a significant incident could endanger first responders, as well as the community at large.

“CN is a large company. They should be able to tell us day-by-day what’s in a train as it leaves Prince George,” he said.

Thiessen said he was told CN’s closest dangerous goods officer was located in Edmonton, meaning “our volunteers would be the first on scene.”

A CN spokesperson referred Postmedia to the Railway Association of Canada.

A statement from the association said its members work with municipalities and the federal government to achieve a “workable process” to ensure information about dangerous goods traffic is available. A mobile app allows first responders to access information about railcar contents so “they can make informed decisions in the event of a rail emergency.”

Thiessen said the process requires first responders to obtain a code from the side of a damaged train car, which might put them at risk if the cars are leaking hazardous substances.

“We need a better process,” he said.

But while the mayor is concerned about safety, he also recognizes the vital role the railway plays in his community.

“I’m in Vanderhoof as a result of the railway,” he said.

Thiessen’s grandfather settled in the community west of Prince George in 1942 to take advantage of the opportunities the railway presented. Thirty years later, as a young man, Thiessen had a part-time job unloading the railcars that carried lumber out of town.

These days, there are more trains coming through Vanderhoof, he said, but fewer stop. There’s also fear that what they might be carrying could someday undo all the good the railway has done.

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Loaded crude cars derail in Missoula rail yard

Repost from The Missoulian

Loaded crude cars derail in MRL Missoula yard

By Kim Briggeman, Sep 15, 2017
091617-mis-nws-derailment
Derailed crude oil train cars sit off the tracks near Reserve Street in Montana Rail Link’s Missoula yard on Friday. The re-railing process was expected to be completed Friday night. | TOM BAUER, Missoulian

One tanker carrying crude oil was badly listing and three others were off the track Friday after a morning derailment on the west end of Montana Rail Link’s Missoula yard.

“So far it doesn’t appear anything leaked, but they’re going to keep a close eye on it when they move it,” Michelle Hutchins of the city-county health department’s Missoula Valley Water Quality District said at midafternoon.
Hutchins said the derailed oil tankers are of the newly designed variety, built stronger and with other safety technology incorporated.

“So that seems to have done its job,” she said.

The low-speed derailment happened at around 8:30 a.m. Friday. Montana Rail Link’s Jim Lewis said the cars were part of a westbound loaded crude train that was leaving the yard. There were no injuries and no hazardous materials were released. The cause of the incident is under investigation.

“Mainline traffic has not been interrupted and MRL haz-mat and mechanical experts are supervising the re-railing process, which is expected to be completed by Friday evening,” Lewis said in an email at 4:45 p.m. “Local, state and federal agencies were notified per standard protocol.”

The derailment occurred on tracks closest to West Broadway, a few hundred feet east of the Reserve Street overpass.

It’s in the same area where 30 empty tank cars derailed in December 2014 in a switching snafu, after a loaded car made low-speed contact with one of them. [Ed. – see back stories here.]
Last December a coupling broke in the pump house at MRL’s west refueling station near Zootown Arts Community Center. Some 7,000 gallons of diesel fuel poured out before the break was discovered and the valve turned off.
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