Download from Platts.com McGraw Hill Financial [Editor: Platts.com is an excellent source of energy industry insider information. Their 4-page May, 2014 report, “Bakken: The King in the North,” has technical data on Bakken background, industry trends and market predictions. I have excerpted a few sample quotes below. – RS]
Bakken: The King in the North
Bakken crude oil represents light sweet crude produced from the Bakken Shale Formation in the North Dakota / Montana / Saskatchewan / Manitoba region. Production from the US side of the Williston Basin, the sedimentary basin that contains the productive Bakken Shale Formation, crossed the 900,000 b/d mark in November 2013 and was more than 888,000 b/d in February, according to the North Dakota Pipeline Authority and estimates from Bentek, a unit of Platts.
Pipeline capacity out of the Bakken is set to increase from 600,000 b/d currently to over 1 million b/d by early 2016….
California refiners double volume of oil imported by rail
Lynn Doan | May 3, 2014
California, country’s biggest gasoline market, more than doubled the volume of oil it received by train in the first quarter as deliveries from Canada surged.
The third-largest oil-refining state unloaded 1.41 million barrels in the first quarter, up from 693,457 a year ago, data on the state Energy Commission’s website showed last week. Canadian deliveries made up half the total and were eight times the number of shipments a year earlier. Supplies from New Mexico jumped 71 percent to 173,081 barrels. Those from North Dakota slid 34 percent to 277,046.
Projects in works
West Coast refiners including Tesoro Corp. and Valero Energy Corp. are developing projects to bring in more oil by rail from reserves across the middle of the U.S. and Canada to displace more expensive supplies. Crude production in the federal petroleum district that includes California and Alaska, has dropped every year since 2002, while drillers are extracting record volumes from shale in states including North Dakota and Texas.
The surging flows of domestic oil to California “reflect a continuing improvement in crude-by-rail receiving facilities here,” said David Hackett, president of Stillwater Associates, an energy consultant.
Rail shipments still account for a small fraction of California’s oil demand. In February, the state imported more than 20 million barrels of crude from abroad, according to the U.S. Energy Information Administration.
Crude from North Dakota and Canada trades at a discount to Alaska North Slope oil, which rose 36 cents to $107.78 a barrel in early trading on Friday. Western Canada Select, a heavy, sour blend, gained 36 cents to $82.88. North Dakota’s Bakken crude also gained 36 cents to $95.28.
It costs $9 to $10.50 a barrel to send North Dakota’s Bakken oil by rail to California, according to Tesoro, the West Coast’s largest refiner.
Series of accidents
Trains are bringing more oil to California even as projects face more regulatory scrutiny after a series of accidents involving rail cars carrying fuel. The most recent was on Wednesday, when a CSX Corp. crude train derailed in Lynchburg, Va., igniting a fire that led to an evacuation. A derailment in Quebec in July killed 47 people.
The U.S. Transportation Department is studying changes to shipping oil by rail, and in February railroads agreed to slow such trains in urban areas. Canada ordered a phase-out of older tank cars last month.
Officials in Benicia said Thursday that they’re delaying until June an environmental report on a rail-offloading complex that Valero has proposed at its refinery in the North Bay city. The San Antonio company originally planned to finish the project by the end of last year.
Tesoro is six to eight weeks behind schedule in receiving regulatory permits for a rail-to-marine crude trans-loading terminal in Washington state, the company, also based in San Antonio, said Thursday. It now expects to receive the permits late this year or in early 2015, with construction taking about 12 months, Scott Spendlove, the chief financial officer, said on a conference call with analysts.
Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks.
FILE – This March 25, 2014 file photo shows perforating tools, used to create fractures in the rock, lowered into one of six wells during a roughly two-week hydraulic fracturing operation at an Encana Corp. well pad near Mead, Colo. The energy boom is scrambling national politics. Democrats are split between environmentalists and business and labor groups. Some deeply-conservative areas are allying with conservationists against fracking, the technique largely responsible for the surge. (AP Photo/Brennan Linsley, File)
DENVER (AP) — The U.S. energy boom is blurring the traditional political battle lines across the country.
Democrats are split between environmentalists and business and labor groups, with the proposed Canada-to-Texas oil pipeline a major wedge.
Some deeply conservative areas are allying with conservationists against fracking, the drilling technique that’s largely responsible for the boom.
The divide is most visible among Democrats in the nation’s capital, where 11 Democratic senators wrote President Barack Obama this month urging him to approve the Keystone XL pipeline, which is opposed by many environmental groups and billionaire activist Tom Steyer. The State Department said Friday that it was extending indefinitely the amount of time that federal agencies have to review the project, likely delaying a pipeline decision until after the November elections.
Several senators from energy-producing such as Louisiana and Alaska have distanced themselves from the Obama administration, while environmental groups complain the president has been too permissive of fracking.
There is even more confusion among Democrats in the states as drilling rigs multiply and approach schools and parks.
California Gov. Jerry Brown was shouted down at a recent state convention by party activists angry about his support for fracking. New York Gov. Andrew Cuomo has kept fracking in his state in limbo for three years while his administration studies health and safety issues. In Colorado, Gov. John Hickenlooper has drawn environmentalists’ ire for defending the energy industry, and a ballot battle to regulate fracking is putting U.S. Sen. Mark Udall in a tough situation.
But the issue cuts across party lines.
Even in deeply Republican Texas, some communities have restricted fracking. In December, Dallas voted to effectively ban fracking within city limits.
“You’re looking at a similar boom as we had in tech in 1996,” said Joe Brettell, a GOP strategist in Washington who works with energy companies. “The technology has caught up with the aspirations, and that changes the political dynamics fundamentally.”
Those technological advances have made it possible for energy companies to tap deep and once-untouchable deposits of natural gas and oil. They include refinements in hydraulic fracturing, or fracking, which is the injection of chemicals into the ground to coax buried fossil fuels to the surface.
The U.S. is now the world’s largest natural gas producer and is expected to surpass Saudi Arabia soon as the world’s greatest oil producer, becoming a net exporter of energy by 2025.
The boom has brought drilling rigs into long-settled neighborhoods, raising fears of water contamination, unsafe traffic and air pollution, and outraging residents.
Pollster Steven Greenberg said Cuomo provides little notice before his public appearances because anti-fracking protesters will crash his events. Republicans blame the governor for stymieing growth. New York voters split evenly on fracking, with Democrats only modestly more likely to oppose it than Republicans.
“No matter what he decides, he’s going to have half the people upset with him,” Greenberg said. “From a purely political point of view, it’s hard to argue with his strategy — punt.”
In California, Brown has a long record of backing environmental causes, but he’s drawn the wrath of some environmentalists for supporting fracking. One group cited the $2 million that oil and gas companies have given the governor’s causes and campaigns since 2006. Democrats in the Legislature have proposed a freeze on fracking but are not optimistic Brown will support it.
The Democratic split is sharpest in Colorado.
Hickenlooper, a former oil geologist, has been a staunch supporter of fracking; at one point he said he drank fracking fluid, albeit a version without most of the hazardous chemicals. His administration has fought suburban cities that have banned fracking, insisting that only the state can regulate energy exploration.
In response, activists are pushing 10 separate ballot measures to curb fracking. One measure would let cities and counties ban it. The effort has the support of Colorado Rep. Jared Polis, a wealthy Democrat. At the state party’s recent convention, he gave a rousing speech nominating Hickenlooper for a second term but acknowledged “none of us … are going to agree on every single issue.”
Some Colorado Democrats worry that the ballot push is bringing energy groups who generally support Republicans into the state. One pro-fracking group has spent $1 million in TV ads.
Jon Haubert, a spokesman for the group, said leaders in both parties think the measures are economically dangerous. “We look at that and say this seems to be an extreme opinion,” he said, referring to the initiatives.
The ballot measures will force Democratic candidates to choose among environmentalists, labor groups and Colorado’s business community, whose political and financial support is vital to Democrats in the swing state.
Udall embodies this dilemma. He’s an environmentalist in a tight re-election campaign with Republican Rep. Cory Gardner, who represents an oil-and-gas rich, mostly rural congressional district.
In an interview, Udall declined to say if cities should have the right to ban fracking. “I’m not a lawyer,” he said.
Hickenlooper has put in place several landmark regulations — requiring that drilling occur a set distance from homes and schools and limiting methane emissions from energy exploration. But that has not assuaged activists such as Laura Fronckwiecz, a former financial worker who got involved in an effort to ban fracking in her moderate suburb of Broomfield after a drilling well was planned near her children’s elementary school.
A Democrat, she’s aghast at her party’s reluctance to embrace the cause. “Ten years ago, I’d say it was a progressive cause they’d get behind,” Fronckwiecz, 41, said, “but much has changed, and the politics of oil and gas are not what you’d expect.”
Fronckwiecz says she has Republicans and Libertarians in her coalition, as do activists pushing to limit fracking in energy-friendly Texas. While the GOP-dominated Legislature in Texas has rejected efforts to limit drilling, activists have earned small victories in towns and cities that have limited drilling, and one big win, the Dallas vote.
Sharon Wilson, Texas organizer for the environmental group Earthworks, says she gets a warm reception from conservatives and Libertarians. “When they come into your community and start fracking,” she said, “it does not matter what your political affiliation is.”
Repost from The Sacramento Bee
[Editor: This is an excellent analysis of refinery benefits and risks, including commentary on the aging bridges used by oil tanker trains. – RS]
Crude oil trains revive Philadelphia refineries but deliver new risks
By Curtis Tate
McClatchy Washington Bureau
Monday, Apr. 7, 2014
Chunks of concrete are falling off Philadelphia’s 25th Street Viaduct, which stretches for several city blocks in South Philadelphia. Two or three loaded crude oil trains pass over the 86-year-old structure every day, bound for Philadelphia Energy Solutions, a sprawling refinery complex that’s now the largest single consumer of Bakken crude oil from North Dakota.
PHILADELPHIA — Just a few years ago, the region’s refineries were on life support, hurt by high prices of oil imported from foreign countries. Now, they’re humming again with the daily deliveries of domestic crude in mile-long trains.
As one of the country’s largest destinations for crude oil from North Dakota’s Bakken region, Philadelphia illustrates both the benefits, and risks, of a massive volume of oil moving by rail.
“It’s a good marriage,” said Charles Drevna, president of the American Fuel & Petrochemical Manufacturers, an industry group. “Ultimately, it will be good for the consumer.”
But even as the oil and the trains that bring it may have saved refineries and jobs, they’re testing the limits of the city’s infrastructure and emergency response capabilities.
In January, seven loaded tank cars derailed on the 128-year-old Schuylkill Arsenal Railroad Bridge over the Schuylkill River. Though no crude was spilled, one car dangled precariously over the river and Interstate 76. Investigators blamed it on faulty track maintenance.
“We always hear that things will never happen,” testified former Rep. Curt Weldon, R-Pa., a former firefighter and mayor of nearby Marcus Hook, Pa., at a hearing last month, “but things always happen.”
The city grew up around its rail network, so the only way to the refineries for trains is through town. Some rumble over a steel viaduct through the campuses of Drexel University and the University of Pennsylvania. Others snake through a tunnel under the iconic Philadelphia Museum of Art and the steps made famous by Rocky Balboa.
One of the main routes to the sprawling refinery complex in South Philadelphia crosses a crumbling viaduct for several blocks through a residential neighborhood. Railroad officials say the 86-year-old viaduct is structurally sound, but residents are concerned about the chunks of concrete that regularly fall into the street.
“It may be perfectly safe, but the impression it gives just by looking at it is something else,” said Roy Blanchard, a longtime South Philadelphia resident knowledgeable about the railroads.
Robert Sullivan, a spokesman for CSX, which owns the structure and operates trains over it, said the viaduct was designed to accommodate heavy commodities, such as iron ore and coal, and the railroad is planning to improve it. It already has hired a contractor to begin removing loose sections of concrete.
While other major endpoints for oil trains, including Albany, N.Y., and towns in the San Francisco Bay Area and the Pacific Northwest, have attempted to slow or stop the shipments because of environmental and safety concerns, Philadelphia largely has welcomed the boom.
State and local officials hailed the opening in October of a rail yard that now unloads two 120-car trains carrying 80,000 barrels of oil every day to feed the largest refinery complex on the East Coast. A partnership between Sunoco and the Carlyle Group, a private equity firm, created Philadelphia Energy Solutions, which employs 1,000 workers.
Without Bakken oil to replace expensive imports, the refinery would have closed.
Republican Pennsylvania Gov. Tom Corbett, flanked by Philadelphia Mayor Michael Nutter and Rep. Robert Brady, both Democrats, called the revived operation “a symbol of the connection that exists between Pennsylvania’s expanding energy industry and the potential we have to achieve energy independence in North America.”
But it’s also created new challenges for emergency response agencies.
A series of fiery derailments involving Bakken crude oil since last summer has raised questions about whether government and industry fully accounted for the risks before railroads began hauling it. The worst killed 47 people in Lac-Megantic, Quebec. Others in Alabama and North Dakota, while not fatal, drove home the need for new precautions.
“This crude is not the crude of old,” said Robert Full, chief deputy director of the Pennsylvania Emergency Management Agency.
Full was testifying before a state House of Representatives oversight hearing last month in nearby Eddystone, Pa., the site of a rail-to-barge facility set to open this month. It will unload two trainloads of crude oil a day by the end of the year.
Bob Andrews, a Texas entrepreneur and fire protection engineer, testified that Pennsylvania should consider developing a specific crude-by-rail response plan to protect communities and the investment they have in keeping the oil moving.
“The Philadelphia area is a good place to start,” he said.
Clifford Gilliam, a spokesman for the Philadelphia Fire Department, said the oil shipments don’t change emergency response procedures, but the department is preparing for the possibility of an event larger in size and scope than what it’s planned for in the past.
He said the department has a good working relationship with the railroads and refineries and “has the training and capability to handle hazmat incidents and, if warranted, join forces with other agencies.”
The rail operations, and risks, cross into Delaware and New Jersey. Norfolk Southern delivers a train every other day to a Sunoco terminal across the Delaware River in Westville, N.J., with plans to double the shipments later this year.
Getting the cars into the Westville facility requires repeat backup moves that block two four-lane highways on a track only feet from several homes.
The drawbridge the trains cross was completed in 1896. An $18.5 million grant from the U.S. Department of Transportation helped pay for repairs to the aging span in 2011, before the oil trains began rolling across it.
At Eddystone, south of Philadelphia International Airport, workers are putting the finishing touches on new tracks that will transfer 160,000 barrels of oil daily from trains to barges by the end of the year. The companies involved in the operations say they’ve accounted for the risks.
CSX reached an agreement with the Pennsylvania Emergency Management Agency last month to give first responders access to the railroad’s shipment tracking system. Norfolk Southern, which plans to supply the Eddystone facility, intends to offer safety training.
Jack Galloway, president of Canopy Prospecting, one of the companies developing the Eddystone facility, assured lawmakers last month that it would be “top of the line,” equipped with containment units under the trains and floating barriers around the barges.
“We don’t think there’s any possibility of this oil getting away,” he said.