Category Archives: Oil imports

Until California curbs its oil refineries, it won’t meet its climate goals (Benicia & others are heroes)

Repost from the Los Angeles Times
[Editor: Significant quote, Benicia in final paragraph – “In the absence of action at the state level, it has fallen to localities to prevent refineries from at least increasing crude oil imports to their facilities. Over the last decade elected officials in half-a-dozen communities from Benicia to San Luis Obispo County have blocked refinery infrastructure projects that would allow more crude oil imports. They’re the real heroes of California’s climate saga — too bad they won’t be the ones in the spotlight at the summit.”  – RS]

Until California curbs its oil refineries, it won’t meet its climate goals

By Jacques Leslie, Sep 11, 2018 | 4:15 AM
Until California curbs its oil refineries, it won't meet its climate goals
The Phillips 66 refinery in the Wilmington neighborhood of Los Angeles. (Rick Loomis / Los Angeles Times)

While Gov. Jerry Brown and other California leaders bask under an international spotlight at this week’s Global Climate Action Summit in San Francisco, there is one highly relevant topic they’re not likely to bring up: oil refineries.

That’s because refineries are crucially absent from California’s climate change strategy. The state has justifiably gotten credit for addressing climate change issues that the nation won’t — promoting renewable energy, cap-and-trade greenhouse gas emission limits, and electric vehicles — but it has backed off from challenging refineries, the centerpieces of California’s oil supply infrastructure.

Concentrated in Los Angeles’ South Bay and the San Francisco Bay Area, the state’s 17 refineries comprise the largest oil processing center in western North America. Unless emissions from those refineries are curbed, the state has no chance of meeting its long-range climate change goals.

Greg Karras, a senior scientist at Huntington Park-based Communities for a Better Environment, calculates that without restraints on refineries, even if emission reductions from all other sources hit their targets, oil sector pollution through 2050 would cause the state to exceed its overall climate goals by roughly 40%.

“Refineries have been largely exempted from the state’s cap and trade program, which charges fees for emissions.”

That’s primarily because refineries have been largely exempted from the state’s cap and trade program, which charges fees for emissions. Last year, the legislature extended the program for another decade, from 2020 to 2030, but only after bowing to the oil industry’s wishes. To win a needed two-thirds majority, cap and trade supporters exempted the industry from fees for all but a tenth of refinery emissions through 2030. The legislation also prohibited regional air districts from imposing their own limits on refinery carbon dioxide emissions, a severe blow to communities suffering from pollution from nearby operations. Instead of curbing refineries, these provisions gave them a decade-long free pass.

To make matters worse, the oil that is being processed is bound to get dirtier, resulting in a higher rate of greenhouse gas emissions throughout the fuel-production chain. Oil used by the state’s refineries already contains the highest intensity of greenhouse gas pollutants of any refining region in the country. As drillers pump the dregs from the state’s nearly spent fields, that intensity is increasing.

With California oil extraction in decline, its refineries will want to import more crude oil from other states and nations. That could include tapping the Canadian tar sands, notorious for its off-the-charts, climate-busting pollutants. Completion of the stalled Trans Mountain pipeline expansion in Canada would facilitate what Greenpeace calls a “tanker superhighway” from Vancouver to California ports. California refineries have tried to win approval for rail terminals and ports that would receive tar sands oil but have so far been blocked by local governments.

The refineries’ contributions to greenhouse gas emissions don’t end with their own production, of course. When the fuel they produce is used, it’s one of the primary contributors to climate change. As California shifts to renewable energy and electric vehicles, less refined fuel will be consumed here and more will be exported to other states and nations.

As a result, the state could become, in Karras’ words, “the gas station of the Pacific Rim.” And as exports grow to countries like India with lax environmental standards, refineries won’t even need to meet California’s more stringent regulations on fuel composition; instead, they will export more pollution.

The main reason state leaders have done little to limit oil supply is obvious: The oil industry remains a formidable adversary, wielding its financial and lobbying might to head off restraints. For virtually all Republican state legislators and a substantial number of Democrats, oil supply is too hot a topic to touch, Karras told me.

Meanwhile, state policy calls for greenhouse gas emissions to drop by 80% of 1990 levels by 2050. Given the oil industry’s cap and trade refinery exemptions in place through 2030, the only way to achieve that level is to place drastic limits on refineries as soon as those exemptions expire, which is unlikely to happen. A more realistic approach would remove the oil industry’s exemptions and impose cuts of 5% a year on refinery emissions immediately — an urgent task that state leaders have shown no interest in carrying out.

In the absence of action at the state level, it has fallen to localities to prevent refineries from at least increasing crude oil imports to their facilities. Over the last decade elected officials in half-a-dozen communities from Benicia to San Luis Obispo County have blocked refinery infrastructure projects that would allow more crude oil imports. They’re the real heroes of California’s climate saga — too bad they won’t be the ones in the spotlight at the summit.

Jacques Leslie is contributing writer to Opinion.

    U.S. imports of Canadian crude oil by rail increase

    Repost from Today in Energy

    MAY 2, 2018

    U.S. imports of Canadian crude oil by rail increase

    monthly crude oil shipments by rail, as explained in the article text

    Source: U.S. Energy Information Administration, Petroleum Supply Monthly

    Growth in Canadian crude oil production has outpaced expansions in pipeline takeaway capacity and, along with past pipeline outages, has driven Canadian crude oil prices lower and increased Canadian crude oil exports by rail to the United States. However, the outlook for increased volumes of Canadian crude oil shipped by rail to the United States is highly uncertain despite significant U.S. demand for Canadian crude oil, specifically on the U.S. Gulf Coast.

    Crude oil production in Canada increased to 3.9 million barrels per day (b/d) in 2017, up approximately 300,000 b/d from 2016. However, crude oil pipeline capacity out of Canada has failed to keep pace with growing production. Consequently, volumes of Canadian crude oil exported to the United States by rail increased in 2017. In December 2017, U.S. imports of Canadian crude oil by rail set a monthly record of 205,000 b/d, nearly matching the amount of crude oil shipped by rail within the United States that month (246,000 b/d).

    Changes in the relative prices of two crude oils—Western Canada Select (WCS) in Hardisty, Alberta, and West Texas Intermediate (WTI) in Cushing, Oklahoma—demonstrate the effects of transportation constraints. Until late 2017, WCS prices averaged $10 to $15 per barrel (b) lower than WTI, largely reflecting differences in the quality of the two crudes. In late 2017 and early 2018, as crude oil production began to exceed pipeline capacity and demand to transport crude oil by rail increased, WCS priced about $25/b lower than WTI.

    The price spread between WCS and WTI has since narrowed to an average of $16/b in early April, suggesting some demand for transporting Canadian crude oil by rail has lessened. Low WCS prices may have led some Canadian crude oil producers to reduce output and advance schedules for planned maintenance, likely reducing the need to move crude oil by rail.

    daily price differences of selected crude oil, as explained in the article text

    Source: U.S. Energy Information Administration, based on Bloomberg, L.P.

    Of the 144,000 b/d of Canadian crude oil imported by rail in 2017, about half (70,000 b/d) went to the U.S. Gulf Coast, or Petroleum Administration for Defense District (PADD) 3. Imports by rail made up 18% of total Canadian crude oil imports to the Gulf Coast, and 2% of the 3.1 million b/d of total crude oil imported by the Gulf Coast in 2017.

    monthly crude oil receipts by rail from Canada, as explained in the article text

    Source: U.S. Energy Information Administration, Petroleum Supply Monthly

    With an API gravity of approximately 20 degrees, WCS crude oil is a heavy crude oil that is attractive to Gulf Coast refiners that process heavier crude oil. Traditional suppliers of heavy crude oil into the Gulf Coast region, such as Venezuela and Mexico, have experienced production declines that resulted in lower crude oil exports, making Canada an increasingly important source of U.S. imports of heavy crude oil.

    In January 2018, the U.S. Gulf Coast imported more crude oil from Canada (448,000 b/d) than from Venezuela (438,000 b/d) for the first time on record and imported more crude oil from Canada (379,000 b/d) than from Mexico (309,000 b/d) in September 2017. Another outlet for Canadian crude oil on the Gulf Coast may be re-exports. Since the removal of restrictions on crude oil exports from the United States, Canadian crude oil can be re-exported from the Gulf Coast without having to be segregated.

    monthly U.S. Gulf Coast crude oil imports by country, as explained in the article text

    Source: U.S. Energy Information Administration, Petroleum Supply Monthly

    Large-scale and sustained increases in crude oil by rail volumes from Canada face several obstacles from the Canadian rail industry and competing pipeline projects. Trade press reports indicate that before investing, Canadian rail companies are requiring that crude oil producers enter long-term commitments for crude oil-by-rail capacity. Canadian crude oil producers have been reluctant to agree to long-term rail commitments because pipeline capacity could increase in the short to medium term as new pipeline projects come online and some currently operating pipelines begin to ease volume restrictions.

    Principal contributors: Arup Mallik, Mason Hamilton

      BLOOMBERG: Local opposition to crude by rail is succeeding in California

      Repost from Bloomberg
      [Editor:  Note 3 mentions of crude by rail, and in the final paragraph a reference to local opposition to CBR in Santa Maria, Pittsburg and Benicia.  – RS]

      California Isn’t Feeling U.S. Oil Boom as OPEC Dependence Grows

      By Robert Tuttle, May 4, 2016 9:01 PM PDT

      • State sourced a record 52% of its crude from overseas in 2015
      • Falling in-state and Alaska production is driving imports

      BBGThe shale oil boom that cut U.S. crude imports by 32 percent in a decade isn’t being felt out west as California grows increasingly dependent on Middle East supplies.

      California brought in a record 52 percent of its crude from abroad last year, up from just 9 percent 20 years earlier, according to California Energy Commission data. The state hasn’t yet released the specific countries that supplied that oil in 2015, but in 2014, about 58 percent came from Saudi Arabia and Iraq, the most recent data show.

      Foreign dependence is only expected to grow as supplies from within the state and Alaska diminish and efforts to bring U.S. crude from the Midwest by rail face local opposition.

      “Regulatory impediments have kept California isolated from the growing sources of domestic crude production,” John Auers, executive vice president at Turner Mason & Co., said by phone from Dallas. “California refiners won’t be able to take advantage”’ of lower-priced domestic crude.

      Growing imports mean that California refiners have some of the highest crude costs in the U.S., which are passed onto consumers in the form of higher gasoline prices, David Hackett, president of Irving, California-based Stillwater Associates, said in a phone interview.

      Imported crude is priced off Brent, which was selling at less than a $1 premium to U.S. West Texas Intermediate Wednesday. While the lifting of restrictions on U.S. oil exports has narrowed the gap from as high as $15 a barrel in 2014, the spread between the grades could widen again when oil rises and U.S. shale oil production picks up, Hackett said.

      Drivers in Los Angeles paid the highest pump prices in the U.S. for much of last year, exceeding $4 a gallon last summer, according to AAA.

      Domestic Supply

      Alaska supplied the state with 73,000 barrels a day of crude in 2015, about 12 percent of California’s total supply, state data show. That’s down from as high as 46 percent in the early 1990s and may fall further as Alaska’s production is forecast to drop to 319,100 barrels a day in 2023, down from almost 500,000 barrels a day this year, official datashow.

      California itself produced about 225,000 barrels a day in 2015, supplying about 36 percent of its own needs, according to state data. That’s a drop from 240,000 barrels a day in 2014. The decline in the state’s own production came as producers cut output amid falling oil prices and following the shutdown of the Plains All American pipeline near Santa Barbara after a spill curtailed about 38,000 barrels a day of offshore production, Stillwater’s Hackett said.

      California could benefit from cheaper Midwestern oil if crude by rail terminals were built. New terminals planned for Santa Maria, Pittsburg and Benicia have been stymied by local opposition and regulatory holdups, Hackett said. In February, for example, Valero Energy Corp’s planned crude-by-rail project was rejected by a city commission.