Category Archives: Oil trains

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

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Oil Train Safety Rules Getting Rolled Back By Trump Adminstration

Repost from KUOW Public Radio, Seattle, WA

Oil Train Safety Rules Getting Rolled Back By Trump Adminstration

By Courtney Flatt, December 6, 2017
<p>Crews subdued the fire from the oil train derailment in Mosier, Oregon, by the morning of Saturday, June 4, 2016. Cleanup on the oil spill and charred rail cars continued into the weekend.</p>
Crews subdued the fire from the oil train derailment in Mosier, Oregon, by the morning of Saturday, June 4, 2016. Cleanup on the oil spill and charred rail cars continued into the weekend. Photo: EMILY SCHWING

The Trump administration is rolling back a requirement for trains carrying highly explosive liquids — like the oil trains that run through the Columbia River Gorge en route to Northwest refineries.

The 2015 rule was supposed to make these hazardous trains more safe, following a number of derailments. But that was under President Obama, Now, President Trump’s Department of Transportation says railroads with trains carrying highly flammable liquids will not have to update their braking systems.

“The costs of this mandate would exceed three-fold the benefits it would produce,” the DOT said in a statement — that’s according to studies by the National Academy of Sciences’ Transportation Research Board and the U.S. Government Accountability Office.

Obama-era regulations required railroad companies to install electronically controlled pneumatic brakes by 2021. Those new systems were supposed to help prevent fiery crashes, like last year’s derailment in Mosier, Oregon. ECP brakes are supposed to brake faster because they signal instantaneously throughout the train.

The current industry-standard air brake technology has been in use for more than a century and had been involved in the deadly Lac Megantic derailment in 2013.

Oregon Sen. Jeff Merkley criticized the decision.

“Oil trains are rolling explosion hazards, and as we’ve seen all too many times—and all too recently in Mosier—it’s not a question of ‘if’ but ‘when’ oil train derailments will occur. Degrading oil train safety requirements is a huge step backward and one that puts our land, homes, and lives at risk,” Merkley said in a statement.

Industry groups applauded the decision. Chet Thompson, president and CEO of the American Fuel & Petrochemical Manufacturers, called the rollback a “rational decision.”

“While we support the use of improved safety technologies, (electronically controlled pneumatic) isn’t an improvement on other technologies currently in use, and would have imposed substantial costs to shippers,” Thompson said in a news release.

Conservation groups in the Northwest said the rollback was frustrating, but unsurprising. Dan Serres is the conservation director with Columbia Riverkeeper.

“We’re definitely frustrated that the Trump administration is weakening standards that are not strong enough to begin with,” Serres said. “We saw that with the Moiser derailment, potentially if there was a better braking system in place, we wouldn’t have seen so many cars come off the tracks.”

Serres said his group is now more committed to stopping oil terminal construction in the Northwest, if the federal government isn’t “holding the rail industry’s feet to the fire to improve the safety of these shipments.”

 

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Washington Agency Votes to Reject Massive Oil-by-Rail Terminal

Repost from DeSmogBlog

Washington Agency Votes to Reject Vancouver Energy’s Massive Oil-by-Rail Terminal

By Justin Mikulka • Wednesday, November 29, 2017 – 10:29
Portland, Oregon, bridge with banner reading 'Coal oil gas none shall pass'
Portland, Oregon, bridge with banner reading ‘Coal oil gas none shall pass’

In another major blow to the West Coast oil-by-rail industry, a Washington state agency voted unanimously to recommend Governor Jay Inslee reject the Vancouver Energy oil terminal. Proposed for construction in Vancouver, Washington, along the Columbia River, it would be the largest oil-by-rail facility in the country.

Washington State’s Energy Facility Site Evaluation Council (EFSEC) has been reviewing the project since 2013 — reportedly the longest review period ever for the council. However, its November 28 meeting and vote on the final recommendation for the Tesoro Savage–backed project only took 10 minutes.

Given the reality of climate change, there is simply no reason to build new fossil fuel infrastructure, especially for the export of extreme oil,” said Matt Krogh of activist group Stand, one of many groups opposing the Vancouver Energy project. “The entire reason behind this proposal was to move crude oil from the middle of North America to overseas markets. Simply put, this oil is not for us — and the proposal would leave every single community along the rail lines with all of the risk and none of the reward.”

Vancouver Energy told Oregon Public Broadcasting that the council has “set an impossible standard” for new energy facilities in Washington.

Proposed by Tesoro Savage Petroleum Terminal LLC (also known as Vancouver Energy), the facility is designed to handle 360,000 barrels of oil per day. Expectations are that the facility would receive both the highly volatile light Bakken oil as well as Canadian tar sands oil, with much of it traveling through the Columbia River Gorge. In 2016 an oil train derailed and caught fire in Mosier, Oregon, with some of the oil ending up in the Columbia River, which has already been suffering major declines of its once-historic salmon populations.

Map of proposed Vancouver Energy oil by rail terminal on the Columbia River
A map of the proposed facility from its Final Environmental Impact Statement. Credit: Tesoro Savage Vancouver Energy Distribution Terminal Facility

Despite lower oil prices, U.S. imports of Canadian tar sands oil reached record levels in 2017 and are currently at 3.3 million barrels per day. More of that oil has been moving by rail recently, and as overall tar sands production continues to rise, industry observers predict large potential increases in shipping more of it by rail over the next several years.

Rich Kruger, CEO of tar sands producer Imperial (the Canadian affiliate of ExxonMobil), recently commented on how rail was becoming more attractive as a way to get oil to America.

Rail is increasingly competitive,” Kruger told Bloomberg. “There are times when we look at the pipeline alternative, [but] the variable cost aspect of rail is a more attractive means for us to get to the mid-Western or Gulf coast markets.”

West Coast Oil-by-Rail Plans

Should Washington Governor Inslee, who has 60 days to make a final decision, follow the recommendation to reject the Vancouver Energy oil terminal, it would throw a major wrench in oil industry plans for Canadian tar sands and Bakken oil in the West. As DeSmog reported in June, oil-by-rail remains part of the industry’s long-term plans to get oil to West Coast refineries.

If Governor Inslee stops this project, it will join the growing list of oil terminals in the West rejected after intense local opposition. Earlier this month a California court ruled that an oil refinery and rail project in Bakersfield could not proceed because its environmental review was inadequate.

Earlier this year the Washington Supreme Court voted unanimously to deny an oil-by-rail project in Grays Harbor because that project lacked a comprehensive environmental review that considered the Ocean Resources Management Act.

Also in 2017, a proposed Phillips 66 oil-by-rail project in California was voted down by the San Luis Obispo County planning commission. In 2016 the city council in Benicia, California, voted unanimously to reject Valero’s proposed oil-by-rail project.

Growing awareness of the risks of oil train terminals has led many communities where they are proposed to back away from such projects.

Local Election Was Proxy Vote on Vancouver Oil Terminal

Because Vancouver Energy’s proposed oil-by-rail facility is sited in the Port of Vancouver, a recent electoral race for one of the port commission’s three seats became a proxy fight over the oil terminal.

The race was between Don Orange, owner of a local auto repair shop and opponent of the oil-by-rail project, and Kris Greene, an insurance agent who was backed by large amounts of money from oil and rail corporations. Oregon Public Broadcasting reported Greene raised “nearly $600,000, with 87 percent coming from Vancouver Energy and backers of the project” and also received support from a PAC, funded in part by rail company BNSF and Tesoro, which spent $160,000.

However, Orange also raised close to $400,000, with considerable support coming from the Washington Conservation Voters Action Fund.

Orange thought there was little question why so much money was pouring into a local election for a seat on a commission that pays around $10,000 a year.

This is a choice of what our economy should look like,” said Orange. “It is a choice of having a vibrant small business economy or becoming a big oil town.”

The election’s results showed how the majority of the community felt about the oil-by-rail project: despite being outspent by Greene, Orange won over 64 percent of the vote.

Current port commissioner Eric LaBrant was shocked by the results, saying, “I’ve never seen anything like this in local politics … This election shows where the community wants to go and what kind of business the community wants to have there at the port.”

Still, the final decision on the oil terminal lies with the governor, and even then, the door remains open for either side to take legal action.

Main image: People’s Climate March PDX Credit: David SierralupeCC BY 2.0

 

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