Category Archives: Phillips 66

The Crude Oil “Bomb Train” Story: Profits Over Safety

Repost from DeSmogBlog

The Crude Oil “Bomb Train” Story: Profits Over Safety

By Justin Mikulka • Friday, May 20, 2016 – 10:42

I would agree with the opponents. This is not about saving jobs…This is about profits. But gee, what is wrong with profits?”

Those were the words of San Luis Obispo County Planning Commissioner Jim Irving, explaining why he was voting for a project to build a rail spur to the Phillips 66 Santa Maria Refinery so that the refinery can receive oil by rail.

It is a safe bet that Jim Irving hasn’t been to Lac-Megantic, where almost three years ago a very profitable oil train derailed and exploded in the middle of downtown. The immediate damage was 47 lives lost, a massive oil spill, and the burning and contamination of the town center.

Nearly three years later, the downtown has yet to be rebuilt. And as we reported on DeSmog, there were many reasons the Lac-Megantic accident occurred. Averting any one of them could have prevented the accident. All were the result of corporate cost-cutting that put profits ahead of safety.

Also to blame were government regulators who allowed corporations to not invest in safety.

The locomotive engine fire that was the initial cause of the event? Faulty cost-saving repair.

The fact that regulators allowed full oil trains to be parked on a hill above a town, unmanned? Staffing cost savings for railroads.

The “19th century technology” air brakes that failed? More profits over safety.

Poor or non-existent employee training? More savings.

And how about those government regulators’ role in this? How could all of these moves to put profits over safety be allowed? The Globe and Mail looked at all the evidence and pointed the finger directly at the regulators.

There is one federal body that is ultimately responsible for the oversight of Canada’s railways: Transport Canada. The Lac-Mégantic disaster falls squarely at its feet.

It was recently revealed that the government of Canada contributed $75 million to the fund for the victims of Lac-Megantic to avoid further litigation. If they weren’t at fault, why would they pay up?

If you want to ask why allowing the pursuit of profits above all other concerns is a problem —  Lac-Megantic is your answer.

Profits Over Safety: The Rule, Not the Exception

The old air braking system that was involved in Lac-Megantic is the standard for all oil trains. There are modern braking systems known as electronically controlled pneumatic (ECP) brakes that have been described as “a quantum improvement in rail safety” by Joseph Boardman, the former head of the Federal Railroad Administration. But this quantum improvement has not been implemented.

Cynthia Quarterman was in charge of the Pipeline and Hazardous Materials Safety Administration for the majority of the multi-year process when the new oil-by-rail regulations were developed, and based on that process, she believes ECP brakes are a top priority.

The more I think about it, the more I think that the ECP brakes may be more important than the tank car itself,” Quarterman told USA Today. “Because it would stop the pileup of the cars when there’s a derailment or when there’s a need to brake in a very quick fashion.”

So why aren’t ECP brakes required on oil trains? As DeSmog reported in March of 2015, the industry explained its opposition to ECP brakes in a presentation to regulators, and the opposition included the argument that safer brakes would be “too costly.”

And of course there is the issue of the tank cars used to move the dangerous oil. When the fracking boom happened in North Dakota and there weren’t pipelines to move the oil, the industry quickly built rail loading facilities.

Did the industry also build new safe tank cars to move the oil? No. They began filling the readily available DOT-111 tank cars with oil and started rolling them across North America through big cities and small towns — including Lac-Megantic.

The problem was that the DOT-111s were not designed to move flammable materials like Bakken crude oil, but were made to move things like molasses and corn oil.

But there was money to be made – so it was full-speed ahead with the DOT-111s for Bakken crude.

Shipping Bakken crude oil in DOT-111s has been called “an unacceptable public risk” by a member of the National Transportation Safety Board. But it continues anyway because it is profitable. Gee, what could go wrong with that?

Bomb trains.

The oil could be made safe to transport through a process known as stabilization. But that would require building stabilizing infrastructure in places like North Dakota. That would cut into profits. So it hasn’t been done.

In testimony to the North Dakota Industrial Commission about the proposed regulations to requireoil stabilization,Tony Lucero of oil producer Enerplus explained the reality:

The flammable characteristics of our product are actually a big piece of why this product is so valuable. That is why we can make these very valuable products like gasoline and jet fuel.”

And so there are no regulations to stabilize the oil because it would be less profitable.

What is wrong with profits? Dangerous oil in unsafe cars with 19th century technology brakes traveling though many North American cities is a good starting point to answer that question.

Profits Buy Plenty of Lobbyists

In January, Sen. Elizabeth Warren (D-MA) released the report “Rigged Justice – How Weak Enforcement Lets Corporate Offenders Off Easy” detailing what is known as regulatory capture — essentially using corporate profits to buy influence over regulators responsible for improving safety. Like the ones who the Globe and Mail said failed the people of Lac-Megantic.

When it comes to undue industry influence, our rulemaking process is broken from start to finish,” Warrenexplained in March while discussing the report. “At every stage – from the months before a rule is proposed to the final decision of a court hearing a challenge to that rule – the existing process is loaded with opportunities for powerful industry groups to tilt the scales in their favor.”

The math is simple. It is much cheaper to buy lobbyists and influence than it is to invest in safety. And that is what is wrong with an approach that puts the pursuit of profits above all else.

We Can’t Take A Chance That Things Will Be Alright

While the oil and rail industries’ pursuit of profits was championed in California on Monday, a similar discussion was happening on the East Coast in Albany, NY. Albany is the largest oil hub on the East Coast and all of that oil comes by rail.

Now there is a proposal to build a pipeline from Albany to the seaport in Linden, NJ. The pipeline would be fed by oil trains that would arrive in Albany. While it was mostly a symbolic vote — unlike the one in California — the Albany city council voted to oppose the Pilgrim Pipeline this week.

In the public comment period, local Pastor McKinley Johnson, whose church is across the highway from the oil train facility, explained his opposition to the pipeline and more oil trains.

“It is time for us to take a stand,” said Johnson “We can’t take a chance that things will be alright.”

And he is right that this is about taking chances. The oil and rail industries are gambling that an event like Lac-Megantic won’t happen in a big city like Chicago — knowing full well that the proper safety measures are not in place to prevent it.

So far they have been really lucky — and very profitable.

This past weekend, Albany was the site of one of the worldwide Break Free From Fossil Fuels events, and the issue of the oil “bomb trains” was front and center. City council member Vivian Kornegay, who represents the community that lives directly alongside the rail yards where the oil is offloaded, was one of the featured speakers.

She repeatedly made the point that her constituents were taking all of the risk with the trains and getting no reward, saying, “We assume 100% of the risk…and miniscule benefits.”

If you are an oil company in pursuit of profits, that is exactly how you want it.


Vivian Kornegay addresses Break Free rally in Albany, NY   Photo credit: Justin Mikulka

Blog Image Credit: Justin Mikulka

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SIERRA CLUB: Community Urges Benicia City Council to Deny Valero’s Dangerous Oil Train Proposal

Repost from Sierra Club – The Planet

Community Urges Benicia City Council to Deny Valero’s Dangerous Oil Train Proposal

By Elly Benson, staff attorney with the Sierra Club’s Environmental Law Program, April 6, 2016
Opponents of Valero’s oil train proposal rallied in front of city hall before the Benicia City Council hearing.
Opponents of Valero’s oil train proposal rallied in front of city hall before the Benicia City Council hearing.

On April 4, scores of concerned Californians converged on Benicia City Hall to urge the city council to reject Valero’s plan to transport volatile crude to its Bay Area refinery in dangerous oil trains. In February, local planning commissioners unanimously rejected the proposal, which would send two 50-tanker oil trains through California communities each day. Valero appealed that decision to the city council. Given the intense public interest in the crude-by-rail project, the city council has scheduled four public hearing dates this month.

Before Monday’s city council hearing began, opponents of Valero’s dangerous plan held a rally in front of city hall. Rally speakers included Berkeley City Councilmember Jesse Arreguín and Andres Soto of Benicians for a Safe and Healthy Community, as well as a local business owner and a senior scientist from Communities for a Better Environment, an environmental justice organization. Benicia residents were joined by members of “up-rail” communities (including Sacramento and Davis) who would be endangered by the oil trains rolling through their cities and towns on the way to the Valero refinery. Oil train derailments and explosions have skyrocketed in recent years — including the July 2013 derailment in Lac-Megantic, Canada that killed 47 people and obliterated several city blocks.

Berkeley City Councilmember Jesse Arreguín addressed the crowd at the rally outside Benicia City Hall.
Berkeley City Councilmember Jesse Arreguín addressed the crowd at the rally outside Benicia City Hall.

Inside the city council chambers, public comment began with testimony by a series of elected officials and agency representatives concerned by the risks posed by Valero’s oil train project. Speaking on behalf of the Sacramento Area Council of Governments (which represents six counties and 22 cities), Yolo County Supervisor Don Saylor urged the Benicia City Council to consider impacts on up-rail communities, including the 260,000 people in the Sacramento region who live within a quarter-mile of the railroad tracks. A representative from the Sacramento City Unified School District noted that 17 schools in the district are within the “blast zone” that would be put at risk by explosive oil trains on the railroad tracks. Other speakers included Berkeley Vice-Mayor Linda Maio and representatives testifying on behalf of up-rail air quality management districts, the City of Davis, and State Senator Lois Wolk.

After the elected officials and agency representatives spoke, residents of Benicia and up-rail communities voiced their concerns about the severe public health and environmental risks posed by Valero’s proposal. Although a few people expressed support for the project, the majority opposed it. Benicians for a Safe and Healthy Community presented the city council with a petition — compiled along with the Sierra Club, Stand, CREDO, Center for Biological Diversity, and 350 Sacramento — with 4,081 signatures of people opposed to Valero’s oil train project.
Benicians for a Safe and Healthy Community presented the city council with a petition signed by over 4,000 people who are opposed to Valero’s oil train project.
Benicians for a Safe and Healthy Community presented the city council with a petition signed by over 4,000 people who are opposed to Valero’s oil train project.

In addition to urging the Benicia City Council to uphold the permit denial, many speakers urged the council to reject Valero’s request to delay the appeal process. At a city council meeting last month, Valero unexpectedly asked the council to put the appeal on hold while the company seeks a declaratory order from the federal Surface Transportation Board regarding the scope of the legal doctrine of preemption. Valero has insisted that federal regulation of railroads means that Benicia is prohibited from considering the project’s impacts on communities and sensitive environments along the rail line (including derailments, oil spills, and explosions).

At the Benicia Planning Commission hearings in February, attorneys from the Sierra Club, Natural Resources Defense Council, and the Stanford Law School clinic refuted this expansive interpretation of the preemption doctrine, and the commissioners ultimately rejected Valero’s interpretation as overly broad. Notably, the California Attorney General has previously weighed in on the shortcomings of the city’s environmental review, and specifically noted the failure to adequately analyze impacts to up-rail communities. Valero has not offered a compelling rationale for why the Attorney General would request that analysis if preemption renders those impacts irrelevant. The oil industry’s self-serving interpretation of preemption was also recently rejected by planning staff in San Luis Obispo County, who recommended denial of a similar oil train proposal at a Phillips 66 refinery due in large part to the environmental and health impacts along the rail line.

In a letter submitted to the Benicia City Council last week, the Sierra Club and our allies explained why federal law does not preempt Benicia from denying the permit for Valero’s project. The letter also reiterated that the project’s local impacts, especially increases in refinery pollution, require the city to deny the permit. For years, the Sierra Club and our partners have pushed back against Valero’s efforts to hide the true impacts of its oil train proposal — including submitting comments at each stage of the environmental review process. Our allies in these efforts include NRDC, Benicians for a Safe and Healthy Community, Stand (formerly ForestEthics), Communities for a Better Environment, Center for Biological Diversity, SF Baykeeper, and Sunflower Alliance, among others.

Additional city council hearings are scheduled for April 6, 18, and 19, as needed for public comment and council action.

Media: Valero crude oil gets another shot at NorCal railways (KCRA Sacramento, 4/5/16)

Rallying in front of Benicia City Hall.
Rallying in front of Benicia City Hall.

 

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Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?

Repost from Think Progress – Climate Progress

Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?

By Joe Romm, March 11, 2016 8:00 AM
BNSF oil train derailment in 2013. CREDIT: BRUCE CRUMMY, AP

Billionaire Warren Buffett has bet the future of his company Berkshire Hathaway on dirty energy. In recent years he has been building a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and burns the most climate-destroying fuels.

The final part of this series on Buffett looks at how BNSF Railways is the engine of his carbon-intensive conglomerate, creating a massive risk for shareholders in this increasingly carbon-constrained world — a risk the “Oracle of Omaha” needs to be far more upfront about.

Is Warren Buffett “The Profiteer” of “Climate Killers”?

When Rolling Stone named Warren Buffett one of its 17 “Climate Killers” in 2010, they called him “The Profiteer.” They zeroed in on his recent purchase of “Burlington Northern Santa Fe railroad for $26 billion — the largest acquisition of Buffett’s sto­ried career.”

Why? BNSF is “the nation’s top haul­er of coal, shipping some 300 million tons a year.” That is especially convenient for Buffett because, as noted in Part 2, Berkshire Hathaway Energy has four major utilities that still rely on coal for over half their electricity generation.

CoalValueImage
CREDIT: BNSF

But BNSF is so much more than just the top hauler of coal. As their website proudly attests “BNSF is the largest transporter of crude oil in North America” — and we all know how well the whole crude-by-rail thing has been going.

2015 “has already been the costliest by far for crude train explosions,” BloombergBusiness reported in December. A “BNSF train that derailed and exploded in Illinois” last March “carrying highly explosive crude from North Dakota” created some $5.5 million in damage.

From 2010 through mid-2014, oil shipped by rail in the United States increased from about one million barrels of oil every month to 25 million! At the same time, Canadian imports increased 50-fold, as we’ve reported. BNSF was a driving force behind that explosion.

oil-overtime
CREDIT: EIA DATA

Also, last October we learned about “what is believed to be the largest frac sand unit train to date in North America.” You guessed it: “The 150-car unit train, operated by BNSF, carried 16,500 tons of frac sand used in hydraulic fracturing.”

Warren Buffett Bets Big On The Tar Sands

But wait, there’s more. You may recall from Part 1 that last year, the billionaire spent $240 million buying another chunk of Canadian tar sands giant Suncor, upping his overall bet on the climate-destroying liquid fuel to $1.1 billion — a fact Buffett does not share with shareholders in his list of Berkshire Hathaway’s climate risks.

On top of that, as BNSF’s website also proudly attests, the railroad “is positioned to act as a gateway to the Canadian oil sands.” Seriously.

Indeed several years ago, a BNSF employee magazine explained how invested the railway was in all aspects of tar sands (aka bitumen) development. The key point is that “Before bitumen can move through a pipeline to its destination, it must be blended with diluents (diluting agents),” lighter weight hydrocarbons like natural gasoline or butane:

BNSF has been moving single carloads of diluents from U.S. refineries to the Canadian border…. The inbounds are then interchanged with Canadian railroads, then moved to Edmonton, with the final move to the oil sands’ processing center via pipeline.

Last year, BNSF moved about 9,000 carloads of diluents for the project, with the majority of loads originating from the Gulf Coast, California, and Kansas. This year, about 12,000 carloads are anticipated to move.

There’s more: Beyond shipping diluents, “BNSF has also transported turbines, other large machinery and pipes for use at the drilling sites.”

There’s still more to this empire. In 2015, Buffett “nearly doubled Berkshire’s position in Phillips 66,” one of the country’s leading oil (and gas) refiners and processors. The company has 15 refineries which can refine a total of 2.2 million barrels of crude per day.

In January of this year alone, Buffett spent a staggering $832 million to buy yet more Phillips 66 stock. At more than $5 billion, it is his sixth-largest holding. He now owns 14 percent of the “Number 7” company on the Fortune 500 list.

Phillips 66 is a major co-owner of the Wood River Refinery in Illinois, which in recent years made investments “to expand the capacity to handle the bitumen from the Alberta oil sands by nearly 700%.” Also not coincidentally, for the last year, Phillips 66 has been trying to get California planning commissioners to let it build a 1.3-mile rail spur to its Santa Maria refinery. Why? As the Sierra Club explained last month, “The oil giant seeks to transport tar sands crude from Canada in mile-long trains — each laden with over 2 million gallons of dirty crude.”

Both A Livable Climate And Buffett’s Empire Cannot Thrive

Yes, the Oracle of Omaha has a thing for the Canadian tar sands. But more than that, over the last several years he has built a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and even burns the most carbon-intensive fossil fuels. It would be a brilliant strategy except for two small details.

First, climate science makes clear we have to leave most fossil fuels — and virtually all of the most carbon-intensive — in the ground to avoid global catastrophic warming. Second, over the past 18 months, the leading nations of the world unanimously agreed on a plan whose goal is to do just that, and the overwhelming majority of them made detailed pledges to slow or reverse carbon-intensive growth and replace it with carbon-free growth.

The domestic and international coal market has already collapsed as a result of growing environmental concerns and low-cost alternatives including renewables. If the world follows through on its plans to keep total warming below 2°C — a big “if,” for sure — then coal is going to continue to be squeezed out of the market in the coming decades and oil will almost certainly follow the same fate, peaking in demand by 2030, as I discussed last month.

Now whether or not you believe the world is going to achieve the plan it unanimously embraced in Paris in December, surely Buffett ought to at least mention to his shareholders the risks to Berkshire Hathaway if the world does. Yet, his latest annual letter to shareholders dismisses the risk of climate change.

Here is all Buffett says about the coal risk: “To begin with an obvious threat, BNSF, along with other railroads, is certain to lose significant coal volume over the next decade.” But he quickly dismisses this as a problem that is not “crucial to Berkshire’s long-term well-being.”

Last summer, BNSF executive chairman Matthew K. Rose noted the decline in U.S. coal transport and consumption. He said of his company’s major investment to upgrade its rail service to and from the coal-rich Powder River Basin, “That leaves us with millions of dollars in investment in what will eventually be stranded assets.”

Certainly, from a short-term business perspective, investing in oil-by-rail and tar-sands-by-rail to replace coal-by-rail appears to make sense. But what are the risks those investments will eventually become stranded assets, too? Low oil prices aren’t good for crude-by-rail, as BloombergBusiness explained in December. And aggressive climate action, which could well give us peak demand within 15 years, is not bullish for oil prices.

BNEFoilpeak1-16
CREDIT: BLOOMBERG

Rather than informing shareholders about any of these risks, Buffett asserts the reverse: “Both BHE [Berkshire Hathaway energy] and BNSF have been leaders in pursuing planet-friendly technology.” Seriously?

I discussed in Part 2 how, despite BHE’s own investments in renewables, BHE is working to crush solar energy in Nevada and around the western United States. And it remains a huge user of coal. And as we’ve seen BNSF is a major deliverer of coal….

But here is how Buffett defends the fairly ludicrous claim that BNSF is somehow one of the “leaders in pursuing planet-friendly technology”:

BNSF, like other Class I railroads, uses only a single gallon of diesel fuel to move a ton of freight almost 500 miles. That makes the railroads four times as fuel-efficient as trucks!

Yes, BNSF is a very fuel-efficient way of delivering vast amounts of climate-destroying fuels to market.

Finally, is it only a coincidence that after outperforming the market for decades, the stock of Berkshire Hathaway has actually underperformed the S&P 500 over the last five years?

Again, if serious global climate action ultimately keeps oil prices low and renders much of the tar sands uneconomic, then Buffett’s carefully constructed fossil fuel empire is going to keep suffering — and deservedly so. After all, leading climate activists have been urging major investors to disinvest in fossil fuels for years. Buffett is doing the exact reverse!

BOTTOM LINE: Between Berkshire Hathaway and a livable climate, only one can thrive. That’s not a tough choice, is it?

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