Category Archives: Pipeline transport

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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Former exec with major coal transporter nominated to head pipeline safety agency

Repost from ThinkProgress

Former exec with major coal transporter nominated to head pipeline safety agency

With no pipeline experience, big learning curve expected.

By Mark Hand, September 11, 2017, 4:59 PM
FILE – In this Sept. 11, 2010, file photo, a natural gas line lies broken on a San Bruno, Calif., road after a massive explosion. Pacific Gas & Electric Co. pleaded not guilty Monday, April 21, 2014, to a dozen felony charges stemming from alleged safety violations in a deadly 2010 natural gas pipeline explosion that leveled a suburban neighborhood in the San Francisco Bay Area. As survivors of the blast looked on, attorneys for California’s largest utility entered the plea in federal court in San Francisco to 12 felony violations of federal pipeline safety laws. (AP Photo/Noah Berger, File)

President Donald Trump intends to nominate a long-time executive with the freight rail industry to serve as administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA), a regulatory agency that oversees the nation’s extensive pipeline network.

For the past decade, Howard “Skip” Elliott held the title of group vice president of public safety, health, environment, and security for CSX Transportation, a Jacksonville, Florida-based subsidiary of CSX Corp. Altogether, Elliott has a 40-year history in the freight rail industry, although he does not have any government service experience. Elliott’s nomination to head PHMSA is subject to Senate confirmation.

One industry observer noted Elliott will have a big learning curve, coming from the railroad industry, since pipeline safety regulation and oversight is complicated with many diverse stakeholders and controversial issues, including the definition gathering lines and pipeline integrity management requirements.

Pipeline industry officials, though, praised Trump’s nomination of Elliott, citing his extensive experience and leadership in freight rail safety. “We urge the president to nominate, and the Senate to hold a hearing and quickly confirm this qualified nominee,” Interstate Natural Gas Association of America (INGAA) President and CEO Don Santa said in a statement Monday. INGAA is the primary industry trade group for U.S. natural gas pipeline companies.

PHMSA, part of the U.S. Department of Transportation, was created in 2004 and is composed of two offices: the Office of Pipeline Safety and the Office of Hazardous Materials Safety.

According to analysis by the Pipeline Safety Trust, a pipeline watchdog group, new natural gas pipelines are failing at a rate slightly above gas pipelines built before the 1940s. Natural gas transmission lines built in the 2010s had an annual average incident rate of 6.64 per 10,000 miles over the time frame considered. Those installed prior to 1940 or at unknown dates had an incident rate of 6.08 per 10,000 miles, SNL Energy reported.

CSX trains have been in numerous accidents in recent years. In early 2014, a tanker of crude oil and a boxcar of sand nearly toppled over a bridge in Philadelphia after a freight train owned by CSX derailed. Later that year, an oil train operated by CSX derailed and caught fire in Lynchburg, Virginia. Less than 24 hours later, about 10 cars of a CSX coal train went off the tracks, though all of the cars remained.

Elliott is a recipient of an Association of American Railroads award for lifetime achievement in hazardous materials transportation safety. He is a “pioneer and leading advocate” in developing computer-based tools to assist emergency management officials, first responders, and homeland security personnel in responding to a railroad hazardous materials or security incidents, the White House said in a statement released Friday.

CSX is the largest coal transporter east of the Mississippi River and operates a railroad network that runs through the heart of the Appalachian coal fields. CSX also transports crude oil from the Midwest to refineries and terminals along the Hudson River, New York Harbor, Delaware River, and Virginia coast.

Drue Pearce, who is serving as acting administrator of PHMSA, will assume the title of deputy administrator if Elliott is confirmed. She previously served as federal coordinator for Alaskan Natural Gas Transportation Projects, a government position created to streamline the construction of a natural gas pipeline from Alaska to the Lower 48 states. The pipeline was never built.

In the Obama administration, Marie Therese Dominquez headed PHMSA from June 2015 through January 2017. Dominquez worked in government prior to joining PHMSA, serving as principal deputy assistant secretary of the Army Corps of Engineers and working at the National Transportation Safety Board. Cynthia Quarterman, who worked as a lawyer for pipeline companies, including Enbridge Inc., served as PHMSA administrator from 2009 to 2014. Earlier in her career, Quarterman served as director of the Minerals Management Service in the Clinton administration.

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THE TRIBUNE, SAN LUIS OBISPO: Decision on Nipomo refinery’s oil-by-rail plan put off again

Repost from The Tribune, San Luis Obispo CA
[Editor:  Additional coverage: The Lompoc Record, “SLO County Planning Commission delays decision on oil trains, again”.  – RS]

Decision on Nipomo refinery’s oil-by-rail plan put off again

By Cynthia Lambert, September 22, 2016 6:55 PM
Phillips 66 hopes to extend a rail line to its Nipomo Mesa refinery, which would allow deliveries from three oil trains a week..
Phillips 66 hopes to extend a rail line to its Nipomo Mesa refinery, which would allow deliveries from three oil trains a week. Joe Johnston

After several more hours of public comment on a controversial oil-by-rail plan Thursday, San Luis Obispo County planning commissioners started to debate various conditions to approve the project, but they did not reach a decision.

Instead, the proposal by Phillips 66, which has been the subject of numerous Planning Commission meetings this year, will again be continued. It is scheduled to return Oct. 5.

In May, a move to deny the project failed on a 3-2 vote, with Commissioners Jim Harrison, Jim Irving and Don Campbell voting “no.” The commission directed planning staff to return with conditions for approving the proposal to allow the oil company to build a 1.3-mile spur that would connect to the main rail line so the Nipomo Mesa refinery can get crude oil by rail.

The proposal calls for deliveries from three trains per week. Each train would have three locomotives and 80 rail cars to haul about 2.2 million gallons of crude oil.

It’s expected that any decision by the commission will be appealed to the county Board of Supervisors.

“I’m concerned that if we were to deny the project today without establishing conditions of approval for a smaller project with fewer trains and specific hours of operation, that this would leave a wide-open project for the Board of Supervisors to consider next year,” Irving said.

In the afternoon, the commission started working its way through a 33-page document of 97 conditions for the project, asking questions and making minor changes and additions.

I’M INTERESTED IN SAFETY, IN RENEWABLE CLEAN ENERGY AND IN BEING A GOOD STEWARD OF OUR ENVIRONMENT. THIS PROJECT COMPROMISES ALL THREE OF THOSE INTERESTS.
Lisa Ritterbuck of Avila Beach

Commissioner Eric Meyer suggested the commission take a straw vote to see which way commissioners were leaning on the project.

Commissioner Ken Topping agreed, saying, “I think the public deserves to know where we stand individually.”

But Harrison pointed out that they had already taken one vote on the project in May.

Irving said his mind is not made up on the project, and he said he wants to look at it point by point and then make a decision.

“I know it drags it out more,” he said. “I know we are on our seventh hearing, but that’s the way I would like to proceed.”

The commission did not reach a consensus to take a straw vote.

Earlier this year, the Planning Commission held five days of hearings on the rail spur project that drew thousands of people from around the state, many opposing the project.

Phillips 66 has said oil production in California is dropping, and they need to bring crude oil by rail from other areas.

The refinery now receives crude oil by pipeline and by truck. The county found out about the trucking during the April 15 hearing on the project.

Planning staff has recommended a condition that would not allow any further trucking of crude oil on or off the refinery property with the approval of the rail spur project. Phillips 66 suggests that “trucking of coke (petroleum carbon) and sulfur from the refinery and delivery of feedstock, including crude oil, to the refinery shall be limited to an annual average maximum of 49 trucks per day.”

But the Planning Commission did not reach that condition — No. 33 out of the 97.

ONE WAY OR ANOTHER, THIS OIL IS GOING TO GET TO THE REFINERY. BUT IS HUNDREDS OF TRUCKS DRIVING DOWN THE HIGHWAY ANY SAFER THAN JUST A FEW TRAINS AND A SMALL RAIL TERMINAL?
Devin Miller of Arroyo Grande

Earlier in the day, public comment was opened to allow people to speak on the new conditions of approval.

About 90 people spoke, with all but four opposed to the project. Most of the speakers live in the county, including more than two dozen Nipomo residents who suggested additional conditions to deal with air pollution, light and odor problems.

Paul Stolpman suggested that Phillips 66 shouldn’t be allowed to operate the three locomotive engines on days when county air officials predict the area will violate air quality standards.

Lisa Ritterbuck, who lives on an organic farm near Avila Beach, said, “I’m interested in safety, in renewable clean energy and in being a good steward of our environment. This project compromises all three of those interests.”

The few supporters who spoke Thursday said there’s a need for the product the refinery is processing.

“One way or another, this oil is going to get to the refinery,” said Devin Miller of Arroyo Grande. “But is hundreds of trucks driving down the highway any safer than just a few trains and a small rail terminal?”

He added that the families of Phillips 66 employees also live in the community.

“Why would they endanger those people?” he asked.

Mike Brown, government affairs director for the Coalition of Labor Agriculture & Business of San Luis Obispo County, also reiterated his support.

“What you’re being asked to do is deny the project on all these potential uptrack incidents that have a very small overall statistical chance,” Brown said. “… You can’t make these decisions based on emotion.”

By the end of the hearing, the Planning Commission had reached condition No. 17 before adjourning at 5 p.m. Public comment will not be reopened at the October hearing.

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