Category Archives: U.S. Department of Transportation

SF Chronicle: California refiners double volume of oil imported by rail

Repost from the San Francisco Chronicle

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.

Lynn Doan is a Bloomberg writer.

Rachel Maddow: Canada forcing new U.S. regulations; Obama must act decisively

Repost from MSNBC / The Rachel Maddow Show
[Editor: This is a lengthy video, (sorry about the commercial ad), but well worth your time.  After exploring oil pipeline spills, Maddow digs into the incredible increase in crude oil transport by rail, and the explosions and the need for quick action from the Obama administration.  Near the end, she interviews Wall Street Journal energy reporter Russell Gold, author of The Boom.    – RS]

Public safety at risk by oil train shipments

 Rachel Maddow, 05/02/2014

Russell Gold, senior energy reporter for the Wall Street Journal, talks with Rachel Maddow about the safety shortcomings inherent in shipping oil by rail, particularly the highly flammable Bakken crude.

Debate: thickness of the steel walls of tank cars

Repost from International Business Times
[Editor: Important report, please read.  – RS]

Oil Industry And Railroads Shipping Shale Boom Riches Are Separated By Just An Eighth Of An Inch

By Meagan Clark  |  April 29 2014
Coal railcars Wyoming by Shutterstock Coal railcars in Wyoming  |  Shutterstock.com

Energy companies and the firms that make the rail cars carrying the flow of crude oil and other products from America’s shale boom are separated by a mere 1/8 of an inch.

That’s the added thickness in the walls of the steel rail cars that the manufacturers say is needed to achieve safe standards. The oil and gas industry argues that the current 7/16 of an inch thickness is adequate.

The debate is important because the U.S. is currently hammering out guidelines that will eventually set the new national standards for transporting hazardous cargo by rail.

The standards for tank cars have made national headlines after several fiery derailments of trains carrying crude in the past year, some near homes.

After several congressional hearings,  the Department of Transportation (DOT) is expected to propose a new set of rules this week for White House review, including “options for enhancing tank car standards,” Anthony Foxx, transportation secretary, blogged for DOT on Thursday. Foxx was visiting Casselton, North Dakota, the site of an explosive train derailment and 400,000-gallon crude spill late last year that managed to not injure anyone.

The White House’s Office of Information and Regulatory Affairs (OIRA) will review the DOT’s proposal. The turnaround usually takes about three months, but could take longer since the regulation in dispute is controversial and costly. The public will have a chance to submit comments before the final rules are set.

“We look forward to working collaboratively with OIRA on the Administration’s proposal and initiating the formal comment process as soon as possible,” Foxx said in the blog post.

The current regulation DOT-111 has been the federal standard for oil-by-rail shipping for more than a decade, and nearly all parties involved in the trade agree it needs updating.  Some officials claim the crude from the Bakken Shale formation in Wyoming and North Dakota is more volatile and dangerous than other domestic crude oil.

Rail operators, oil producers and tank car manufacturers have argued without resolve for months on what the best dimensions would be to transport crude.

The American Petroleum Institute claims that the current a 7/16th inch-thick steel frame is adequate for crude shipments, while the Association of American Railroads, the rail industry’s lead representative, proposes a thicker 9/16th inch frame.

The thicker tank not only would cost the companies more to buy; it also holds less crude, which adds to shipping costs.

A 7/16th inch model called the CPC-1232 has been a voluntary industry standard since 2011, and factories have sold many of the tank cars in recent years to transport crude. AAR introduced the standard after several DOT-111 derailments, but now recommends phasing out or retrofitting the older models for a minimum 9/16th inch-thick tank.

AAR estimates its proposal would phase out or retrofit about 92,000 cars built since 2011 that meet the current standard. Retrofitting the whole existing fleet of current-standard cars carrying flammable liquids would be more than $3 billion, according to the rail group.

Once the rules are final, rail companies will have to decide whether to upgrade their existing fleet or wait for tanks to be built to the new standard.

North America’s oil boom has increased rail transport of crude from 9,500 carloads a year in 2008 to 400,000 carloads last year, according to the U.S. Energy Information Association. The more oil riding the rails, the more likely spills and accidents are to occur. Only 0.0023 percent of hazardous material carloads spill or crash, according to the Association of American Railroads and the American Shortline and Regional Railroad Association. But that small percentage of accidents gets a lot of attention.

Federal Pipeline and Oil-by-Rail Regulator Making 9% Staff Cut, Confounding Experts

Repost from Inside Climate News

Job cuts come at a time when PHMSA is struggling to regulate the nation’s aging pipeline network and new pipelines tied to the oil and gas boom.
By Elizabeth Douglass, InsideClimate News | Apr 24, 2014

Ruptured aging pipeline, image courtesy of PHMSA. If employees accept all of the available buyouts, PHMSA will shrink to a full-time staff of 386, putting it 112 jobs short of its approved payroll for the current fiscal year.

The federal regulator for petroleum pipelines and oil-toting railcars is offering employee buyouts that could shrink the agency’s staff by 9 percent by mid-June—a step that has confounded observers because the agency is widely regarded as being chronically understaffed.

Pipeline and Hazardous Materials Safety Administration (PHMSA) spokesman Damon Hill said the buyout offers are meant to “help the agency manage attrition in areas where a large and growing number of employees are eligible for retirement by offering an inducement for a limited number of employees to voluntarily retire or resign.”

Hill said PHMSA is continuing to hire in key areas at the same time. “I understand how some folks may be looking at [the buyout effort], but it’s part of an overall plan to retain expertise and plan for retention and things like that,” he said. “There is some good that comes out of this.”

Still, the job cuts come at a time when PHMSA is already under considerable duress. Politicians and the public have been pushing the agency to more rigorously regulate the nation’s aging pipeline network as well as the many new pipelines tied to surging domestic oil and natural gas production. A spate of damaging pipeline spills and oil-by-rail accidents is adding to the workload, exposing PHMSA’s shortcomings and intensifying scrutiny of the agency.

PHMSA, which is part of the Department of Transportation, regulates the 2.6 million miles of U.S. pipelines that carry hazardous liquids such as crude oil and fuels. It’s also responsible for making sure that more than 6 million tons of other hazardous material travels safely across the country each day via air, rail, ship and vehicle.

Carl Weimer, executive director of the Pipeline Safety Trust and a member of PHMSA’s technical committee for pipeline safety standards, was puzzled by news of the agency’s move to trim its staff.

“It seems like a lot of people … [and] an inopportune time,” he said. “They have all these Congressional mandates, they have all these requests from [the National Transportation Safety Board] to fix things, there’s been a series of incidents that they’re trying to investigate, and they’re even saying out loud how they don’t have enough inspectors and how they would like to do more.”

Weimer’s concern was echoed by Barbara Lawrence, who lives on a lake in Texas that has pipelines running through it carrying thick, diluted bitumen from Canada’s oil sands.

“I’m actually shocked because there’s a proliferation of [oil and natural gas] drilling in this country with the shale revolution, they’re bringing in tar sands, and they’re building pipelines like crazy,” she said. “Some of this stuff is hazardous, and [PHMSA] should be expanding at an incredible rate to make sure that all this stuff is safe.”

Hill, the PHMSA spokesman, said the agency is offering financial incentives for early retirement or resignation until mid-May, and those who volunteer must leave their jobs a month later. The buyouts were offered to investigators and engineers, as well as to transportation specialists, public affairs specialists and administrative, human resources and legal personnel.

“Industry offers buyouts periodically to entice older people to retire, and I think that’s all it was about,” said John Pepper, an engineer and inspector who left PHMSA for a natural gas storage company in February, between the buyout offers. Still, he said, “It was bizarre to me. We needed people and they offered that [buyout plan]. It didn’t really make sense.”

If all of the authorized slots are filled, the agency will lose 33 employees. Spokesman Hill said 13 employees left PHMSA through a similar offer that closed at the end of 2013.

Together, the buyout programs could result in the loss of up to 46 employees. But because PHMSA recently hired six new people, the net loss to the agency would be 40 people, or 9 percent of the full-time workforce since the end of last year.

The size of PHMSA’s payroll cut seems small compared to private sector layoffs and the big reductions that have hit elsewhere in the federal government. But the losses are likely to have an outsized effect on PHMSA, which is already hampered by substantial vacancies, a plodding hiring process and the lengthy training that’s required for many of its new hires.

If employees accept all of the available buyouts, PHMSA will shrink to a full-time staff of 386, putting it 112 jobs short of its approved payroll for the current fiscal year. Despite having fallen further behind in its hiring because of the buyouts, PHMSA’s budget proposal for 2015 seeks a major expansion to 602 full time positions.

Previous efforts to substantially boost PHMSA’s budget and staffing have been thwarted by political wrangling over the federal budget and the regulator’s inability to hire and retain enough inspectors and other key employees.

The administration had hoped to beef up PHMSA in 2013, but Hill said it got a $10.5 million funding cut instead because of the federal government’s across-the-board budget cuts called for under the sequester agreement between Congress and the White House. The agency saw a modest rise in funding for the current fiscal year, but PHMSA is hoping for a more significant increase in the next budget.

In making the case for more money, the regulator’s 2015 budget proposal said, “The pressing dangers of aging pipelines, the introduction of increasingly vulnerable pipeline materials, and the significant growth in new pipeline infrastructure demand PHMSA not only sustain, but increase current [inspection and enforcement] staffing levels to prevent incidents involving major injury to humans and damage to property and the environment.”

Hiring has been a problem, according to Pepper, the former PHMSA inspector.

“It’d be nice if they had a lot more inspectors, but it’s just almost impossible to hire them,” said Pepper. “I don’t know why they were letting inspectors go [in the buyouts].”

The rapid expansion of oil and natural gas drilling—and the pipelines that go with it—has led to a worsening shortage of inspectors and engineers throughout the industry. Multinational corporations with plenty of money to lure new talent are scrambling to land enough skilled personnel, so the task is doubly hard for governments that offer workers much lower salaries.

That has undermined PHMSA’s staffing ambitions, but they’re not alone. The National Transportation Safety Board, which conducts investigations following major pipeline or other accidents, recently noted that it has just 10 rail inspectors to handle 20 ongoing investigations involving railroad oil tankers.

PHMSA’s buyout offers could exacerbate the problem by letting experienced engineers go before replacements are ready to take over. It’s already happened elsewhere within the pipeline agency.

Weimer from the Pipeline Safety Trust cited the loss of two PHMSA employees who volunteered for the PHMSA buyouts and were gone shortly thereafter.

The employees handled requests for agency information submitted by the public—including groups like Weimer’s—under the federal Freedom of Information Act (FOIA). Their departure has crippled the pipeline agency’s FOIA office, undermining efforts to be more transparent and responsive to the growing demand for pipeline information to be made public.

“It was a blow for getting stuff out of the FOIA office,” Weimer said. “But we have also had conversations with multiple PHMSA people in [Washington, D.C.] who mentioned how much institutional memory and staff abilities were lost because of the last minute early retirement of many people within PHMSA.”

PHMSA’s spokesman said the buyout process was meant to avoid that problem.

“We have quite a few retirement-eligible employees,” said Hill, PHMSA’s spokesman. The agency’s buyout program, he added, “gives us time to work with those folks who decided to accept the offer and garner their expertise, and help us get other people ready to assume those responsibilities.”