Gravy Train Derails for Oil Workers Laid Off in Slump

January 17, 2015 Roger Straw

Gravy Train Derails for Oil Workers Laid Off in Slump

By David Wethe, Jan 15, 2015

A Halliburton Co. worker walks through an Anadarko Petroleum Corp. hydraulic fracturing (fracking) site north of Dacono, Colorado. Halliburton said last month it was laying off 1,000 staff in the Eastern Hemisphere alone as it adapted to a shrinking business. | Photographer: Jamie Schwaberow/Bloomberg

The first thing oilfield geophysicist Emmanuel Osakwe noticed when he arrived back at work before 8 a.m. last month after a short vacation was all the darkened offices.

By that time of morning, the West Houston building of his oilfield services company was usually bustling with workers. A couple hours later, after a surprise call from Human Resources, Osakwe was adding to the emptiness: one of thousands of energy industry workers getting their pink slips as crude prices have plunged to less than $50 a barrel.

“For the oil and gas industry, it’s scary,” Osakwe said in an interview after he was laid off last month from a unit of Halliburton Co. (HAL), which he joined in September 2013. “I was blind to the ups and downs associated with the industry.”

It’s hard to blame him. The oil industry has been on a tear for most of the past decade, with just a brief timeout for the financial crisis. As of November, oil and gas companies employed 543,000 people across the U.S., a number that’s more than doubled from a decade ago, according to data kept by Rigzone, an employment company servicing the energy industry.

Oil Prices

Stunned by the sudden plunge in the price of oil, energy companies have increasingly resorted to layoffs to cut costs since Christmas, shocking a new generation of workers, like Osakwe, unfamiliar with the industry’s historic boom and bust cycles.

Workers who entered the holiday season confident they had secure employment in one of the country’s safest havens now find themselves in shrinking workplaces with dimming prospects.

Short-lived Salvation

Sean Gross, 35, was over the moon when he secured a job in March last year at Schlumberger Ltd. (SLB), the world’s largest oilfield service company. He’d been laid off from a technology company and saw the oil business as his salvation.

“I was happy. My life was starting to take shape. Life was really, really, really, really good,” he said.

Oil prices started drifting down after hitting a high of $107 a barrel on June 20, but were still at $91 at the end of September. In the next few weeks the market buckled, falling to $80 by the end of October, to $66 by the end of November, and to $53 at the end of the year.

After hitting an intraday low of $44.20 on Jan. 13, oil traded higher today, rising to $49.62 at 9:15 a.m.

By December, Gross said talk was spreading through his Houston office about people losing their jobs “left and right.” Old-timers were suddenly retiring. Yet Gross still thought he’d be okay working in information technology far from the oilfield.

Not Again

As a newcomer to the energy industry, he didn’t realize how crashing oil prices would ripple through the company. He’d made it through another unsettling day and was in the parking lot, buckling on his motorcycle helmet for the ride home, when he looked up to see his boss running after him. “Hey Sean, I need to talk to you in my office.”

“Oh God, here I go again,” Gross recalled thinking as his boss delivered the news that he was getting laid off.

There’s no firm number yet on how many oil industry workers are losing their jobs, or how many more cuts might be coming. Halliburton said last month it was laying off 1,000 staff in the Eastern Hemisphere alone as it adapted to a shrinking business. Suncor Energy Inc., a Canadian oil company, said this week it will cut 1,000 jobs in 2015, a day after Royal Dutch Shell Plc (RDSA) said it would cut 300 in the region. Other companies have announced layoffs, but many are making the cuts without public fanfare.

The effects are being felt beyond the oil companies as cutbacks trickle down to suppliers and other companies that thrived along with $100 oil. The biggest drilling states — Texas, North Dakota, Louisiana, Oklahoma, Colorado — are expected to feel the most pain. The Dallas Federal Reserve bank estimates 140,000 jobs directly and indirectly tied to energy will be lost in Texas in 2015 because of low oil prices.

More Coming

Halliburton said it will continue to make adjustments to its workforce “based on current business conditions,” according to an e-mailed statement from Emily Mir, a spokeswoman. “While these reductions are difficult, we believe they are necessary to work through this challenging market,” she wrote.

Joao Felix, a spokesman for Schlumberger, declined to comment on the company’s layoff plans.

The job-hunting website Indeed.com has filled up with thousands of newly posted resumes from oil industry workers over the past six weeks. Among them is Scott Brewer, another industry transplant who had been working for big-box retailer Home Depot Inc. (HD) before jumping into the Texas oilfield four years ago with plans to bulk up his savings.

Burning Money

Brewer felt sure the boom times would churn along for at least another decade. “It was just consistently getting better,” he said.

His confidence was boosted by watching all the money the oil companies threw around. “They’d spend $20,000 like you and I spend $10 at McDonald’s,” he said, recalling catered meals at the drilling site featuring catfish, shrimp and lobster. “It was insane.”

The downturn hit everyone by surprise, said Brewer, who worked on wells mostly in South Texas for a small, private drilling technology company called Leam Drilling Systems LLC. After sitting at home a month waiting to be called to his next job, Brewer got a phone call at the end of December telling him he was no longer needed.

Jean Chapin, director of human resources, declined to say how many jobs Leam has had to cut.

‘Right Sizing’

“We are constantly in the process of trying to right-size our company,” Chapin said in a phone interview. “We do anticipate a continued downturn in domestic drilling activity.”

Like many in the industry, the oil business runs in the family for Svetlana Mazitova, 39, compounding her anxiety. A third-generation oil veteran, her Russian roots and two masters degrees in science and business helped her secure a job in June with a Houston-area company selling drilling equipment around the world.

Her husband, a native Texan, works for a company that sells the material drilling companies use to prop open the cracks in rock that allow oil and gas to flow. Her son is planning to start college in August to study engineering.

Mazitova’s company was hit first by U.S. and European economic sanctions against Russia, related to the nation’s conflict with Ukraine. The sanctions eliminated an important market, and when oil prices fell, the company had to lay off workers, including Mazitova. Now she’s worried for her husband’s job, too, and wondering how they’ll put her son through school if both are out of work.

Shrinking Future

“It’s terrifying,” said Mazitova. “I’m upset. I don’t know what to do for a future.”

For 31-year-old Australian engineer Adam Beaton, the oil crash has dashed hopes of returning to work in the U.S., where he lost his non-energy job — and his work visa — during the 2009 recession.

Beaton has been working back at home in Australia helping develop huge offshore oil and natural gas projects, hoping to transfer to the U.S. when his current project ended. Instead, he was laid off, with no prospects for getting more work.

“When the oil price goes down, everything happens quickly,” Beaton said.

As industry analysts and consultants increasingly predict that low oil prices could linger for years, laid off workers face a workplace where their chances of getting rehired by an energy company are remote. Many don’t plan to even try.

“I’m pretty much decided I’m not gonna do this oil thing again,” Brewer said.

New Reality

Osakwe is thinking of going back to school to broaden his physics training with an eye toward looking for “something that’s hard to do without.”

Scott Richardson, 47, of Longview, Texas, is still trying to get an energy job back. It’s what he knows best after 10 years in the oilfield, spending 300 days a year on the road bouncing from drilling site to drilling site. He drives a $120,000 Jaguar XFR-S, bought with the bounty of his well-paying job as a supervisor of an oilfield equipment operator.

That decade of prosperity made Richardson so complacent that he hadn’t been paying attention to the price of oil in early December when he quit his job in frustration over equipment problems.

“I honestly didn’t give it any thought,” he said. “The oilfield’s been good to me for 10 years.” When he cooled off and asked for his job back, his boss told him the position had been eliminated. Now he’s pounding the pavement looking for anything he can get, resigned to making a third of his old salary just to sign on somewhere.

“That car payment still comes around,” said Richardson, who now checks oil prices more than four times a day.

Derailment, Freight trains

Latest derailment: Grain train in Cheney, Washington

January 16, 2015 Roger Straw

Repost from The Spokesman-Review, Spokane, WA

Train derailment near Cheney may block road until Saturday

By Mike Prager , January 16, 2015

Cars derailed where the tracks cross Cheney- Spokane Road in Cheney on Thursday. Jesse Tinsley photo

The rail line where a grain train jumped the tracks early Thursday has been targeted for major upgrades so it can safely handle today’s heavier locomotives and longer trains.

The derailment at Cheney-Spokane Road on the northeast side of Cheney left at least six cars off the track, including one that was tilting at a 20-degree angle.

The train was traveling slowly – no more than 10 mph – a crew worker said. No injuries were reported and no wheat was spilled.

Cheney-Spokane Road likely will be blocked until Saturday. After a contractor lifts the fully loaded grain hoppers back onto the rails, crews will fix damage to the rail line and crossing.

A detour is in place on a gravel section of Betz Road east of state Highway 904 and on a short section of Andrus Road.

The 30-car train derailed as it entered Cheney from Almira just before 1:30 a.m. Thursday on the state-owned short line.

Bob Westby, the state’s manager of the Palouse River & Coulee City Railroad line, said the state has been seeking funding to upgrade the track, ties and roadbed in the location where the derailment occurred.

Last year, the state asked the federal government for a $6 million TIGER grant (Transportation Investment Generating Economic Recovery) to upgrade the line from Cheney to the Geiger spur, a distance of just over 6 miles.

The grant was rejected, but it had to compete with nearly 800 other TIGER requests nationwide. It was one of three submitted by the state Department of Transportation.

“This project is one of our priorities,” Westby said.

The project is included in a $30 million budget request to the Legislature this session for rail needs. If approved, work on the line could begin later this year or next year.

The derailment underscores concerns about more frequent rail shipments, including potentially volatile crude oil traveling on mainline tracks.

John Taves, a Cheney city councilman, said the blockage of Cheney-Spokane Road would delay emergency vehicles and shows the risks facing the public from train accidents.

“People need to realize railroad traffic is increasing,” he said. “There has been a lot of concern.”

Bill Wolff, director of maintenance for the short line’s operator, said it was not clear what caused the derailment. He said cold weather puts stress on the track, making it vulnerable to fracture under a bad wheel, for example.

Once the line is cleared, inspectors can examine the track to determine a cause, Wolff said.

The state bought the line in 2004 to preserve rail access for rural communities in Eastern and Central Washington and to keep more truck traffic off state highways. At the time, state officials said $22 million in upgrades were needed.

The upgrades north of Cheney are requested in part so heavier BNSF Railway locomotives and 110-car trains can serve a new grain loader under construction north of Four Lakes. The new loader facility will have an “eight pack” concrete grain elevator, high-speed loading and a large circular staging track for filling the units. The elevator will be 190 feet tall.

The line, which dates to the late 1800s, is part of the former BNSF network in the region. The railroad sold the line in the mid-1990s to a private company, which then sold it to the state.

It’s operated under lease by the Eastern Washington Gateway Railroad.

The short line serves farm communities by hauling grain at favorable rates and industrial companies at Airway Heights. The 108-mile segment north and west of Cheney passes through Medical Lake, Reardan, Davenport, Creston, Wilbur, Almira, Hartline and Coulee City, the terminus.

Companion lines run south of Cheney and serve Rosalia, Oakesdale and points south, including a network of rail in the Palouse. The total track is 296 miles.

The derailment did not block access to shopping areas at Highway 904 and Cheney-Spokane Road. Roadblocks were set up ahead of the crossing in both directions.

Bakken Crude, Crude By Rail, Derailment, Emergency Readiness & Response, Explosion, Fire, First responder training, Oil spill, Tar sands crude, U.S. Department of Transportation

KFBK News Radio: How safe is Sacramento?

January 16, 2015 Roger Straw

Repost from KFBK News Radio, Sacramento CA
[Editor: Two part series, both shown below. Of particular interest: a link to 2014 California Crude Imports by Rail. Also, at the end of the article an amazing Globe and Mail video animation detailing the moments leading up to the devastating explosion in Lac-Megantic Quebec. – RS]

Part 1: How Safe is Sacramento When it Comes to Crude-by-Rail?

By Kaitlin Lewis, January 16, 2015

Two different railroad companies transport volatile crude oil to or through Sacramento a few times a month. The trains pass through Truckee, Colfax, Roseville, Sacramento and Davis before reaching a stop in Benicia. Last week, a train carrying the chemical Toluene derailed in Antelope.

KFBK’s Tim Lantz reported that three cars overturned in the derailment. There was initially some concern about a possible Hazmat leak.

Union Pacific Railroad insists over 99 percent of hazardous rail shipments are handled safely.

Most of the oil shipped in California is extremely toxic and heavy Canadian tar sands oil, but an increasing portion of shipments are Bakken crude, which has been responsible for major explosions and fires in derailments.

Firefighters around the region are being trained on how to respond to crude oil spills.

However, Kelly Huston with the California Office of Emergency Services says 40 percent of the state’s firefighters are volunteers.

“They’re challenged right from the get-go of being able to respond to a catastrophic event like a derailment, explosion or spill of a highly volatile compound like crude oil,” Huston said.

Since 2008, crude by rail has increased by 4000 percent across the country.

By 2016, crude-by-rail shipments in California are supposed to rise by a factor of 25.

Union Pacific Railroad hosted a training session in November 2014.

Six out of the eight state fire departments listed as having completed the course confirm they were there.

“We were trained in November,” Jerry Apodaca, Captain of Sac City Fire, said.

When asked when he received the first notification of crude oil coming through, he said he didn’t have an exact date, but that it was probably a month or two prior to the training — in September or October.

Apodaca says the U.S. Department of Transportation requires railroads to notify state officials about Bakken oil shipments.

“Basically it just says in this month’s time, there should be 100,000 gallons going through your community. So it didn’t really specify when, or where, or how many cars or what it looks like,” Apodaca said.

And Paul King, rail safety chief of the California Public Utilities Commission, says it’s not easier to distinguish which lines transport Bakken oil through an online map.

“It was hard to interpret and it was too gross. Basically, the whole state of California on an 8 1/2 by 11 piece of paper with what appears to be a highlighter pen just running through the counties,” King said.

See a map of North American crude by rail.
California rail risk and response.
2014 Crude Imports by Rail

PART 2: How Sacramento’s First Responders Will Deal with Oil Spill

KFBK told you Sacramento’s firefighters were being trained on how to respond to a crude-by-rail derailment after shipments had already been going through the region in Part 1.

In Part 2, KFBK’s Kaitlin Lewis will tell you how Sacramento’s first responders will handle a possible oil spill, and what caused that train derailment along the Feather River Canyon.

It’s called a bomb train.

On July 6, 2013, 47 people were killed in Canada when a 73-car train carrying crude oil derailed.

About 30 buildings in the Lac-Mégantic downtown district were destroyed. The fire burned for 36 hours.

“If we have a derailment and fire of crude oil, fire departments are going to throw large quantities of water and foam to cool the tanks and to put a blanket on the liquid that’s on the ground to help smother that fire,” Mike Richwine, assistant state fire marshal for Cal Fire, said.

Richwine says that’s the only operation for a spill/fire.

In December, 11 cars carrying corn derailed along the Feather River Canyon.

Paul King, rail safety chief of the California Public Utilities Commission reveals the cause was a rail line break.

“That was probably the most concerning accident because that just as well could have been one of the Bakken oil trains, the corn, you know, ran down the bank. It was heavy, and it consequently does put more force on the rail, but it’s about the same weight as an oil train,” King said.

Aaron Hunt, a spokesman for Union Pacific says California has more than 40 track inspectors and 470 track maintenance employees.

“In addition to that, cutting edge technology that we put in to use for track inspection. One of those technologies is our geometry car. It measures using lasers and ultrasonic waves, the space between the two rails — makes sure that space is accurate,” Hunt said.

But Kelly Huston, deputy director of California’s Office of Emergency Services says the real challenge is preparedness in remote areas like the Feather River Canyon, which is designated as a High Hazard Area due to historic derailments.

“In some more metropolitan areas, your response may be quicker and they’ll have that gear and the training and knowledge of, like, how do we fight this kind of fire? And in some areas, like in the more remote areas like we talked about in the Feather River Canyon there’s going to be perhaps maybe volunteer firefighters that have the basic equipment,” Huston said.

The Feather River feeds the California Water Project, which provides drinking water for millions of Californians. The nearest first responder is Butte County Fire Department, which is approximately 31 miles away.

Federal pre-emption, Federal Regulation (U.S.), State regulation

Are California foie gras, oil train court cases on parallel tracks?

January 15, 2015 Roger Straw

Repost from McClatchyDC News
[Editor: Despite the curious analogy to foie gras, this is a SERIOUS discussion of Federal pre-emption and California’s attempt to regulate crude by rail. Apologies for the auto-play video. – RS]

Are California foie gras, oil train court cases on parallel tracks?

By Curtis Tate, January 15, 2015

US NEWS RAIL-SAFETY 1 WA — On April 30, 2014, a CSX train carrying Bakken crude oil derailed in downtown Lynchburg, Va. No one was injured or killed but three tank cars went into the James River, spilling 30,000 gallons of oil and igniting a fire. CURTIS TATE — TNS

WASHINGTON — Perhaps the only imaginable connection between trains and foie gras, the famous French delicacy obtained by force-feeding duck or geese to fatten up their livers, would be as an appetizer in the dining car of the luxury Orient Express.

Ah. Pas vrai.

A California court recently overturned the state law against selling foie gras because poultry regulation is a federal concern. And that’s just what the railroad industry is arguing about a state law enacted last year requiring it to develop oil spill response plans.

The law came about as an expected increase in crude oil transported to California by rail raised concerns about public safety and emergency response.

Like the restaurants that serve foie gras and the industry that supplies it, railroads have decided they won’t be forced to swallow a state law that they think is pre-empted by a federal one.

In the foie gras case, a producer and a restaurant that served it argued that California’s attempt to choke off sales ran afoul of the federal Poultry Products Inspection Act. Last week, a U.S. district judge agreed, citing the Supremacy Clause of the Constitution, which gives Congress the ability to displace state laws.

Similarly, the Association of American Railroads, the rail industry’s principal advocacy organization, and two of California’s major railroads, Union Pacific and BNSF, argue that the Federal Rail Safety Act derails the state’s oil spill response requirements.

According to some attorneys who know the issue well, California’s law is heading to the end of the line.

“I don’t think the court will struggle with this,” said Kevin Sheys, a Washington attorney who advises railroads but has no involvement in the California case. “The law will be struck down.”

Environmental groups, however, argue that other federal laws apply to the railroads. Patti Goldman, a Seattle-based attorney with Earthjustice, an environmental group, said the Clean Water Act and the Oil Pollution Act, the latter passed in response to the Exxon Valdez oil tanker disaster, gave states the power to enact stricter oil spill response requirements than federal ones.

That’s in contrast to the Federal Rail Safety Act, which doesn’t allow states much room to exceed what’s required at the federal level. A court decision that weighs more heavily on the rail safety act would favor the railroads. A reliance on federal water pollution laws would favor the state.

“The structures for pre-emption in there are almost polar opposite,” Goldman said. “The federal government sets a minimum standard, and the states can go further. All of that is a structure that is meant to preserve state authority.”

Sometimes pre-emption works in California’s favor. Opponents of the state’s $68 billion high-speed rail system tried to slow down the project by arguing that it was subject to the California Environmental Quality Act and required extensive impact reviews.

But in a 2-1 ruling last month, the federal Surface Transportation Board said the project was exempt from the state law. Last week, state and federal officials, including Gov. Jerry Brown, broke ground on the project in Fresno.

As a more practical matter, railroads have largely prevailed in pre-emption cases because courts have been sympathetic to the notion that a patchwork of 50 different state laws could unreasonably burden interstate commerce.

In a notable case in Washington, D.C., a decade ago, a federal court struck down a local law that prohibited the shipment of hazardous materials by rail within two miles of the Capitol. A busy CSX freight line runs only blocks away, and the law would have forced lengthy and expensive detours of hazardous cargo.

But a massive increase in the transportation of crude oil by rail in recent years, and with it an increase in high-profile accidents, has exposed gaps in safety and emergency preparedness. California is bracing for a big increase in crude by rail, and last year the legislature extended the state’s oil spill response requirements to cover inland waterways.

That, naturally, affected railroads, which historically followed rivers because of the level terrain for heavy trains, including California’s Feather and Sacramento rivers.

The Association of American Railroads declined to comment on the California case, but spokesman Ed Greenberg noted that railroads “have extensive emergency plans in place, which include procedures in working with local first responders” and have “stepped-up emergency response capability planning and training.”

David Beltran, a spokesman for California Attorney General Kamala Harris, who’s defending the law, wouldn’t comment on the case beyond what’s in court filings.

State Sen. Jerry Hill, a San Mateo Democrat, said the attorney general’s office had assured him that the law wouldn’t be pre-empted when it came before his committee last year.

“We feel comfortable based on the legal opinions we have,” Hill said.

He thinks it’s premature to predict that the law will be invalidated. But Hill said that he and others who supported it should be prepared for that outcome.

“Everyone would regroup and try to find a way to meet the goals that we’re trying to achieve,” he said.

Harris, who’s said she’ll run next year for the U.S. Senate seat of retiring Democrat Barbara Boxer, also defended the foie gras ban. She tried to have that suit dismissed by arguing that she had no present intent on enforcing the law while reserving the right to do so.

That prompted a quip from Judge Stephen Wilson in his 15-page ruling striking it down: “Defendant seeks to have her paté and eat it, too.”

Harris made a similar argument in the rail case.

“I think it’s going to be decided the same way,” said Mike Mills, an oil and gas attorney in Sacramento. “I don’t see a different outcome.”

Mills said the California case might put a federal solution on a faster track.

The U.S. Department of Transportation issued an Advance Notice of Proposed Rulemaking in August for a new regulation that would require railroads hauling crude oil to have comprehensive oil spill response plans. The rule would apply uniformly across all states, and it would achieve what California tried to do on its own.

“Oftentimes, litigation will produce a decision that forms the basis for new legislation,” Mills said. “Potentially, it could happen.”