All posts by Roger Straw

Editor, owner, publisher of The Benicia Independent
Chevron Refinery, Marine transport, Oil exports, Valero Benicia Refinery

Contaminated Oil That No One Wants Is Heading to Asia: California allows rare export exemption

Repost from Bloomberg Business News
[Editor:  A local resident observed that the photo below was taken at the docks here in Benicia, California — home of Valero Benicia Refinery.  The Bloomberg story says that the contaminated oil originated with Chevron and was stored at Plains All American in Martinez.  But maybe there’s more to the story?  Maybe Valero was an additional source or storage facility for the ship’s contents?  My source says that the tanker Hellespont Protector has been seen about twice over the last few months, and is a new one around here. (Background on current efforts of the oil industry to overturn the 1975 U.S. crude-export ban.)  – RS]

Contaminated Oil That No One Wants Is Heading to Asia

By Lynn Doan and Dan Murtaugh, April 26, 2015 4:00 PM PDT
Hellespont Protector
Oil tanker Hellespont Protector, said to be chartered to export California oil, was anchored in the San Francisco Bay on April 20, 2015. Photographer: Lynn Doan/Bloomberg

One million barrels of oil. Enough to fill more than 60 Olympic-sized swimming pools. And there it sat in tanks outside San Francisco — for three years — despite crude prices that topped $100 a barrel.

This isn’t the prized “light, sweet” kind of crude that is pumped out of the ground in Texas, or even the thick, sticky stuff from Alberta’s tar sands. Rather, it’s what’s known as “orphaned oil” that is so contaminated with organic chlorides that it can corrode the insides of even the biggest refineries.

Now, it’s on the move — and guessing exactly where is turning into a sort of parlor game for some in the oil market. All that is known is that Chevron Corp., which flushed the oil from a pipeline in September 2012 and has seen its value drop by $50 million since then, is loading it onto two tankers bound for Asia.

“It’s really kind of a bizarre incident,” said Gordon Schremp, a senior fuels specialist at the California Energy Commission who was notified by industry representatives of the planned exports.

It’s a rare shipment, considering most crude is barred from leaving U.S. borders. It just so happens that an exemption has been in place since 1992 allowing limited amounts of California oil to leave the country.

Export Exemption

The only reason exports don’t happen very often is because California’s refiners keep almost all the state’s oil for themselves.

The saga began on Sept. 17, 2012, when Chevron told shippers that its pipeline delivering California crude to San Francisco-area refiners was contaminated. Chevron ended up pushing an estimated 1 million barrels through the pipe to get rid of the chlorides.

And so the tainted oil sat in tanks at a Plains All American Pipeline LP terminal in Martinez until this month, when all the red tape, including getting an export license from the Commerce Department, was finally cut, Schremp said.

When the contamination was discovered, heavy crude from California’s San Joaquin Valley cost $97 a barrel. It’s now $46. The difference, multiplied by 1 million barrels, is more than $50 million. And that’s not counting the cost of storing the oil for more than two years, which could add millions more.

In Limbo

West Texas Intermediate futures, the benchmark for U.S. crude, rose 9 cents to $57.24 a barrel at 11:53 a.m. local time on the New York Mercantile Exchange. Prices dropped about 44 percent in the past year.

Kent Robertson, a spokesman for Chevron, declined to comment on the exports. Brad Leone and Meredith Hartley, spokesmen for Plains, didn’t respond to requests for comment.

Oil tanker Hellespont Protector, one of the two vessels chartered to carry the crude, was anchored in the San Francisco Bay on Friday, shipping data compiled by Bloomberg show. The other, Energy Champion, is headed for Qingdao, China, a place with no refineries. It may be a stopover, or it may not be headed to a refinery at all.

Schremp, who wasn’t told where the outcast barrels are headed, said they could be used as fuel for large ships or burned in a power plant.

If refiners know about the contamination ahead of time, they can blend in additives as a cure, but it’s an expensive solution that erodes the value of the crude, said David Hackett, president of energy consultant Stillwell Associates LLC in Irvine, California.

Wherever it lands, chances are it’ll be the first and last California oil that Asia sees for a while. California crude prices have been getting stronger and refiners across the Pacific have been flooded with supplies from much closer by.

Asked whether the rare cargoes are a bellwether for future exports of California oil, Schremp said, “It’s not like it makes perfect economic sense to move barrels that way into the world market — this was an export of circumstance.”

Fracking, Oil prices, Oil producers

Industry downturn: Half of US Fracking Companies “Dead or Sold” By Year-End

Repost from Oil Change International

Half US Frackers “Dead or Sold” By Year-End

By Andy Rowell, April 24, 2015

fracking photoThere has been increasing speculation over the last twenty-four hours that the oil price might start to rally upwards.“

What we are seeing now is improvement, suggesting a recovery within the longer term downtrend … I’m short-term bullish on Brent,” Roelof van den Akker, a chartist at ING Wholesale Banking, told CNBC earlier today. Van den Akker is predicting that the oil price could jump $20 / barrel in the near future.

He is not the only one who is thinking that the oil price is set to rebound. The Financial Times is reporting that hedge funds are also placing some of their “largest ever bets on a rally in oil prices”.

But the FT adds that this comes “just as evidence mounts that energy companies are hunkering down for a delayed recovery.”

Part of what this “hunkering down” might look like was outlined by one industry executive on Wednesday.

The executive, Rob Fulks, a marketing director at fracking company Weatherford, predicted that half of the 41 fracking companies operating in the U.S “will be dead or sold” by the end of this year due to slashed spending by oil companies caused by the oil price plunge.

Fulks, whose company is the fifth largest fracker in the US, was speaking at an industry conference in Houston on Wednesday. He predicted there could be as little as 20 fracking companies left by the year end, compared to the 41 there are currently and 61 there were at the beginning of last year.

The cuts are part of the $100 billion the industry has cut in spending globally after prices have plummeted.

He told the audience that “we see yards are locked up and the doors are closed”, adding “it’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”

As far as his own company is concerned, Fulks said that Weatherford was making “dramatic” cuts to expenditure.

Many in the industry, like Fulks, will be hoping that the hedge funds are right and that the oil price rebounds sooner rather than later.

But whether it happens before more fracking companies go bust or are taken over, remains to be seen.

Derailment, Emergency planning, Emergency Readiness & Response, Hazmat notification

Failure to Report: A pattern of secrecy by major oil train hauler puts public at risk

Repost from Sightline

Failure to Report

A pattern of secrecy by major oil train hauler puts public at risk.

By Eric de Place (@Eric_deP) and Deric Gruen on April 10, 2015 at 11:19 am

The first commuters were just beginning to trickle over the Magnolia Bridge near downtown Seattle as the short summer night was warming to gray. Probably none of them realized just how narrowly they escaped disaster that morning.

Below them, a BNSF locomotive pulling 97 tank cars—each laden with at least 27,000 gallons of crude oil from the Bakken formation of North Dakota—came to a halt under the Magnolia Bridge in Seattle. Three cars had derailed. It was July 24th of 2014.

The time was 1:50 AM.

What happened next—or more precisely, what didn’t happen—has come to define what appears to be a pattern of secrecy and poor communication by BNSF, troubling habits that put lives in the Northwest at risk. For example, three years earlier when a BNSF hazardous substance train derailed on a Puget Sound beach near Tacoma, the railroad was unresponsive to emergency officials for nearly four hours. Even then, communication lines were so poor that the railroad’s subsequent actions put the first responding firefighters directly into harm’s way for no purpose.

Early Morning: BNSF Downplays the Risk

Within five minutes of the Magnolia Bridge derailment, the BNSF response team was on site, according to the company spokesman. (The derailment happened less than a hundred yards from the railway’s Interbay Railyard.) The team determined, apparently without consulting public authorities, that there was no safety risk and that they did not need assistance.

By 3:11 AM, BNSF dispatch had notified the Washington State Department of Ecology, informing state officials there were no hazardous materials involved, even though crude oil is unambiguously considered a hazardous material. BNSF also said there was no risk to life and safety, and there was no potential for either. This despite the risk of oil spill from the notoriously leak-prone tank cars on the train, and despite the fact that Bakken crude has a noted tendency to explode catastrophically.

Oil train derailment in Magnolia neighborhood of Seattle, July 24, 2014 (2), by Hayley Farless, WEC intern

Seattle Awakens, Does Not Like What it Sees

By 5:44 AM, the Seattle Times had posted a story up about the incident, though some reports suggest neither local authorities nor the Department of Ecology were aware that an oil train had derailed. Sometime during the six o’clock hour, the City of Seattle’s Director of Emergency Management became aware of the incident, apparently after hearing a news broadcast, rather than receiving an emergency management notification. By 6:54 AM the Seattle Fire Department learned of the incident via a 911 call placed from a nearby business, but emergency responders had still heard nothing directly from BNSF.

The Fire Department, clearly concerned, deployed 19 firefighters, including a hazardous materials team.

At 7:30 am, more than five hours after the incident, the Department of Ecology finally learned that the derailed cars reported hours earlier did, in fact, contain hazardous material—a particularly volatile form of crude oil—-one that could, in fact, pose a risk.

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The source of the notification? Not BNSF.

It was officials at the Tesoro oil refinery in Anacortes, the train’s destination, who alerted the state. Like the fire department, Ecology deployed staff to oversee precautionary measures, including clean-up preparation and a containment boom near stormwater drains that lead to Puget Sound.

Hours after the original incident, a coal train passed by the askew oil cars, a moment illustrative of the perilous concentration of fossil fuels running through Seattle.

seattlederailment

A Pattern of Failing to Report

The mishap and subsequent failure to report in Seattle was not an isolated incident. In March 2015, staff at the Utilities and Transportation Commission recommended that BNSF be cited for 700 violations spanning 14 incidents from November 2014 to February 2015. The failures related specifically to Washington’s requirement to report spills within 30 minutes, which BNSF failed 14 out of 16 times during this period.

How late was BNSF in reporting? Here are few examples provided by the Department of Ecology:

  • November 5, 2014: A rail tank car of Bakken crude oil arrived at the BP oil refinery in Ferndale with staining down the body of the car to the wheels and with several trailing cars also stained. Measurements suggest the car lost 1,611 gallons of oil somewhere along the route. Ecology was not notified for month and a half, on January 21, 2015.
  • January 12, 2015: Bakken oil rail cars were observed in Vancouver, Washington with oil staining. Approximately seven cars had leaked an estimated 5 gallons each. Ecology was notified of the incident by BNSF two weeks later, on January 23. BNSF claimed the oil evaporated during transit and thus no oil reached the ground or water during transit.
  • January 13, 2015: Bakken crude rail cars in Auburn, Washington were seen with oil staining, after six cars leaked an estimated 1 gallon each. Ten days later on January 23, 2015, BNSF notified Ecology of the incident by BNSF, making the same claim that that oil evaporated during transit and there was no indication that oil had reached the ground or water during transit.

Because Ecology was unable to verify spilled oil on land or water in these incidents, they are unable to penalize the railway for spills.

Reason for Concern

Given the pattern of obfuscation and secrecy in BNSF’s reporting habits, there is plenty of reason to question the wisdom of letting the railroad haul crude oil. If the Magnolia derailment had led to a spill or fire as it easily might have, the railway’s delay would have cost valuable time and put many lives at risk.

In March 2015, the Washington Fire Chiefs demanded a plan from the railroad, along with much more information about oil train movements in the state. Given the propensity of these trains to spill and to occasionally erupt into infernos, allowing BNSF’s bad habits to persist may mean that we won’t find out about the next incident until it’s too late.

Big Oil, Fossil fuel divestment, Natural gas, Sensitive wildlife habitats

North America’s Oil And Gas Industry Has Taken Over 7 Million Acres Of Land Since 2000

Repost from Think Progress’s Climate Progress

North America’s Oil And Gas Industry Has Taken Over 7 Million Acres Of Land Since 2000

By Katie Valentine, April 24, 2015 at 12:28 pm

Millions of acres of land across the U.S. and Canada has been taken over by oil and gas development in the last 12 years, according to a new study.

The study, published Friday in Science, tallied up the amount of land that’s been developed to house drilling well pads, roads, and other oil and gas infrastructure in 11 U.S. states and three Canadian provinces. It found that between 2000 and 2012, about 3 million hectares (7.4 million acres) have been turned over to oil and gas development, a stretch of land that, combined, is equal to three Yellowstone National Parks.

This land takeover can have ecological consequences, according to the report.

“Although small in comparison with the total land area of the continent, this important land use is not accounted for and creates additional pressures for conserving rangelands and their ecosystem functions,” the report states. “The distribution of this land area has negative impacts: increasing fragmentation that can sever migratory pathways, alter wildlife behavior and mortality, and increase susceptibility to ecologically disruptive invasive species.”

Most of the land converted into drilling operations was cropland and rangeland — a term that encompasses prairies, grassland, shrubland, and other ecosystem types — and roughly 10 percent was woodland. Wetlands, according to the report, were mostly spared by oil and gas developers, though a very small amount have been converted into oil and gas sites.

CREDIT: Science/AAAS

Land takeover due to oil and gas development can have a number of negative consequences, the report states. It removes vegetation that’s important for food, habitat, and carbon storage, and it also fragments ecosystems in such a way that can disrupt the natural behavior of wildlife.

According to the report, oil and gas development reduced the study area’s net primary production (NPP) — the rate at which an ecosystem produces plant biomass, which the report calls “a fundamental measure of a region’s ability to provide ecosystem services” — by 4.5 teragrams (9,920,801,798 pounds). The amount of vegetation lost from rangelands amounts to about five million animal unit months (the amount of vegetable forage required to feed an animal for one month), which “is more than half of annual available grazing on public lands managed by the U.S. Bureau of Land Management.”

“The loss of NPP is likely long-lasting and potentially permanent, as recovery or reclamation of previously drilled land has not kept pace with accelerated drilling,” the report states.

Steve Running, co-author of the study and ecology professor at the University of Montana, told Midwest Energy News that the upward trend of oil and gas development is concerning in terms of land use, especially if serious efforts to reclaim land aren’t taken.

“The point we’re trying to make with this paper is not so much that some huge fraction of current land area has been de-vegetated, as much as the trajectory of drilling, (consuming) a half-million acres per year,” he said. “If we continue that to 2050, you get to some seriously big amounts of land.”

CREDIT: Science/AAAS

Right now, there’s not much known about to what extent oil and gas areas in the U.S. are being reclaimed after they’ve been developed, said Samuel D. Fuhlendorf, another co-author of the report from Oklahoma State University. And, he said, there isn’t much work at the federal or state level to regulate or enforce this reclamation. Some states — including Pennsylvania, Ohio, North Dakota, and West Virginia — do require oil and gas companies to submit plans for reclaiming land after they’re done drilling. But others, like Colorado, don’t require these plans.

“You’d expect there would be both state- and federal-level policy,” Running told Midwest Energy News. “But we’re not aware of a clear policy on this. We don’t see any active discussion or regulatory planning of how that’s going to be done, who will do it and when it will be done. Beyond policy, is there actual enforcement. We are not aware that any state or federal policies are actively following this.”