All posts by Roger Straw

Editor, owner, publisher of The Benicia Independent
Alon USA Energy, Bakersfield CA, Crude By Rail

Oil-by-rail project for shut California refinery near approval

Repost from Reuters
[Editor: Significant quote: “…proposals have faced lengthy delays for comprehensive environmental reviews, public input, and revisions.  Valero Energy Corp, the largest U.S. refiner, postponed its plans to send crude by rail to its San Francisco-area refinery because of such delays, and withdrew permit applications for a similar project at its Los Angeles plant….’I think Bakersfield is probably the best place to build a rail facility in California, because it’s not sitting in San Francisco or LA, and it has access to pipes going north and south. It just seems like it’s going to be a struggle to develop rail in other locations,’ Plains’ Chief Operating Officer Harry Pefanis told analysts in May.”  – RS]

Oil-by-rail project for shut California refinery near approval

Kristen Hays, August 15 2014

(Reuters) – The first new crude-by-rail project at a California refinery is likely to win approval next month after more than a year of scrutiny, the head of the Kern County planning division told Reuters, and it could help reopen the shuttered plant.

The facility at independent refiner Alon USA Energy Inc’s Bakersfield plant would increase crude offloading capacity to 140,000 barrels per day from its current 13,000 bpd and open up significant access to cheaper inland U.S. and Canadian crudes.

Alon’s Bakersfield plant is in Kern County, home to about 65 percent of all California oil production, where crude has been produced for more than a century.

Alon shut the 70,000 bpd Bakersfield refinery in late 2012 because its reliance on more expensive imports and lack of access to other crudes without significant rail rendered the plant unprofitable.

Other California refiners also struggle with profitability because of reliance on expensive imported crude and costly fuel manufacturing regulations in the biggest gasoline market in the country.

“We’re supportive of what Alon is doing with this refinery,” said Lorelei Oviatt, director of the county’s planning and community development department. “This refinery is not operating at full capacity. We would like to see this refinery operating at full capacity.”

Alon didn’t respond to requests for comment.

The Alon project is among several proposed at California refineries, some of which face growing opposition in light of a spate of crude train crashes in the past year as the U.S. oil boom sent amounts of crude moving by train soaring.

The worst by far was in Quebec in July last year when a runaway crude train exploded in the town of Lac-Megantic, killing 47 people.

Several California refiners, largely isolated by the Rocky Mountains from the growing cheap bounty from oilfields in Texas, North Dakota and Canada, want to tap those sources via rail because no major pipelines carry crude from those areas into the Golden State, nor are any planned.

More than half of the 1.7 million barrels of crude processed by California refiners each day is imported.

But proposals have faced lengthy delays for comprehensive environmental reviews, public input, and revisions.

Valero Energy Corp, the largest U.S. refiner, postponed its plans to send crude by rail to its San Francisco-area refinery because of such delays, and withdrew permit applications for a similar project at its Los Angeles plant.

Kinder Morgan Energy Partners operates the state’s most substantial oil-by-rail facility at a terminal in Richmond, which handles up to 72,000 bpd. Local planners last year approved, without an environmental review, a revised ethanol offloading permit to allow the terminal to handle crude. But opponents are suing to temporarily shut it down and force that kind of review.

Tesoro Corp faces similar growing opposition for a 360,000-bpd railport project in southwest Washington state that could ship crude to California refineries by tanker.

That could let California refiners – which includes Tesoro’s Los Angeles-area plant – replace more than 40 percent of more expensive imported oil with North American crudes if all of it were shipped to the state.

Alon is considering possibly leaving the Bakersfield refinery shut and running the facility as a rail and logistics terminal.

If the refinery remains shut, the rail operation would be similar to a separate 70,000-bpd oil-by-rail facility Plains All American plans to open in October and eventually expand to 140,000 bpd. That project was approved two years ago before it was acquired by Plains.

Alon bought the Bakersfield plant out of bankruptcy in 2010 from Flying J Inc, which had shut it in early 2009 shortly after seeking bankruptcy protection. Alon restarted the hydrocracker in the summer of 2011, but operational problems led to more shutdowns and startups.

David Hackett, president of Stillwater Associates, a refining consultancy in Irvine, California, said the refinery’s spotty operational history may better support a future as a rail hub.

“They haven’t run it as a refinery in a long time. I don’t think they’ll restart Bakersfield, and I don’t understand why they didn’t pull this off two years ago,” he said.

ESTABLISHED OIL HUB

Bakersfield sits in the center of the state’s oil production where the oil industry is long established. Plains executives have said its crude-friendly climate and existing infrastructure make the area more attractive for such projects.

“I think Bakersfield is probably the best place to build a rail facility in California, because it’s not sitting in San Francisco or LA, and it has access to pipes going north and south. It just seems like it’s going to be a struggle to develop rail in other locations,” Plains’ Chief Operating Officer Harry Pefanis told analysts in May.

Alon had hoped to have its Bakersfield rail project up and running by the end of 2013, but it, like others in the state, underwent a lengthy environmental review and public comment.

Oviatt said the Kern County planning department had considered all issues during that review, including safety and spill preparedness.

Now the project is slated to go before the county’s board of supervisors for a vote at a Sept. 9 public hearing. Oviatt, who is not one of the five members of the board, said she expected a final decision at that time.

The planning department has signed off on it, and Oviatt said the board tended to be supportive of business.

“I can’t say how the board would vote, but I do believe that given their business-friendly attitude, they’re going to take all of this into serious consideration.”

(Reporting by Kristen Hays in Houston; Editing by Terry Wade, Lisa Shumaker, Jessica Resnick-Ault and Phil Berlowitz)
Bakken Crude, Crude By Rail, DOT-111, Federal Regulation (U.S.), Take Action

Bainbridge Island Review Guest Opinion: Why I blockaded an oil train

Repost from the Bainbridge Island Review

GUEST OPINION: Why I blockaded an oil train

BY ANNETTE KLAPSTEIN, August 16, 2014

On Monday, July 28, I joined Jan Woodruff of Anacortes and Adam Gaya of Seattle in locking ourselves to barrels full of concrete on the rail spur into the Tesoro refinery in Anacortes in order to keep an oil train from leaving the refinery.

Why would a 62-year-old retired lawyer and long-time resident of Bainbridge Island take such a drastic action?

The short answer is: I could not do otherwise.

This kind of resistance may seem extreme, but these are extreme times — these oil trains present an imminent threat to the lives and safety of tens of thousands of our friends and neighbors, and our politicians have done a woefully inadequate job of addressing this.

The puncture-prone DOT-111 tanker cars were deemed “inadequate” by federal authorities more than 20 years ago. Yet every week, more than a dozen of these trains travel through downtown Seattle to refineries including Tesoro.

These trains are carrying Bakken shale crude, which the DOT has warned is unusually volatile and can catch fire at temperatures as low as 75 degrees F!

There have been very frequent derailments, including one in Seattle last week (headed for the Tesoro refinery), which occurred despite a train speed of only 5 miles per hour. Had it been going much faster, the results would likely have been catastrophic.

There have been five explosions and massive fires associated with derailments within the past year, the worst being at Lac-Megantic, Quebec, where a derailment caused a massive explosion, leveling several city blocks and vaporizing 47 people. If this happens in Seattle near the sports stadiums during a Seahawks or Mariners game, tens of thousands of people will die a horrific death.

Tesoro had a terrible safety record even before the huge increase in oil-by-rail.

After its tragic 2010 fire, which killed seven workers, it was found to have committed 39 “willful” and five “serious” violations of safety regulations.

Tesoro is planning to build the massive Tesoro Savage Vancouver Oil Terminal, a project so fraught with potential problems that the Vancouver City Council has asked Governor Inslee to reject it.

The United States Supreme Court, in its questionable wisdom, has declared corporations to be “persons” with human rights. If Tesoro and the other oil companies trying to turn our beautiful state of Washington into the Bakken shale oil dealer to the world are “persons” it is terribly clear to me what sort of “persons” they are: psychopaths — lacking all conscience or empathy. If any other group of people exposed us to such risks, they’d be locked up as the criminals they are. Instead, we get cheap bromides about “safe fracking,” while wells across the country are poisoned and billions of gallons of water in drought-stricken California are ruined: all for cheap dirty energy, in an era when the ravages of climate change are becoming increasingly visible.

The fires in Washington last week were one small sample of ominous things to come. In under a week of the official fire season, more area was burned than in any full year of the past decade. If we do not take drastic measures to address climate change immediately, our children and grandchildren will have to live through the collapse of our civilization within decades. I cannot live with that on my conscience.

And what has our political leadership offered to address these issues? Feeble and half-hearted actions such as the federal plan to “phase out” the most unsafe oil-by-rail cars over the next four years.

In four years we are certain to have more disasters and more deaths — such a plan is criminally negligent and absolutely unacceptable.

We need a total ban on all shipment of Bakken crude by rail NOW, and a complete halt to the development of any new oil terminals in the Pacific Northwest.

The oil companies have no sense of responsibility to anything but their bottom lines. Companies that make decisions like this have no place doing business on our increasingly fragile planet, and we the people of the state of Washington have to draw the line.

Annette Klapstein is a Bainbridge Island resident and a retired attorney who worked for the Puyallup Indian Tribe for 21 years, primarily on fisheries issues.
Bakken Crude, Canadian regulation, Crude By Rail, DOT-111, Insurance Industry, Tank car retrofit, Volatile gases

Rightwing Canadian Thinktank: Bakken crude is safe, consumers will pay for unneeded regulation

Repost from The Waterloo Record, Kitchener, Ontario, Canada [Editor: It is instructive – although distressing – to take note of current talking points of the right-wing Canadian Fraser Institute.  – RS]

Consumers are the losers in rush to regulate oil by rail

Opinion, by Kenneth P. Green

In the wake of the 2013 Lac-Mégantic oil-by-rail disaster, when a train carrying crude oil from North Dakota’s Bakken field exploded in Quebec, some people began to characterize Bakken crude oil as “uniquely flammable,” implying that new rail car standards might be required to move the material.Indeed, the supposed uniquely flammable characteristics of Bakken crude was ultimately cited as a central reason for the recent Department of Transportation proposal to tighten railcar standards in the U.S., which Canada will almost certainly have to match given the integrated nature of the North American rail system.

There’s no question we must carefully consider the safety of how we move oil, whether by pipeline, rail, roadway or barge. But we should make those judgments based on data, not on emotion or hunches. We also need to consider the costs that such decisions might impose on consumers of oil and derivative products and services. And a recent study of Bakken crude commissioned by the North Dakota Petroleum Council reveals that Bakken crude is just regular crude oil that can be safely transported in existing rail cars.

The study sampled Bakken crude at 15 well sites across the Bakken formation, and at seven rail terminals, testing the oil for a broad range of physical characteristics.

To summarize the findings in plain language: Bakken crude is comparable to light sweet crude oil when it comes to its relative weight as compared to water, and it has very low levels of sulphur and corrosive acidic components. The vapour pressure of Bakken oil (a measure of how much outward pressure that Bakken oil would exert on a container such as a rail car) was found to be within a few pounds per square inch of other light sweet crude oils.

The flash point of Bakken oil (that’s the lowest temperature at which the oil could vaporize enough to ignite in air) was found to be below 73 degrees Fahrenheit, similar to other light sweet crudes. The initial boiling point (that’s the temperature at which bubbles form in a heated liquid) was found to be between 95 F and 100 F, which is also in the normal range for light sweet crude oil; and Bakken crude didn’t have unusually high concentrations of very light (and particularly flammable) hydrocarbons (known as “light ends”).

And, contrary to suggestions that there might have been additions to Bakken crude that would make it uniquely flammable, the study found no evidence that Bakken crude was “spiked” with more flammable natural gas liquids prior to being shipped by rail.

Finally, the report notes that: “… Bakken crude oil meets all specifications for transport using existing DOT-111 tank cars.” This conclusion is consistent with the recent American Fuel & Petrochemical Manufacturers Bakken Report, which stated: “Bakken crude oil does not pose risks significantly different from other crude oils or other flammable liquids authorized for rail transport. While Bakken and other crude oils have been classified as flammable liquids, the report noted Bakken crude poses a lower risk than other flammable liquids authorized for transport by rail in the same specification tank cars.”

The “uniquely flammable” narrative has driven the ongoing process to develop new rail-safety regulations, and new standards have been proposed in the U.S.

Retrofitting existing rail cars to meet the new standards is estimated to cost between $30,000 US and $40,000 US, and industry estimates suggest there are about 78,000 cars that need to be retrofit, at a total cost of $2.3 billion US to $3.1 billion US. Complying with the new regulations will increase costs of oil transport and, thus, the cost of oil, gasoline, derivative products and services provided through the use of those products for everyday consumers. It will also slow the trend of the shift to rail, at least in the short term, until retrofits can be worked through the system.

Some have suggested that the new standards might engender savings through reduced insurance rates, though this seems unlikely. In the wake of the Lac-Mégantic derailment, the United States Pipeline and Hazardous Materials Safety Administration effectively concluded that current insurance coverage levels were not simply low, they were drastically too low to cover potential costs of an accident. If anything, there will be still higher insurance rates issued to cover the more expensive cars, further reducing the economic viability of moving large quantities of oil by rail.

Adding to the complexity, there may not be sufficient resources in the rail-insurance sector to step up to the plate and offer more comprehensive coverage.

We may or may not be safer as a result of the proposed tank-car regulations, but it may be that the “uniquely flammable” narrative of Bakken crude has led us to focus on the wrong problem by tackling the material aspect of things before we’ve tackled the insurance side of the equation. Most likely, an integrated process tying both factors together would have yielded a superior outcome.

Kenneth P. Green is the senior director of natural resource studies at the Fraser Institute, an independent, right-of-centre think-tank.
Bakken Crude, Crude By Rail, DOT-111, Emergency Readiness & Response, Hazmat notification

Merced Sun-Star editorial: Tell us when dangerous oil cars are rolling

Repost from The Merced Sun-Star

Our View: Tell us when dangerous oil cars are rolling

Editorial, August 15, 2014

Railroad tracks run up and down the valley like a spine, carrying everything from cans to cars, telephone poles to toothpicks. Many communities see 30, 40 or even 50 trains a day.  Some of those cars carry dangerous materials. Compressed gas and caustic chemicals move in black, cylindrical tank cars adorned with two markings – the red diamond with a flame and “DOT 111” stenciled on each car.

Not yet, but soon some of those rail cars will be hauling another dangerous material – crude oil extracted from the Bakken shale formation in North Dakota. While it is no more dangerous than many other chemicals, there’s likely to be a lot more of it on the rails that bisect our communities. The railroads and state must make certain that we are aware of these movements and have a plan for dealing with any emergency.

California’s Office of Emergency Services estimates shipments of Bakken crude will increase 25-fold by 2016 as 150 million barrels are sent to refineries in the Bay Area, Southern California and soon to two being readied in Bakersfield. That could mean thousands of tank cars a year moving through Modesto, Livingston, Merced and beyond. Mother Jones magazine calls it a “virtual pipeline.”

The Wall Street Journal reported Bakken crude contains higher amounts of butane, ethane and propane than other crude oils, making it too volatile for actual pipelines.

In July, 2013, a train carrying Bakken crude derailed and exploded in the small town of Lac-Megantic, Quebec, killing 47 people. Less dramatic derailments, some with fires, have occurred in North Dakota, Virginia and Illinois. The U.S. Department of Transportation reports 108 crude spills last year.

“When you look at the lines of travel from Canada and North Dakota, you figure if they’re headed for the Bay Area or to Bakersfield, the odds are that you’re going to see shipments going down the Valley,” said Assemblyman Roger Dickinson, who represents north Sacramento. So, he authored Assembly Bill 380, which would require the railroads to notify area first-responders whenever these trains are passing through.

Others are concerned, too. In July, the DOT issued proposed rules for safe transport, including increased cargo sampling, better route analysis, a 40 mph speed limit on trains labeled “high-hazard flammable,” and switching to newer, safer DOT 111 cars after Oct. 1, 2015. The new cars have double steel walls, better closures and heavier carriages. Currently, they make up about a third of the nation’s tanker fleet. California’s Office of Emergency Services has issued 12 recommendations, ranging from allowing better data collection to phasing out those old tank cars to better training for first-responders.

The railroads are already doing many of these things. Since the mid-1990s, BNSF has offered – at no charge – training for handling spilled hazardous materials and more extreme emergencies. But not enough local agencies have found the time to take the classes. A BNSF spokeswoman said the railroad would even come to town to conduct the training.

In May, the USDOT issued an emergency order in May requiring all carriers to inform first responders about crude oil moving through their towns and for the immediate development of plans to handle spills. Unfortunately, it contains a discomforting criteria: the order applies only to trains carrying 1 million gallons of Bakken crude, or roughly 35 tank cars. And to reach USDOT’s definition of a “high-hazard flammable train,” also requiring a warning, a train must have 20 tank cars.

Some perspective. In Virginia, one one tank car carrying Bakken crude exploded and flew an estimated 5,500 feet; a photograph of another explosion showed a fireball rising 700 feet from a single car. Our first responders ought to know when even one car carrying such material is coming through town. And that information must be shared beyond communities directly on rail lines because even our largest communities count on neighboring agencies to provide assistance during emergencies. When such cargo is moving, every emergency responder in the vicinity should be on alert.

Currently, the railroads share that information only if a local agency asks for it. That’s not good enough. Dickinson’s bill would make notification available on a real-time basis, without asking. But his bill mirrors federal orders on the size of the train; a dangerous loophole.

The incredible expansion of America’s oil resources is creating many positives – from more jobs to less dependence on foreign oil. But it’s happening so fast that we’re making up the safety aspects as we roll along. Federal rules don’t go nearly far enough to protect public safety in this new world.