Repost from Reuters
[Editor: Significant quote: “The price of credits has fuel makers like PBF Energy Inc and Valero looking to increase exports, which are not subject to the regulations, as a way to escape the costs.” (emph. added) – RS]

Refiners on track to spend record on U.S. clean fuel standards

By Jarrett Renshaw, Aug 10, 2016 4:26pm EDT

Major refiners like Valero Energy Corp are on track to pay record amounts this year for credits to comply with U.S. renewable fuel rules, corporate filings show, a trend that hurts profits and has some looking to export more to avoid the cost.

Refiners and fuel importers are required to meet a U.S. biofuel quota of roughly 10 percent through blending products like ethanol into gasoline and diesel. If they fall short, they can buy credits generated by companies in compliance. But the cost of the credits, known as Renewable Identification Numbers (RINs), has jumped.

The rising costs have hurt a sector already struggling with huge global fuel stockpiles. The S&P 1500 index of refining and marketing companies has fallen 18 percent so far in 2016, compared with a 6.5 percent gain for the broader market.

In the first half of 2016, a collection of 10 refinery owners including Marathon Petroleum Corp, spent at least $1.1 billion buying RINs, a Reuters review of their filings showed. This puts them on track to surpass the annual record of $1.3 billion the same group spent in 2013.

Refinery executives sharply criticized the regulations during recent earnings calls, saying the burden helped bring about the weakest profits in five years.

“RINs continue to be an egregious tax on our business and have become our single largest operating expense, exceeding labor, maintenance and energy costs,” CVR Refining Chief Executive Jack Lipinski said last month.

Marathon Chief Executive Gary Heminger said on a call last month that demand for RINs are going to outpace supply and the company wanted to see renewable fuel standards eased.

Refiners without blending or retail outlets, such as Delta Air Lines and CVR, have to buy a greater percentage of RINs because they don’t create their own. Delta is part of a refiner group challenging fuel standards through the courts.

Supporters of the existing policy, including the influential corn lobby, said the regulations have produced the desired effect: more renewable fuels in the nation’s gasoline and diesel. They noted refiners can avoid the cost of RINs by investing in blending operations.

“Companies that refuse to blend more renewable fuel will end up paying a premium to other market participants, including speculators, but this is a choice,” said Emily Skor, CEO of Growth Energy, which represents ethanol producers.

ESCAPE THROUGH EXPORTS

Renewable fuel credits averaged about 78 cents apiece in the second quarter, about 25 percent above the same period a year ago, according to Oil Price Information Service data analyzed by Reuters.

Prices for the credits have rallied on more ambitious targets from U.S. regulators on the volumes of ethanol required to be blended with gasoline, traders and industry sources said.

The price of credits has fuel makers like PBF Energy Inc and Valero looking to increase exports, which are not subject to the regulations, as a way to escape the costs.

PBF Chief Executive Thomas Nimbley said on an earnings call last month that it was “very important” that they expand their refined product export operations, citing RINs as a driver.

Refiners are also lobbying to shift the responsibility of compliance from their industry to blenders and distributors who mix gasoline with ethanol for delivery to filling stations.

(Editing by Jeffrey Hodgson)

California Regulation, Crude By Rail, Hazmat rail fees, High Hazard Flammable Trains (HHFTs), State regulation

BNSF, Union Pacific lawsuit: claims California’s new rail hazmat fee illegal

August 11, 2016 Roger Straw

Repost from Hazmat Magazine
[Note: The complaint is available at http://src.bna.com/hm1. – RS]

California’s new Rail Hazmat Fee Illegal Claims Railroads

By J Nicholson, August 11, 2016

As reported in Bloomberg BNA, California’s new fee on rail deliveries of crude oil and certain other hazardous materials is illegal, the nation’s two largest railroad companies said in a lawsuit ( BNSF Railway Co. v. California State Board of Equalization, N.D. Cal., No. 16-cv-04311-JCS, 7/29/16 ).

Filed in federal court in San Francisco, the complaint challenges a newly approved regulation requiring railroad companies to collect from their customers $45 for each rail car carrying 25 specified hazardous materials into the state. To be paid to the state’s Board of Equalization, the fee is earmarked to help the state prepare for hazardous material incidents.

The federal ICC Termination Act of 1995, the Hazardous Materials Transportation Act and the Railroad Revitalization and Regulatory Reform Act of 1976 preempt the fee implemented under S.B. 84, a budget bill enacted in 2015, the complaint said.

Plaintiffs want an order blocking the state from collecting the fee.

RAILWAY-TRACK

“This hazmat charge defies federal law and economic logic,” the complaint filed July 29 by BNSF Railway Co. and Union Pacific Railroad Co. said. “If exclusive federal jurisdiction over the economic relationship between railroads and their customers means anything, it means that a State cannot establish the charges to be collected for rail transportation, order a railroad to collect them from its customers, and depress rail revenues and customer demand in the process.”

Chemicals Covered by Fee

California’s Office of Emergency Services adopted the fee regulation in June. Expected to take effect later this year, the fee applies to rail cars containing acetonitrile, certain alcohols, anhydrous ammonia, ammonium hydroxide and calcium hypochlorite. It also applies to chlorine, certain corrosive liquids, diesel fuel, environmentally hazardous substances, ethanol, gasoline, hydrogen peroxide, liquefied petroleum gas, liquefied gas, methanol, methyl ethyl ketone, nitric acid, petroleum crude oil, phenol, phosphoric acid, potassium hydroxide, propylene, sodium hydroxide, sulfuric acid, toluene and vinyl acetate.

California’s fee only applies to rail deliveries, no other type of delivery of hazardous materials. The Interstate Commerce Clause and the federal hazardous materials law forbid states from discriminating against interstate commerce, the complaint said.

Benjamin J. Horwich of Munger, Tolles & Olson LLP is representing BNSF Railway. Union Pacific’s counsel are from Sidley Austin LLP and include Carol Lynn Thompson and in-house attorney Melissa B. Hagan.

A copy of the complaint is available at http://src.bna.com/hm1.

Bakken Crude, Crude By Rail, Derailment, Explosion, Fire, Mosier OR, Spill, Water contamination, Worst case scenario

PUBLIC RADIO: The Best Of A Worst Case Scenario: How Bad Could The Mosier Oil Train Spill Have Been?

August 10, 2016 Roger Straw

Repost from Jefferson Public Radio, Southern Oregon University

The Best Of A Worst Case Scenario: How Bad Could The Mosier Oil Train Spill Have Been?

By EMILY SCHWING • AUG 10, 2016

In the wake of June's train derailment in the Columbia River Gorge, Washington's Department of Ecology placed an oil containment boom in Rock Creek 'just in case.' — In the wake of June’s train derailment in the Columbia River Gorge, Washington’s Department of Ecology placed an oil containment boom in Rock Creek ‘just in case.’ WASHINGTON DEPARTMENT OF ECOLOGY

If it had to happen, the worst case scenario couldn’t have played out more smoothly. That’s the sentiment in Mosier, Oregon, where a train loaded with highly volatile Bakken crude oil derailed two months ago.

On the day of the accident, 14 cars bent and folded like an accordion across the tracks. Four of them caught fire, but the wind was oddly quiet, so a subsequent fire didn’t spread like it could have. And as they careened off the track, oil cars narrowly missed the trestle of an overpass that serves as one of only two routes into town.

“Living here in Mosier, it was the best of a worst case scenario,” local Walter Menge said. “I mean it could have been so much worse.”

Bob Schwarz is a project manager with Oregon’s Department of Environmental Quality. Lately, he’s been giving a lot of media tours of the accident site.

“We’re standing near a manhole where the lid was sheared off by one of the cars and it caused a lot of the oil to flow into the manhole to the wastewater treatment plant which is about 200 feet from us right now,” Schwarz said. “And that captured quite a bit of the oil fortunately, which kept it from getting into the Columbia River.”

Schwarz said some of that oil did seep into the groundwater, although it’s not clear how much.

“We’re measuring it in hundreds of parts per billion with a ‘b,’ so it’s a very small mass,” Schwarz said. “But the levels are still high enough for us to have to clean it up.”

Despite all the luck, there are still a few unknowns, like where all that spilled oil might go.

“I’m concerned about all the animals in the wetlands,” Schwarz said.

Schwarz wouldn’t say whether the cleanup effort is moving fast or slow. He did say DEQ is ‘pleased with how things are progressing’ and said Union Pacific Railroad, the company that was transporting the oil, has been ‘extremely cooperative.’

Bakken Crude, Crude By Rail, Refinery operating capacity, Valero Benicia Refinery, Valero Crude By Rail

GRANT COOKE: Questions about Valero’s operating capacity

August 10, 2016 Roger Straw

Repost from the Benicia Herald (letters are not available in the online edition)

Valero raises further questions

By Grant Cooke, August 10, 2016

Regarding the recent letter by Valero’s environmental manager, Kimberly Ronan. The letter writer complains that there were inaccuracies in a previous letter written by Kathy Kerridge that pointed out that data from BAAQMD indicated that Valero was refining about 65% of its capacity. This clearly begs lots of questions that one would like to ask the refinery.

The Valero’s manager’s response, unfortunately, shied no light on BAAQMD’s reported data. The response was basically, “Kerridge’s analysis may not be right, but we’re not telling what it is” There was also a vague suggestion that BAAQMD’s charts were confusing. Is this really the refinery’s response? (I have a hard time believing that the refinery’s GM and/or corporate communications people didn’t write or review the letter before it went out).

At a time when Valero’s crude-by-rail project has created such animosity, and confusion, the refinery is going to step away from a clear explanation of such a simple question? This sort of misinformation, secrecy, and silliness is just what gets oil companies and other big corporations in deep trouble. Not being clear and straightforward with capacity information has been an issue with California’s refineries for years, and it leads to all sorts of rumors and investigations into maintenance shutdowns and production reductions verse the price of gas and a host of other questions.

Recently, in Valero’s earnings report, which noted that Valero, Inc. made $19.6 billion in Q2 and $87.8 billion last year, Joe Gorder, Valero’s CEO, said “We are also encouraged by ample supplies of medium and heavy sour crude oils in the market…” So, if there is plenty of supply, and Benicia’s refinery isn’t producing at full capacity because the market doesn’t need anymore gas, why the heck is it pushing for a crude-by-rail project that is clearly not in the town’s interests?

On another note, it is not particularly comforting to know that the refinery monitors 265,000 individual valves and components, or that it has a long period of without recordable injury. Those of us who know a bit about mechanical engineering, know that it is not a question of if, but when, a mechanical part will fail, particularly, when you’re dealing with volatile substances. Since Bakkan crude is extremely volatile, knowing that the refinery wants to run that stuff through that many valves and components just makes me shiver.

Grant Cooke, Benicia
Sustainable Energy Associates
DEW – Harvesting Water from Air