Tesoro & Phillips 66 building crude railcars stronger than new US rules require

Repost from Reuters
[Editor:  These tank cars exceed the new standard, but still fail on several counts.  For instance, note the closing sentences here: “Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.  ‘We have some time to make that decision,’ he said.”  You can be sure that every refinery seeking permits for crude by rail will crow that they, too, have ordered newer, safer tank cars.  Get ready, Benicia!   – RS]

EXCLUSIVE-Tesoro building crude railcars stronger than new US rules require

By Kristin Hayes, May 18, 2015 4:59pm BST

(Reuters) – U.S. refiner Tesoro Corp has ordered new crude oil railcars with features that surpass safety standards that federal regulators set this month, executives told Reuters.

The 210 tank cars being built in northern Louisiana are so-called pressure cars, with the same design as those that carry liquid petroleum gases such as propane and butane, gas cargoes that are more flammable than crude oil.

They will be delivered in the coming months after being ordered in early 2014.

The new federal rules for all crude and ethanol railcars built after Oct. 1 of this year do not require strength to the level of a pressure car but are stronger than the standards adopted by the industry in 2011.

Tesoro, like other oil-by-rail players, knew the federal standards were coming and the basics of what they would likely be. But the company went further with a stronger car, “which is the primary thing we control,” C.J. Warner, Tesoro’s head of strategy and business development, told Reuters.

The order was a sign the refiner wanted to get ahead of the coming regulations and avoid potential capacity bottlenecks at companies that build tank cars as shippers must now renovate their fleets.

Booming North American onshore production spurred sharp growth in moving oil by rail, particularly for U.S. West and East coast refiners which otherwise must depend on more costly imports. No major crude pipelines move oil from the Midcontinent west across the Rocky Mountains or east through the Appalachians and densely populated northeastern states.

Fiery derailments, caused in some cases by track failures, have become more frequent as oil-by-rail and crude-only trains carrying 100 cars or more went from nearly nothing five years ago to more than 1 million barrels per day late last year.

Opposition to moving oil by rail spiked on safety concerns, prompting the U.S. Department of Transportation and Canada to impose new railcar safety standards.

Tesoro isn’t the only refiner that didn’t wait for word from the U.S. DOT to order stronger cars.

Phillips 66 confirmed to Reuters that it also last year ordered 350 non-pressurized new cars that mostly match the new DOT standard. Those cars will be delivered by year-end, the company said.

THICKER HULLS

Both sets of new cars have 9/16-inch-thick hulls, steel shields on the front and back and protections for valves and fittings where crude goes in on top and drains out the bottom, as the new rules require, company executives said. Tesoro’s design modifies those fittings to handle crude rather than just LPGs.

Tesoro’s cars also have test pressure specifications of 200 pounds per square inch of internal pressure, twice that for non-pressurized cars. A test pressure is typically 20 to 40 percent of how much pressure it would take for the railcar to burst.

That level of test pressure is standard for cars that transport LPGs or highly poisonous substances such as hydrogen cyanide, according to the Association of American Railroads.

“When we saw the design, we were very comfortable that it would meet the new standards that we anticipated,” John Hack, Tesoro’s head of rail operations, told Reuters.

For Tesoro, which hopes to build the largest oil-by-rail facility in the United States in Washington state, it’s an investment in safety and continued access to cheaper North American crudes.

“It’s very important to us to continue to transport North American crude and get it from the Midcontinent out to the West Coast where it competes very nicely with the foreign crudes,” Warner said.

RETROFITS?

By last year most refiners, including Tesoro and Phillips 66, no longer accepted shipments in older, weaker railcars such as those used on a runaway crude train that careened into the small Quebec town of Lac Megantic in mid-2013, killing 47 people.

Early last year Tesoro needed to replace the last of its older cars and worked with its builder, Berkshire Hathaway Inc’s Union Tank Car, to develop the new design, Warner said.

Tesoro and Phillips 66 aim to use their newest cars in crude trains before deciding whether to order more. Both companies’ fleets meet the 2011 industry standard for cars with 7/16-inch-thick hulls and reinforced valves.

Those 7/16-inch cars don’t have to be thrown out, but to move in crude-only trains, they will need added protections, including ‘jackets’, or an extra layer of steel around the tank, according to the DOT rules.

Neither Tesoro’s nor Phillips 66’s new cars are equipped with specialized brakes that the DOT said crude-only trains must have starting in 2021 or be held to 30 miles per hour. An oil industry trade group is challenging that provision in court.

Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.

“We have some time to make that decision,” he said.

(Reporting by Kristen Hays; Editing by Terry Wade and James Dalgleish)

Santa Barbara Pipeline spill could further hamper California crude-by-rail projects

Repost from Reuters

Pipeline spill could further hamper big California oil projects

By Kristen Hays, May 22, 2015 9:53pm EDT

HOUSTON  –  Hundreds of barrels of oil that gushed from a ruptured coastal pipeline in scenic California this week could stiffen opposition to large oil projects that companies want to build in the state, notably those to deliver cheap U.S. crude on trains.

Several proposed oil-by-rail offloading terminals in California were already being contested in light of several fiery crude train derailments since 2013 that have stoked safety concerns about spills and explosions.

Now, the sight of oil washing up on the shores of Santa Barbara could further galvanize rail opponents after up to 2,500 barrels of crude leaked on Tuesday from a pipeline owned by Plains All American Pipeline LP (PAA.N).

“The more oil we’re moving through the state, the greater the risk of these sorts of accidents,” said Paul Cort, an attorney with EarthJustice, which has sued to stop crude deliveries at Plains’ 70,000 barrels per day (bpd) oil-by-rail terminal in Bakersfield.

Past spills have prompted policy changes. A leak of 100,000 barrels of crude off Santa Barbara in 1969 led to bans on new leases for offshore drilling in California.

The latest spill could complicate regulatory approvals.

“It’s certainly not good news for anyone trying to permit any kind of oil-related facilities in California,” said John Auers, a consultant at Turner, Mason & Co in Dallas.

Refiners Valero Energy Corp (VLO.N) and Phillips 66 (PSX.N) want to use railways to transport cheap crude from onshore fields in North America to northern California refineries to displace more pricey foreign imports.

But the projects, which could help mitigate upward pressure on gasoline prices that are among the highest in the United States, have been repeatedly delayed to allow for lengthy environmental reviews.

Some companies have given up.

Nearly two months ago, WesPac Energy-Pittsburg LLC withdrew the 51,000 bpd oil-by-rail component in a broader proposal that has been awaiting permits from the city for more than two years. WesPac now proposes that crude would move into the terminal only via pipeline or vessel if approved. Valero last year scrapped crude-by-rail plans at its Los Angeles-area refinery.

And even some companies with permits face more hurdles.

EarthJustice is suing local permitting agencies over both the Plains’ Bakersfield operation, which the company aims to expand to 140,000 bpd, and a new Alon USA Energy (ALJ.N) rail project nearby slated for next year.

“People trying to build projects that bring North American crude oil to displace imports at California refineries now have another thing they have to deal with,” said David Hackett, a consultant with Stillwater Associates in Irvine, California.

(Additional reporting by Rory Carroll in San Francisco; Editing by Terry Wade and Grant McCool)

CNN: California oil spill 5x bigger than thought

Repost from CNN
[Editor:  One of the best reports I’ve seen.  The video has spokespeople for environmental concerns and footage of protests.  Unfortunately, CNN does not permit embedding – you will need to go to CNN and watch the commercial first.  Grrr.  – RS]

Santa Barbara oil spill: Authorities, environmentalists step up response

By Michael Martinez, Sara Sidner, and Faith Karimi, CNN, May 23, 2015

California oil spill causes coastal crisis 02:15

Santa Barbara, California (CNN)   –  Authorities have intensified their response to this week’s Santa Barbara oil spill by announcing remedies and additional investigations.

The federal government on Friday ordered the firm, Plains All American Pipeline, to suspend operations and make safety improvements on the ruptured pipe, according to a corrective action order announced Friday by the U.S. Department of Transportation.

The California attorney general’s office is working with local prosecutors as well as state and federal agencies in investigating Tuesday’s spill that prompted a state-issued emergency in Santa Barbara County and the closing of two state beaches until June 4.

“California’s coastline is one of the state’s most precious natural treasures. This oil spill has scarred the scenic Santa Barbara coast, natural habitats and wildlife. My office is working closely with our state and federal partners on an investigation of this conduct to ensure we hold responsible parties accountable,” Attorney General Kamala D. Harris said.

The cause of the oil spill remains under investigation.

Oil company’s response

The oil firm, Plains All American Pipeline, has been actively participating in the cleanup and daily press conferences with federal and state officials.

“Our goal is zero (spills),” senior director Patrick Hodgins of Plains All American told reporters Friday. “Are we happy with this unfortunate event? Absolutely not.

“We’re going to be here until it is taken care of,” Hodgins added.

In a general statement Friday, the firm said it had “significantly increased” the size and spending of its safety program since 2008. The firm added that “releases from Plains pipelines have significantly decreased while throughput volume has increased since 2008.”

The firm had taken measures that “exceeded the federal regulatory requirement” for the Santa Barbara pipeline that eventually ruptured this week, and had inspected it two times in the past three years.

In fact, the pipeline was examined May 5, and investigators will be reviewing those results, officials said.

The coastal town of Goleta on Friday declared its own state of emergency, citing the spill as an “extreme peril to the safety of persons and property.”

Progress so far

As the cleanup entered its fourth day on Friday, vessels were “actually doing pretty well” recovering oil from the ocean, but “the harder part” will be cleaning the land — the shoreline, the beaches, the cliffs and the hillside near U.S. Highway 101 where the pipe ruptured, said U.S. Coast Guard Capt. Jennifer Williams.

“It could take months,” she said.

Officials provided a tally Friday of the cleanup and environmental damage:

• 10,000 gallons of oily water removed from the ocean;

• 91 cubic yards of oily solids and 800 cubic yards of oily soil removed from beaches;

• 9.5 square miles of ocean and 8.7 miles of coastline affected, from Arroyo Hondo beach to Refugio State Beach, near Goleta.

• Three brown pelicans were killed. Six more brown pelicans, two California sea lions and an elephant seal are being rehabilitated after oil coated them. A common dolphin was found dead without oil on its exterior, but it will be examined for signs of ingested oil.

Also called the Refugio oil spill, the incident began Tuesday when a 24-inch diameter pipeline ruptured near Goleta, California. It transports crude oil for 10.6 miles from Exxon Mobil’s breakout storage tanks in Las Flores Canyon to Plains’ pump station in Gaviota, said the federal Transportation Department’s Pipeline and Hazardous Materials Safety Administration.

Environmentalists denounce oil firm

On Friday, environmentalists declared the spill “a wake-up call” on continued oil development. They urged state and federal politicians to refuse additional oil projects, especially in Santa Barbara County, and called upon the nation to usher in a “post-oil era” by embracing renewable energy.

“When we have a huge solar spill around here, we just call it a nice day,” said Dave Davis, CEO and president of the Community Environmental Council.

The oil spill has hurt the area’s $1.2 billion tourism economy, which employs more than 12,000 people, but tour operators such as Michael Cohen of Santa Barbara Adventure Company told potential visitors that only two state beaches are closed and other attractions remained open, including Channel Islands National Park.

The activists noted that a 1969 spill in Santa Barbara was so catastrophic it ignited the environmental movement and a host of federal and state laws to protect the natural world.

Putrid odor

The onshore pipeline behind this week’s Santa Barbara oil spill leaked more than 100,000 gallons of crude on coastal lands and into the ocean, the oil company said.

At its worst, the smell burns your nostrils and gives you a little nagging headache.

Stones at Refugio State Beach lay splattered with a jet black tar, like goo, which can only be crude oil.

An industrial-size trash bin of oily vegetation sits next to the beach. Bikinis and surfboards on once pristine sandy shores have been replaced with people in hazmat suits, digging in the dirt and picking up oil-laden sticks and plants.

Among the worst violators

The underground oil pipeline was carrying 1,300 barrels an hour, below its maximum capacity of 2,000 barrels an hour, said Rick McMichael of Plains All American Pipeline.

Plains All American is among the worst violators listed by the U.S. Pipeline and Hazardous Materials Administration.

It surpassed all but four of more than 1,700 operators in safety and maintenance infractions, the federal agency said.

Hodgins suggested the comparison wasn’t fair because “we’re also much larger than those companies that we were compared to.”

“Most of the companies that we’re compared to have half the amount of pipelines” that Plains All American has, Hodgins said Friday. “So therefore, with double the number of miles of pipelines, unfortunately incidents have occurred, (and) the larger and the more of those can be realized.”

The company has had 175 federal safety and maintenance violations since 2006, responsible for more than 16,000 barrels of spills that have caused more than $23 million worth of property damage.

Plains has been committing money to safety improvements for the past seven years, said Pat Hutchins, the company’s senior director of safety.

Plains All American Pipeline violated federal environmental violations 10 times between 2004 and 2007, when about 273,420 gallons of crude oil were discharged into waters or shorelines in Texas, Louisiana, Oklahoma and Kansas, the Environmental Protection Agency said.

Most of the spills were caused by pipe corrosion, the EPA said.

The oil company agreed to pay a $3.25 million civil penalty and spend $41 million to upgrade 10,420 miles (16,770 kilometers) of crude oil pipeline operated in the United States, the EPA said in 2010.

Lobsters killed, pelicans soaked in oil

Meanwhile, crews continued to clean beaches and coastal waters, and officials reported the leak killed an undisclosed number of lobsters, kelp bass and marine invertebrates. Six oil-soaked pelicans and one young sea lion were being rehabilitated.

As of Thursday night, vessels had skimmed 9,500 gallons of oily water from the ocean, McMichael said.

The cleanup could last months, officials said. For now, currents, tides and winds make the oil plume “a moving target” as it drifts offshore, said U.S. Coast Guard Capt. Jennifer Williams.

The size of the spill, which began contaminating California’s beaches Tuesday, is equivalent to the volume of water the average American residence uses in a year.

How it all started

Houston-based Plains All American Pipeline estimated up to 105,000 gallons may have spilled from a broken pipe, based on the typical flow rate of oil and the elevation of the pipeline.

Since the pipeline is underground, it will take a few days to determine how much crude oil was spilled, said McMichael, who estimated 21,000 gallons of crude had gone into the Pacific Ocean, with the rest spilled on land.

Not the first time

A spill in January 1969 became what was, at the time, the nation’s worst offshore oil disaster. Though this week’s spill is smaller, it still prompted California’s governor to declare a state of emergency in Santa Barbara County.

The 1969 disaster was so catastrophic that it gave birth to an environmental movement, a host of regulations against the oil and gas industry, and a new commission to protect California’s coast, experts said.

Santa Barbara Harbor after what was then the worst oil spill in U.S. history, in February 1969.
Santa Barbara Harbor after what was then the worst oil spill in U.S. history, in February 1969.

In all, about 3 million gallons of oil spewed from a Union Oil drilling rig 5 miles off the coast of nearby Summerland, California. The pipe blowout cracked the seafloor, and the oil plume killed thousands of seabirds and “innumerable fish,” according to a 2002 paper by geographers at the University of California, Santa Barbara.

Opinion: Pipeline rupture a warning of spills to come?

Backlash and consequences

Subsequent U.S. oil spills were much larger, including the Exxon Valdez accident, which dumped 11 million gallons off Alaska’s shores in 1989, and the Deepwater Horizon spill, which put 210 million gallons into the Gulf of Mexico in 2010.

But the 1969 Santa Barbara spill energized a movement that led to new federal and state environmental laws and helped establish the first Earth Day the next year.

The threat

The environment remains a major concern around Refugio State Beach, which was desolate Thursday, as were its campgrounds, which are normally packed for Memorial Day weekend. The only sounds were the waves and the helicopter above, a buzzing reminder of the oily mess below.

How does Santa Barbara match up with other U.S. oil spills?

BIG WIN: Washington state judge denies Shell appeal on rail project review

Repost from Reuters

Washington state judge denies Shell appeal on rail project review

HOUSTON | By Kristen Hays, May 21, 2015 11:34pm BST

A judge on Thursday denied Royal Dutch Shell’s appeal of a ruling that a proposed oil-by-rail project at its Washington state refinery must undergo a full environmental review, just two weeks after a crude train derailment caused a fire in North Dakota.

Shell had appealed a February ruling from a Skagit County Office of Land Use Hearings examiner that the plan to move 70,000 barrels per day of inland crude to its 145,000 bpd Puget Sound refinery in Anacortes must be comprehensively reviewed.

In 2014, the county said the project did not need that much scrutiny to get a permit, prompting challenges from several environmental organizations.

On Thursday, a Skagit County Superior Court judge denied Shell’s appeal, according to court officials.

The denial came two weeks after an eastbound crude train derailed in North Dakota, the latest in a spate of fiery mishaps since 2013 that have stoked fears about moving oil by rail.

Shell had sought to limit the review’s scope to exclude railroad issues overseen solely by federal regulators, but said it remains committed to working with the county and other agencies to finish the permitting process.

Shell’s refining competitors in Washington have been bringing in U.S. crudes by rail since 2012 to displace more expensive imports and declining Alaskan oil output. Shell was the last to seek oil-by-rail permits in late 2013, but by then opponents had taken notice of train crashes and safety concerns.

The rail issue is not Shell’s only concern in the state. The company also faces opponents to its plan to use the port city of Seattle to ready rigs before they travel to the Chukchi Sea off the north coast of Alaska.

(Reporting By Kristen Hays. Editing by Andre Grenon)