Bakken Crude, Federal Regulation (U.S.), Hazmat notification, Oil stabilization, Rail infrastructure, Rail inspection, Tank car design, Train speed

Dems to Obama: Use Powers to Crack Down on Oil Rail Transportation

March 9, 2015 Roger Straw

Repost from The PJ Tatler

Dems to Obama: Use Powers to Crack Down on Oil Rail Transportation

By Bridget Johnson, March 9, 2015 – 2:50 pm

Wisconsin Democrats are urging President Obama to explore using his executive authority to take “immediate” action against “dangerous” trains transporting oil from hugely successful production areas in North Dakota.

Sen. Tammy Baldwin (D-Wis.) and Rep. Ron Kind (D-Wis.) noted that the Obama administration missed a Jan. 15 deadline to release final Department of Transportation and the Pipeline and Hazardous Materials Safety Administration rules on oil train accidents.

“We write to you today with deep concerns about the risk that trains carrying crude oil continue to pose to our constituents. Oil train accidents are increasing at an alarming rate as a result of the increased oil production from the Bakken formation in North Dakota. Congress has provided additional funding to study safer tank cars, hire more track inspectors, and repair rail infrastructure. We urge your Administration to use this funding, along with its regulatory powers, to improve oil train safety as quickly as possible,” Baldwin and Kind wrote to Obama today.

“…It is time for you to take immediate action and we request that your Administration issue final rules without further delay. We believe that recent accidents make clear the need for rules stronger than those originally proposed.”

Baldwin and Kind said that the primary risk is crumbling rail infrastructure, including not enough Federal Railroad Administration inspections and old bridges.

“The danger facing Wisconsin communities located near rail lanes has materialized quickly. Just a few years ago, an oil train in the state was a rare sight. Today, more than 40 oil trains a week pass through Wisconsin cities and towns, many more than 100 tank cars long,” the lawmakers wrote. “It is clear that the increase in oil moving on the rails has corresponded with an uptick in oil train derailments. In addition to the derailment in Illinois on Thursday March 5, 2015, there have been derailments in North Dakota, Virginia, Alabama, West Virginia, and a fatal explosion in Lac-Megantic, Quebec.”

“These catastrophes have illuminated the many areas ripe for improvement, as well as additional measures needed to be taken in order to ensure safety when transporting crude oil by train.”

They want new regulations for the stabilization of oil to make crude “less likely to ignite,” new safety requirements for tank cars, new speed limits for oil trains, and “increased transparency” about oil shipments as “it is also important that our communities are aware of what is being shipped in their backyard.”

Supporters of the Keystone XL pipeline have noted the need for a comprehensive energy infrastructure that involves rail and roads, though Baldwin voted against the pipeline in January.

Baldwin sought amendments requiring that tar sands producers pay into the Oil Spill Liability Trust Fund, and guarantees that American consumers get the Keystone oil before foreign export markets.

“Working with Canada we can achieve true North American energy security and also help our allies,” sponsor Sen. John Hoeven (R-N.D.) said then. “For us to continue to produce more energy and compete in the global market we need more pipelines to move crude at the lowest cost and in the safest and most environmentally friendly way. That means that pipelines like the Keystone XL are in the vital national interest of our country.”

Oil Industry, Oil prices, Oil producers, Tar sands crude

Tar Sands Going the Way of the Dodo? – Energy companies canceling tar sands projects

March 9, 2015 Roger Straw

Repost from OneEarth.org

Are Tar Sands Going the Way of the Dodo?

Energy companies are canceling their tar sands projects.

By Brian Palmer | March 6, 2015

Shell withdrew its application to extract tar sands from Canada’s Pierre River mine last week. The cancellation is news in itself, but the oil company’s decision to walk away from a massive seven-year project says a great deal about the viability of tar sands generally. Last year, the Canadian Association of Petroleum Producers cut its 2030 tar sands production forecast by 400,000 barrels per day. Last week, the energy consultancy Wood Mackenzie predicted that cash flows from tar sands would drop $21 billion in the next two years. The industry is undeniably shrinking.

Tar sands won’t disappear tomorrow, of course—most of the expense comes in opening the mine, so producers will keep operating their existing mines for several decades. New mines, however, are economically unfeasible. It’s difficult to break even in the tar sands business at current low oil prices. Over the medium term, the lack of pipeline access challenges any prospects for profitability. (That’s why the industry is so desperate for the Keystone XL and Energy East pipelines.) Looking deeper into the future, the specter of carbon taxation is enough to scare energy executives away.

All this is good news for the climate. Tar sands are the most carbon-intensive form of energy on the planet, emitting three or four times more greenhouse gas than conventional crude oil (which isn’t exactly good for the environment either). Here’s a brief rundown of all the canceled or deferred Canadian tar sands projects in recent months, and how much carbon they could have pumped into the atmosphere.

Pierre River Mine
Company: Shell
Stated reason for withdrawal: “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible.”
Projected barrels per day: 225,000
Carbon saved from the atmosphere each day, in tons: 21,000

Corner Oil Sands Project
Company: Statoil
Stated reason for withdrawal: “Costs for labor and materials have continued to rise in recent years…Market access issues also play a role, including limited pipeline access.”
Projected barrels per day: 40,000
Carbon saved from the atmosphere each day, in tons: 3,700

Christina Lake Expansion
Company: MEG Energy
Stated reason for withdrawal: None given
Projected barrels per day: 150,000
Carbon saved from the atmosphere each day, in tons: 14,000

Narrows Lake
Company: Cenovus
Stated reason for withdrawal: None given
Projected barrels per day: 130,000
Carbon saved from the atmosphere each day, in tons: 12,200

Grand Rapids
Company: Cenovus
Stated reason for withdrawal: None given
Projected barrels per day: 180,000
Carbon saved from the atmosphere each day, in tons: 16,800

Telephone Lake
Company: Cenovus
Stated reason for withdrawal: None given
Projected barrels per day: 90,000
Carbon saved from the atmosphere each day, in tons: 8,400

MacKay River Expansion
Company: Suncor
Stated reason for withdrawal: “Cost management has been an ongoing focus…In today’s low crude price environment, it’s essential we accelerate this work.”
Projected barrels per day: 40,000
Carbon saved from the atmosphere each day, in tons: 3,700

Joslyn Mine
Company: Total
Stated reason for withdrawal: “Costs are continuing to inflate when the oil price and, specifically, the [net profit] for the oil sands are remaining stable at best—squeezing the margins.”
Projected barrels per day: 160,000
Carbon saved from the atmosphere each day, in tons: 15,000

* * *

Tally that up and these canceled or postponed projects represent nearly 95,000 tons of carbon dioxide staying in the ground rather than floating into the atmosphere. That’s the equivalent of taking 6.6 million cars off the road. Murmurs in the energy industry suggest that several other projects will soon be deferred or canceled, as oil prices show few signs of recovering. Stay tuned.

Crude By Rail, Tar sands crude

Tar sands crude-by-rail: industry failing prior to explosions

March 9, 2015 Roger Straw

Repost from NRDC Switchboard, Anthony Swift’s Blog
[Editor: Normally, I only post current news and views. This October 2014 post by the NRDC’s Anthony Swift gives an interesting contextual background to recent disclosures of the volatile nature of tar-sands diluted bitumen (dilbit). Even before the dilbit trains began derailing and exploding, the outlook for tar-sands crude-by-rail was poor. See also the link to the September 2014 OCI report, “Wrong Side of the Tracks.” – RS]

The tar sands train that couldn’t

By Anthony Swift, October 21, 2014

News from Canexus today indicates that it is only getting worse for the Bruderheim terminal. A major customer has terminated its contract. Now only 40% of capacity is under contract. But not even that is being used. Last week, the 100,000 bpd capacity terminal loaded only 13,200 bpd.

The issue of whether significant quantities of tar sands crude will move by rail if projects such as the Keystone XL tar sands pipeline are not built is a major part of the ongoing debate about tar sands expansion. The assertion that rail is a viable alternative to pipelines to the Gulf Coast is important for tar sands proponents because any claim that Keystone XL passes the President’s climate test rests on the weak argument that carbon intensive tar sands crude will be developed at the same rate with or without the massive pipeline.

This is the first in a series of blogs discussing and building upon the evidence presented in the Oil Change International report ‘Wrong Side of the Tracks’. The report details the challenges the Canadian tar sands industry faces in getting its dirty product to market via rail in the face of ongoing pipeline delays caused by rising public opposition to tar sands production and related pipelines.

In today’s blog we look at the ongoing underperformance of the first unit train loading terminal in Alberta with access to tar sands crude. It is a tale of budget overruns, missed targets and operational failures.

Many observers hailed the beginning of unit train shipping for tar sands crude as a new era in which tar sands producers could use North America’s existing rail network to circumvent opposition by environmentalists and indigenous communities. But almost one year after the first tar sands unit train facility was completed, tar sands unit trains are limping along and the rush of tar sands crude they are supposed to deliver is yet to materialize. Far from proving the economic viability of tar sands by rail, the first companies to experiment in this sector have encountered operational issues, high costs and low returns.

The crude-by-rail boom started in North Dakota, where producers demonstrated the economic feasibility of shipping light crude by rail via unit trains. Unit trains are loaded as a single unit, generally of between 80 and 120 cars, delivering their cargo to a single destination with lower costs than having a train carrying a variety of freight cars pick up and deliver those cars via various switching yards. By 2013, North Dakota’s oil producers had built fifteen crude-by-rail terminals with over one million barrels per day (bpd) of capacity.

By comparison, the tar sands industry had been very slow to adopt crude-by-rail. However, in the face of severe pipeline bottlenecks and delays, companies began looking for ways to replicate the crude-by-rail boom in North Dakota and ship diluted bitumen (dilbit) by unit train.

In mid-December 2013, a little known company – Canexus Corp. – got ahead of the game by opening the first unit train terminal with access to tar sands crude in Bruderheim (near Edmonton), Alberta.

The week the terminal began loading its first train vice president Jamie Urquhart told Platts Commodity News, “our aim will be to transport about 62,400 barrels per day diluted bitumen during the first phase and increasing to 98,100 bpd by July 2014 through increasing the number of trains to 11 a week”. In its environmental review of the Keystone XL pipeline, the State Department claimed that Canexus had contracts to ship 150,000 bpd of diluted bitumen and used the company’s estimates to support the low end of the Department’s estimate of the cost of tar sands by rail (see Section 1.4 pages 85 and 102).

Since then, the terminal has faced dramatic cost overruns and has operated at only a small fraction of its capacity. Construction ran 60 percent over budget jumping to CAD$360 million. Only 60 percent of capacity is under contract – less than half of the volume assumed by the State Department. Even then the project has yet to operate at even 50 percent of designed capacity.

From December to late June, loading averaged a little over 19,000 barrels per day, around 30 percent of the figure touted by Urquhart, and the highest ever weekly recorded rate was 31,000 bpd.[1] By July, which was when the company had predicted it would be raising throughput to nearly 100,000 bpd, the terminal was shut down for a three-month overhaul. Average loadings since it restarted in September are at a paltry 9,000 bpd compared to the facility’s maximum 100,000 bpd capacity.

In addition to overhauling malfunctioning equipment, another reason that Bruderheim shut down was to connect it to a pipeline coming from the Cold Lake tar sands region. The pipeline is part owned by tar sands producer MEG Energy. MEG Energy signed a deal with Canexus to ship its dilbit by rail from the Bruderheim terminal. However in August, when Canexus attempted to connect to MEG’s pipeline as it prepared to restart the rail terminal, MEG refused access. Canexus took MEG to court claiming it was violating contractual commitments and the connection went ahead in early September

The question of why MEG initially refused permission for Canexus to connect to its pipe remains a mystery. Could it be that MEG is getting cold feet over sending tar sands by rail? Given that throughout 2014, traders have reported that shipping tar sands to the Gulf Coast by rail is unprofitable because low prevailing oil prices do not cover the high costs of rail, this would not be surprising. The ruinous economics of shipping tar sands by rail to the Gulf Coast is described in the Oil Change report Wrong Side of the Tracks and will be the subject of a future blog in this series.

What is clear is that far from proving the feasibility of tar sands by rail as an alternative to pipelines, the company pioneering this activity has proven it to be a highly risky business. Canexus’s share price is down nearly 50 percent since the beginning of the year, it has cut dividends and replaced its CEO. It is also considering selling Bruderheim in order to revive its balance sheet and support its other core businesses.

It remains to be seen whether Bruderheim will be able to ramp up loadings to anywhere near the touted figures of 60,000 to 90,000 bpd or 10 to 14 trains a week. Thus far it has only rarely loaded a single full unit train per week.

Whatever the reason for MEG’s action against Canexus, it is clear that the tar sands industry’s first foray into large scale crude-by-rail has gotten off to a shaky start. It stands in stark contrast to the bubbling optimism for the trade projected in the Department of State’s analysis of the Keystone XL pipeline, which concluded that shipping tar sands by rail would be a viable alternative to the pipeline and therefore not permitting the pipeline would not achieve any net environmental benefits.

The experience so far at Bruderheim clearly contradicts that conclusion.

[1] Figures from Genscape Petrorail Report, a subscription only publication that monitors activity at various North American crude-by-rail terminal including Bruderheim. Figures are reported weekly so weekly totals are averaged to barrels per day.

Bakken Crude, CPC-1232, Crude By Rail, Derailment, Explosion, Fire, Massive increase in crude-by-rail, Tar sands crude

CN Rail, BNSF Tackle Accidents as Group Seeks Ban on Oil Trains

March 9, 2015 Roger Straw

Repost from Bloomberg News
[Editor: Many groups have called for a moratorium on crude by rail; this may be the first time a highly respected national media outlet has highlighted this view in a headline. New in this report: “The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes.” – RS]

CN Rail, BNSF Tackle Accidents as Group Seeks Ban on Oil Trains

March 8, 2015, by Doug Alexander9:33 AM PDT

Illinois Train Derailment — Smoke and flames erupt from the scene of a train derailment near Galena, Illinois, on March 5, 2015. Photographer: Mike Burley/Telegraph Herald via AP Photo

(Bloomberg) — Canadian National Railway Co. is building a 1,500-foot (457 meter) long track to bypass a burning train that derailed Saturday in northern Ontario, while BNSF Railway Co. crews are working to reopen track in rural Illinois after a train carrying oil derailed three days ago.

CN crews teamed with outside specialists are fighting the blaze after an eastbound train carrying crude oil derailed and caught fire around 2:45 a.m. near Gogama, about 600 kilometers north of Toronto, cutting off rail traffic between Toronto and Winnipeg, Manitoba. The BNSF train jumped the tracks Thursday afternoon near Galena, Illinois, about 160 miles west of Chicago, according to the railroad, a unit of Warren Buffett’s Berkshire Hathaway Inc.

The accidents bring to four the number of oil train wrecks in North America in the past three weeks, according to the Center for Biological Diversity. The environment group is calling for a halt to transport of oil by rail, which has surged since 2009 with the boom in crude production from shale.

“We need a moratorium on oil trains,” Mollie Matteson, a senior scientist at the center, which has fought to protect wildlife for 26 years, said in a March 7 statement. “The oil and railroad industries are playing Russian roulette with people’s lives and our environment.”

The BNSF train was carrying oil from North Dakota’s Bakken shale formation for Mercuria Energy Group Ltd. Twenty-one of the train’s 105 cars, which include two sand cars as buffers, jumped the tracks Thursday afternoon. The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes. No injuries have been reported.

BNSF plans to reopen its mainline track Monday, Mike Trevino, a spokesman for the railroad, said in a phone interview Sunday.

40-Fold Increase

North American oil producers have increased their reliance on rail as new pipelines failed to keep pace with a surge of production from shale. The typical rail car carries about 700 barrels of oil, according to data posted on BNSF’s website. The number of oil carloads rose more than 40-fold from 2009 through 2013, when 435,560 carloads were shipped, and kept climbing last year to an estimated 500,000, according to the Association of American Railroads.

The CN derailment damaged a bridge over a waterway as five tank cars ended up in the water, with some of them on fire, the Montreal-based railway said in a Saturday statement. Crews have placed three lines of booms on the river to contain the crude. Drinking water supplies to Gogama Village and a nearby Mattagami First Nation community are not affected, CN said.

“Fire suppression activities will begin later today,” spokesman Jim Feeny said Sunday in an e-mailed statement. “Residents will likely see occasional smoke plumes of various shades of black, gray or white. This is expected, normal, and poses no threat to the public or the environment.”

Pipeline Limits

The railcars, carrying crude oil from Alberta, are CPC-1232 models railroads began to roll out in 2011 to boost safety.

The accident marks the second derailment of a CN oil train in three weeks near Gogama. A train with 100 cars, all laden with crude from Alberta bound for eastern Canada, derailed on Feb. 14 about 30 miles north of the town. A total of 29 cars were involved in that incident and seven caught fire, a spokesman said at the time.

Investigators from the Transportation Safety Board of Canada are on site, which is 37 kilometers from the previous accident, agency spokesman John Cottreau said Sunday by phone. The train was headed to Levis, Quebec, when 30 to 40 cars derailed.

“Billions of gallons of oil pass through towns and cities ill-equipped to respond to the kinds of explosions and spills that have been occurring,” according to the Center for Biological Diversity. “Millions of gallons of crude oil have been spilled into waterways.”