Tag Archives: Bakersfield CA

Low oil prices chill a once-hot oil town in North Dakota

Repost from The Christian Science Monitor
[Editor: Significant quotes: “The cost of getting oil out of the ground is high here. Unless the price of oil tops $73 a barrel, producers in Divide County can’t break even.”  …and… “In Bakersfield, Calif., Canadian oil company Ensign Energy Services Inc. has already laid off 700 workers.” – RS]

Low oil prices chill a once-hot oil town in North Dakota

Just months ago Crosby, N.D., a small town on the Canadian border, was booming. Now it’s hunkering down to ride out the oil bust that has the US energy industry reeling. 

By Jared Gilmour, January 24, 2015
Josh Young and his daughter Ava walk past the post office in Crosby, N.D., where falling prices have turned an oil boom into a bust. | Andrew Cullen/Special to The Christian Science Monitor

Crosby, N.D. — An empty strip of gravel – lined with streetlights and unused utility hookups – runs next to the highway, south of a once-booming oil town.

A few years ago, city officials anticipated oil field companies and other businesses would fill up the 230-acre strip. The city spent $1.7 million on the land, with another $9 million coming from state oil impact grants. There was talk of 300 housing units popping up in the fields behind the commercial street. The former mayor said the 1,300-person town was preparing to potentially double or triple in size.

But there is only one building along the road today. At night the streetlights shine on the gravel, illuminating flurries of snow that semi trucks have whipped off the nearby highway down onto the deserted street. To the south, farmland rambles into the middle distance, dotted with nodding pump jacks extracting oil, flares burning off gas, and idle, darkened drilling rigs.

“The year they proposed this they could have gotten quite a bit of commerce in there – but now? It’s like a street to nowhere. You’ve got streetlights on and nobody’s home,” says Cecile Krimm, editor of the county’s newspaper, The Journal.

Emptiness along the newly built road is a portrait of the “echo economy” – an America that looks at plummeting oil prices not as a sign of savings at the pump, but as potential trouble ahead. They are towns as remote as Crosby, where the recent oil boom drove rents to San Francisco levels, or as familiar as Houston, a metropolis bracing for as many as 75,000 layoffs.

This is the country’s echo economy. While the rest of the country struggled through a recession, these beneficiaries of the shale boom helped prop up the economy. The oil and gas industry created more than 100,000 US jobs between 2007 and 2013 – a 40 percent increase in US energy industry jobs and a 1 percent boost in total US employment. But as the national economy has found firmer footing, the drop of oil prices to five-year lows has begun to turn the tables on towns like Crosby.

In many ways, this lonely swath of North Dakota is a bellwether for America’s energy economy. Twenty-two of the 65 American counties that had fully recovered from the recession by 2014 were in or bordering North Dakota, according to a study by the National Association of Counties. Only Texas (with 24) accounted for more. So when Crosby’s once-bustling Main Street is less harried than it once was, and when fewer landmen are crowding into the rotunda of the county courthouse to scour mineral rights records for Divide County, it is a hint that oil-dependent towns from Ohio to California might soon be feeling the pinch.

For Crosby, the oil boom of the past decade has come with a catch: The cost of getting oil out of the ground is high here. Unless the price of oil tops $73 a barrel, producers in Divide County can’t break even. For years, that’s hardly been a problem, with oil consistently trading for more than $100 a barrel. As of mid-January, however, US crude is below $50 a barrel.

Oil production is costly in Crosby because it sits on the very fringe of North Dakota’s oil-rich Bakken region. The Bakken is essentially a bowl beneath North Dakota’s northwestern quadrant with more oil concentrated in the center where the bowl is deepest. Crosby is perched on the frigid northern rim, a few miles from Canada.

Being at the rim means less oil.

“We’re on the edge, and that won’t be to our advantage if oil prices continue to go down,” says Bert Anderson, Crosby’s affable mayor for most of the past 30 years.

Oil has revived his town, Mayor Anderson says, sitting in a sturdy wooden chair and peering at Main Street through the window of his shop, Bert’s Woodworks. The surroundings are a portrait of the modest farming town Crosby once was. Newspaper clippings from The Journal yellow on the door that opens to the back room, and a rainbow of paint chips hang on one wall. On another wall are a series of bald eagle prints next to a portrait of Cosmo Kramer from “Seinfeld.”

For now, Anderson is confident oil prices will rebound. Almost everyone in Crosby is optimistic. Anderson notes that several vacant lots along the empty road south of town are sold. They’re just waiting for development.

And even as drilling slows down, Anderson is grateful for how the boom reversed Crosby’s trajectory of decline and depopulation.

Before the boom, Anderson says, “Crosby was tearing down houses.” The population was dwindling. There was even a December when the city ran out of money before the end of the year, and had to take out a loan to make payroll.

Now, with rents rivaling those in San Francisco and new housing crowding the outskirts of town – from two-story tan condos to an RV park where newcomers camp out in “winterized” RVs – “we don’t have that problem anymore,” Anderson says.

But what if oil prices stay low? For years, Crosby has watched from afar as construction booms in Nevada, Arizona, and Florida went bust in the housing crisis, leaving unwanted and overvalued homes. Crosby isn’t there yet. A temporary slowdown could bring sky-high rents back to earth and give the town time to catch up on construction projects, Anderson says.

Still, oil prices are notoriously unpredictable. Most analysts say it’s unlikely that the US oil boom, fueled by the hydraulic fracturing of shale, will stop altogether. But oil prices stuck at $50 a barrel would challenge towns that live in the echo economy the shale boom has created, both in the Bakken and beyond.

Sweetwater, Texas, for one, is already facing Crosby-like problems. Expecting oil workers to flood its shale fields, the town spent nearly $50 million renovating its courthouse, building a law enforcement center, and improving the hospital. With the collapse of oil prices, however, those plans have not come to fruition, leaving the town of 11,000 facing layoffs and budget cuts.

“Here we are trying to figure out, is this a six-month problem or is it all over?” said Greg Wortham, head of the Cline Shale Alliance, which was formed to prepare the region for oil workers, to The Associated Press.

In Bakersfield, Calif., Canadian oil company Ensign Energy Services Inc. has already laid off 700 workers. Even in Ohio – hardly an oil mega-producer – U.S. Steel has warned of layoffs for 614 workers at a pipe plant, citing low oil prices.

In the Bakken, falling oil prices mean producers retreat to safer areas, like the counties at the epicenter of the Bakken boom: “places like McKenzie County and Dunn County, where break-even prices are $30 and $29, respectively,” says Alison Ritter, a spokeswoman for the North Dakota Department of Mineral Resources.

That could spell trouble for Crosby, which has invested millions in new infrastructure – from a multimillion-dollar hospital expansion to new housing for recently hired schoolteachers. And it’s unclear just when prices will rise, or at what range they’ll settle and find equilibrium.

“That’s just how oil works. Everyone’s seen it happen multiple times,” says Matt Nystuen, an oil rig worker whose jacket and hat, worn atop a mat of blond hair, give away his employer, Ensign Energy Services, before he can with his “Fargo”-worthy accent.

Mr. Nystuen was three years out of high school when an oil price slump during the recession slowed drilling. “I saw all of my friends lose their jobs,” he says.

Prices rallied, with oil trading at over $100 a barrel until this summer. Then crude oil production in Libya and Iraq began picking up and US production also surged, filling the global market with a glut of crude. At the same time, demand was down in recession-racked Europe and Asia, and the Saudi-led Organization of the Petroleum Exporting Countries decided to maintain production levels to hold their market share and drive down prices. Many interpreted it as an effort to drive US shale drillers, who rely on high prices, out of business.

All that pushed prices down, and when they began falling, the rig count in Divide County tumbled, too – from 12 in the late summer to just three active rigs in December. Prospects for the first half of 2015 are dimmer: Continental Resources alone, a major player in the Bakken, has slashed its 2015 capital expenditures budget from $5.2 billion to $2.7 billion.

In late December, Nystuen received his own surprise: He was laid off from his job on a rig in Divide County.

In Houston, the story is the same. Since 2011, Houston has added 100,000 new jobs every year on the strength of the energy economy, according to Forbes. By 2016, it could have lost 75,000 over two years, writes Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston’s Bauer College of Business.

“Given Houston’s dependence on oil exploration and production, there is never a good time to see oil prices fall as far and fast as they have in recent months,” his study says. But a construction boom in the city and the improvement of the national economy should help, it adds.

In Crosby, the situation is not yet dire, either. Since oil production slowed, the town has gotten sleepier. It’s more like it was in the decades before oil transformed Crosby from an idyllic farm town into a boomtown, says Ms. Krimm, the newspaper editor.

Signs advertising available lots are posted in the fields that abut the empty new street. And companies have begun layoffs, though Nystuen found a new job within days. All the same, he doesn’t expect to stay in the industry long – maybe a couple years.

If the boom ends, he says he’d happily move on to something else. For him and for so many others in Crosby, the oil wealth is useful so long as it lasts. The boom has its drawbacks: There’s crime, pollution, and the soaring rents. Above all, there’s an uneasy sense that Crosby has lost the charm of a windswept prairie outpost where doors were never locked.

But that place had been vanishing, anyway. All things considered, an oil boom – no matter how long it lasts – seems better than nothing. “You get it while the getting’s good,” Nystuen says.


Environmentalists sue to stop crude-by-rail terminal in California

Repost from Reuters
[Editor: See also excellent coverage on YubaNet, The Sacramento Bee and Public News Service.  Read the legal document filed here.  Read the public records request here.  – RS]

Environmentalists sue to stop crude-by-rail terminal in California

By Rory Carroll, Jan 29, 2015
An oil train moves through California’s Central Valley. The newly opened Bakersfield Crude Terminal has the capacity to receive two 100-car unit trains a day. Credit: Elizabeth Forsyth / Earthjustice

Environmental groups on Thursday sued a California regulator that permitted trains carrying crude oil to begin making deliveries at a terminal in Bakersfield, arguing the permit was issued in secret and the volatile crude could cause explosions.

The plaintiffs asked the California Superior Court to stop operations at the newly opened Bakersfield Crude Terminal in Taft until a full environmental review is conducted. The terminal, located in Kern County, began receiving crude in November from North Dakota and Canada and is owned by Plains All American Pipeline LP.

In their complaint, the groups point to emails obtained through a public records request that they say show the San Joaquin Air Pollution Control District helping the company avoid environmental and public reviews of the project.

The terminal can currently receive one 100-car unit train a day carrying crude from the Bakken shale formation as well as heavier tar sands crude from Canada. The terminal will ultimately expand to receive two unit trains per day, carrying as much as 61 million barrels of crude a year, making it one of the state’s largest crude-by-rail terminals, the groups said.

Crude oil shipments by rail in California have jumped in recent years as producers seek to move cheap, landlocked crudes from North Dakota and Canada to refineries along the West Coast.

The increase has raised environmental and safety concerns due to a series of fiery derailments, most notably the Lac-Mégantic rail disaster in Quebec in July 2013, which killed 47 people.

“The Bakersfield Crude Terminal evaded both state and federal environmental review and was permitted largely in secret. Given the potentially catastrophic damage from derailments of these tank cars full of volatile crude, these permits must be cancelled,” said Vera Pardee, senior attorney for the Center for Biological Diversity, one of the five environmental groups who are plaintiffs in the case.

Annette Ballatore-Williamson, an attorney for the air district, said the lawsuit misrepresents the nature of the permit, which only covered the construction of a couple storage tanks that emit about a half a pound of air pollution per day.

The facility and the rail terminal underwent significant environmental review and analysis by Kern County several years ago, she said.

“The problem from (the plaintiff’s) perspective is the statute of limitations on their claim against Kern County expired quite some time ago so now they are just looking for a target,” she said.

(Reporting by Rory Carroll; Editing by Andrew Hay and Lisa Shumaker)

Sacramento Bee: Crude oil train shipments on the rise in California

Repost from The Sacramento Bee
[Editor: Significant quotes: “…UP said new shipments into California from Canada started in late November, running through Idaho, Washington and Oregon…. The trains from Canada likely carry tar sands…. the trains from Canada appear to be traveling on the UP line that runs parallel to Interstate 5 through Northern California, which almost certainly takes them on one of several rail lines through Sacramento…. The new shipments are the first “unit” – or all-oil – trains to enter the Western U.S. from Canada, according to a report in Railway Age.  Crude from Canada has been coming into California sporadically and in smaller shipments for more than a year, Railway Age reported.”  See also Railway Age, UP begins Canada-to-California CBR service. – RS]

New crude oil trains from Canada arrive in California

By Tony Bizjak, 12/08/2014

In a sign that crude oil train shipments to California refineries are on the rise, Union Pacific railroad officials confirmed last week they are now transporting full trains of Canadian oil through Northern California on a route that likely cuts through central Sacramento.

State rail-safety inspectors shadowed the initial trains outside of Bakersfield and reported the mile-long trains were traveling at slow speeds, most likely out of caution, just days after a UP corn train derailed in the Feather River Canyon and spilled feed into the river.

The Canadian imports are the second set of all-oil trains now believed to be coming through the capital on a regular basis. A Bakken oil train comes through midtown Sacramento once or twice a week en route to Richmond in the Bay Area.

Several more oil trains may join them in the next year. Valero Refining Co. has applied for permission to run two 50-car oil trains a day through Sacramento to its plant in Benicia, and Phillips 66 has plans to run oil trains five days a week into its refinery in San Luis Obispo County, some from the north and some via southern routes.

State officials say the Canadian trains are heading to a newly opened transfer station outside Bakersfield, where the crude oil is expected to be piped to coastal refineries. The station, operated by Plains All American Pipeline, a Texas company, is the first of several crude-by-rail facilities planned for California in the next few years. Combined, they would give oil companies the ability to receive up to 22 percent of the state’s imported crude oil by rail instead of by marine shipment.

The increase nationally in train transport of North American crude has helped push international oil prices down dramatically in recent months. It also has raised concerns about the risk of derailments and oil spills. Sacramento officials have called on oil and rail companies and federal regulators to increase safety measures to protect against spills, including requiring stronger tank cars.

Citing safety issues of their own, rail companies have generally declined to disclose where and when rail shipments are happening. But in an email to The Sacramento Bee last week, UP said new shipments into California from Canada started in late November, running through Idaho, Washington and Oregon.

“We expect to run crude trains on this route moving forward,” UP’s Aaron Hunt wrote.

The trains from Canada likely carry tar sands, also called bitumen, which is considered less flammable than the Bakken oil from North Dakota. Bakken oil has been involved in a several major rail explosions in the last few years, including one that killed 47 people in a Canadian town. State safety officials say tar sands, viscous and heavy, are a threat to waterways because the material can sink, making spills hard to clean. A bitumen spill from a ruptured pipe forced closure of 35 miles of the Kalamazoo River in Michigan in 2010 and required $1 billion in cleanup costs over a three-year period.

The state recently called on railroads to provide plans that show that they have the wherewithal to clean oil spills on state waterways. Officials with the state Office of Spill Prevention and Response say tar sands may require particular equipment. “Businesses that transport heavy oils are required to have response resources necessary to address these types of spills,” state spokesman Steve Gonzalez said in an email. “Contractors must be able to locate, contain and clean up a spill that has sunk to the bottom of the water. Some of these responses include sonar, containment boom, dredges and pumps.”

Rail shippers point out that derailment numbers overall have been decreasing nationally for decades and that the industry now runs oil trains at slower speeds at times.

State Public Utilities Commission officials say they sent inspectors out near Bakersfield to monitor the first Canadian oil train, and another train headed to Bakersfield from the south, and noted that the trains were traveling slower than normal.

“The first run is a critical run. If anything goes wrong, we want to be there,” PUC rail safety chief Paul King said. “There might be compliance issues. We want to see how it interfaces with traffic, what speeds they decided to go.”

King said the trains from Canada appear to be traveling on the UP line that runs parallel to Interstate 5 through Northern California, which almost certainly takes them on one of several rail lines through Sacramento. Rail officials have declined to say which lines the oil trains use.

In May, the U.S. Department of Transportation required railroads to notify state officials of large shipments of Bakken oil. Many states ultimately made the information available through public records requests, against the wishes of the railroads. However, railroads are not required to report oil shipments from Canada or other non-Bakken domestic sources.

The new shipments are the first “unit” – or all-oil – trains to enter the Western U.S. from Canada, according to a report in Railway Age. Crude from Canada has been coming into California sporadically and in smaller shipments for more than a year, Railway Age reported.

Errors made: Waste Water from Oil Fracking Injected into Clean California Aquifers

Repost from NBC Bay Area
[Editor: Shocking coverage.  Apologies for the video’s commercial ad.  – RS]

Waste Water from Oil Fracking Injected into Clean Aquifers

California Dept. of Conservation Deputy Director admits that errors were made
By Stephen Stock, Liza Meak, Mark Villarreal and Scott Pham, 11/14/2014

State officials allowed oil and gas companies to pump nearly three billion gallons of waste water into underground aquifers that could have been used for drinking water or irrigation.

Those aquifers are supposed to be off-limits to that kind of activity, protected by the EPA.

“It’s inexcusable,” said Hollin Kretzmann, at the Center for Biological Diversity in San Francisco. “At (a) time when California is experiencing one of the worst droughts in history, we’re allowing oil companies to contaminate what could otherwise be very useful ground water resources for irrigation and for drinking. It’s possible these aquifers are now contaminated irreparably.”

California’s Department of Conservation’s Chief Deputy Director, Jason Marshall, told NBC Bay Area, “In multiple different places of the permitting process an error could have been made.”

“There have been past issues where permits were issued to operators that they shouldn’t be injecting into those zones and so we’re fixing that,” Marshall added.

In “fracking” or hydraulic fracturing operations, oil and gas companies use massive amounts of water to force the release of underground fossil fuels. The practice produces large amounts of waste water that must then be disposed of.

Marshall said that often times, oil and gas companies simply re-inject that waste water back deep underground where the oil extraction took place. But other times, Marshall said, the waste water is re-injected into aquifers closer to the surface. Those injections are supposed to go into aquifers that the EPA calls “exempt”—in other words, not clean enough for humans to drink or use.

But in the State’s letter to the EPA, officials admit that in at least nine waste water injection wells, the waste water was injected into “non-exempt” or clean aquifers containing high quality water.

For the EPA, “non-exempt” aquifers are underground bodies of water that are “containing high quality water” that can be used by humans to drink, water animals or irrigate crops.

If the waste water re-injection well “went into a non-exempt aquifer. It should not have been permitted,” said Marshall.

The department ended up shutting down 11 wells: the nine that were known to be injecting into non-exempt aquifers, and another two in an abundance of caution.

In its reply letter to the EPA, California’s Water Resources Control Board said its “staff identified 108 water supply wells located within a one-mile radius of seven…injection wells” and that The Central Valley Water Board conducted sampling of “eight water supply wells in the vicinity of some of these… wells.”

“This is something that is going to slowly contaminate everything we know around here,” said fourth- generation Kern County almond grower Tom Frantz, who lives down the road from several of the injection wells in question.

According to state records, as many as 40 water supply wells, including domestic drinking wells, are located within one mile of a single well that’s been injecting into non-exempt aquifers.

That well is located in an area with several homes nearby, right in the middle of a citrus grove southeast of Bakersfield.

This well is one of nine that were known to be injecting waste water into “non-exempt” aquifers. It’s located just east of Bakersfield.

State records show waste water from several sources, including from the oil and gas industry, has gone into the aquifer below where 60 different water supply wells are located within a one mile radius.

“That’s a huge concern and communities who rely on water supply wells near these injection wells have a lot of reason to be concerned that they’re finding high levels of arsenic and thallium and other chemicals nearby where these injection wells have been allowed to operate,” said Kretzmann.

“It is a clear worry,” said Juan Flores, a Kern County community organizer for the Center on Race, Poverty and The Environment. “We’re in a drought. The worst drought we’ve seen in decades. Probably the worst in the history of agriculture in California.”

“No one from this community will drink from the water from out of their well,” said Flores. “The people are worried. They’re scared.”

The trade association that represents many of California’s oil and gas companies says the water-injection is a “paperwork issue.” In a statement issued to NBC Bay Area, Western States Petroleum Association spokesman Tupper Hull said “there has never been a bona vide claim or evidence presented that the paperwork confusion resulted in any contamination of drinking supplies near the disputed injection wells.”

However, state officials tested 8 water supply wells within a one-mile radius of some of those wells.

Four water samples came back with higher than allowable levels of nitrate, arsenic, and thallium.

Those same chemicals are used by the oil and gas industry in the hydraulic fracturing process and can be found in oil recovery waste-water.

“We are still comparing the testing of what was the injection water to what is the tested water that came out of these wells to find out if they were background levels or whether that’s the result of oil and gas operation, but so far it’s looking like it’s background,” said James Marshall from the California Department of Conservation.

Marshall acknowledged that those chemicals could have come from oil extraction, and not necessarily wastewater disposal.

“But when those (further) test results come back, we’ll know for sure,” Marshall said.

When asked how this could happen in the first place, Marshall said that the long history of these wells makes it difficult to know exactly what the thinking was.

“When you’re talking about wells that were permitted in 1985 to 1992, we’ve tried to go back and talk to some of the permitting engineers,” said Marshall. “And it’s unfortunate but in some cases they (the permitting engineers) are deceased.”

Kern County’s Water Board referred the Investigative Unit to the state for comment.

California State officials assured the EPA in its letter that the owners of the wells where chemicals were found have been warned and could ask for further testing of their drinking wells.