Tag Archives: Bakken crude

Bakken Crude, Crude By Rail, Derailment, Explosion, Federal Regulation (U.S.), Oil spill, Public Safety, Rail Safety, Volatility

California Reps push rail safety amendments, vote no on gutted energy security bill

By Roger Straw, The Benicia Independent, December 6, 2015

California Reps push rail safety amendments, vote no on gutted energy security bill

Benicia’s neighboring congressional representatives, Mark DeSaulnier (CA-11) and John Garamendi (CA-3) co-sponsored TWO important amendments in new legislation passed recently by Republicans in the House.  The amendments were not enough to rescue a fundamentally bad bill.  DeSaulnier, Garamendi and Benicia’s rep, Mike Thompson (CA-5), all voted against passage.  (IMPORTANT: See Reasons below.)

1.  According to a December 3 press release, a measure to improve the safety of crude oil rail shipments across the nation, introduced by Congressman Mark DeSaulnier (CA-11), Congresswoman Nita Lowey (NY-17),  and Congressman John Garamendi (CA-3), was passed in the House by unanimous consent and included as an amendment to the Republican sponsored North American Energy Security and Infrastructure Act (H.R. 8).

The amendment requires the U.S. Department of Energy (DOE) to study the maximum level of volatility that is safe for transporting crude oil-by-rail within one year. Since 2008, oil traffic has increased over 5,000 percent along rail routes leading from production zones in the central continent to refineries and hubs along the coast.

“Crude oil production is at record levels, and railroads are moving more crude oil than ever. For over 25 years, I have represented areas in Contra Costa County which include four oil refineries and two destination facilities for oil-by-rail. This initiative is a first step in addressing concerns of communities, like those in my district, that face threats of environmental degradation, injury, and loss of life due to the unsafe handling of volatile oil in our railroad system,” said Congressman DeSaulnier.

2.  Another amendment to the bill, introduced by Rep. Garamendi, added the single word “transportation” to the section directing the Department of Energy to study “energy security valuation methods.”  According to Rep. Garamendi’s press release:

Energy policy can’t simply focus on “generation” …. “How we transport energy deserves very careful consideration. Too often, these choices are made without consideration of strategies to achieve important policy goals like creating good manufacturing jobs and enhancing our national security. Safety must also be a top concern: oil train traffic has increased by 5,000 percent because of the shale oil boom. The risk of derailments, spills and explosions is very real, and we need a volatility standard to guarantee the safety of the communities this oil traffic passes through. Oil trains can and do pass by major residential neighborhoods and schools in my district, including Davis, Dixon, Suisun and Marysville. I want them to be as safe as possible.”

Reasons…
Garamendi’s press release included his reasons for voting NO on the bill as amended:

Despite the success of his amendments, Congressman Garamendi voted against final passage of H.R. 8. The bill started out as a bipartisan compromise on energy policy before being gutted in favor of a bill that caters to the wish lists of big coal and big oil at the expense of consumers, agriculture and the environment.

“The very same week that leaders across the globe are meeting in Paris to find a worldwide solution to climate change, our Congress is seeking to lock our country into dependence on energy sources like coal and oil that pollute our environment and contribute to climate change,” said Congressman Garamendi. “H.R. 8 would artificially subsidize coal, inhibit the development of clean energy technologies, and reverse progress on energy efficiency. With climate change threatening our planet and way of life, we need to search for new solutions, not drag our country back to the energy policy of the last century.”

Congressman Garamendi was especially troubled by the adoption of an amendment to allow unfettered exports of crude oil without any safeguards for American motorists or industries.“If our country is seeking to become energy independent, it makes zero sense to allow unrestricted exports of our oil overseas,” he said. “It may make more profits for the oil industry, but it won’t help consumers, agriculture, or the refinery industry here at home. It’s a bad idea.”

Bakken Crude, Crude By Rail, Derailment, Explosion, Fire, Vapor pressure, Volatile gases, Volatility

New York AG calls on PHMSA to close crude-by-rail safety loophole

Repost from Progressive Railroading
[Editor:  See also New York Wants Oil Companies to Treat Oil Shipped on Trains – Wall Street Journal, and NYS attorney general pushes federal limit on crude oil train explosion risk – Albany Times Union.  – RS]

New York AG calls on PHMSA to close crude-by-rail safety loophole

December 4, 2015

New York Attorney General Eric Schneiderman has called on the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) to limit the vapor pressure of crude oil shipped by rail.

In a petition for rulemaking, Schneiderman asked the agency to require all crude transported by rail in the United States to achieve a vapor pressure of less than 9 pounds per square inch (psi). Vapor pressure is a key driver of the oil’s explosiveness and flammability, according to a press release issued by Schneiderman’s office.

In his petition, the attorney general argues that reducing crude oil vapor pressures is practical and necessary for minimizing the risk and severity of accidents involving tank cars.

Crude oils with the highest vapor pressures — including crude produced from the Bakken Shale formations in North Dakota — have the highest concentrations of propane, butane, ethane and other highly volatile gases, Schneiderman noted. 

While the vapor pressure of crude involved in train accidents is often undisclosed, the vapor pressure in such accidents in which the levels were disclosed have exceeded 9 psi, including the crude train accident in Lac Megantic, Quebec, that caused 47 fatalities.

“Recent catastrophic rail accidents send a clear warning that we need to do whatever we can to reduce the dangers that crude oil shipments pose to communities across New York State,” Schneiderman said in a prepared statement. “In New York, trains carrying millions of gallons of crude oil routinely travel through our cities and towns without any limit on its explosiveness or flammability — which makes crude oil more likely to catch fire and explode in train accidents. … The federal government needs to close this extremely dangerous loophole, and ensure that residents of the communities in harm’s way of oil trains receive the greatest possible protection.”

Bakken Crude, Crude By Rail, Derailment, Explosion, Fire, Oil spill, Pipeline transport, Tank car design, Tar sands crude, Volatility

The U.S. Has An Oil Train Problem

Repost from ThinkProgress

The U.S. Has An Oil Train Problem

By Samantha Page, Dec 3, 2015 2:43 PM
In this Feb. 16, 2015 photo, provided by the Transportation Safety Board of Canada, workers fight a fire after a crude oil train derailment south of south of Timmins, Ontario. CREDIT: AP PHOTO / TRANSPORTATION SAFETY BOARD OF CANADA

Recipe for disaster: Put a flammable substance under pressure into a metal container, then rumble it at 50 miles an hour down a metal rail, across hundreds or even thousands of miles, through towns and cities and over bodies of water. Repeat, as necessary.

The United States is coming to the end of the costliest year on record for oil train explosions, Bloomberg News reported Tuesday, as crude oil travelling by rail has reached its highest levels ever. This past year saw a town in North Dakota evacuated after a May derailment and explosion; another major derailment and explosion in Illinois in March; and a February derailment and explosion in West Virginia, which destroyed a home, forced the evacuation of 1,000 people, and caused the governor to declare a state of emergency.

oil-overtime

CREDIT: EIA DATA

At the beginning of 2010, the United States was shipping about one million barrels of oil by rail every month. By mid-2014, though, that number was around 25 million. Imports from Canada increased 50-fold during that time. The resulting surge in accidents — including a Quebec derailment in 2013 that killed 47 people — prompted the Department of Transportation to enact new safety rules in May 2015.

But those rules didn’t prevent costs from ballooning from $7.5 million in damage in 2014 to $29.7 million in 2015, according to Department of Transportation data.

crude by rail

CREDIT: ENERGY INFORMATION ADMINISTRATION

Still, carloads of petroleum products have declined significantly since their peak in December 2014, and Bloomberg reporter Mathew Philips suggests that we are unlikely to see this amount of crude by rail in the future.

The reasons for this decline are two-fold. The United States sees crude by rail mainly from two places: Alberta, Canada’s tar sands and the Bakken oil fields of North Dakota, which are affected by two very different scenarios. The Alberta tar sands are expensive to develop and are far from refineries and consumers. That means developers who have already invested will turn to rail as a way to recoup expenses, but it is not their first choice. Without available, low-cost transportation, new development in the tar sands is economically unfeasible, Oil Change International’s Lorne Stockman told ThinkProgress. According to his group’s report “Lockdown: The End of Growth in the Tar Sands,” without more pipelines, tar sands development is going to hit a wall. (In other words, the group agrees with climate activists who say the Keystone decision really will keep more oil in the ground.

But even though stopping pipeline expansion could inhibit oil extraction in Canada, it’s not so simple in the United States. Developing the Bakken fields is significantly less expensive than in Alberta, and producers have — for the past five years — had no problem using rail to bring their cheap crude to the coasts, where it competed with more expensive overseas oil. Now that overseas prices have dropped, producers are building out more pipeline infrastructure, but without it, they could still compete on the open market.)

“It’s hard to say that if you don’t build the pipe, it won’t go by rail,” Stockman said. “We’ve seen in the last five years that it does go by rail.”

He admits this is probably not what anti-pipeline activists want to hear.

“There are local issues around [pipelines], landowner issues, and I totally sympathize with that,” he said. The answer just isn’t going to be found in infrastructure. “If you want to stop production in the Bakken, you should make the producers pay for their pollution.”

The fact is, there is no safe way to transport oil. Studies have shown that while trains spill more often, pipelines spill more oil per incident. When the new regulations came out in 2014, environmentalists — and some legislators — criticized them as not going far enough. Because the realities of transporting an explosive material are pretty scary: while the new regulations lower allowable speeds, tests have shown that the cars can be punctured travelling at less than 20 miles an hour. The new speed limit is 50 miles an hour.

This week, New York Attorney General Eric Schneiderman filed a petition to reduce the pressure of crude rail cars.

“In New York, trains carrying millions of gallons of crude oil routinely travel through our cities and towns without any limit on its explosiveness or flammability – which makes crude oil more likely to catch fire and explode in train accidents,” Schneiderman said in an emailed statement. “The federal government needs to close this extremely dangerous loophole, and ensure that residents of the communities in harm’s way of oil trains receive the greatest possible protection.”

Bakken Crude, Crude By Rail, Derailment, Ethanol, Oil prices, Spill, Tar sands crude

How Cheap Crude Stalled America’s Booming Oil Trains

Repost from Bloomberg Business

How Cheap Crude Stalled America’s Booming Oil Trains

It was a record year for oil train mishaps—and the year crude-by-rail hit the brakes.

By Matthew Philips , December 2, 2015 – 4:00 AM PST

 

David Wilson/Flickr

It’s been several months since an oil train accident grabbed big headlines—but not because there haven’t been any. A single weekend in November saw two trains derail in Wisconsin. The first spilled about 20,000 gallons of ethanol into the Mississippi River, followed a day later by a spill of about 1,000 gallons of North Dakota Bakken crude.

This year has already been the costliest by far for crude train explosions. Derailments in 2015 have caused $29.7 million in damage, according to data from the U.S. Department of Transportation, a huge increase from $7.5 million in 2014. Most of this year’s price tag can be attributed to two crashes within a three-week span. The Feb. 16 derailment of a CSX train in West Virginia triggered a massive explosion near a cluster of homes along the Kanawha River and led to more than $23 million in damage. A BNSF train that derailed and exploded in Illinois on March 5 caused an additional $5.5 million in damage. Both trains were carrying highly explosive crude from North Dakota.

The lesser-noticed recent accidents haven’t come with explosions or towering fireballs. At least some of the ruptured tank cars were the newer-model CPC-1232, which are supposed to be less likely to split open. The U.S. and Canada earlier this year announced stricter tank car standards, mandating further improvements in the future. Those rules will cost companies—mostly those that ship crude—an estimated $2.5 billion from 2015 to 2034; government estimates suggest the benefits will range from $912 million to $2.9 billion, presumably from fewer accidents.

But even without changing safety standards, there’s reason to suspect that costly train accidents will decline. While 2015 will go down as the worst year for crude train disasters, it’s also shaping up to be the year crude-by-rail hit the brakes. The crash in prices has slowed activity in the oilpatch and reduced the amount of petroleum riding the rails. The number of train carloads carrying petroleum has fallen 30 percent through Nov. 20 since peaking in December 2014, according to the American Association of Railroads. The monthly data on crude-by-rail shipments kept by the U.S. government lags a few months behind, but as of September those shipments had dropped 21 percent from their peak in January 2015.

Rail shipments of petroleum are down 30 percent in 2015.
Rail shipments of petroleum are down 30 percent in 2015.

This marks the first sustained decline in crude-by-rail traffic since it took off in 2009, jumping an astounding 5,000 percent in a little more than five years. Putting oil on trains was never the most efficient way to move it. It’s expensive and slow, not to mention dangerous. But in the places where the shale boom has unlocked the biggest amounts of crude, trains were often the only option.

That’s especially true in North Dakota, home to the Bakken formation, where oil production has risen from about 200,000 barrels a day to more than 1 million. By 2013, 71 percent of Bakken crude was transported by train. North Dakota has almost single-handedly driven the crude-by-rail boom, accounting for 80 percent of all oil train traffic in the U.S. as of earlier this year.

Since the third quarter of 2014, however, two pipeline projects have been completed in North Dakota, increasing the amount of oil that can be piped out of the state by nearly 200,000 barrels a day. There’s also a new refinery that opened earlier this year, reducing the amount of oil that needs to be railed down to the large refineries outside Chicago. Since 2011, North Dakota’s combined pipeline and refining capacity has doubled, from 400,000 barrels a day to 800,000. By the end of 2017 it’s slated to double again, to 1.5 million barrels a day.

Oil traders now have options for how to move oil out of North Dakota. But there’s another reason they’re pulling back on the amount they put on the rails: It’s not as profitable as it used to be. Early on, the shale boom created an enormous glut of crude that ended up stuck in the middle of the country. Getting it to market meant putting it on trucks and trains and barges, which was expensive and slow. So the price of U.S. crude fell compared with international prices. By October 2011 a barrel of U.S. oil pegged to the West Texas Intermediate contract that trades in New York was $27 cheaper than an equivalent barrel priced against the Brent contract trading in London.

That differential led to one of the biggest arbitrage opportunities the oil market has ever seen. Savvy traders could buy cheap oil in the middle of the U.S., find a way to move it, and sell it for higher prices along the coasts, where the market is more exposed to Brent prices. The price to send a barrel of oil by rail from North Dakota down to the U.S. Gulf Coast was about $9 or $10; the rest became profit. Over the past few years, millions of barrels of oil in North Dakota got loaded onto trains bound for the East Coast and the Gulf.

But as the U.S. oil infrastructure reoriented around the shale boom and pipelines began moving domestic oil to the coasts, instead of moving imports into the heartland, the spread between WTI and Brent has narrowed. The crash in global oil prices has closed the gap even further, to the point that a barrel of WTI crude is now just $3 cheaper than a barrel of Brent. That’s not enough to make money if you have to ship it hundreds of miles on a train. Refineries in Texas and Louisiana have switched from railing oil in from North Dakota to importing more crude from West Africa.

As a result, there’s now a glut of tank cars on the market. According to energy research firm Genscape, lease rates have fallen from $2,500 a month to about $500. Big refining companies, which are among the largest crude-by-rail shippers, are shifting their strategy and trying to lock in prices for three and four years rather than just a few months.

David Vernon, a transportation analyst at Sanford C. Bernstein, thinks crude-by-rail traffic has peaked. “The heyday is over,” he said. “The high-water mark has likely been set in terms of volumes.”

Canada’s growing oil production is expected to outpace its capacity of new pipelines.
Canada’s growing oil production is expected to outpace its capacity of new pipelines.
Citigroup

Canada, however, could be a different story. Although the country’s oil sands industry is struggling against low prices, there are projects currently under construction that will be finished over the next few years. That extra oil will have to move somehow, and as of now, trains are looking like a strong candidate. Canada’s oil production is forecast to grow faster than pipelines can be built, especially now that the Keystone XL is officially dead. So while the number of trains loaded with crude crisscrossing the U.S. may diminish in the next few years, rail may remain a viable option in Canada.