MOUNT CARBON, W.Va. — There will be another CSX train carrying Bakkan oil going through eastern Kanawha and Fayette counties soon now that the track has been repaired following the Feb. 19 derailment of an oil train near Mount Carbon.
“It’s part of the freight that goes over that line,” CSX Spokesman Gary Sease told MetroNews Friday. “Those shipments, along with all the other freight we haul, have resumed.”
The rebuilt line, just a few miles from Montgomery, reopened Thursday afternoon following a week long cleanup. [CONTINUED]
WASHINGTON — Fiery wrecks of trains hauling crude oil have intensified pressure on the Obama administration to approve tougher standards for railroads and tank cars despite industry complaints that it could cost billions and slow freight deliveries.
On Feb. 5, the Transportation Department sent the White House draft rules that would require oil trains to use stronger tank cars and make other safety improvements.
Nine days later a 100-car train hauling crude oil and petroleum distillates derailed and caught fire in a remote part of Ontario, Canada. Less than 48 hours later, a 109-car oil train derailed and caught fire in West Virginia, leaking oil into a Kanawha River tributary and burning a house to its foundation. As the fire spread across 19 of the cars, a nearby resident said the explosions sounded like an “atomic bomb.” Both fires burned for nearly a week. [CONTINUED]
Exxon, Shell, Chevron Pare Back as Rising Production Costs Squeeze Earnings
By Daniel Gilbert and Justin Scheck, Nov. 2, 2014
As crude prices tumble, big oil companies are confronting what once would have been heresy: They need to shrink.
Even before U.S. oil prices began their summer drop toward $80 a barrel, the three biggest Western oil companies had lower profit margins than a decade ago, when they sold oil and gas for half the price, according to a Wall Street Journal analysis.
Despite collectively earning $18.9 billion in the third quarter, the three companies— Exxon Mobil Corp. , Royal Dutch Shell PLC and Chevron Corp. —are now shelving expansion plans and shedding operations with particularly tight profit margins.
The reason for the shift lies in the rising cost of extracting oil and gas. Exxon, Chevron, Shell, as well as BP PLC, each make less money tapping fuels than they did 10 years ago. Combined, the four companies averaged a 26% profit margin on their oil and gas sales in the past 12 months, compared with 35% a decade ago, according to the analysis.
Shell last week reported that its oil-and-gas production was lower than it was a decade ago and warned it is likely to keep falling for the next two years. Exxon’s output sank to a five-year low after the company disposed of less-profitable barrels in the Middle East. U.S.-based Chevron, for which production has been flat for the past year, is delaying major investments because of cost concerns.
BP has pared back the most sharply, selling $40 billion in assets since 2010, largely to pay for legal and cleanup costs stemming from the Deepwater Horizon oil spill in the Gulf of Mexico that year.
To be sure, the companies, at least eventually, aim to pump more oil and gas. Exxon and Chevron last week reaffirmed plans to boost output by 2017.
“If we went back a decade ago, the thought of curtailing spending because crude was $80 a barrel would blow people’s minds,” said Dan Pickering, co-president of investment bank Tudor, Pickering, Holt & Co. “The inherent profitability of the business has come down.”
It isn’t only major oil companies that are pulling back. Oil companies world-wide have canceled or delayed more than $200 billion in projects since the start of last year, according to an estimate by research firm Sanford C. Bernstein.
In the past, the priority for big oil companies was to find and develop new oil and gas fields as fast as possible, partly to replace exhausted reserves and partly to show investors that the companies still could grow.
But the companies’ sheer size has meant that only huge, complex—and expensive—projects are big enough to make a difference to the companies’ reserves and revenues.
As a result, Exxon, Shell and Chevron have chased large energy deposits from the oil sands of Western Canada to the frigid Central Asian steppes. They also are drilling to greater depths in the Gulf of Mexico and building plants to liquefy natural gas on a remote Australian island. The three companies shelled out a combined $500 billion between 2009 and last year. They also spend three times more per barrel than smaller rivals that focus on U.S. shale, which is easier to extract.
The production from some of the largest endeavors has yet to materialize. While investment on projects to tap oil and gas rose by 80% from 2007 to 2013 for the six biggest oil companies, according to JBC Energy Markets, their collective oil and gas output fell 6.5%.
Several major ventures are scheduled to begin operations within a year, however, which some analysts have said could improve cash flow and earnings.
For decades, the oil industry relied on what Shell Chief Financial Officer Simon Henry calls its “colonial past” to gain access to low-cost, high-volume oil reserves in places such as the Middle East. In the 1970s, though, governments began driving harder bargains with companies.
Oil companies still kept trying to produce more oil, however. In the late 1990s, “it would have been unacceptable to say the production will go down,” Mr. Henry said.
Oil companies were trying to appease investors by promising to boost production and cut investment.
“We promised everything,” Mr. Henry said. Now, “those chickens did come home to roost.”
Shell has “about a third of our balance sheet in these assets making a return of 0%,” Shell Chief Executive Ben van Beurden said in a recent interview. Shell projects should have a profit margin of at least 10%, he said. “If that means a significantly smaller business, then I’m prepared to do that.”
Shell late last year canceled a $20 billion project to convert natural gas to diesel in Louisiana and this year halted a Saudi gas project where the company had spent millions of dollars.
The Anglo-Dutch company also has dialed back on shale drilling in the U.S. and Canada and abandoned its production targets.
U.S.-based Exxon earlier this year allowed a license to expire in Abu Dhabi, where the company had pumped oil for 75 years, and sold a stake in an oil field in southern Iraq because they didn’t offer sufficiently high returns.
Exxon is investing “not for the sake of growing volume but for the sake of capturing value,” Jeff Woodbury, the head of investor relations, said Friday.
Even Chevron, which said it planned to increase output by 2017, has lowered its projections. The company has postponed plans to develop a large gas field in the U.K. to help bring down costs. The company also recently delayed an offshore drilling project in Indonesia.
The re-evaluation has also come because the companies have been spending more than the cash they bring in. In nine of the past 10 quarters, Exxon, for example, has spent more on dividends, share buybacks and capital and exploration costs than it has generated from operations and by selling assets.
Though refining operations have cushioned the blow of lower oil prices, the companies indicated that they might take on more debt if crude gets even cheaper. U.S. crude closed Friday at $80.54 a barrel.
Chevron finance chief Patricia Yarrington said the company planned to move forward with its marquee projects and is willing to draw on its $14.2 billion in cash to pay dividends and repurchase shares.
“We are not bothered in a temporary sense,” she said. “We obviously can’t do that for a long period of time.”
Repost from WANE TV15 – Fort Wayne, Indiana [Editor: Regarding railroad hazmat notification … significant quote by a County Emergency Management Director in Indiana: “The first I heard about it was from you. I believe if the state was aware of that, I would have that information.” Excellent video on this 2-month investigation. Apologies for commercial content on the video…. – RS]
Through Your Backyard
By Adam Widener, October 30, 2014
FORT WAYNE, Ind. (WANE) – The volume of crude oil being shipped via railroads is rising across the country. Much of it comes from North Dakota and is heading for the east coast. It’s a path that funnels millions of gallons directly through northeast Indiana every week.
The U.S. Department of Transportation said the increase in crude-by-rail poses a greater risk for incidents and recently ordered railroad companies to tell each state where and how often trains are hauling large amounts of the energy product. Federal officials cited several oil train derailments in the U.S. and Canada as a reason for the order.
But some emergency responders in northeast Indiana had no idea about the growing threat traveling through their backyard, until 15 Finds Out began asking questions.
To understand the severity of that communications gap, one must first understand the reason for the rising number of oil trains. More and more petroleum crude oil is being drilled at the Bakken Shale formation in North Dakota. Rail companies say it’s traveling to refineries in high quantities via the most economical option: rail.
“There’s an important development happening in this country and it’s happening here in this community,” said Dave Pidgeon, public relations manager for Norfolk Southern Corp. “We are moving towards greater energy independence.”
On April 30, a CSX train carrying 105 crude oil tank cars derailed in Lynchburg, Virginia. The highly flammable crude oil caught fire. Emergency crews evacuated 350 people from their homes. Up to 30,000 gallons of petroleum crude oil spilled into a nearby river.
The most notable oil train derailment happened in Lac-Mégantic, Quebec, Canada on July 5, 2013. An unmanned, runaway oil train carrying crude oil derailed, exploded, caught fire, and killed 47 people. 2,000 people had to be evacuated from the town.
The dramatic rise in oil trains combined with recent derailments caused the USDOT to file an emergency order in May. Federal officials cited an “unsafe condition” or “unsafe practice” for crude-by-rail causing an “imminent hazard.”
The DOT ordered railroad companies to begin reporting to each state’s Emergency Response Commission. Beginning in June, railroads were to tell state officials the expected movement and frequency of trains transporting 1 million gallons or more of crude oil from North Dakota.
“We share information with the state emergency management services across our network,” said Tom Livingston, CSX’s regional vice president for government affairs in the Midwest.
“Be as well-informed as possible”
The emergency order makes other important recommendations. It says state and local first responders should “be as well-informed as possible as to the presence of trains carrying large quantities of Bakken crude oil” in their area. That way, they have “reasonable expectations” to “prepare accordingly for the possibility of an oil train accident.”
15 Finds Out uncovered that wasn’t the case for some first responders in northeast Indiana. On October 1, 15 Finds Out spoke with Michael “Mick” Newton, emergency management director for Noble County. At the time, Newton had never heard of the emergency order and didn’t know about the increase in crude-by-rail in his county.
“The first I heard about it was from you,” Newton said. “I believe if the state was aware of that, I would have that information.”
15 Finds Out obtained proof that the Indiana Department of Homeland Security (IDHS) actually did have that information and delayed passing it along. I-Team 8 at our sister station, WISH-TV in Indianapolis, recently got a copy of an email sent to several emergency management directors across northern Indiana.
The email included Norfolk Southern’s oil train route maps and how many of its oil trains travel through 12 northern Indiana counties with more than 1 million gallons every week.
Norfolk Southern sent IDHS that information in a letter dated June 3, 2014. But IDHS didn’t forward it to EMA directors until October 8, ironically after 15 Finds Out and I-Team 8 began asking questions.
The Federal Railroad Administration has noted those crude-by-rail stats are public. Still, IDHS denied a request for copies and said that information could hurt public safety by creating a vulnerability to terrorist attacks.
Millions of gallons “through your backyard”
Because of legal concerns, 15 Finds Out is not releasing Norfolk Southern’s oil train exact routing maps. Noble and DeKalb Counties have 13 to 24 trains carrying a million gallons or more of crude oil every week. Whitley and Allen Counties have between 0 and 4 trains carrying a million gallons or more every week.
Leaders with CSX were more forthcoming with oil train information. Livingston said 20 to 35 trains carrying a million gallons or more of North Dakota Crude Oil travel on its Garrett line every week.
15 Finds Out shared those stats with Newton on October 1.
“Nobody’s come up with, other than you, of any information like that to me,” he said.
It was a similar story in DeKalb County. EMA Director Roger Powers said he hadn’t received any crude-by-rail notifications from IDHS until, ironically, the day of his interview with 15 Finds Out.
“It’s always good for us to know,” Powers said. “When we don’t know, that’s when we get caught sometimes and have to pull back and regroup and think about how we are going to attack this.”
When asked why it took IDHS four months to give first responders the oil train notifications, public information officer John Erickson released a statement that said in part:
There was an internal delay at IDHS with respect to the first notification the agency received regarding the U.S. Department of Transportation (U.S. DOT) order. This notification was not evaluated as efficiently as it could have been, and as a result, was not forwarded to the local responders as quickly as IDHS would have liked.
The statement said the agency has since modified its evaluation process of these notifications and will, in the future, get them to local emergency responders as quickly as possible.
There was an apparent confusion at IDHS regarding the oil train notification. The statement said officials weren’t sure if it was the particular notification required under the DOT order. Since IDHS considers the information to be highly sensitive, the agency said the documents had to be “carefully evaluated regarding which agencies had a need to know.”
In the end, Newton argued that his department’s response would be the same whether they knew how many oil trains pass through or not. Despite the four month delay, both Newton and Powers are each thankful they now have the proactive information. They are now passing those stats down to first responders, like Auburn Fire Chief Mike VanZile.
“Since you said something to me I’ve done some research, and now I think through your efforts and some other folks’ efforts, now the state has given our EMA director, homeland security office, some vital information that he has passed on to me,” VanZile told 15 Finds Out. “Millions of gallons going across these rails, that’s a huge concern.”
15 Finds Out continues its investigative series “Through Your Backyard” next week. Tune in Thursday, November 6 at 6:00 p.m. to hear what the railroad companies and U.S. Department of Transportation are doing to make crude-by-rail safer.
Our View: Tell us when dangerous oil cars are rolling
Editorial, August 15, 2014
Railroad tracks run up and down the valley like a spine, carrying everything from cans to cars, telephone poles to toothpicks. Many communities see 30, 40 or even 50 trains a day. Some of those cars carry dangerous materials. Compressed gas and caustic chemicals move in black, cylindrical tank cars adorned with two markings – the red diamond with a flame and “DOT 111” stenciled on each car.
Not yet, but soon some of those rail cars will be hauling another dangerous material – crude oil extracted from the Bakken shale formation in North Dakota. While it is no more dangerous than many other chemicals, there’s likely to be a lot more of it on the rails that bisect our communities. The railroads and state must make certain that we are aware of these movements and have a plan for dealing with any emergency.
California’s Office of Emergency Services estimates shipments of Bakken crude will increase 25-fold by 2016 as 150 million barrels are sent to refineries in the Bay Area, Southern California and soon to two being readied in Bakersfield. That could mean thousands of tank cars a year moving through Modesto, Livingston, Merced and beyond. Mother Jones magazine calls it a “virtual pipeline.”
The Wall Street Journal reported Bakken crude contains higher amounts of butane, ethane and propane than other crude oils, making it too volatile for actual pipelines.
In July, 2013, a train carrying Bakken crude derailed and exploded in the small town of Lac-Megantic, Quebec, killing 47 people. Less dramatic derailments, some with fires, have occurred in North Dakota, Virginia and Illinois. The U.S. Department of Transportation reports 108 crude spills last year.
“When you look at the lines of travel from Canada and North Dakota, you figure if they’re headed for the Bay Area or to Bakersfield, the odds are that you’re going to see shipments going down the Valley,” said Assemblyman Roger Dickinson, who represents north Sacramento. So, he authored Assembly Bill 380, which would require the railroads to notify area first-responders whenever these trains are passing through.
Others are concerned, too. In July, the DOT issued proposed rules for safe transport, including increased cargo sampling, better route analysis, a 40 mph speed limit on trains labeled “high-hazard flammable,” and switching to newer, safer DOT 111 cars after Oct. 1, 2015. The new cars have double steel walls, better closures and heavier carriages. Currently, they make up about a third of the nation’s tanker fleet. California’s Office of Emergency Services has issued 12 recommendations, ranging from allowing better data collection to phasing out those old tank cars to better training for first-responders.
The railroads are already doing many of these things. Since the mid-1990s, BNSF has offered – at no charge – training for handling spilled hazardous materials and more extreme emergencies. But not enough local agencies have found the time to take the classes. A BNSF spokeswoman said the railroad would even come to town to conduct the training.
In May, the USDOT issued an emergency order in May requiring all carriers to inform first responders about crude oil moving through their towns and for the immediate development of plans to handle spills. Unfortunately, it contains a discomforting criteria: the order applies only to trains carrying 1 million gallons of Bakken crude, or roughly 35 tank cars. And to reach USDOT’s definition of a “high-hazard flammable train,” also requiring a warning, a train must have 20 tank cars.
Some perspective. In Virginia, one one tank car carrying Bakken crude exploded and flew an estimated 5,500 feet; a photograph of another explosion showed a fireball rising 700 feet from a single car. Our first responders ought to know when even one car carrying such material is coming through town. And that information must be shared beyond communities directly on rail lines because even our largest communities count on neighboring agencies to provide assistance during emergencies. When such cargo is moving, every emergency responder in the vicinity should be on alert.
Currently, the railroads share that information only if a local agency asks for it. That’s not good enough. Dickinson’s bill would make notification available on a real-time basis, without asking. But his bill mirrors federal orders on the size of the train; a dangerous loophole.
The incredible expansion of America’s oil resources is creating many positives – from more jobs to less dependence on foreign oil. But it’s happening so fast that we’re making up the safety aspects as we roll along. Federal rules don’t go nearly far enough to protect public safety in this new world.