Tag Archives: Federal Regulation (U.S.)

Bakken Crude, DOT-111, Federal Regulation (U.S.), Oil Industry, Oil stabilization

North Dakota perspective on Bakken: ‘Getting it right’

From The Bismarck Tribune, Bakken Breakout
[An interesting analysis of the future of Bakken crude extraction from the perspective of an apparent oil industry advocate.  They’re listening!  – RS]

Getting it right

By Brian Kroshus, Publisher, September 17, 2014

Domestic oil production levels in the United States continue to rise – largely the result of the boom in shale oil drilling across the country. Notable plays like the Bakken shale in North Dakota and Permian and Eagle Ford shale in Texas, have been leading the way with more promising formations in different geographies, targeted for exploration and drilling in the years ahead.

Plays like the Bakken, Permian and Eagle Ford were actually in decline until only recently, having peaked decades ago when conventional, vertical wells were the only economically viable means of extracting crude. Now, those same plays are part of a drilling renaissance in key parts of the country. Geologists have known for years that more oil was present, trapped in source stone within the formations, but developing technology to profitably extract shale oil hasn’t come easy.

Today, oil production in the United States is surging thanks to advances in horizontal drilling and hydraulic fracturing techniques. Drillers are not only better understanding the geology of shale formations, but technology necessary to economically drill and produce oil. Increasingly, they’re becoming more efficient. Still, only a small percentage resource is making its way to the surface presently. Undoubtedly, more will continue to be learned in the years ahead, ultimately leading to higher extraction percentage and proven reserves.

From an energy independence standpoint, the outlook for the United States is certainly promising. In October 2013, for the first time in nearly two decades, the United States produced more oil than it imported. Predictably, while there are those including the current administration attempting to take partial credit, rising output has been the result of drilling on state and private lands. On federal lands, production has actually declined during Pres. Barack Obama’s time in office according to the American Petroleum Institute.

Despite declines on federal ground, experts still predict that the United States could be fully energy independent by the end of this decade. According the EIA, U.S. oil production will rise to 11.6 million barrels per day in 2020, from 9.2 million in 2012, overtaking Saudi Arabia and Russia and becoming the world’s largest oil producer. Over the same period, Saudi Arabia production levels are expected to decline from 11.7 million barrels to 10.6 million. Russia will also product less oil, falling from 10.7 million to 10.4 million barrels per day.

With a shale revolution and energy renaissance underway in the United States, there’s reason to be optimistic. Achieving energy independence appears to be within our grasp. Still, despite the prospect of becoming an energy independent nation, potential roadblocks loom.

In May, at the 2014 Williston Basin Petroleum Conference, Harold Hamm, CEO of Continental Resources told convention attendees that “we can’t have any more issues.” He also said “It has to be done in an absolute, safe manner. It’s going to take all of us.” He was referring to recent problems related to Bakken crude including pipeline ruptures and the fiery train derailment near Casselton, North Dakota this past December.

There’s a lot at stake. Companies like Continental Resources and others, are expected to invest billions in the years ahead to fully develop plays like the Bakken. Drillers are keenly aware that it’s their game to lose. Hamm stressed, “If we have anything, they’re going to shut us down. So many people want to stop fossil fuel use and production.”

Despite the positive macroeconomic effects rising domestic oil production and decreased imports have on the U.S. economy, job creation and economic growth alone won’t guarantee that shale oil production will continue, unless it is deemed safe and not a threat to public safety during transportation of Bakken crude in particular.

Volatility levels of Bakken crude and implication on public safety, continues to be heavily debated. The Lac-Megantic, Quebec, rail tragedy, where 47 people lost their lives when a runaway train carrying tanker cars filled with Bakken formation crude, derailed and exploded in the heart of town has been at the center of that debate. The explosions were so intense, that approximately one-half of the downtown area was destroyed.

Understandably, safely transporting Bakken crude by rail throughout North America, knowing freight rail routes frequently pass through residential areas on their way to final destinations, is a top industry priority. Much of the focus has been and remains on the DOT-111 tank car. On July 23 the U.S. Department of Transportation announced comprehensive proposed rulemaking for the safe transportation of crude oil and flammable materials, with Bakken crude being mentioned – in the form of a Notice of Proposed Rulemaking (NPRM) and a companion Advanced Notice of Proposed Rulemaking (ANPRM).

The NPRM language includes “enhanced tank car standards, a classification and testing program for mined gases and liquids and new operational requirements for high-hazard flammable trains that includes braking controls and speed restrictions.” Within two years, it proposes to “phase out of the older DOT-111 tank cars for the shipment of flammable liquids including Bakken crude oil, unless the tank cars are retrofitted to comply with new tank car design standards.” It also seeks “Better classification and characterization of mined gases and liquids.”

The North Dakota Public Service Commission has set a special hearing for September 23rd, as a part of the discussion on the volatility of Bakken crude and potential oil conditioning requirements necessary to safely transport oil from the Williston Basin. Reducing the light hydrocarbons present in Bakken crude would not only provide greater safety, but the standardization of Bakken crude into a class of oil much like West Texas Intermediate, possibly creating premium pricing opportunities.

NDPSC involvement and recommendations in addition to oil conditioning include heightened rail inspection efforts at the state level in addition to the Federal Pipeline and Hazardous Materials Administration, and emergency response training. Working closely with federal officials and a heightened inspection process, will require additional resources moving forward.

Expanding pipeline capacity and reducing reliance on rail to transport Bakken crude will continue to be a growing need, playing a role in addressing public safety concerns. The North Dakota pipeline authority anticipates two new pipelines coming online before the end of 2016, with capacity for 545,000 barrels a day. Another third proposed pipeline, capable of handling an additional 200,000 barrels, could potentially be in operation by late 2016 or early 2017.

With daily production expected to reach 1.5 million barrels in 2017, and 1.7 million barrels in early 2020, diversifying how Bakken crude is moved to market will be necessary not only from a public safety standpoint, but in order to address logistically challenges that continue to surface as production levels increase.

Extracting domestic oil and gas, moving it to market and properly disposing of or using byproducts created during the production process in a safe and efficient manner will be necessary in order for plays like the Bakken to be fully capitalized on. Those opposed to fossil fuel production will continue to watch and patiently wait for any opportunity to pressure elected officials and sway public opinion.

Ensuring both public and environmental safety to ensure the future of domestic oil production – will require a cooperative effort on the part of both industry and the state. As Harold Hamm alludes to, it truly is industries game to lose.

Crude By Rail, Federal Regulation (U.S.), Local Regulation, State regulation

Letter from railroad attorneys to Governor Brown: in effect, ‘You can do nothing’

Letter from Union Pacific & BNSF attorneys to Governor Brown

By Roger Straw, Editor, The Benicia Independent

On September 15, 2014, San Francisco Baykeeper offered highly critical comments to the City of Benicia on Valero’s Draft EIR. With their comments, Baykeeper attached a VERY interesting letter from attorneys for the two railroads that operate in California, claiming that preemption under The Federal Rail Safety Act and the Interstate Commerce Commission Termination Act render the State of California pretty much helpless in protecting against oil spill prevention and emergency response.

The letter specifically holds that the Federal Clean Water Act is useless as a preemption workaround.

Addressed to Dana Williamson, Cabinet Secretary in Governor Brown’s office and dated July 3, 2014, the letter addresses issues discussed in a June 18, 2014 meeting between Ms. Williamson and the lawfirm Latham & Watkins.   The letter is signed by Maureen E. Mahoney of Latham & Watkins LLP, Counsel for Union Pacific Railroad Co. and BNSF Railway Co.

Note that this document is lawyer-talk, and I am not versed in legalese, so I hope my interpretation in the previous paragraph is accurate.  I’m advised by a local activist attorney that the document is significant, so am posting it here to highlight the rail industry’s views and their efforts to influence decision-makers in Benicia and elsewhere in California.

Bakken Crude, Crude By Rail, DOT-111, Federal Regulation (U.S.), U.S. Department of Transportation

Groups sue over oil shipments in older rail cars

Repost from The Bismarck Tribune, Bismarck, ND

Groups sue over oil shipments in older rail cars

September 11, 2014

SEATTLE (AP) — Environmental groups sued the U.S. Department of Transportation on Thursday over the shipment of volatile crude oil in older railroad tank cars.

Accident investigators have complained for decades that the cars are too easily punctured or ruptured when derailed, leading to spills.

The lawsuit filed by the Sierra Club and ForestEthics says the agency failed to respond to a legal petition the groups filed in July. That petition sought an emergency order to prohibit crude oil from the Bakken region of North Dakota and Montana and elsewhere from being carried in older tank cars, known as DOT-111s.

A spokesman with the Department of Transportation, Kevin Thompson, declined to comment, citing the pending litigation.

Since 2008, there have been 10 significant derailments in the U.S. and Canada in which crude oil has spilled from ruptured tank cars. The worst was a runaway oil train that exploded in the Quebec town of Lac-Megantic a year ago, killing 47 people.

The federal government in late July proposed rules that would phase out tens of thousands of older tank cars that carry crude oil and other highly flammable liquids.

But that process could take several years, and in the meantime, shipments of crude oil in older rail cars are putting small towns and major cities along the rail lines at risk, the groups said.

“That’s just far too long given the risks,” said Patti Goldman, a lawyer with Earthjustice, which is representing the groups.

The groups had asked the 9th U.S. Circuit Court of Appeals to order the agency to respond to its July petition within 30 days.

Bakken Crude, Blast zone, Crude By Rail, Federal Regulation (U.S.), Oil stabilization, State regulation

Safety of Citizens in Bomb Train Blast Zones in Hands of North Dakota Politicians

Repost from Desmogblog

Safety of Citizens in Bomb Train Blast Zones in Hands of North Dakota Politicians

2014-09-05, Justin Mikulka
Lac Megantic train explosion
Lac Megantic train explosion

When North Dakota Congressman Kevin Cramer was asked recently if it was scientifically possible to make Bakken crude oil safer by stripping out the explosive natural gas liquids with a process like oil stabilization, his response was quite telling.

“So scientifically can you do it? Sure, but you have to look at it holistically and consider all of the other elements including economics, and is the benefit of doing something like that does that trump other things like speed of trains, and what kind of cars,” he said.

This is very similar to the comments made by Lynn Helms of the North Dakota Department of Mineral Resources according to the July 29 meeting minutes provided to DeSmogBlog by the Industrial Commission of North Dakota.

“In response to a question regarding other mechanisms besides oil conditioning in the field, Mr. Helms stated there are other mechanisms — none of them without a significant downside….It makes sense to do the conditioning in the field. There are other options to do it downstream somewhere in a very large and very expensive operation.”

In a June 24 e-mail obtained by DeSmogBlog through a freedom of information request, Helms identified himself as “the primary contact for Governor Dalrymple’s team on the crude safety issue” in response to an inquiry from the Department of Energy about who would be working on the issue of Bakken crude oil safety.

As the point person on this issue for North Dakota, Helms’ opinions carry significant weight. And just like Congressman Cramer, Helms is pointing out the “significant downside” of stabilization, which is that it is an expensive operation.

It is well established that stabilization works and would make oil trains much safer. Not even North Dakota politicians are arguing that point anymore. But the industry doesn’t want to pay for it. And right now, the only ones who could mandate them to stabilize the oil via new regulations are the three members of the Industrial Commission of North Dakota.

What About The Feds’ Oil-By-Rail Regulations?

The reason North Dakota politicians are discussing this issue at all is because the federal government has essentially punted the question.

In the 200 pages of new proposed oil-by-rail regulations released in July, there is not a single line about requiring the oil or rail companies to stabilize the oil prior to shipping.

Stabilization is a process that removes the explosive natural gas liquids from the oil and is required by pipeline companies. This process would turn the current Bakken “bomb trains” into simple oil trains. They would still pose a threat of oil spills, but would no longer threaten to kill people in massive explosions like the one in Lac-Megantic, Quebec, or be a target for terrorism.

While the proposed regulations don’t require stabiliazation, they do include three questions that indicate lawmakers are aware that stabilizing or “degassifying” the crude makes it safer and that producers have the ability to reduce the volatility of crude oil prior to shipping it by rail.

Is the current exception for combustible liquids sufficient to incentivize producers to reduce the volatility of crude oil for continued use of existing tank cars?

Would an exception for all PG III flammable liquids further incentivize producers to reduce the volatility of crude oil prior to transportation?

What are the impacts on the costs and safety benefits of degasifying to these levels?

As previously reported by DeSmogBlog, the regulators in charge of finalizing the new proposed oil-by-rail regulations are big believers in cost-benefit analysis. And looking at their questions, it is clear they know the oil can be made less volatile. But they want to hear more from the industry about the costs of doing this before doing anything. And instead of requiring stabilization, they are looking for ways to “incentivize” the producers to do it.

Oil Conditioning vs. Oil Stabilization

The North Dakota Industrial Commission is holding a hearing on September 23rd during which it is requesting input on how to make the Bakken crude oil safer for transport. The headline of its press release, “Hearing set on oil conditioning practices,” almost ensures that oil stabilization will never be required in North Dakota.

Oil conditioning is not the same as oil stabilization. Oil conditioning can be done with all of the existing equipment already in the field in North Dakota and thus the cost is minimal. However, in situations where the industry needs to ensure it strips out all the volatile natural gas liquids from the oil, as in the Eagle Ford formation in Texas, they use a different process called stabilization.

Helms and the members of the Industrial Commission like to cite the North Dakota Petroleum Council Study on Bakken Crude Properties when claiming that Bakken crude is no different than other crude oils and thus doesn’t require stabilization. However, that very report makes it clear that conditioning, done with the equipment currently available, is insufficient and was never designed to achieve the type of results expected from stabilization.

From the report, prepared by industry consultant Turner and Mason:

The data consistency [sic] indicates that field equipment is limited in its ability to significantly impact vapor pressure and light ends content.

This is consistent with the expected capabilities of the equipment.

The field equipment is designed to separate gas, remove water and break emulsions to prepare crude for transport, and not remove significant levels of dissolved light ends from the crude.

Meanwhile, at the August 26 meeting of the North Dakota Industrial Commission, Helms once again acknowledged the effectiveness of stabilization, as reported by Petroleum News: “This is very routinely done with high gravity condensate — oil that condenses out of a gas well as it is produced,” Helms said. “That has to be stabilized before it can move through the system.”

Helms word choice is telling. Oil that “has to be stabilized before it can move through the system.” Oil that is moved by pipeline has to be stabilized before it can be moved because pipeline companies require it. The rail companies do not.

Despite his acknowledgement of how stabilization is routine in the pipeline business, at the August meeting, Helms was also sure to point out that in North Dakota they expected to choose conditioning as their solution, as reported by Petroleum News.

Helms agreed, saying conditioning is likely more suitable for North Dakota since the equipment is already in place on well sites but he’d like to hear from others at the upcoming hearing.

“We haven’t closed the door to (stabilization),” Helms said. “We want to hear what people have to say.”

However, if the North Dakota Industrial Commission actually wanted to hear what people have to say about stabilization, the press release about the September 23rd hearing probably should have actually mentioned stabilization. It doesn’t.

The North Dakota Industrial Commission

If there is going to be any regulation requiring stabilization of the Bakken crude it will require the three members of the North Dakota Industrial Commission to make it happen.

Governor Jack Dalrymple is one member of the commission. And his point man on this issue, Helms, has already made it clear he supports conditioning over stabilization.

North Dakota Attorney General Wayne Stenehjem is another member. When a report by the Pipeline and Hazardous Safety Materials Administration recently concluded that Bakken oil was more flammable than most other crude oils, Stenehjem responded to the science by saying, “It seems like they are picking on us.”

The third member of the commission is Agricultural Commissioner Doug Goehring. At the August 26th meeting of the commission, Petroleum News reported that Goehring opposed stabilization for an unlikely reason for someone who helped oversee the massive expansion of the Bakken oil production.

Agriculture Commissioner Doug Goehring voiced his concern with dotting the landscape with stabilizer units.

“We’ve been trying hard to shrink that footprint out there on the landscape, and that’s going to make that awfully difficult.”

So in all likelihood, stabilization is off the table and conditioning will be the new regulation. Helms and others often say conditioning is already being done because the equipment is already in the field. Yet, according to the minutes from the July meeting of the Industrial Commission, Governor Dalrymple said: “Right now we are assuming producers are doing conditioning but we do not have a mechanism to verify that.”

So, let’s get this straight. It is more than a year after the explosion of a Bakken crude train in Lac-Megantic that killed 47 people. And it’s been more than eight months since a train of Bakken crude exploded in Casselton, ND. And the best the regulators can do is hold a hearing to talk about how to do regulate a practice that’s inadequate and they already assume is being done?