Tag Archives: Keystone XL

Bakken Crude, Crude By Rail, Derailment, Explosion, Fire, Keystone XL, Oil spill, Rail routing, Tar sands crude

Federal data: Not many oil trains for Keystone XL to displace

Repost from McClatchyDC News

Federal data: Not many oil trains for Keystone XL to displace

By Curtis Tate, McClatchy Washington Bureau, April 2, 2015 
Congress Keystone
Miles of pipe ready to become part of the Keystone Pipeline are stacked in a field near Ripley, Okla, Feb. 1, 2012. SUE OGROCKI — AP

New data on crude oil shipments by rail released by the Department of Energy this week show that there are relatively few oil trains taking the path of the controversial proposed Keystone XL pipeline.

In its first monthly report on crude by rail, the U.S. Energy Information Administration shows that the bulk of oil shipments by rail are moving from North Dakota’s Bakken region to refineries in the mid-Atlantic and the Pacific Northwest.

Far less is moving from either Canada or the Midwest to the Gulf Coast, the location of 45 percent of U.S. refining capacity. Only about 5 percent of the crude oil moved by rail nationwide in January was bound for the Gulf Coast from either Canada or the Midwest.

A series of derailments has brought increased scrutiny to oil transportation by rail. Since the beginning of the year, four oil trains have derailed in the U.S. and Canada, leading to spills, fires and evacuations.

The White House Office of Management and Budget is reviewing new regulations intended to improve the safety of oil trains. They’re scheduled for publication next month.

Some supporters of the 1,700-mile Keystone project have claimed that it would reduce the need for rail shipments. The pipeline would have a projected capacity of 830,000 barrels a day, and would primarily move heavy crude oil from western Canada to the Gulf Coast.

The government’s new data confirms, however, that the primary flows of oil by rail are not to the Gulf Coast. Northeast refineries, concentrated in Delaware, Pennsylvania and New Jersey, have come to rely heavily on Bakken crude delivered by rail, and to a lesser extent, Canadian oil.

Oil trains have resulted in a 60 percent decline in oil imported to the East Coast from overseas countries, according to EIA.

Of the roughly 1 million barrels a day of oil that moved by rail in January, according to EIA, 914,000 barrels were from the Midwest petroleum-producing district that includes North Dakota, while another 130,000 barrels a day crossed the border from Canada.

In a report last month, the Energy Department projected that shipments of Canadian oil by rail could more than triple by 2016.

The mid-Atlantic region received 437,000 barrels a day from the Midwest district, and only 61,000 barrels from Canada. That’s roughly the equivalent of six or seven 100-car trains, each carrying about 3 million gallons.

Another 171,000 barrels a day from the Midwest, or about two to three 100-car trains, supplied West Coast refineries, mostly in Washington state.

The Gulf Coast region received only 107,000 barrels of oil a day from the Midwest and Canada combined. Another 107,000 barrels came from the Rocky Mountain petroleum-producing district, which includes the Niobrara region of Colorado and Wyoming.

Including oil that comes from west Texas or New Mexico, the equivalent of about three to four 100-car trains arrive at the Gulf Coast every day.

 

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

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

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
Photo: O.F.E.

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

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.

CUS-Stock-Chart-1024x567.jpg

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.