Tag Archives: Oil Industry

Canadian regulation, Crude By Rail, DOT-111, Federal Regulation (U.S.), Oil Industry, Rail industry, Tank car design, Tank car retrofit

National Geographic series on Energy: New Oil Train Safety Rules Divide Rail Industry

Repost from The National Geographic

New Oil Train Safety Rules Divide Rail Industry

Many railroad companies want more time to retrofit cars in the U.S. and Canada, but some are forging ahead.
By Joe Eaton for National Geographic, October 31, 2014
Smoke rises from railway cars that were carrying crude oil after derailing in downtown Lac Megantic, Quebec, Canada, Saturday, July 6, 2013.
Smoke rises from railway cars that were carrying crude oil and derailed in downtown Lac-Megantic, Quebec, in 2013. Regulators in Canada and the United States have been working on new standards for trains that carry flammable fuel. – Photograph by Paul Chiasson, Associated Press

Three days after an oil train derailed and exploded in 2013 in Lac-Mégantic, Quebec, killing 47 people, Greg Saxton wandered through the disaster site inspecting tank cars.

For Saxton, the damage was personal. Some of the tank cars were built by Greenbrier, an Oregon-based manufacturer where he’s chief engineer. Almost every car that derailed was punctured, some in multiple places. Crude oil flowed from the gashes, fueling the flames, covering the ground, and running off into nearby waterways.

Each day, as Saxton returned to the disaster zone, he passed a Roman Catholic church. “We never came and went when there wasn’t a funeral going on,” he said.

In the wake of this and other recent accidents as energy production soars in North America, Canadian and U.S. regulators are proposing new safety rules for tank cars that carry oil, ethanol, and other flammable liquids. Saxton and Greenbrier have pushed for swift changes, but others in the industry are asking for more time to retrofit cars like the type that exploded at Lac-Mégantic. (See related stories: “Oil Train Derails in Lynchburg, Virginia” and “North Dakota Oil Train Fire Spotlights Risks of Transporting Crude“)

“If you don’t set an aggressive time line, you won’t see improvements as quickly as the current safety demands require,” Jack Isselmann, a Greenbrier spokesman, said. “We’ve been frankly just perplexed and confused by the resistance.”

Industry Pushes for More Time

The tank cars that derailed at Lac-Mégantic were built before October 2011, when the American Railway Association mandated safety enhancements to the oil and ethanol tankers known in the industry as DOT-111 cars. The cars lacked puncture-resistant steel jackets, thermal insulation, and heavy steel shields, all of which could have lessened the destruction, experts say.

In July, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed rules that, if finalized, would require higher safety standards for new oil cars. The rules also require owners to retrofit older cars or remove them from the rails by October 2017.

Canadian regulators in July mandated that DOT-111 tank cars built before 2014 be retrofitted or phased out by May 2017. Transport Canada, which regulates rail safety, has also proposed aggressive safety standards for new tank cars and will seek industry comment this fall before finalizing its rules.

Saxton and others at Greenbrier support the proposed regulations, which could be tremendously lucrative to the company. However, others in the rail supply industry say the proposed retrofit time line cannot be met.

The Railway Supply Institute—a trade organization that represents the rail industry—has asked DOT to allow legacy cars in the oil and ethanol fleet to remain on the rails until 2020.

Thomas Simpson, the institute’s president, said a survey of rail maintenance and repair shops found that only 15,000 of the roughly 50,000 non-jacketed legacy tank cars in the crude oil and ethanol fleet can be modified by the proposed 2017 deadline.

For many cars, the retrofit process would include adding thermal protection systems, thick steel plates at the ends, and outer steel jackets, as well as reconfiguring the bottom outlet valve to ensure it does not break off and release oil during a derailment.

That’s too much work to complete before the deadline, and the regulations have not yet been finalized, Simpson said.

The proposed deadline, he said, will “idle cars waiting for shop capacity and adversely affect the movement of crude and ethanol.”

Tying in the Keystone XL Debate

The American Petroleum Institute, which represents the oil and natural gas industry, also says the 2017 deadline to retrofit tank cars is too aggressive and could slow oil and gas production. (See related story: “Blocked on Keystone XL, Oil-Sands Industry Looks East“)

In comments to U.S. regulators and the press, API tied the safety upgrades to approval of the proposed Keystone XL pipeline, which would transport Alberta’s tar sands oil through the Midwest to Texas refineries.

Workers stand before mangled tanker cars at the crash site of the train derailment and fire in Lac-Megantic, Quebec
The deadly oil train accident at Lac-Megantic, Quebec, raised awareness of the potential dangers of transporting crude by rail. – Photograph by Ryan Remiorz, Associated Press

If Keystone is not built, API president Jack Gerard said in September that the cost of the proposed oil tank rules would nearly double to $45 billion because demand for transporting crude by rail would be higher.  (See related story and map: “Keystone XL: 4 Animals and 3 Habitats in Its Path” and “Interactive Map: Mapping the Flow of Tar Sands Oil“)

Both API and the Rail Supply Institute have also warned regulators that a short time line for retrofitting oil cars could cause a spike in truck shipments of oil and ethanol.

But Anthony Swift, an attorney with the Natural Resources Defense Council, an environmental group opposed to Keystone XL, called these arguments misleading. Swift said Keystone XL would have little impact on retrofitting tank cars, because most train traffic from the Bakken oil fields in North Dakota moves to East Coast and West Coast refineries. He said that traffic would not be affected by the pipeline.

Keystone XL would have the capacity to carry 830,000 barrels of oil-sands crude a day, with up to 100,000 barrels a day set aside for crude from the Bakken. By 2016, the rail industry in Canada is expected to carry about as much oil as Keystone XL would. The U.S. rail industry is already there: Almost 760,000 barrels a day of crude had traveled by rail by August.

Swift said the costs to the oil industry are worthwhile if lives are saved. “The argument that we need to wait until the oil industry does not need tank cars until we can make them safe is ridiculous on its face,” he said.

Greenbrier Gears Up to Meet Demand

In February, Greenbrier introduced a beefed-up tanker with a 9/16-inch steel shell (1/8-inch thicker than many DOT-111 cars), 11-gauge steel jacket, removable bottom valve, and rollover protection for fittings along the top of the cars.

Greenbrier calls the tanker the “car of the future,” saying it’s eight times safer than the DOT-111. Isselmann said Greenbrier has received more than 3,000 orders for the new car and plans to double its manufacturing capacity by the end of the year.

In June, Greenbrier and Kansas rail-service company Watco joined forces to form GBW Railcar Services, creating the largest independent railcar repair-shop network in North America. Isselmann said the company plans to hire 400 workers and start second shifts at its factories to meet demand for retrofitting DOT-111 tank cars.

In comments to U.S. regulators, GBW said it currently has the capacity to retrofit more than 10 percent of the fleet of DOT-111 tank cars.

Isselmann said that number will grow as other companies take advantage of the market once regulators release final rules. For that reason, he said the industry’s current capacity to meet regulations is less important than its ability to ramp up quickly to capture the increased business that new safety standards could bring.

“This notion that the status quo is going to remain—it’s diversionary at best,” Isselmann said.

An oil tanker car at Lac-Megantic, Quebec
Almost every tanker in the Lac-Megantic accident was punctured. New standards would mandate stronger cars, among other measures. – Photograph by Ryan Remiorz, Associated Press

Some in the industry are responding to public concern before rules are finalized. In April, Irving Oil—the owner of Canada’s largest refinery, in Saint John, New Brunswick, where the Lac-Mégantic train was headed before the disaster—completed a voluntary conversion of its crude oil railcar fleet.

Also in April, Global Partners, one of the largest U.S. distributors of gasoline and other fuels, began requiring all crude oil unit trains making deliveries at its East and West Coast terminals to meet October 2011 safety standards for tank car design.

“As an industry, we have both an opportunity and a responsibility to maximize public confidence in the safety of the system that carries these products across the country,” Eric Slifka, Global Partners’ CEO, said in a press release.

A Push to Harmonize Regulations

As the U.S. and Canada consider train safety regulations, oil and rail companies are pushing to ensure that the same tank cars can be used to haul flammable liquids in both countries.

Regulators say they are working together to make that happen. Lauren Armstrong, a spokeswoman at Transport Canada, said the department is holding technical discussions on new tank car standards with the U.S. Department of Transportation and the Federal Railroad Administration.

However, coordinating tank car regulations between the two countries would have to overcome current gaps, industry representatives say.

In April, Transport Canada banned the use of the oldest and least crash-resistant DOT-111 tank cars, which lacked bottom reinforcement.  The U.S. so far has not banned the cars from carrying oil and ethanol.

Canada also set a 2017 deadline for retrofitting the cars. In the U.S., regulators are expected to release final rules by early 2015. The process, however, could continue much longer.

The strongest standards will carry the day, said Thomas Simpson, the president of the Railway Supply Institute. Given the large amount of oil that moves between the two countries, Simpson said it makes no business sense for companies to keep two different sets of cars to meet the two sets of rules.

Communities Concerned About Safety

But as final rules are being hammered out in the U.S., some train safety advocates and community groups worry they are being left out of the process.

Karen Darch, co-chair of TRAC, a coalition of Illinois communities concerned about train congestion and rail safety, said she is hopeful that final rules will include a fast deadline to retrofit old cars. (See related story: “Illinois Village Leads Charge for Tougher Train Rules“)

But she said rail and oil industry lobbyists have had much more access to policymakers than community advocates, and she’s concerned they will have a greater impact on final rules.

“The inside players, the guys in the industry,” she said, “they seem to be able to be in front of the decision-makers more than we have been.”

The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

Big Oil, Climate Change, Coal industry, Fossil fuels, Green Industrial Revolution, Oil Industry

Grant Cooke: Big Oil’s endgame: What it all means for Benicia

Repost from The Benicia Herald
[Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.  This is the last of three parts.  Read part one by CLICKING HERE and part two by CLICKING HERE.  – RS]

Big Oil’s endgame: What it all means for Benicia

October 12, 2014, by Grant Cooke

P1010301IN APRIL 2014, THE HIGHLY RESPECTED Paris-based financial company Kepler Chevreux released a research report that has rippled through the fossil fuel industries. In it, Kepler Chevreux describes what is at stake for the fossil fuel industry as world governments’ push for cleaner fuels and reduced greenhouse gas emissions gathers momentum.

The firm argues that the global oil, gas and coal industries are set to lose a combined $28 trillion in revenues over the next two decades as governments take action to address climate change, clean up pollution and move to decarbonize the global energy system. The report helps to explain the enormous pressure that the industries are exerting on governments not to regulate GHGs.

Kepler Chevreux used International Energy Agency forecasts for global energy trends to 2035 as the basis for its research, and it concluded that as carbonless energy becomes more available, and as government policies make steep cuts in carbon emissions, demand for oil, natural gas and coal will fall, which will lower prices.

The report said oil industry revenues could fall by $19.3 trillion over the period 2013-35, coal industry revenues could fall by $4.9 trillion and gas revenues could be $4 trillion lower. High-production-cost extraction such as deep-water wells, oil sands and shale oil will be most affected.

Even under business-as-usual conditions, however, the oil industry will still face risks from increasing costs and more capital-intensive projects, fewer exports, political risks and the declining costs of renewable energy.

The report continues: “The oil industry’s increasingly unsustainable dynamics … mean that stranded asset risk exists even under business-as-usual conditions. High oil prices will encourage the shift away from oil towards renewables (whose costs are falling) while also incentivizing greater energy efficiency.” Eventually, fossil fuel assets will be too expensive to extract, and the oil will be left in the ground.

As far as renewables are concerned, Kepler Chevreux says tremendous cost reductions are occurring and will continue as the upward trajectory of oil costs becomes steeper.

Kepler Chevreux’s report is consistent with others released in 2014. One report from U.S.’s Citigroup, titled “Age of Renewables is Beginning — A Levelized Cost of Energy (LCOE)” and released in March 2014, argues that there will be significant price decreases in solar and wind power that will add to the renewable energy generation boom. Citigroup projects price declines based on Moore’s Law, the same dynamic that drove the boom in information technology.

In brief, Citigroup is looking for cost reductions of as much as 11 percent per year in all phases of photovoltaic development and installation. At the same time, they say the cost of producing wind energy also will significantly decline. During this period, Citigroup says, the price of natural gas will continue to go up and the cost of running coal and nuclear plants will gradually become prohibitive.

When the world’s major financial institutions start to do serious research and quantify the declining costs of renewable energy versus the rising costs of fossil fuels, it becomes easier to understand the monumental impact that the Green Industrial Revolution is having.

Zero marginal cost

Marginal cost, to an economist or businessperson, is the cost of producing one more unit of a good or service after fixed costs have been paid. For example, let’s take a shovel manufacturer. It costs the shovel company $10,000 to create the process and buy the equipment to make a shovel that sells for $15. So the company has recovered its fixed or original costs after 800 to 1,000 are sold. Thereafter, each shovel has a marginal cost of $3, consisting mostly of supplies, labor and distribution.

Companies have used technology to increase the productivity, reduce marginal costs and increase profits from the beginning. However, as Jeremy Rifkin points out in “Zero Marginal Cost Society,” we have entered an era where technology has unleashed “extreme productivity,” driving marginal costs on some items and services to near zero. File sharing technology and subsequent zero marginal cost almost ruined the record business and shook the movie business. The newspaper and magazine industries have been pushed to the wall and are being replaced by the blogosphere and YouTube. The book industry struggles with the e-book phenomenon.

An equally revolutionary change will soon overtake the higher education industry. Much to the annoyance of the universities — and for the first time in world history — knowledge is becoming free. At last count, the free Massive Open Online Courses (MOOCs) had enrolled about six million students. The courses, many of which are for credit and taught by distinguished faculty, operate at almost zero marginal cost. Why pay $10,000 at a private university for the same course that is free over the Internet? The traditional brick-and-mortar, football-driven, ivy-covered universities will soon be scrambling for a new business model.

Airbnb, a room-sharing Internet operation with close to zero marginal cost, is a threat to change the hotel industry in the same way that file sharing changed the record business, especially in the world’s expensive cities. Young out-of-town high-tech workers coming to San Francisco from Europe use Airbnb to rent a condo or an empty room in a house instead of staying at a hotel. They do this because they cannot find a room with the location they need, or because their expense reimbursement cap won’t cover one of the city’s high-end hotel rooms. Industry analysts estimate that Airbnb and similar operations took away more than a million rooms from New York City’s hotels last year.

A powerful technology revolution is evolving that will change all aspects of our lives, including how we access renewable energy. An “Energy Internet” is coming that will seamlessly tie together how we share and interact with electricity. It will greatly increase productivity and drive down the marginal cost of producing and distributing electricity, possibly to nothing beyond our fixed costs.

This is almost the case with the early adopters of solar and wind energy. As they pay off these systems and their fixed costs are covered, additional units of energy are basically free, since we don’t pay the sun to shine or the wind to sweep around our back wall. This is the concept that IKEA, the Swedish furniture manufacturer, is exploiting. IKEA is test marketing residential solar systems in Europe that cost about $11,000 with a payback of three to five years. Eventually, we’ll be able to buy a home solar system at IKEA, Costco or Home Depot, have it installed and recover our costs in less than two years.

All three elements — carbon mitigation costs, grid parity and zero marginal costs — and others like additive manufacturing and nanotechnology are part of the coming Green Industrial Revolution. It will be an era of momentous change in the way we live our lives. It will shake up many familiar and accepted processes like 20th-century capitalism and free-market economics, reductive manufacturing, higher education and health care. More to the point, it will see the passing of the carbon-intensive industries.

Like the centralized utility industry, the fossil fuel industries and the large centralized utilities have business models predicated on continued growth in consumption. Once that nexus of declining prices for renewables and rising costs of extraction and distribution is crossed — and we are already there in several regions of the world — demand will rapidly shift and propel us into “global energy deflation.”

Think about it: No more air pollution strangling our cities, no more coal ash spills in rivers that our kids swim in, no more water tables being poisoned by fracking toxics. Better yet, think of no more utility bills and electricity that is almost free. These are among the unlimited opportunities that extreme productivity can provide.

* * *

SO WHAT DOES ALL THIS MEAN FOR BENICIA? Our lovely town, along with some of our neighbors, has enjoyed a stream of tax revenue from the fossil fuel industries for several decades. This will end as these industries lose the ability to compete in price with renewable energy. After all, if my energy costs drop to near zero, I’m not going to pay $5 for a gallon for gas or 20 cents per kilowatt hour. If Kepler Chevreux, Citigroup and the prescient investment bankers are right — and they usually are — oil company profits will begin a death spiral accompanied by industry constriction and refinery closings. Losing $19.3 trillion over two decades is a staggering amount even for the richest industry in world history.

Benicia should begin a long-range plan to replace Valero’s current tax revenues. Two decades from now this town will be very different — we are headed toward a city of gray-haired pensioners and retired folks too contented with perfect weather and amenities to sell homes to wage earners who, in fact, may not be able to afford big suburban houses and garages full of cars.

Instead, the Millennials are choosing dense urban living that’s close to work, and they prefer getting around by foot or bicycle, with some public transportation and the occasional Zipcar to visit the old folks in ‘burbs. The last thing pensioners want to do is pay extra taxes for schools and services they aren’t using, so raising taxes to meet the tax revenue shortfall is probably out of the question.

A similar revenue shortfall is probably facing the thousands of fossil fuel and utility industry employees who are thinking of retiring in the East Bay. Many plan to live on their stock dividends and pass the stock along to their heirs. This will be difficult as the industry begins the attrition phase of its cycle. They should see a financial planner and diversify.

To gamble Benicia’s safety and expand GHG emissions by approving Valero’s crude-by-rail proposal is illogical given that the oil industry is winding down and fossil-fuel will soon not be competitive with renewables. It would better for the Bay Area if we start to help Valero and the other refineries begin the long slow wind-down process, and gradually close them while the companies are still profitable. If we leave the shutdown process to when the companies start to struggle financially, they will just lock the gates and walk away, leaving the huge environmental cleanup costs to the local communities much the way the military does when they close bases.

There’s no good reason why Benicia residents should be saddled with the burden of a shuttered and vacant Valero refinery. We should begin the process as soon as possible and work with the refinery to not only find a way to replace the lost tax revenue, but to identify who will pay for the hazard waste and environmental cleanup.

At the very least, Benicia City Council should understand the move to a carbonless economy, read the Citigroup and Kepler Chevreux reports and the other emerging research, and accept the fact that Big Oil has begun its endgame. Leadership is about looking forward, not back, and identifying and solving problems at the most opportune time.

Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” set to be released in October by Elsevier.

Big Oil, Climate Change, Coal industry, Fossil fuels, Green Industrial Revolution, Oil Industry

Grant Cooke: Big Oil’s endgame has begun

Repost from The Benicia Herald
[Editor: Benicia’s own Grant Cooke has written a highly significant three-part series for The Benicia Herald, outlining the impending fall of the fossil fuel industry and concluding with good advice for the City of Benicia and other cities dependent on refineries for a major portion of their local revenue stream.  This is the first of three parts.  Read part part two by CLICKING HERE and part three by CLICKING HERE and .  – RS]

Grant Cooke: Big Oil’s endgame has begun

September 28, 2014 by Grant Cooke

Editor’s note: First of three parts to run on consecutive Sundays.

P1010301“THE STONE AGE CAME TO AN END, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil,” said Sheikh Ahmed-Zaki Yamani. The former Saudi oil minister is arguably the world’s foremost expert on the oil industry. In 2000, he introduced this extraordinary observation with an even more prescient one — to wit, “Thirty years from now there will be a huge amount of oil — and no buyers. Oil will be left in the ground,” he told the UK’s Telegraph.

A decade and half later, we are coming to the end of Big Oil, and the domination of the world’s geopolitics and economy by the fossil-fuel interests for the past century. Correspondingly, the carbon- and nuclear-powered centralized utility industry that was started by Thomas Edison in 1882 when he flipped the switch at the Pearl Street substation in Manhattan has begun its decline.

Over the years, Big Oil and its related industries and supporters have disrupted the way humans manage their affairs, and wreaked havoc on our environmentally fragile planet. Today, the loss of a major section of the West Antarctic Ice Sheet from global warming caused by excessive carbon-generated heat appears unstoppable.

That hasn’t stopped the dead-enders from fighting on. In February, North Carolina’s Republican governor turned his administration into a joke with a clumsy attempt to help Duke Energy, the nation’s largest utility, avoid cleaning up 39,000 tons of coal ash that was spilled into the Dan River. The Duke ash coal spill came a month after 10,000 gallons of 4-methylcyclohexane methanols, or MCHM, spilled into West Virginia’s Elk River, ruining the water supply of Charleston, the state’s capital. A second chemical, a mix of polyglycol ethers known as PPH, was part of the leak, the company involved, Freedom Industries, told federal regulators. The company uses the chemicals to wash coal prior to shipping for coal-powered utilities. More than 300,000 West Virginians were impacted and several hundred residents were hospitalized with various symptoms.

Closer to home in Northern California, we had the massive 2012 Chevron fire that sent toxic chemicals billowing into the air and caused respiratory problems for 15,000 Richmond residents. Chevron admitted to negligence as the cause of the fire. In 2010, PG&E’s neglect led to the horrific San Bruno gas pipeline explosion that killed eight, injured 66 and destroyed 38 homes. The California Public Utilities Commission fined PG&E $2.5 billion, the largest fine in U.S. utility history. PG&E now faces federal charges that it violated the U.S. Pipeline Safety Act.

For several years, U.S. oil oligarchs Charles and David Koch have made a mockery of American democracy by pouring hundreds of millions of dollars into smear campaigns against scientists, environmentalists and liberal politicians. More than any others in recent memory, the Koch brothers have manage to replace consensus and compromise with vitriol and dysfunction in U.S. politics.

Oil madness is not a strictly U.S. disease. Vladimir Putin, channeling the ghost of Joseph Stalin, recently swept up a huge chunk of Ukraine and threatened an astonished Europe that if it opposed him, the result would be a shutdown of the Russian natural gas that many see as vital to the EU’s economic recovery. And the world seems to have grown accustomed to Mideast mayhem, where the biggest transfer of wealth in world history — from the oil users to the oil suppliers — has led to social and political chaos, repression, suffering and death.

* * *

EVEN AFTER A CENTURY OF SUPPORT, the U.S. federal government grants the oil industry, the world’s richest, with about $4 billion a year in tax subsidies, and Exxon Mobil Corporation (the largest grossing company in the world) minimizes the taxes it pays by using 20 wholly owned subsidiaries in the Bahamas, Bermuda and the Cayman Islands to legally shelter cash from its operations in Angola, Azerbaijan and Abu Dhabi.

The coal industry is also favored with tax breaks, public land loopholes and subsidized railroads. A 2013 Harvard University study concluded that the total real economic costs from U.S. coal amounted to $345.3 billion, adding close to 17.8 cents per kilowatt hour to the cost of electricity generated from coal. Called “external costs, or externalities,” these costs are borne by the U.S. public.

Now the carbon-based industries, which include coal, oil, natural gas and related industries like centralized utilities and transmission line companies, are coming to the end of their socially useful cycle. Their resources are aging beyond economic justification and their business models are too inflexible to adapt to a new industrial era with a different energy model.

This new era of energy generation, storage and sharing is upon us. We call it the Green Industrial Revolution, and it is emerging as the next significant political, social and economic era in world history. As it takes hold, it will result in a complete restructuring of the way energy is generated, supplied and used. It will be a revolutionary time of extraordinary potential and opportunity, with remarkable innovations in science and energy that will lead to new ones in sustainable, smart and carbon-less economies powered by nonpolluting technologies like wind, geothermal, wave, river and solar, with their advanced technologies like flywheels, regenerative and maglev systems, and hydrogen fuel cells.

Community-based and on-site renewable energy generation will replace massive fossil fuel and nuclear-powered central plant utilities. New advances in efficient recyclable batteries and fuel cells will store energy for when it is needed. Smart green grids will share electricity effortlessly. Additive manufacturing will minimize wasted resources, and new sciences like nanotechnology will have a profound impact on business, careers, human health and the global economy.

This new era encompasses changes in technology, economics, business, manufacturing, jobs and consumer lifestyles. The transition will be as complete as when the steam-driven First Industrial Revolution gave way to the fossil fuel-driven Second Industrial Revolution. It is a monumental shift that is already under way and spreading rapidly around the world.

Industrial revolutions occur when a new energy source intersects with a new form of communication. In the First Industrial Revolution, steam was the energy source and the printing press provided the means to disseminate new ideas that accelerated scientific breakthroughs and the adoption of inventions. In the Second Industrial Revolution, the fossil fuel-driven internal combustion engine was the power source and analog communication provided the channel for new ideas and technologies.

Today, the digital age, with Internet access to almost all scientific knowledge and Facebook and Twitter-led social media, has intersected with renewable energy generation, hydrogen storage and smart grids. While vast fortunes were made in the fossil-fuel era by extracting natural resources and despoiling the environment, wealth in this new green era will come from digital and IT breakthroughs, intelligent machines and a host of environmentally sensitive inventions.

Many factors are coming together to hasten the Green Industrial Revolution. Putin’s march on Ukraine shocked Europe and stirred the region’s efforts to generate more renewable energy and cut ties to fossil fuel. Forty percent of Scotland’s domestic electricity generation comes from renewable sources, mostly tidal and wind. Denmark and other Nordic nations intend to generate 100 percent of their energy by mid-century. Germany’s Energiewende (Energy Transformation), which aims to power the country almost entirely on renewables by 2050, is accelerating.

Almost daily, scientists in university and national research laboratories are making breakthroughs in developing non-carbon energy sources. The chemistry department of the University of California-Davis recently figured out how to make carbon-less gasoline from straw. Advancements in nanotechnology are making electricity usage much more efficient.

China is considering a ban on new cars that run on fossil fuels, and major cities across the globe have limited the use of autos in downtown areas. Several nations — and California, too — are creating hydrogen highways. Norway, Sweden and Germany have them; California will open its hydrogen highway in 2016. Daimler, Honda, Chevrolet and most other major automobile manufacturers have hydrogen-powered fuel cell cars ready to go.

Grant Cooke is a long-time Benicia resident and CEO of Sustainable Energy Associates. He is co-author, with Nobel Peace Prize winner Woodrow Clark, of “The Green Industrial Revolution: Energy, Engineering and Economics,” to be released in October by Elsevier, of which this column is excerpted.

Bakken Crude, Bay Area Refineries, Crude By Rail, Oil Industry, Tar sands crude

East Bay projects are redefining refineries

Repost from The Contra Costa Times
[Editor: a shorter version of this article appeared in The Vallejo Times-Herald with byline Robert Rogers.  This seems to be a re-write by Tom Lochner and Rogers.  Interesting to see analysis of all five refineries in the Bay Area, labeled the “Contra Costa-Solano refinery belt, California’s largest.”  Good quotes from our colleagues Tom Griffith and Antonia Juhasz.   – RS]

East Bay’s oil refineries look to the future

Upgrades: Projects to allow flexibility to respond to changing energymarkets, but environmentalists raise concerns
By Tom Lochner and Robert Rogers, September 24, 2014

chevronThe East Bay’s first oil refinery opened in 1896 near the site of Porkopolis-of-the West, a defunct stockyard and slaughterhouse in the town of Rodeo. In the ensuing decades, four more East Bay refineries joined it, defining the region and powering its growth like no other industry.

A century later, the Contra Costa-Solano refinery belt, California’s largest, continues to cast an enormous shadow over surrounding cities, influencing their politics, their economies, even their aesthetics. And at a time when fossil fuel seems like yesterday’s energy source, the Bay Area’s five refineries have all embarked on ambitious projects to transform the way they do business — and ensure their economic viability in a rapidly changing global energy market for decades to come.

These projects, if seen to completion, will diversify the refineries’ operations by allowing them to process both dirtier, heavier oil and cleaner, lighter crude. Two refineries are looking to build their future, at least in part, on crude-by-rail operations, expanding available sources of petroleum while intensifying a controversy over whether that transportation method endangers East Bay communities.

All told, the upgrades will generate a collective investment in the East Bay of more than $2 billion, while adding hundreds of construction jobs. And once they are completed, proponents say, the projects should result in a substantial combined cut to greenhouse gas emissions, even though many environmentalists remain unsatisfied.

“While some of these local refinery projects promise to reduce greenhouse gasses, or pollution in general, that’s not nearly enough,” Tom Griffith, co-founder of Martinez Environmental Group, said in a recent email. “And it’s arguable given the cumulative costs.”

Catherine Reheis-Boyd, president of the Western States Petroleum Association, said oil companies are looking to increase efficiency through these refinery projects while meeting the state’s stricter environmental requirements — not an easy balancing act.

“They want to continue to supply California. And they want to contribute to the economy of the state,” she said. “What’s different right now is, a lot of the policies being contemplated in California, either at the state level or locally, are making it more difficult to achieve that. The biggest thing is, how do you balance our energy policy with our climate change policies?”

Even without the new projects, the five East Bay refineries are a critical part of the local economy.

In 2012, Chevron, Tesoro, Shell, Phillips 66 and Valero processed a total of about 800,000 barrels a day of crude oil, providing more than 7,500 direct jobs, according to industry sources. The oil and gas industry as a whole in the Bay Area generated $4.3 billion that year in state and local taxes, plus another $3.8 billion in federal taxes, according to an April 2014 Los Angeles County Economic Development Corporation study commissioned by the Western States Petroleum Association.

The biggest project underway is at Chevron, a $1 billion investment to upgrade parts of its century-old 2,900-acre Richmond refinery allowing it to refine dirtier blends of crude with no increase in greenhouse gas emissions, according to the project application.

Tesoro’s Golden Eagle refinery, near Martinez, has spent nearly as much on upgrades since 2008, and other projects are underway at Shell in Martinez, Phillips 66 in Rodeo and Valero in Benicia.

ENVIRONMENTAL CONCERNS

While these sweeping investments offer the promise of new jobs and cleaner, more efficient operations, many environmentalists complain that they don’t go far enough to curb emissions of greenhouse gases that contribute to global warming by trapping heat in the lower atmosphere, and sulfur dioxide and other pollutants that can cause serious health problems in people in surrounding communities.

And others warn that the improvements will smooth the path for highly flammable crude oil from North America’s Bakken shale region to the East Bay on railroad lines, raising the specter of spectacular explosions from train derailments, as happened last summer in Lac-Mégantic, Quebec, where 47 people died. Those fears have dominated debate over a proposed rail terminal at Benicia’s Valero refinery.

A growing number of detractors clamor for America to cast off the yoke of fossil-fuel dependency altogether and concentrate on efforts to develop cleaner, renewable energy.

“The missed opportunity here is for the oil companies to refocus their sights on the future of renewable energy,” Griffith said.

That aim, albeit more gradual, is the policy of the state under Assembly Bill 32, the California Global Warming Solutions Act of 2006. The legislation calls not only for reducing greenhouse gas emissions but also for reducing the state’s dependency on petroleum.

The refineries take that as a challenge but not a death warrant.

“The industry clearly thinks these refineries are here to stay and wants them to adjust to the changes of the makeup of the world’s oil supply, which is dirtier, more dangerous oil,” said Antonia Juhasz, an oil and energy analyst and author of the book “The Tyranny of Oil.”

Juhasz cited Canadian tar sands oil as the prime example of dirtier crude, and pointed to oil from the Bakken shale formation, mostly in North Dakota, as the prime example of the more dangerous variety.

Scott Anderson, a San Francisco-based senior vice president and chief economist for Bank of the West, agrees that the increases in renewable energy sources pose no threat to the future of oil refineries locally. In fact, he says, increasing global demand for refined oil products makes refineries like those in Contra Costa and Solano counties an “emerging growth industry for the U.S.”

“Demand is going to continue to increase, and there haven’t been any new refineries built in the U.S. in decades. So what we’re left with is these projects in existing refineries designed to improve efficiency and flexibility,” he said.

Here is a look at the major projects underway:

• At Tesoro’s Golden Eagle refinery, one of the biggest shifts has been bringing in up to 10,000 barrels per day of Bakken crude, which company officials say is critical to replace other sources of petroleum.

“Our challenge going forward is, as California and Alaskan crudes decline, to find replacements that keep the refinery a viable business,” General Manager Stephen Hansen said.

“One of those crudes is in the midcontinent, and the only way to get it here is by rail,” he added, noting that the refinery receives crude from ship, pipeline and truck after offloading it from rail cars in Richmond.

The refinery’s nearly $1 billion in capital upgrades since 2008 have focused not on increasing capacity but on using a wider variety of crude blends and processing them more efficiently, cleanly and safely. A $600 million replacement of the refinery’s coker, for example, has reduced annual carbon dioxide emissions by at least 400,000 tons, according to refinery officials.

• Shell’s Martinez refinery is seeking to shift some of its refining capacity toward lighter crudes, which it says will allow it to trim greenhouse gas emissions. In phases over several years starting in 2015, the refinery would build processing equipment and permanently shut down one of two coker units, resulting in a reduction in greenhouse gas emissions by 700,000 tons per year.

Shell spokesman Steve Lesher said the project involves replacing equipment, not expanding the facility beyond its 160,000 barrels per day. He also said the refinery currently processes heavier oil from the San Joaquin Valley but will be bringing in oil from other, as-yet-unidentified sources.

• Phillips 66 in Rodeo, the region’s oldest refinery, hopes to start recovering and selling the propane and butane that are a byproduct of its refining process, rather than burning them off in a highly polluting process called flaring or using them as fuel in refinery boilers.

The project would add new infrastructure, including a large steam boiler, propane and butane recovery equipment, six propane storage vessels and treatment facilities and two new rail spurs.

Phillips 66 has said the project, which was approved by the county Planning Commission in November, would reduce emissions of sulfur dioxide by removing sulfur compounds from refinery fuel gas, and reduce other pollutants and greenhouses gases, but those assertions have been questioned by environmentalists and the Bay Area Air Quality Management District, which wants further evaluation before signing off.

Two groups have filed an appeal to overturn the Planning Commission’s approval, and in what might be a first for the region, the air district is requiring that the project’s emissions and possible health effects must be considered cumulatively with other refinery-related projects in the Bay Area.

• Chevron’s plan, which received City Council approval in July after months of intense public debate, is touted as an important upgrade in an increasingly competitive global petrofuels market. While other refineries are gearing up to exploit the North American oil boom, Chevron will continue to get the bulk of its oil from the Persian Gulf and Alaska.

But the new modernization plan approved in July would allow the refinery to process crude oil blends and gas oils with higher sulfur content, which refinery officials say is critical to producing competitive-priced transportation fuels and lubricating oils in the coming decades.

In addition, it would replace the refinery’s existing hydrogen-production facilities, built in the 1960s, with a modern plant that is more energy-efficient and yields higher-purity hydrogen, and has the capacity to produce more of it.

• Valero Refining wants to build a $55 million crude-by-rail unloading facility at its Benicia refinery that could handle daily shipments of up to 70,000 barrels of oil transported in two 50-car trains daily from sources throughout North America. That plan has drawn sharp criticism from locals and leaders in Sacramento concerned about the hazards of increased rail shipments.

The project would not increase capacity at the refinery but replace crudes that are currently delivered by ship. Nor would it increase emissions from refinery operations, according to a project description on the city of Benicia’s website. The document also cites an air quality analysis indicating that rail cars generate fewer emissions locally than marine vessels.

The latest projects, while still drawing criticism, have turned some critics into allies. Henry Clark of the West County Toxics Coalition, who played a leading role in getting millions of dollars in settlements for North Richmond residents stemming from a chemical spill linked to the Chevron refinery in the early 1990s, has come out in support of the Chevron modernization.

“After all the negotiation and community input, we have a better project than we ever expected,” Clark said. “Fenceline communities like North Richmond are going to be next to a safer, cleaner facility and get to share in millions in community benefits.”