Tag Archives: Tar sands crude

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.
Bakken Crude, CPC-1232, Crude By Rail, Derailment, Explosion, Fire, Massive increase in crude-by-rail, Tar sands crude

CN Rail, BNSF Tackle Accidents as Group Seeks Ban on Oil Trains

Repost from Bloomberg News
[Editor:  Many groups have called for a moratorium on crude by rail; this may be the first time a highly respected national media outlet has highlighted this view in a headline.  New in this report: “The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes.”  – RS]

CN Rail, BNSF Tackle Accidents as Group Seeks Ban on Oil Trains

March 8, 2015, by Doug Alexander9:33 AM PDT
Illinois Train Derailment
Smoke and flames erupt from the scene of a train derailment near Galena, Illinois, on March 5, 2015. Photographer: Mike Burley/Telegraph Herald via AP Photo

(Bloomberg) — Canadian National Railway Co. is building a 1,500-foot (457 meter) long track to bypass a burning train that derailed Saturday in northern Ontario, while BNSF Railway Co. crews are working to reopen track in rural Illinois after a train carrying oil derailed three days ago.

CN crews teamed with outside specialists are fighting the blaze after an eastbound train carrying crude oil derailed and caught fire around 2:45 a.m. near Gogama, about 600 kilometers north of Toronto, cutting off rail traffic between Toronto and Winnipeg, Manitoba. The BNSF train jumped the tracks Thursday afternoon near Galena, Illinois, about 160 miles west of Chicago, according to the railroad, a unit of Warren Buffett’s Berkshire Hathaway Inc.

The accidents bring to four the number of oil train wrecks in North America in the past three weeks, according to the Center for Biological Diversity. The environment group is calling for a halt to transport of oil by rail, which has surged since 2009 with the boom in crude production from shale.

“We need a moratorium on oil trains,” Mollie Matteson, a senior scientist at the center, which has fought to protect wildlife for 26 years, said in a March 7 statement. “The oil and railroad industries are playing Russian roulette with people’s lives and our environment.”

The BNSF train was carrying oil from North Dakota’s Bakken shale formation for Mercuria Energy Group Ltd. Twenty-one of the train’s 105 cars, which include two sand cars as buffers, jumped the tracks Thursday afternoon. The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes. No injuries have been reported.

BNSF plans to reopen its mainline track Monday, Mike Trevino, a spokesman for the railroad, said in a phone interview Sunday.

40-Fold Increase

North American oil producers have increased their reliance on rail as new pipelines failed to keep pace with a surge of production from shale. The typical rail car carries about 700 barrels of oil, according to data posted on BNSF’s website. The number of oil carloads rose more than 40-fold from 2009 through 2013, when 435,560 carloads were shipped, and kept climbing last year to an estimated 500,000, according to the Association of American Railroads.

The CN derailment damaged a bridge over a waterway as five tank cars ended up in the water, with some of them on fire, the Montreal-based railway said in a Saturday statement. Crews have placed three lines of booms on the river to contain the crude. Drinking water supplies to Gogama Village and a nearby Mattagami First Nation community are not affected, CN said.

“Fire suppression activities will begin later today,” spokesman Jim Feeny said Sunday in an e-mailed statement. “Residents will likely see occasional smoke plumes of various shades of black, gray or white. This is expected, normal, and poses no threat to the public or the environment.”

Pipeline Limits

The railcars, carrying crude oil from Alberta, are CPC-1232 models railroads began to roll out in 2011 to boost safety.

The accident marks the second derailment of a CN oil train in three weeks near Gogama. A train with 100 cars, all laden with crude from Alberta bound for eastern Canada, derailed on Feb. 14 about 30 miles north of the town. A total of 29 cars were involved in that incident and seven caught fire, a spokesman said at the time.

Investigators from the Transportation Safety Board of Canada are on site, which is 37 kilometers from the previous accident, agency spokesman John Cottreau said Sunday by phone. The train was headed to Levis, Quebec, when 30 to 40 cars derailed.

“Billions of gallons of oil pass through towns and cities ill-equipped to respond to the kinds of explosions and spills that have been occurring,” according to the Center for Biological Diversity. “Millions of gallons of crude oil have been spilled into waterways.”

Bakken Crude, CPC-1232, Crude By Rail, Derailment, Explosion, Fire, Insurance and liability, Massive increase in crude-by-rail, Rivers, Tar sands crude, Train braking systems, Volatility

WALL STREET JOURNAL: In Recent Derailments, Newer Tougher Railcars Failed to Prevent Rupture

Repost from The Wall Street Journal

Wrecks Hit Tougher Oil Railcars

Sturdier train cars built to carry crude oil have failed to prevent spills in recent derailments 

By Russell Gold, March 8, 2015 9:36 p.m. ET
Galena
Fire continued Friday after a train carrying 103 railcars loaded with crude oil from North Dakota’s Bakken Shale derailed south of Galena, Ill. Photo: Associated Press

In a string of recent oil train derailments in the U.S. and Canada, new and sturdier railroad tanker cars being built to carry a rising tide of crude oil across the continent have failed to prevent ruptures.

These tank cars, called CPC-1232s, are the new workhorses of the soaring crude-by-rail industry, carrying hundreds of thousands of barrels a day across the two countries.

But the four recent accidents are a sign that the new tanker cars are still prone to rupture in a derailment. The ruptures could increase momentum for rules aimed at further reducing the risk of shipping crude by rail.

In the last month, there have been significant derailments of crude-carrying trains in West Virginia and Illinois, plus two in Ontario, including one Saturday in a remote part of the Canadian province.

Each train was hauling the new tank cars, which weren’t able to prevent the crude from escaping, leaking into one river and exploding into several giant fireballs.

“These new type of cars were supposed to be safer, but it’s obvious these cars are not good enough or safe enough,” said Claude Gravelle, a Canadian lawmaker who represents the northern Ontario area where two recent derailments occurred.

On Sunday, emergency workers were still trying to extinguish fires in multiple tank cars after 30 cars of a 94-car Canadian National Railway Co. train laden with Alberta crude derailed Saturday near Gogoma, Ontario. Five cars landed in a waterway.

The energy industry began using rail to transport oil in 2008 because it was a fast and inexpensive way to move growing volumes largely from the Bakken Shale in North Dakota.

In addition, building new pipelines has been expensive and politically fraught. In February, President Barack Obama vetoed legislation to approve the Keystone XL pipeline, which has been under review by the Obama administration for more than six years.

The robustness of tanker cars has become a major focus of efforts to improve the safety of shipping crude by rail. Such shipments have soared from about 21,200 barrels a day in 2009 to 1.04 million barrels a day by the end of 2014, according to government statistics.

As the U.S. shale boom gathered speed, the safety of growing crude shipments by rail has attracted greater scrutiny in the U.S. and Canada, especially after a 2013 derailment in Lac-Mégantic, Quebec, that claimed 47 lives.

Speed limits have been adopted, and a new rule in North Dakota that will take effect next month requires crude from the state to be treated to make the crude less combustible.

The cars involved in the two Ontario derailments and the incidents in West Virginia and Illinois all met the standards introduced by the rail industry in 2011 as a significant upgrade over older models, and were built with thicker shells and pressure-relief devices.

Fiery_TracksThere are about 60,000 of the new CPC-1232 tanker cars in use hauling crude oil across North America, as well as about 100,000 of the older models, says the Association of American Railroads.

Last year, the Transportation Department proposed additional new rules for tank cars carrying crude, presenting three main options. One would stick with the CPC-1232, but the other two would make new cars stronger and retrofit existing cars.

The White House is now reviewing these options and is expected to issue recommendations in May.

Ed Greenberg, a spokesman for the Association of American Railroads, said the railroad-industry trade group “wants all tank cars carrying crude oil, including the CPC-1232, to be upgraded by retrofitting or taken out of service. Railroads share the public’s deep concern regarding the safe movement of crude oil by rail.”

The American Petroleum Institute, the oil industry’s trade group, says it also supports upgrades to the tanker fleet to improve safety.

Cynthia Quarterman, a former director of the Pipeline and Hazardous Materials Safety Administration who stepped down last October, said the recent incidents “confirm that the CPC-1232 just doesn’t cut it.”

Tanker-car improvements alone won’t be enough to reduce overall risk, she added. “The crashworthiness of the tank cars does need to be raised, but that’s not enough. There needs to be a comprehensive solution, including better brakes to help minimize pileups.”

The four recent crashes also highlight some of the other risks of carrying crude by rail that seem to be persistent.

Two of the derailments involved Bakken crude from North Dakota, which contains a high level of gas, making it more volatile than other kinds of crude. In the Mount Carbon, W.Va., accident in February, nearly two dozen tankers full of crude derailed and were engulfed in flames, some exploding into fireballs that rose more than 100 feet in the air.

Tests on the crude showed that its vapor pressure, a measure of volatility, exceeded a new regulatory standard that will go into effect next month.

The recent derailments involved long trains that are essentially mobile pipelines as much as a mile long. The BNSF Railway Co. train that derailed and caught fire in Galena, Ill., 160 miles northwest of Chicago, was roughly a mile long and carrying 103 railcars loaded with crude from North Dakota’s Bakken Shale. BNSF is a unit of  Berkshire Hathaway Inc.

“We certainly believe that a stronger tank car is necessary and appropriate,” said Mike Treviño, a BNSF spokesman. A Canadian National spokesman said the company is in favor of stronger tank-car design standards.

The train in the Canadian National accident in Ontario over the weekend was 94 cars long, while the West Virginia train had 109 tankers full of North Dakota crude oil.

Canadian Transport Minister Lisa Raitt referred to “very long” unit trains last month when she proposed a new tax on crude shipments by rail aimed at building an insurance fund. “With that increased length of car, there’s an increased risk associated with it,” she said.

The number of derailments on long-haul tracks in the U.S. has declined 21% since 2009, according to the Federal Railroad Administration. But the number of train accidents related to “fire” or “violent rupture” climbed to 38 last year from 20 in 2009.

Canadian regulation, CPC-1232, Crude By Rail, Derailment, Fire, Rivers, Tar sands crude, Water quality

Gogama derailment – 35 oil tanker cars go off rails — 5 of them into the Makami River

Repost from CBC News

Gogama derailment – 35 oil tanker cars go off rails — 5 of them into the Makami River

Mar 08, 2015 6:14 PM ET

As crews continued to tackle a fire Sunday set off after 35 CN Rail cars carrying oil went off the tracks just outside of Gogama, Ont., the province’s transportation minister and his caucus colleague went after the federal government for its rail safety record.​

“The federal government, responsible for rail safety, must do more to protect our communities and the environment,” tweeted Glenn Thibeault, Liberal MPP for Sudbury and parliamentary assistant to Ontario’s environment minister.

“The rail cars involved are new models, compliant with the latest federal regulations. Yet they still failed to prevent this incident,” Thibeault said in a statement.

Gogama Train Derailment 2
Five of the oil tankers are in the Makami River, four kilometres outside of Gogama. This is the third CN derailment in northern Ontario in less than a month, (@GlennThibeault/Twitter)

​CN Rail has confirmed that five of the 35 tanker cars that detailed are in Makami River, which is part of the Mattagami River System. The train was 94 cars long and all were tanker cars carrying crude oil from Alberta.

Firefighters are working to control the flames and smoke from the burning oil tankers, about four kilometres outside of Gogama.

This is the third CN derailment in northern Ontario in less than a month, and the second in the same area. Crews are still working to clean up a similarly fiery derailment near the community just three weeks ago.

That prompted Ontario Transportation Minister Steven Del Duca to say in a statement Sunday that he “will be contacting Federal Transport Minister Lisa Raitt, CN and CP this week to reiterate our government’s serious concerns with respect to ensuring our railways are safe.”

There’s no sign that drinking water or air quality near the site of the train derailment have been affected, according to CN Rail’s latest update Sunday afternoon.

The company has launched its emergency response plan, bringing in experts in engineering, operating, environment and dangerous goods. CN crews have already started constructing a 460-metre stretch of bypass track to divert around the derailment site.

Chief operating officer Jim Vena apologized to local residents for the disruption caused by the derailment, adding that he is heading to the scene.

‘Very hard to accept’

Rick Duguay, who runs Gogama’s general store, woke early Saturday morning to what he described as a strange banging noise. Duguay has lived in the community his entire and is accustomed to the sound of trains, but said this sound was different.

He’s relieved the derailment happened outside of town.

“Luckily it’s not right here at the railroad crossing, but it’s close enough and very hard to accept the things going on,” Duguay said.

He wants to see changes put in place to make railroads safer, but doesn’t think the two recent crashes are enough to prompt change.

“The worry was always there that a train wreck could happen in town … but I mean, we lived with it all our life.”

Morris Neveau said the two derailments so close together have left many in the Mattagami First Nation, just downstream from the recent derailment, unnerved.

“It affects our thinking and how we live, you know, because we live in fear, eh?”

‘What can we do now?’

Gogama residents spent much of the weekend looking up at the large plume of black smoke looming over the town.

Gogama Train Derailment
CN says indications are that ‘the drinking water supply to Gogama Village and the nearby First Nation are not affected at this time.’ (@GlennThibeault/Twitter)

Dawn Simoneau, 33, said her two daughters have been asking questions about the derailment.

“Like, ‘Are the fish going to be okay?’ and they are concerned as well,” said  .

Simoneau, a life-long Gogama resident, has lived her entire life with trains rumbling past and an ever-present fear that something might happen.

“This is just always the way it’s been. And now … we’re thinking, ‘What can we do now to make sure this doesn’t happen again?'”

The derailment has some residents talking about the Energy East oil pipeline, which has faced opposition in other parts of northern Ontario.

Nickel Belt New Democrat MP Claude Gravelle said he didn’t want to get into that debate while visiting Gogama on Saturday.

“Well, that’s a different discussion for a different day, but there certainly are some concerns about pipelines. But there are concerns about rail cars. What’s the safest? Accidents are accidents.”

The intense heat of the fire has kept investigators away from the site so far, but investigators hope to find some answers Sunday about how much oil was spilled and what caused the derailment.

With files from The Canadian Press