Crude oil joins rail industry staples as key revenue producer
By Jarrett Renshaw, Mar 16, 2015 2:05pm EDT
(Reuters) – U.S. railroads generated almost as much money last year hauling crude oil and sand, largely used in hydraulic fracturing, as they did moving industry staples like field crops and motor vehicles, according to a Reuters’ analysis of newly released federal data.
The previously unreported company data submitted to the U.S. Department of Transportation provides the latest piece of evidence of the blossoming marriage between the energy and rail industries, forged on the back of the U.S. shale oil boom.
Led by Berkshire Hathaway-owned BNSF Railways, the seven largest railroads operating in the United States generated $2.8 billion in gross revenue from hauling crude oil in 2014, up nearly 30 percent from 2013, according to company data filed with the federal government and released earlier this month.
The $2.8 billion figure puts crude oil in sixth place among similarly classified products, trailing industry standards like coal, field crops and motor vehicles, the analysis shows. Sand and gravel, an often overlooked winner in the shale boom, generated $2.7 billion last year in gross revenue.
Crude oil provides the biggest return on a per-carload basis, drawing $5,700 in gross revenue for each car that originated on the network, more than double than what coal brings.
The continuing financial success comes as the industry faces threats from a massive drop in oil prices and impending new U.S. regulations aimed at public safety that could impose additional costs.
“Will the major carriers go belly up? No,” said Barton Jennings, a professor of supply chain management at Western Illinois University. However, short-line cariers that rely upon crude for the bulk of their business may be exposed, he said.
Overall, the seven major carriers reported U.S. profits of $14.4 billion last year, led by Union Pacific and BNSF, which combined accounted for 67 percent of the industry’s U.S. profits, the analysis shows.
KING CRUDE
The biggest player in the U.S. crude rail business is BNSF, which dominates North Dakota, home to the Bakken shale.
BNSF’s gross revenue from crude oil rose to $1.48 billion from $63 million in 2010. Gross revenue from hauling sand and gravel climbed to $651 million last year, a more than 300 percent jump from 2010.
The growth in crude and sand hauling helped BNSF boost profits, which climbed from $2.6 billion in 2010 to $4.4 billion last year.
(Reporting By Jarrett Renshaw; Editing by Jessica Resnick-Ault and Jonathan Oatis)
A Washington county puts the brakes on a new oil-train facility
In the wake of recent oil-train derailments, Skagit County wants Shell to do a full environmental review.
Jeremy Miller, March 12, 2015
BACKSTORY
Railroad cars full of flammable crude oil are rattling through the West, hauling more than six out of every 10 barrels produced in the Bakken to refineries, according to a 2014 report. Washington state has already seen a major uptick in oil-train traffic and at least one derailment. Shell Oil wants to build a new facility north of Seattle that would take in six 100-car locomotives per week (“Flash point,” HCN, 11/24/14).
FOLLOWUP
Last month, following West Virginia’s massive oil train derailment and explosion and reports of a Bakken train leaking oil in Washington, Skagit County blocked Shell’s proposed facility until the company completes a full environmental review. The U.S. Department of Transportation predicts an average of 10 oil train derailments per year over the next two decades. But the recent drop in oil prices means fewer trains are rolling out of the Bakken; perhaps — at least for now — there’s less chance of another disaster.
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.”
Day after derailment, cleanup and restoration begin
By Rusty Marks, Staff writer, Tuesday, February 17, 2015
MOUNT CARBON — Cleanup crews began removing the hulks of derailed and burned-out railroad tank cars Tuesday evening, and residents began to get water and electricity back, after a train carrying crude oil derailed, caught fire and exploded in western Fayette County on Monday.
Emergency shelters, set up after hundreds of residents were evacuated from the area, were closed Tuesday evening after CSX, the company whose train derailed, provided hotel rooms for them.
The CSX train, hauling 107 tank car loads of Bakken Shale crude oil from North Dakota to a transportation terminal in Yorktown, Virginia, derailed in Adena Village near Mount Carbon and Deepwater about 1:30 p.m. Monday, setting one house ablaze and causing numerous tank cars to burn and explode. The train also included two cars of sand, which were used as buffers at either end of the train, CSX officials said.
At a briefing Tuesday afternoon, Gov. Earl Ray Tomblin said officials expected hundreds of residents without electricity to have service restored sometime Tuesday evening.
State officials said fewer than 800 people were affected by outages related to lines damaged by the initial fire. They also said they believed between 100 and 125 residents were evacuated or displaced, while the Federal Emergency Management Agency put that number at 2,400 in its daily report.
Local officials said about 100 people took refuge at emergency shelters Monday night at Valley High School in Smithers and the Armstrong Volunteer Fire Department.
Most people who had been staying at the shelters moved out once CSX offered hotel rooms, and others decided to stay with friends or relatives following the fire.
Billy Dunfee was the last to leave the shelter at Valley High School, having spent the night Monday. “They set us up on cots in the back gyms,” he said.
But the school didn’t have water Monday night, so Dunfee decided Tuesday morning to either stay with relatives or take CSX up on it’s offer for a hotel room. Dunfee wasn’t sure how long it would be before he would be allowed to return to his home.
Smithers police and volunteer firefighters from the area set up a makeshift water distribution center at Valley High School late Monday, and handed out water throughout the day Tuesday.
Smithers Police Chief Gerald Procter said the owner of J&J Trucking in nearby Canvas had a tractor-trailer filled with pallets of water, and took it upon himself to bring the truck to Smithers.
Volunteers had passed out water to about 60 cars by noon, with some drivers picking up water for friends and family members.
“I already came out and picked up water for six households before,” said Cannelton resident Jay Pauley. “I’m getting water for five more. There’s about 20 houses in the section where I live.”
CSX spokesman Gary Sease said the railroad was working with the Red Cross and other relief organizations to help those who had to leave their homes because of the train derailment.
The Federal Railroad Administration’s acting administrator, former Charleston resident Sarah Feinberg, and chief safety officer, Robert Lauby, were among several investigators from the FRA and the federal Pipeline Hazardous Materials Safety Administration who were on the scene Tuesday.
“Once the site is secured, officials will begin the investigation into the cause of the derailment,” U.S. Department of Transportation spokeswoman Suzanne Emmerling said Tuesday morning.
Officials at the West Virginia American Water treatment plant in Montgomery, downriver on the Kanawha-Fayette county line, were told to shut down their water intake as a precaution. The intakes were reopened Tuesday afternoon, after three rounds of testing by the company, with the help of the West Virginia National Guard, showed “non-detectable levels” of the components of crude oil in the Kanawha River.
The approximately 2,000 customers of West Virginia American Water’s Montgomery system — including people in Montgomery, Smithers, Cannelton, London, Handley and Hughes Creek — were told to boil their water before using it. Bottled water stations were being set up at the Montgomery Town Hall and at Valley High School.
Kelley Gillenwater, spokeswoman for the state Department of Environmental Protection, said that the fires were keeping DEP officials from being able to fully examine the site of the derailment to determine what sort of containment and cleanup is going to be needed.
Full details of water sampling being done by the state were not immediately available, but Gillenwater said that so far the results had come back “non-detect.” She said that despite initial reports, none of the train cars that derailed actually ended up in the Kanawha River.
Tomblin declared a state of emergency in Fayette and Kanawha counties after the derailment. “It appears things are starting to come back to normal,” the governor said at Tuesday’s news conference.
Randy Cheetham, a regional vice-president with CSX, said at the same press conference that the section of track where the derailment occurred had last been inspected on Friday. He said CSX and transportation officials have not yet determined the cause of the wreck.
Cheetham said the derailment started with the third car behind two locomotives pulling the train, and continued to the 28th car. Work crews were able to pull most of the cars away from the site of the fire.
An engineer and conductor on the train were not hurt, Cheetham said. He said the tank cars set fire to one home at the site, and the homeowner was treated for smoke inhalation — the only injury reported related to the derailment.
The West Virginia University Institute of Technology in Montgomery canceled classes for the rest of the week. In a statement, WVU Tech officials said water service on campus isn’t expected to be restored for another two or three days, and the school’s residence halls would close at 5 p.m. Tuesday. WVU Tech students will be temporarily housed at the University of Charleston’s residence halls at the former Mountain State University in Beckley, and at the Marriott Courtyard hotel in Beckley if necessary.
In April 2014, a train carrying crude oil on the same North Dakota-Virginia route derailed in Lynchburg, Virginia — one of several incidents involving oil-carrying rail cars in recent months that have brought increased scrutiny to the transport of oil via rail.
In October, officials with the state Department of Homeland Security blacked out details about the frequency of CSX oil train shipments, the amounts of oil transported and the routes the trains took through West Virginia from a Charleston Gazette Freedom of Information Act request for data on Bakken crude oil shipments through the state, citing security concerns and saying some of the information was proprietary to CSX.
Asked Tuesday whether the state would reconsider that stance in light of Monday’s derailment, Tomblin said there were probably still security concerns over releasing the information. However, he said state officials would take another look at the question.
Amtrak’s thrice-weekly Cardinal service, which runs through Fayette County on its way between Chicago and New York City, listed today’s run as canceled on the Amtrak website. Friday’s run is listed as “sold out,” which the service often does to block ticket sales on annulled runs. Tickets are being sold online for Sunday’s run.
Staff writers Ken Ward Jr., Erin Beck and Phil Kabler contributed to this report.
