Tag Archives: Union Pacific

Plumas Co. Grand Jury: Scathing indictment of hazardous material transportation through Feather River Canyon

Repost from Plumas County News
[Editor:  This Grand Jury report is thorough and well written – an excellent resource and alarming in its analysis.  Its findings and recommendations (near the end of the report) might be a valuable resource for communities everywhere.  There are a number of references to “after-action reports.”   Question for our research: how can concerned citizens obtain such reports?  – RS]

Hazardous material transportation a roulette wheel for potential disaster

Feather Publishing

6/5/2015

Editor’s note: This is the fourth in a series of midterm reports submitted by the 2014-15 Plumas County Civil Grand Jury.

SUMMARY
Early in the morning Nov. 25, 2014, a Union Pacific freight train derailed in the Feather River Canyon just east of Belden, sending 11 railcars full of corn off the tracks and down the steep embankment. In a press statement shortly afterward, a State Office of Emergency Services official was quoted as saying, “We dodged a bullet” because the train was only carrying corn.

Based on a rash of recent derailments and spills of hazardous materials happening throughout the United States and Canada, “a bullet” in fact grossly underestimates the potential devastation, magnitude and scope of the consequences left from these horrific incidents. Luckily, it was only corn that spilled. With the recent surge in crude-by-rail domestic crude oil transports between oil fields in North Dakota, Texas, Colorado and Pennsylvania and Bay Area refineries through the Feather River Canyon, the aftermath could have wrought far-reaching disaster had it been the high-flammable Bakken crude in the tanker cars.

According to sources, the number of crude-by-rail trains passing through the Feather River Canyon has tripled in number within the past three years. With developments in hydraulic fracking technology coming about in domestic oil fields, the petroleum market has seen a profound shift from importing foreign oil to extracting it in domestic oil fields in the United States. As a result, thousands of jobs have been created and oil prices have plummeted since this recent boon in domestic oil production. In addition, other hazardous chemicals are transported throughout the United States by rail and by truck. According to the Federal Railroad Administration, only the railroads are required to know what’s in the cars they’re shipping.

The grand jury found it extremely important to examine the recent corn derailment other recent crude-by-rail disasters in the U.S. and Canada to determine whether Plumas County agencies and private transportation operators are adequately prepared in “worst-case” scenarios. In respect to the Plumas County corn derailment, because the corn was relatively harmless and could be immediately dealt with without invoking hazardous material protocols, local, state and railroad officials and crews did an excellent job in containment of the spill and clearing and repairing the tracks within the impact area.

As a result of a quick and well-coordinated response, the Feather River Canyon rail route was restored and passing rail traffic three days after the initial derailment. Nonetheless, the grand jury has found the incident to be a practical review for a county hazardous material spill and useful opportunity to compare and contrast the corn spill with other recent more disastrous spills. Plumas County did indeed “dodge the bullet,” and from this incident the grand jury believes it will provide valuable findings and recommendations which may in turn act as a catalyst and cast fresh perspectives and insights on dealing with future potential spills and hazardous material disasters.

BACKGROUND
In review of the Feather River Canyon corn spill Nov. 25, 2014, a total of 11 cars full of raw corn derailed and spilled down a steep embankment near Rich Bar. Luckily, the spill was only tons of kernels and husks, and the incident proved to have had only a minimal impact, environmentally speaking.

The corn spill turned out to be good opportunity to test the Plumas County emergency response system. The incident was first reported by Union Pacific Railroad Dispatch in Omaha, Nebraska, to the Plumas County Warning Center, stating, “12 rail cars close to Rich Bar at Hwy 70 MPM 265 on the Canyon Sub,” and that “12 rail cars loaded with grain derailed, it is unknown whether the cars are upright or on their sides, and that the derailment occurred in a canyon next to a stream or river and it is unknown at this time if the waterway was impacted.”

According to the after-action report on the incident, the State Warning Center notification included the Plumas County sheriff, California Highway Patrol, Plumas County Environmental Health, State Water Quality Board, State Department of Toxics, State Drinking Water, Cal Office of Emergency Services, U.S. Environmental Protection Agency and the California Department of Fish and Wildlife. The accident occurred around 3 a.m. Nov. 25. By 8 a.m. Union Pacific had placed containment booms 100 feet down the Feather River. Fortunately, none of the cars landed in the river and only a small amount of corn spilled into the river.

One of the important facts that should be emphasized here concerns containment supplies and where they are located. It took roughly five hours for the railroad to have containment booms in place. According the Plumas County officials, Union Pacific does not have any spill containment kits in Plumas County. A formal request from the grand jury was emailed to Union Pacific safety representatives asking about the whereabouts of containment kits — according to their response (the grand jury received a very quick email reply that day), Chico, Roseville and Reno, Nevada, were the closest railroad facilities that had emergency containment kits.

Other revelations from the after-action report revealed that the Union Pacific Railroad Dispatch Center could not pinpoint the exact location in the Feather River Canyon to the Warning Center. In addition, dispatch was not “forthcoming” on what was spilled, although the center did state that the Plumas County Sheriff’s Department was notified that “there were no injuries, no hazardous materials released, and that no assistance was needed.” The corn spill after-action report in its conclusion posted its “corrective actions from railroad incident” review. Some of the recommendations are summarized here:

—Push Union Pacific dispatch for better initial report information.

—Use GPS to pinpoint incident location.

—Coordinate with the U.S. Forest Service and the California Department of Fish and Wildlife for any incident in the Feather River Canyon.

—The incident commander for any hazardous materials incident is designated as the primary law enforcement authority.

—Follow Plumas County Hazardous Materials Response Plan.

—The Office of Emergency Services will try to find a local Union Pacific dispatch contact person.

Evidently, the cause of the corn derailment was a section of the railroad track breaking or separating. Ironically, Union Pacific reported that all railroad ties along the Feather River Canyon were replaced in 2013. Union Pacific conducts track inspections at regular intervals and reportedly it conducts Feather River Canyon inspections every three months. Nonetheless, the corn derailment exemplifies that rail accidents can happen at any time.

In respect to the other crude-by-rail spills, the same results were concluded. Train speed was not a factor and rail and bridge inspections were documented before the incidents occurred. The crude-by-rail derailments were all on relatively flat landscapes. The Feather River Canyon route, with its rocky and unstable terrain, is much more prone to outside factors that can lead to derailments.

According to 2013 Plumas County Hazard Mitigation Plan, in 2007 and in 2012 a rockslide struck and derailed passing trains. The 2007 slide derailed 22 rail cars; 20,000 gallons of peanut oil ruptured from several cars and 30,000 gallons of highly flammable denatured alcohol also spilled down the embankment. The 2012 incident was caused by a large boulder that fell onto the tracks and was struck by a Burlington Northern Santa Fe train. Over 3,000 gallons of diesel fuel spilled from the train into the Feather River.

The recent crude-by-rail spills throughout the U.S. showcase the dramatic rise in domestic oil production and rail shipments to coastal refineries. According to railroad data, in 2008 there were reportedly about 10,000 oil cars carrying domestic crude. In 2014, there were over 400,000 crude-by-rail train cars, representing a 4,000 percent increase. Furthermore, the type of crude oil coming from shale deposits from Bakken oil fields (commonly referred as “light crude”) is high combustible. In almost every instance in which trains carrying Bakken crude derail and tanker cars are punctured, fiery detonation results. First responders and emergency service crews can merely watch it burn and concentrate on containment perimeters rather than extinguishing the oil fire. Without sensationalizing a disaster that occurred in another place, had any of the recent oil tanker disasters happened along the Feather River route, particularly at locations near population areas including downtown Portola, Blairsden, Twain and Keddie, where the railroad tracks are relatively close, the extent of the damage could have been far different.

The grand jury would first like to acknowledge as a matter of fact that hazardous chemical hauling is an integral part of our economy. As potentially dangerous as they are, crude oil, gasoline and chemicals are used safely every day. Without them our economy and all the things we do, all the products we require in our daily lives, the way we move would be changed; just about everything revolves around the consumer and the safe use of chemicals and their byproducts.

That being said, the vital role of both the national carriers of hazardous materials and our public safety officials at each level is to make safety the No. 1 priority. Safety, defined here, entails the complete processing of any particular product, from its extraction and refinement to transportation, delivery and ultimate usage.

Railroads carry over 40 percent of our nation’s freight. When conducted safely and securely, commodity transport over rail is proven to be economically the best and most efficient mode of transportation in terms of fuel efficiency, supply chain costs and safety. Intermodal traffic refers to the transport of goods on trains. Today, two major rail companies, Union Pacific and Burlington Northern Santa Fe, transport intermodal goods through Plumas County. According to the Union Pacific Railroad, chemical transport is roughly 17 percent of total payload being carried. The breakdown of goods, however, is not representative of actual train payloads. In other words, trains passing through the county could have any number of railcars full of one particular commodity or another and the cars may be full or empty.

The grand jury has found that the mission statements, top priorities, primary focus and action plans are remarkably similar in commitment, scope and language between hazardous material producers, transport carriers and government officials at every level. In other words, everyone directly engaged in the production and distribution of everything delivered over rail, by air or on pavement — as well as their overseers — share a common pledge to make safety their top priority in the public domain and the environment.

In addition, the grand jury has studied the after-action reports of many of the most recent crude-by-rail derailments and public highway chemical transport accidents and learned that in nearly every case, there were inspections completed days or weeks before the incidents, rail and highway speeds were under the mandated limits and handling of the volatile payloads were properly done according to federal safety mandates.

According to official published reports, there has been more oil spilled from trains in the past two years than in the previous four decades. Between 1975 and 2012, around 800,000 gallons of crude oil was spilled in the U.S. By comparison, according to data from the Pipeline and Hazardous Materials Safety Administration data, over 1.5 million gallons of crude oil was spilled from rail cars.

As a result of the series of ruptures and fires that have recently plagued the U.S., federal regulators are considering higher safety standards and further upgrades such as thicker tanks, rollover protection for chemical carrying tanker cars, electronic braking systems on individual rail cars and increased track inspections.

The U.S. Department of Transportation has issued a notice for crude oil and high-hazard flammable trains tanker cars, calling for a phaseout of the older CTC-111A tanker car (commonly known as the DOT-111). Currently there are still around 300,000 CTC-111A cars still being used throughout the U.S. These tanker cars each generally carry between 20,000 and 30,000 gallons of oil. According to the U.S. Department of Transportation the older CTC-111As have the following safety flaws:

—Thin skins: Upon derailment, tanks often rupture.

—No head shields: Shields on both ends of tanker cars can prevent puncturing during collisions.

—Poor protection over valves and fittings.

—Lack of pressure relief devices for boiling liquid expanding vapor explosions.

In short, the older CTC-111A tanker cars were not designed for hauling flammable materials.

The new replacement tanker car, called the CPC-1232 (CPC is a railroad industry standard that stands for casualty prevention circular), features new standards for hazardous material railway transport. As of November 2011, all new tank cars built for transporting crude oil and ethanol must follow new standards, including half-height shields, thicker tank and head material, normalized steel, top fitting and gauge protection and recloseable pressure relief valves.

As of March 2015, there are reportedly 60,000 of the newer CPC-1232 tanker cars hauling crude in the U.S. In response to all the recent crude-by-rail derailments, Union Pacific, CSX and Burlington Northern Santa Fe have all stepped up in increased safety inspections and adapting new safety standards. The railroads are now relying on distributed power units, which place locomotives in the middle and/or both ends of the trains. Studies show that placing power locomotives on both ends and in the middle enhances safety because it even spreads physical forces on the train.

This revelation is significant — the 1991 Dunsmuir toxic chemical derailment was caused by this very reason. The power locomotive was placed in the rear of a 97-car train and light and empty cars flanked a full tanker car filled with 19,000 gallons of metam sodium. The investigation of the Dunsmuir disaster found that because all the power was placed at the rear of the large train, the uneven power distribution caused the train to buckle.

Metam sodium is a soil fumigant. When it spilled into the upper Sacramento River — because of poor containment action and the nature of toxicity of the chemical — it killed every plant and fish for approximately 40 miles downstream.

Railroads also use wayside electronic detectors to monitor railroad tracks. New safety detecting technology is also being used in their prevention and risk reduction process that features use of lasers and ultrasound to identify rail defects.

The grand jury has learned that many of the hazardous material railcars do not belong to the rail carrier but to the company producing and transporting the product. For example, most of the older CTC-111A and newer CPC-1232 tanker cars are actually owned by the crude oil fracking companies and refineries.

The number of trains carrying crude oil and other hazardous materials is actually based on sheer economics. For example, in 2014, when oil prices hovered around $100 a barrel, the price sent domestic oil production to an all-time high. Crude-by-rail oil shipments though Plumas County increased substantially as coastal refineries in Martinez and Benicia purchased more oil from the Bakken oil fields in North Dakota and other domestic oil fields in Texas and Oklahoma.

DISCUSSION
The grand jury chose a review of several recent U.S. crude-by-rail derailments for comparative reasons. The after-action reports provide valuable findings and recommendations from disasters that can happen anywhere, anytime. The reports are particularly invaluable to first responders, and public safety agencies.

After-action reports detail each incident from the time of the initial report that entails the scope and severity of the incident. In response to the above disastrous incidents, the U.S. Department of Transportation and the Federal Pipeline and Hazardous Materials Safety Administration issued a “call to action” in January, calling on “rail company executives, associations, shippers and state and federal agencies to discuss how stakeholders can prevent and mitigate the consequences of rail accidents that involve flammable liquids.”

The grand jury also believes that examining the recent corn spill in Plumas County and comparing it with the way other derailments were handled can lead to information and recommendations that enhance and hopefully improve upon the vanguards (prevention, preparedness, response, recovery) of any future local potential disaster.

The tenets from the PHMSA call to action report produced similar recommendations — a strategic approach that promotes “effective preincident planning, preparedness, response, outreach and training.” One important point that the grand jury kept hearing was a difficulty and lack of communication between the railroad and local emergency management officials. One of the key elements the PHMSA call to action report specifically addresses is the absolute need for interaction and relevant guidance to first responders and local emergency management teams to “safely and effectively manage incidents.”

The report also called for preincident planning and communication with all organizations to learn about what is being transported. Emergency response teams must have the training to safely contain and protect themselves and the contaminate zone affected. The need for a local hazmat team cannot be overemphasized.

The following crude-by-rail disasters summarized in this grand jury report illustrate some of the potential circumstances other public safety agencies have had to deal with. Despite all the mandated safeguards dealing with hazardous material hauling, i.e., safe speeds, upgraded rail cars, railcar and track inspections, specialized training, etc., accidents can happen anytime and anywhere within transportation routes of hazardous materials.

Plumas County and the surrounding 12 counties in northeastern California lie within Region 3 of the State Emergency Services System. At the time of this report, Plumas County has no hazmat team. Upon any need for hazmat response, Plumas County must contact nearby Butte or Shasta teams. In more serious incidents, Plumas County would have to enlist state or federal emergency service agencies.

Lac-Megantic, Canada: In July 2013 a train carrying 72 tank cars full of crude oil exploded after the train braking system released, sending the unmanned train on a downhill run into the Canadian town of Lac-Megantic, Quebec. The runaway train crashed into a crowded downtown pub, killing 47 people and destroying over 30 buildings. According to the National Transportation Safety Board investigation, the train had been idling and unmanned for over seven hours and the emergency braking system disengaged. The train then rolled down the tracks for several miles, picking up speed and eventually derailing into downtown Lac-Megantic. Of the four disaster crude-by-rail spills mentioned in this report, the results from the official investigation determined that sheer neglect (train left running and unattended and braking system released, causing a runaway unmanned train) was the primary factor in the disaster.

Aliceville, Alabama: A 90-car train carrying Bakken crude derailed in November 2013 and exploded. Nearly 750,000 gallons of its 2 million gallon load spilled in wetlands in Alabama. Officials still assail cleanup operations today and report that containment booms and absorbent products were ineffective.

Lynchburg, Virginia: In April 2014 a CSX train carrying crude oil derailed and caught fire, spilling thousands of gallons of oil into the James River. Oil fires from the ruptured tanker cars burned for two days. Reports indicate that the tanker cars were all the new CPC-1232 model.

Casselton, North Dakota: In December 2013 a Burlington Northern Santa Fe train hauling grain derailed and fell across another set of tracks. Shortly after, a crude oil train heading in the opposite direction struck the derailed cars and derailed itself. Several tanker cars exploded. A slow response to the first incident set up the chain of events for the explosive second incident.

Montgomery, West Virginia: In February 2015 a train carrying crude oil in West Virginia derailed sending 27 tanker cars off the tracks. Twelve of those rail cars exploded, not at once, but randomly for up to 12 hours. The cause is still under investigation.

In the event of a local hazardous material disaster, the Plumas County Office of Emergency Services is notified and it determines the scope and magnitude of the incident and then contacts the Plumas County Board of Supervisors. Depending on the incident assessment of the Plumas County OES, the BOS has the authority to officially declare an emergency, which allows the Plumas County OES to request help from relevant local, state and federal agencies.

Through leadership and partnership with all first responders, each incident goes through a foundational process that includes prevention, preparedness, response and recovery. The first three steps of the mitigation process rely on the safe containment of the hazardous material as quickly as possible with a special focus on protecting human life (isolate, deny entry, protect life safely, mitigate). The recovery phase, however, can last for years. The Dunsmuir toxic spill, for example, seriously impacted the area for several years after. At the time of this report, the crude-by-rail spills were all still in the recovery phase. Fortunately, the Plumas County corn derailment had a minimal effect on the environment. The first three phases of emergency services mitigation at the corn spill served as a great training exercise for all agencies and first responders involved.

Recovery, in this case, was at a minimum in terms of environmental impact.

In regard to Plumas County hazmat, the grand jury has learned that the county must rely on local volunteers to devote their time as first responders.

Plumas County has had a difficult time finding enough volunteers to cover the entire county, and retaining volunteers after hazmat certification and specialized training has not worked out. All the local fire districts within Plumas County have been actively seeking volunteers.

FINDINGS
F1) The grand jury finds that communication between Plumas County public safety agencies and railroad officials is profoundly inadequate.

F2) The grand jury finds that the lack of spill and containment equipment along rail routes in Plumas County poses a direct threat to public safety and the natural environment.

F3) The grand jury finds that relying on hazmat response teams from surrounding counties compromises response times and threatens Plumas County public safety and natural resources.

F4) The grand jury finds that the lack of training of first responders concerning hazardous materials that they may have to deal with could have profound consequences.

F5) The grand jury finds that population centers within Plumas County that are in close proximity to railroads have grossly inadequate protection resources.

RECOMMENDATIONS
R1) The grand jury recommends Plumas County Emergency Services and the Plumas County Environment Health Agency establish direct local contact with Union Pacific and Burlington Northern Santa Fe and any hazardous material carrier that operates within the county.

R2) The grand jury recommends that Plumas County negotiate with railroad officials to have spill containment booms and absorbent kits in key strategic storage facilities in Plumas County.

R3) The grand jury recommends that the BOS find the means to provide hazmat training and certification to in-county first responders.

R4) The grand jury recommends more hazardous material training between first responders and all those involved in mitigating hazardous material disasters. Union Pacific, for example, offers tank car safety training in Roseville at the California Office of Emergency Services Specialized Training Institute every year. The training involves practically all aspects of hazardous material incident mitigation.

R5) The grand jury recommends that the BOS and Plumas County OES conduct a “what-if” evaluation for population centers within Plumas County that are within potential “blast zones” of crude-by-rail tanker cars.

Positive Train Control – background, progress, funding

Repost from the Miami Herald

Rail safety technology improvements delayed by cost, complexity

Curtis Tate, McClatchy Washington Bureau, May 14, 2015
Emergency personnel work at the scene of the deadly Amtrak train wreck Wednesday in Philadelphia. Federal investigators are trying to determine why the Amtrak train jumped the tracks in a wreck that killed eight people and injured dozens. Patrick Semansky – AP

Most of the nation’s railroads will not meet a Dec. 31 deadline for installing collision-avoidance technology that could have prevented Tuesday’s deadly Amtrak crash in Philadelphia.

Congress in 2008 required that railroads install positive train control by the end of this year, and although the rail industry has made progress on the $9 billion system, equipping 60,000 miles of track and 22,500 locomotives with the technology has proved to be complicated.

The technology has to work across not only the seven largest freight railroads but also 20 commuter railroads, Amtrak and dozens of smaller carriers. It requires 36,000 wireless devices that relay information to train crews and dispatchers from signals and track switches.

It also must work in densely populated regions where multiple rail lines intersect and are heavy with passenger and freight traffic, such as Chicago, Southern California, New York and New Jersey.

“Each of these systems has to be able to talk to each other,” said Ed Hamberger, the president and CEO of the Association of American Railroads, an industry group.

Even lawmakers who months ago wanted to hold the industry to the 2015 deadline have softened their position in recognition that the system simply won’t be ready.

Hamberger told reporters Thursday that the industry needs another three years just to get the equipment installed, and two more to make sure it works. Of the 60,000 miles of track where the system is required, he said only 8,200 miles would be ready by year’s end.

A bill approved by the Senate Commerce Committee in March would give railroads until 2020 to complete the task. But Sen. Dianne Feinstein, D-Calif., who wrote the legislation that contained the 2015 deadline, said a five-year blanket extension was not the answer.

“In my view, that is an extremely reckless policy,” she said in a statement Thursday. Feinstein has introduced a bill that would extend the deadline on a case-by-case basis.

The technology was not in place at the site of Tuesday’s derailment, on Amtrak’s Northeast Corridor, the busiest passenger railroad in the country. The National Transportation Safety Board said Wednesday that positive train control would have prevented Train 188 from approaching a 50 mph curve at more than 106 mph.

Eight people were killed and more than 200 were injured. It was Amtrak’s first fatal accident on the Northeast Corridor since a January 1987 crash that killed 16 people. In that instance, positive train control could have stopped a freight locomotive from running past a stop signal into the path of the Amtrak train.

The NTSB has recommended positive train control for decades. In January, the board included the technology on its “Most Wanted” list of safety improvements. It did not endorse giving railroads an extension beyond December.

Amtrak actually may finish its installation of the system on the entire 457-mile passenger rail corridor between Washington and Boston ahead of most railroads.

“We will complete this by the end of the year,” Amtrak President and CEO Joe Boardman said Thursday at a news conference in Philadelphia.

The rail industry supports the Senate bill that would give the companies a five-year deadline extension, and even some of the industry’s toughest critics in Congress are prepared to give it more time.

According to the Federal Railroad Administration, freight hauler BNSF and Metrolink, a commuter railroad in Southern California, are positioned to meet the original deadline.

An August 2008 collision near Chatsworth, Calif., prompted Congress to pass the Rail Safety Improvement Act requiring positive train control. Twenty-five people were killed when a Metrolink commuter train ran past a stop signal and into the path of a Union Pacific freight. According to the NTSB accident report, the Metrolink engineer, who was among those killed, was texting just before the crash.

Another fatal crash, on New York’s Metro North commuter railroad in December 2013, renewed calls for positive train control. Four people were killed when a New York-bound train jumped the tracks in the Bronx. The train was traveling 80 mph when it hit a 30 mph curve.

Positive train control is designed to prevent a train from running a red signal or approaching a slow curve too fast. Accident investigators don’t yet know why Train 188 was going more than twice the appropriate speed when it derailed in Northeast Philadelphia, but they do know the accident was preventable.

“The Amtrak disaster shows why we must install positive train control technology as soon as possible,” Sen. Barbara Boxer, D-Calif., said in a statement Thursday.

One thing Congress did not do when it required railroads to install the system was give them any money to do it. When asked Thursday how much the government had contributed to the freight railroads to assist with positive train control, Hamberger, of the Association of American Railroads, replied, “Zero.”

President Barack Obama’s fiscal 2016 budget includes $825 million to help commuter railroads install the technology. The president’s 2009 economic stimulus provided $64 million to Amtrak for its installation. But that wasn’t enough, the railroad said in a report justifying its 2014 budget request.

Overall, Amtrak has spent $110.7 million since 2008 to install positive train control.

“Additional funding to fully comply with PTC requirements is necessary,” Amtrak said.

Richard Harnish, the president of the Midwest High Speed Rail Association, a group that advocates for passenger rail improvements, said in a statement Thursday that positive train control was delayed because Congress gave railroads an unfunded mandate.

“Congress needs to invest in the safety of our transportation system,” he said.

Santa Maria Refinery’s controversial oil train project is topic of public forum Thurs. 4/2/15

Repost from KCBX FM Central Coast Public Radio

Santa Maria Refinery’s controversial oil train project is topic of public forum

By KCBX Newsroom, Tue March 31, 2015 5:16 pm
A train transporting oil through San Jose, one of the many municipalities that has expressed concern over the Phillips 66 rail project.
A train transporting oil through San Jose, one of the many municipalities that has expressed concern over the Phillips 66 rail project. Credit Flickr member Drew Jacksich

A controversial plan to ship oil by train to the Phillips 66 Santa Maria Refinery will be the topic of a public discussion Thursday night in Grover Beach.

Key players from both sides of the issue are scheduled to attend. Representatives from Phillips 66, as well as the Oil Refinery Watch Group [Mesa Refinery Watch Group] are expected to present their arguments for and against the rail project.

The forum is being organized by Karen Bright with the South County Democratic Club of San Luis Obispo County. Bright says this issue is important to many people in the area.

“We had put it out to our members—various things and items, subject matter that they’d like to have presentations on throughout the year—and this was the one that rose to the top,” said Bright. “I think because it’s so current and there are so many differences of opinion, so we just wanted to get the facts from both sides.”

A growing number of cities, counties, and other governmental bodies located along the Union Pacific rail line have expressed concern over the project. They’ve sent official letters to the San Luis Obispo County Planning Commission.

Phillips 66 says a quarter million barrels of crude oil would arrive at the facility each week, should the rail connector be approved.

The company says that crude would be transported on modern rail cars that exceed current regulatory safety standards.

MEETING DETAILS:

  • Wednesday, April 1, 2015
  • The Grover Beach Trouville Community Center, 1230 Trouville Avenue, Grover Beach, CA
  • Meeting starts at 7:00 p.m.
  • Contact: South County Democratic Club of San Luis Obispo County

California Crude Trains: How Much Oil Is Actually Coming In and Where Is It Coming From?

Repost from North American Shale Blog
[Editor: Notwithstanding the disparaging remarks about crude-by-rail opponents and politics in California, this is an interesting report by a pro-industry analyst.  – RS]

California Crude Trains: How Much Oil Is Actually Coming In and Where Is It Coming From?

California has become ground zero for legal opposition to crude-by-rail projects. Opponents decry derailments, toxic vapors, and other ills.[i]  Yet despite the dire images painted by crude-by-rail’s opponents, the reality on the ground in California has been quite mundane thus far. The high-water mark to date for California railborne crude supplies was approximately 39 thousand barrels of oil per day (kbd) in December 2013 (Exhibit 1).

To put this number in perspective, California refineries typically process an average of around 1.7 million barrels per day of crude – meaning that at the crude-by-rail peak, only about one barrel in 50 of the state’s crude supply came in by rail.[ii]  Presently, the number is closer to one barrel in 100 – certainly not the overwhelming flood of trains opponents fear. And to that point, even supplying one-quarter of California’s total crude oil needs would only require about six to seven crude oil unit trains per day. To put this in context, the Colton Crossing east of Los Angeles by itself can see more than 100 freight trains per day.[iii]

Exhibit 1: California Crude by Rail Sources

exhibit 1
Source: California Energy Commission, Alberta Office of Statistics and Information

Where California’s Railborne Oil Imports Come From

For much of the past six years, light, low-sulfur Bakken crude and heavier, higher-sulfur Western Canadian Select (“WCS”) dominated rail imports into California. Canadian supplies show a clear correlation with how cheap WCS is relative to Maya, a heavy crude oil from Mexico that is shipped by tanker and offers a proxy for what heavy, sour, waterborne crude oil imports into California will cost. The spread between WCS and Maya prices matters because it only makes sense for refiners to purchase WCS barrels if they are sufficiently discounted that the buyer still comes out ahead after adjusting for rail transport costs, which can amount to approximately $20/barrel for manifest trains and $15/barrel for oil moved on unit trains.[iv]

For reference, “manifest trains” are mixed cargo trains where a 100-car freight train might include 20 or 30 tanker cars carrying oil. Unit trains, on the other hand, carry only one type of freight, meaning that all 100 to 120 cars carry crude oil. This maximizes economies of scale and significantly reduces transportation costs. Shipments of Canadian crude oil into California traditionally rode on manifest trains, but in November 2014, Union Pacific brought its first unit train of crude oil from Western Canada into California, to a terminal near Bakersfield.[v] The route is currently dormant as WCS crude’s discount to Maya was less than $10 per barrel in January 2015, according to official price data, making it uneconomical to import the Canadian oil by rail.[vi] Unit trains’ lower costs relative to the previously used manifest trains will likely have oil trains rolling from Alberta to California once again if the WCS discount widens to around $15 per barrel.

California has also seen increased supplies of light, low-sulfur crude oil from New Mexico in recent months. The most likely explanation for this is that continued strong oil production in Texas, New Mexico, and the Midcontinent are inundating the Gulf Coast with light, sweet barrels. Indeed, this author’s models using official Energy Information Administration data strongly suggest that Gulf Coast refineries have hit a physical “wall” where they are not able to sustainably use more than 65 percent domestic crude oil to supply their plants, because facilities designed for heavier, higher-sulfur oils cannot run at maximal efficiency with light, low-sulfur crude feedstocks.[vii] This crowded market reduces the potential realized value of crude to certain Permian Basin producers and makes California attractive as a clearing destination because crude can be railed from the Permian Basin to California for as little as $7-8/bbl, according to Tesoro.[viii]

What the Future May Hold

The bottom line is that California’s existing crude-by-rail terminal capacity is massively underutilized at present. The state’s two largest facilities alone – Kinder Morgan’s terminal at Richmond and new terminal near Bakersfield – can offload more than 140 kbd at full capacity. In comparison, crude-by-rail import volumes were less than 20 kbd in December 2014, the last month for which data are available (Exhibit 2). 

Exhibit 2: California Crude by Rail Capacity vs. Actual Import Volumes

exhibit 2
Source: California Energy Commission, Company Reports

Current terminal capacity is sufficient for approximately two unit trains per day of crude – 140 to 150 kbd – to enter the state. California’s fickle politics make forecasting crude-by-rail volumes a tough exercise. That said, this author believes that if oil prices recover to at least $75/bbl, California’s railborne crude imports will likely exceed 200 kbd by early 2016. Under those conditions, existing terminals would increase their capacity utilization and larger price differentials would attract additional Canadian heavy crude, as well as Bakken and other light, sweet grades from the Rocky Mountain states and the Permian.


[i] “GROUPS SUE TO STOP DAILY 100-CAR TRAIN DELIVERIES OF TOXIC CRUDE OIL TO BAKERSFIELD TERMINAL,” Earthjustice, January 29, 2015, http://earthjustice.org/news/press/2015/groups-sue-to-stop-daily-100-car-train-deliveries-of-toxic-crude-oil-to-bakersfield-terminal; See also Alexander Obrecht, “Environmental Groups Ramp Up the Crude-by-Rail Fight in the Courtroom,” BakerHostetler North America Shale Blog, October 6, 2014, http://www.northamericashaleblog.com/2014/10/06/environmental-groups-ramp-up-the-crude-by-rail-fight-in-the-courtroom/
[ii] “FACTBOX – California crude sources and oil-by-rail projects,” Reuters, July 21, 2014, http://af.reuters.com/article/energyOilNews/idAFL2N0PM26S20140721
[iii] “Colton Flyover Supports L.A.-Area Business,” Union Pacific Railroad, September 5, 2013, http://www.uprr.com/newsinfo/community_ties/2013/september/0905_colton.shtml
[iv]Yadullah Hussein, “Oil-by-rail economics suffers amid narrowing spreads,” Financial Post, February 9, 2015, http://business.financialpost.com/2015/02/09/oil-by-rail-economics-suffers-amid-narrowing-spreads/?__lsa=c711-5acd
[v] Bruce Kelly, “UP begins Canada-to-California CBR service,” Railway Age, November 25, 2014, http://www.railwayage.com/index.php/tag/CBR/feed.html
[vi] “Heavy Crude Oil Reference Prices, Monthly,” Alberta Office of Statistics and Information, https://osi.alberta.ca/osi-content/Pages/OfficialStatistic.aspx?ipid=941 (last accessed March 18, 2015)
[vii] Detailed explanation of models available; please contact author at gcollins @ bakerlaw.com.
[viii] Company investor presentation, September 2014, “Rail Costs to Clear Bakken,” slide 11, http://phx.corporate-ir.net/phoenix.zhtml?c=79122&p=irol-presentations

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