Category Archives: Bakken Crude

Concerns of communities heard at meeting of the Cal Energy Commission in Crockett CA

Repost from The Contra Costa Times

Contra Costa residents pushing for more information on crude by rail

By Karina Ioffee, Bay Area News Group,  03/27/2015 05:22:01 PM PDT

CROCKETT — With plans in the works to transport crude oil by rail through Contra Costa County cities to a Central California refinery, local residents say they want assurances that state and federal agencies are doing everything they can to keep them safe.

Less than 1 percent of crude that California refineries received in 2014 came by rail, but the negative perception of transporting oil by train has grown sharply because of highly publicized accidents. A derailment in Quebec in 2013 killed 47 people and destroyed parts of a town; another in West Virginia contaminated local water sources and forced the evacuation of hundreds of residents.

Tanker cars sit on railroad tracks near the Shell Refinery in Martinez on May 6, 2013.
Tanker cars sit on railroad tracks near the Shell Refinery in Martinez on May 6, 2013. (Kristopher Skinner/Bay Area News Group)

If the Phillips 66 plans are approved, an estimated five trains a week, each hauling 80 tank cars, could travel through Contra Costa cities, then Berkeley, Oakland and San Jose along the Amtrak Capitol Corridor, before arriving at the refinery in Santa Maria.

At a community meeting here Thursday, residents peppered a representative from the California Energy Commission about what kind of emergency plans were in place should a train derail and explode, what timelines the federal government had for new and improved tanker cars, and whether railroad companies have enough insurance in case of a catastrophic event.

Many came away unsatisfied with what they heard, saying they were terrified by the prospect of rail cars filled with Bakken crude from North Dakota, which is lighter and more combustible than most types of petroleum.

“The oil companies are getting all the benefits and the communities who live near them are taking all the risk,” said Nancy Rieser, who lives in Crockett and is a member of Crockett-Rodeo United to Defend the Environment, a community organization.

Her group is pushing the railroad industry to release its risk-assessment information, required for insurance purposes, to better understand what kind of plans companies have in an event of an emergency and whether their insurance policies would cover a large incident. Railroad companies have so far declined to release the information.

“You need to have hospitals at the ready, you need to have first responders, so if you keep it a secret, it’s as if the plan didn’t exist,” Rieser said. “You can’t be coy with the communities.”

Regulations about rail safety are written and enforced by the Federal Railroad Administration, and the California Public Utilities Commission focuses on enforcement in the state, employing inspectors to make sure railroads comply with the law. There is also an alphabet soup of state agencies such as the Office of Emergency Services (OES), the Office of State Fire Marshal (OSFM), California Environmental Protection Agency (CalEPA) and the Office of Spill Prevention and Response (OSPR).

But to what extent the agencies are working together to prepare for crude-by-rail transports and how they’re sharing information remains unclear. Last year, an Interagency Rail Safety Working Group, put together by Gov. Jerry Brown, produced a report recommending that additional inspectors be hired to evaluate tracks, rail cars and bridges; more training for local emergency responders; and real-time shipment information to local firefighters when a train is passing through a community. According to the report, incidents statewide involving oil by rail increased from three in 2011 to 25 in 2013.

Many at Thursday’s meeting said the only way to prevent future accidents was to ban the transport of crude by rail completely, until all rail cars and tracks had been inspected.

“These trains are really scary because we live so close to them and we feel the effects deeply through emissions and air pollution,” said Aimee Durfee, a Martinez resident. Statewide, Californians use more than 40 million gallons of gasoline each day, according to the California Energy Commission.

Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University, said railroad companies are already shifting to new cars — outfitted with heat shields, thicker tank material and pressure-relief devices — although the process is gradual because of the sheer volume of the fleet, estimated at more than 25,000. New rulings specifying tanker car standards and timelines about phasing in updated technology are also expected this May.

“No human activity is completely risk-free,” Weinstein said, adding that the spill rate for trains transporting crude was roughly four times higher than accidents involving pipelines.

“Communities are resistant to crude by rail and they are against pipelines, but they also want to go to the pump and be able to fill up their car.”

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

‘Get them off rails now,’ Four US Senators say of some oil tank cars

Repost from McClatchy News
[Editor:  Thank you to co-sponsors of Sen. Cantwell’s bill: Senators Patty Murray of Washington, Tammy Baldwin of Wisconsin and Dianne Feinstein of California, all Democrats.  See also: the Cantwell press release (including a video), and the text of the legislation.  – RS]

‘Get them off rails now,’ Sen. Cantwell says of some oil tank cars

By Curtis Tate, March 25, 2015
US NEWS RAILSAFETY 3 MCT
A DOT-111A tank car rolls past the Amtrak platform at Newark, Del., on July 28, 2013. CURTIS TATE — MCT

WASHINGTON — Sen. Maria Cantwell, D-Wash., introduced legislation on Wednesday that would immediately ban the least sturdy tank cars from carrying crude oil after a series of recent fiery train derailments.

The bill also would require the U.S. Department of Transportation to regulate the volatility of crude oil transported by rail, particularly oil extracted from shale formations in North Dakota’s Bakken region.

Cantwell’s bill follows four recent derailments in West Virginia, Illinois and Ontario that have drawn new scrutiny to the large volumes of oil moving by rail across North America.

The White House Office of Management and Budget is reviewing new regulations intended to address the safety concerns, but Cantwell told reporters Wednesday that the changes couldn’t wait.

“We know that we need to move on this legislation now,” she said. “Derailments keep happening, and we need to take responsibility to ensure that our communities are safer.”

Sens. Patty Murray of Washington, Tammy Baldwin of Wisconsin and Dianne Feinstein of California, all Democrats, are co-sponsoring Cantwell’s bill.

In addition to addressing tank cars and volatility, the legislation also would increase penalties for rail and energy companies that don’t meet federal safety requirements.

The bill would authorize funding to train emergency responders and require railroads to provide more information about oil shipments to state and local emergency officials. It also would require railroads to have comprehensive oil spill response plans.

The measure aims to remove from crude oil service the kinds of tank cars that have proved vulnerable to punctures and fire exposure in a series of derailments over the past two years.

Those include the older DOT-111 cars involved in a July 2013 derailment in Quebec that killed 47 people, as well as newer, industry-designed CPC-1232 cars involved in the most recent four derailments.

All lack thermal insulation and outer jackets to better protect the cars in derailments, and Cantwell’s bill would require tank cars carrying oil have those features.

“There are a bunch of tank cars that are unacceptable now,” she said. “So we’re saying get them off the rails, now.”

Cantwell noted that the rail industry asked the Transportation Department for an improved tank car design four years ago and that her bill would help give the industry some certainty.

“I’m willing to tell them right now: Here’s the standard that I think should be set,” she said.

Crude oil trains are unsafe, period. Stopping them will protect our communities and climate

Repost from Oil Change International
[Editor:  An important article by Lorne Stockman, Research Director
at Oil Change International in Washington, D.C.  Quote: “For the sake of a mere 4% of total petroleum passing through the United States, we say stop the trains now, protect North America’s communities and build an energy system that protects the climate and our citizens from a reckless oil industry.”  – RS]

Crude oil trains are unsafe, period. Stopping them will protect our communities and climate

By Lorne Stockman, March 26, 2015

rail-blog-featured v1The five major oil train derailments and explosions that occurred less than a month apart in the U.S. and Canada recently has refocused attention on the reckless practice of moving millions of gallons of crude oil at a time on a train through the continent’s communities.

The only sensible and safe position on crude-by-rail is clear. We need an immediate moratorium on crude-by-rail shipments in North America. This needs to stop now.

Based on the recent developments and disasters, we now know that nothing short of a moratorium on moving crude by rail in North America is required, until the safety of our communities and climate can be fully guaranteed.

The evidence that the practice is unsafe is undeniable. It’s hard to imagine a more terrifying proposition than one of these trains derailing and exploding in your community.  It is not a disaster waiting to happen, it has already happened over and over again.  That the regulator has still not acted is inexcusable.

Before we go into the details of what it would take to make it safe and why that will not happen without essentially banning the practice, let’s quickly examine what is at stake in terms of U.S. crude oil supply. This is important because it seems that the main reason the Obama Administration has failed to act is because it somehow considers the supply of crude oil enabled by crude-by-rail to be too important to effectively regulate.

This is unacceptable in and of itself, but when you see what’s really at stake regarding our community safety and climate crisis, the assumption appears to be beyond comprehension.

According to our estimates based on Association of American Railroads (AAR) data, about 850,000 barrels per day (bpd) of U.S. crude oil was loaded onto trains in the last quarter of 2014.  In addition, the Canadian National Energy Board reported that around 175,000 bpd of Canadian crude oil was exported by rail to the U.S. in the same period. For simplicity’s sake let’s call it one million bpd.

Meanwhile, the petroleum products consumed in the U.S. in the last quarter of 2014 averaged just less than 19.5 million bpd.  But 24 million bpd passed through the system as the U.S. exported an average of around 4.5 million bpd, including both crude oil and refined products.

In fact, while some pretty wild claims have been made about the current oil boom leading to “energy independence”, the U.S. still imported over 9 million bpd of crude oil and products in the same period.

So given the enormous amount of total petroleum passing through the U.S. system, what would be the impact of banning crude-by-rail immediately until we can work out whether it’s worth risking another disaster? The answer is not very much.

Crude-by-rail accounts for 4.1% of the total petroleum moving through the system (consumption plus exports) or 5.1% of total U.S. petroleum consumption.

What about U.S. oil production? That stood at 9.1 million bpd in Q4-14. The 850,000 bpd that went by rail is just 9.3% of that.

So over 90% of U.S. production traveled by means other than rail and there is in fact spare pipeline capacity in North Dakota and elsewhere. (See here for North Dakota government list of pipelines, refineries and rail facilities)

CBR---Total-Petroleum-Q4-14-Chart
Source: Oil Change International, U.S. Energy Information Administration, Association of American Railroads, Canada National Energy Board. … NOTE: Difference between Production plus Imports vs. Consumption is Refinery Gains and Natural Gas Liquids entering the refinery system.

Any way you cut it, crude-by-rail carries a very small percentage of the oil in our country, yet continues to pose an outsized risk to communities around the country. The build out of terminal capacity suggests that the practice could grow especially if the U.S. crude oil export ban is lifted. This would trigger a rush to move crude to the east and west coasts for export, threatening the communities along the way with much more frequent crude train traffic.

OCI_Box-CrudeTrains-Unsafe
CLICK TO ENLARGE

Are we really unable to ensure public safety because we’re worried that we may impact the transportation of 9% of U.S. oil production or 5% of our oil consumption?  Is government’s role really to weigh the probability of a major death toll against a fraction of energy supply or is it to protect the public? Aren’t our communities and our climate worth more than 1/20th of U.S. oil consumption?

Without crude-by-rail, the industry will have to produce only slightly less than it currently does, which is much more than it produced only a few years ago.  Is that really worth bomb trains endangering 25 million American every year?

The current effort to make crude-by-rail safer through increased regulations is in fact sadly misguided and inadequate. That crude-by-rail is inherently unsafe is painfully obvious.

That it cannot be addressed through looking at any single variable, such as tank car standards or the volatility of a particular crude oil grade, was made clear by a Department of Energy report released earlier this week.

That report aimed to look at whether Bakken crude oil is more volatile than other crude oil. It concluded that there was insufficient information about the crude oil in the Bakken to assess that at this stage. But in the press release the DOE made an important statement regarding the focus on any one particular cause of the terrifying crude-by-rail explosions that have so far occurred.

“The report confirms that while crude composition matters, no single chemical or physical variable — be it flash point, boiling point, ignition temperature, vapor pressure or the circumstances of an accident — has been proven to act as the sole variable to define the probability or severity of a combustion event. All variables matter.”

This goes to the heart of why crude-by-rail cannot be made safe.

It’s not Bakken crude, it’s all crude oil. It’s not the vapor pressure or boiling point of the crude; it’s the incredible weight of a 120-car train carrying 3.5 million gallons of crude oil and the pressure that exerts on rails making derailments more likely. It is the enormous kinetic energy that such a train exerts on tank cars during a derailment. It is the speed the trains travel and the inability of any tank car, including the more robust designs proposed in the draft rulemaking, to withstand the impact of a unit train full of oil derailing at anything near the slowest speeds that would maintain a viable rail freight system. (The tank car design proposed in the draft PHMSA rule has been shown to puncture at speeds of between 12 and 18 mph, while speed limits for crude oil trains are currently set at 40 mph. See pages 119-120 here.)

So there is a combination of things that could be done to prevent derailments and/or the occurrence of explosions and fire in a derailment; e.g. stronger tank cars, shorter trains, slower speeds, less gaseous crude among other things. But the rail and oil industries are fighting the tightest standards for any of these variables and so far it seems the Administration has not shown itself capable of fighting back.

Nearly two years has passed since 47 people were killed in Lac-Mégantic, Quebec by a crude oil train carrying Bakken oil. Since then at least ten fiery derailments have occurred among countless other less dramatic spills and incidents. The regulator has so far failed to propose an adequate suite of measures that would fully protect the public.

That the rail and oil industries are fighting any requirements that will increase their costs is standard practice; it will cost them money and the sociopathic nature of corporate behavior puts profits before the interests of society. But while the oil industry opposes stabilizing gassy crude oil, stronger tank cars and fast phase-outs for the existing stock of dangerous cars, the rail industry opposes better braking systems and stricter speed limits.

Together they make a strong team of opposition to the range of safety measures that might be effective. A safety regulator under fire from the combined power of two of the most notorious and well-resourced lobby machines in the history of the United States is unlikely to come up with a solution that prioritizes the public’s interest.

Beyond the urgent issue of the safety of hundreds of North American communities that live within a mile of the train tracks, some 25 million people in the U.S. alone, we urgently need to transition to a clean energy economy as fast as possible. The All of the Above energy policy that has brought us reckless crude-by-rail has been focused on pulling oil out of the ground as quickly as possible no matter the consequences, rather than transitioning us away from oil. That needs to change beginning with ending this dangerous practice.

For the sake of a mere 4% of total petroleum passing through the United States, we say stop the trains now, protect North America’s communities and build an energy system that protects the climate and our citizens from a reckless oil industry.

Go here for more on crude-by-rail

 

For safe and healthy communities…