Category Archives: Crude By Rail

Tesoro & Phillips 66 building crude railcars stronger than new US rules require

Repost from Reuters
[Editor:  These tank cars exceed the new standard, but still fail on several counts.  For instance, note the closing sentences here: “Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.  ‘We have some time to make that decision,’ he said.”  You can be sure that every refinery seeking permits for crude by rail will crow that they, too, have ordered newer, safer tank cars.  Get ready, Benicia!   – RS]

EXCLUSIVE-Tesoro building crude railcars stronger than new US rules require

By Kristin Hayes, May 18, 2015 4:59pm BST

(Reuters) – U.S. refiner Tesoro Corp has ordered new crude oil railcars with features that surpass safety standards that federal regulators set this month, executives told Reuters.

The 210 tank cars being built in northern Louisiana are so-called pressure cars, with the same design as those that carry liquid petroleum gases such as propane and butane, gas cargoes that are more flammable than crude oil.

They will be delivered in the coming months after being ordered in early 2014.

The new federal rules for all crude and ethanol railcars built after Oct. 1 of this year do not require strength to the level of a pressure car but are stronger than the standards adopted by the industry in 2011.

Tesoro, like other oil-by-rail players, knew the federal standards were coming and the basics of what they would likely be. But the company went further with a stronger car, “which is the primary thing we control,” C.J. Warner, Tesoro’s head of strategy and business development, told Reuters.

The order was a sign the refiner wanted to get ahead of the coming regulations and avoid potential capacity bottlenecks at companies that build tank cars as shippers must now renovate their fleets.

Booming North American onshore production spurred sharp growth in moving oil by rail, particularly for U.S. West and East coast refiners which otherwise must depend on more costly imports. No major crude pipelines move oil from the Midcontinent west across the Rocky Mountains or east through the Appalachians and densely populated northeastern states.

Fiery derailments, caused in some cases by track failures, have become more frequent as oil-by-rail and crude-only trains carrying 100 cars or more went from nearly nothing five years ago to more than 1 million barrels per day late last year.

Opposition to moving oil by rail spiked on safety concerns, prompting the U.S. Department of Transportation and Canada to impose new railcar safety standards.

Tesoro isn’t the only refiner that didn’t wait for word from the U.S. DOT to order stronger cars.

Phillips 66 confirmed to Reuters that it also last year ordered 350 non-pressurized new cars that mostly match the new DOT standard. Those cars will be delivered by year-end, the company said.

THICKER HULLS

Both sets of new cars have 9/16-inch-thick hulls, steel shields on the front and back and protections for valves and fittings where crude goes in on top and drains out the bottom, as the new rules require, company executives said. Tesoro’s design modifies those fittings to handle crude rather than just LPGs.

Tesoro’s cars also have test pressure specifications of 200 pounds per square inch of internal pressure, twice that for non-pressurized cars. A test pressure is typically 20 to 40 percent of how much pressure it would take for the railcar to burst.

That level of test pressure is standard for cars that transport LPGs or highly poisonous substances such as hydrogen cyanide, according to the Association of American Railroads.

“When we saw the design, we were very comfortable that it would meet the new standards that we anticipated,” John Hack, Tesoro’s head of rail operations, told Reuters.

For Tesoro, which hopes to build the largest oil-by-rail facility in the United States in Washington state, it’s an investment in safety and continued access to cheaper North American crudes.

“It’s very important to us to continue to transport North American crude and get it from the Midcontinent out to the West Coast where it competes very nicely with the foreign crudes,” Warner said.

RETROFITS?

By last year most refiners, including Tesoro and Phillips 66, no longer accepted shipments in older, weaker railcars such as those used on a runaway crude train that careened into the small Quebec town of Lac Megantic in mid-2013, killing 47 people.

Early last year Tesoro needed to replace the last of its older cars and worked with its builder, Berkshire Hathaway Inc’s Union Tank Car, to develop the new design, Warner said.

Tesoro and Phillips 66 aim to use their newest cars in crude trains before deciding whether to order more. Both companies’ fleets meet the 2011 industry standard for cars with 7/16-inch-thick hulls and reinforced valves.

Those 7/16-inch cars don’t have to be thrown out, but to move in crude-only trains, they will need added protections, including ‘jackets’, or an extra layer of steel around the tank, according to the DOT rules.

Neither Tesoro’s nor Phillips 66’s new cars are equipped with specialized brakes that the DOT said crude-only trains must have starting in 2021 or be held to 30 miles per hour. An oil industry trade group is challenging that provision in court.

Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.

“We have some time to make that decision,” he said.

(Reporting by Kristen Hays; Editing by Terry Wade and James Dalgleish)

Santa Barbara Pipeline spill could further hamper California crude-by-rail projects

Repost from Reuters

Pipeline spill could further hamper big California oil projects

By Kristen Hays, May 22, 2015 9:53pm EDT

HOUSTON  –  Hundreds of barrels of oil that gushed from a ruptured coastal pipeline in scenic California this week could stiffen opposition to large oil projects that companies want to build in the state, notably those to deliver cheap U.S. crude on trains.

Several proposed oil-by-rail offloading terminals in California were already being contested in light of several fiery crude train derailments since 2013 that have stoked safety concerns about spills and explosions.

Now, the sight of oil washing up on the shores of Santa Barbara could further galvanize rail opponents after up to 2,500 barrels of crude leaked on Tuesday from a pipeline owned by Plains All American Pipeline LP (PAA.N).

“The more oil we’re moving through the state, the greater the risk of these sorts of accidents,” said Paul Cort, an attorney with EarthJustice, which has sued to stop crude deliveries at Plains’ 70,000 barrels per day (bpd) oil-by-rail terminal in Bakersfield.

Past spills have prompted policy changes. A leak of 100,000 barrels of crude off Santa Barbara in 1969 led to bans on new leases for offshore drilling in California.

The latest spill could complicate regulatory approvals.

“It’s certainly not good news for anyone trying to permit any kind of oil-related facilities in California,” said John Auers, a consultant at Turner, Mason & Co in Dallas.

Refiners Valero Energy Corp (VLO.N) and Phillips 66 (PSX.N) want to use railways to transport cheap crude from onshore fields in North America to northern California refineries to displace more pricey foreign imports.

But the projects, which could help mitigate upward pressure on gasoline prices that are among the highest in the United States, have been repeatedly delayed to allow for lengthy environmental reviews.

Some companies have given up.

Nearly two months ago, WesPac Energy-Pittsburg LLC withdrew the 51,000 bpd oil-by-rail component in a broader proposal that has been awaiting permits from the city for more than two years. WesPac now proposes that crude would move into the terminal only via pipeline or vessel if approved. Valero last year scrapped crude-by-rail plans at its Los Angeles-area refinery.

And even some companies with permits face more hurdles.

EarthJustice is suing local permitting agencies over both the Plains’ Bakersfield operation, which the company aims to expand to 140,000 bpd, and a new Alon USA Energy (ALJ.N) rail project nearby slated for next year.

“People trying to build projects that bring North American crude oil to displace imports at California refineries now have another thing they have to deal with,” said David Hackett, a consultant with Stillwater Associates in Irvine, California.

(Additional reporting by Rory Carroll in San Francisco; Editing by Terry Wade and Grant McCool)

BIG WIN: Washington state judge denies Shell appeal on rail project review

Repost from Reuters

Washington state judge denies Shell appeal on rail project review

HOUSTON | By Kristen Hays, May 21, 2015 11:34pm BST

A judge on Thursday denied Royal Dutch Shell’s appeal of a ruling that a proposed oil-by-rail project at its Washington state refinery must undergo a full environmental review, just two weeks after a crude train derailment caused a fire in North Dakota.

Shell had appealed a February ruling from a Skagit County Office of Land Use Hearings examiner that the plan to move 70,000 barrels per day of inland crude to its 145,000 bpd Puget Sound refinery in Anacortes must be comprehensively reviewed.

In 2014, the county said the project did not need that much scrutiny to get a permit, prompting challenges from several environmental organizations.

On Thursday, a Skagit County Superior Court judge denied Shell’s appeal, according to court officials.

The denial came two weeks after an eastbound crude train derailed in North Dakota, the latest in a spate of fiery mishaps since 2013 that have stoked fears about moving oil by rail.

Shell had sought to limit the review’s scope to exclude railroad issues overseen solely by federal regulators, but said it remains committed to working with the county and other agencies to finish the permitting process.

Shell’s refining competitors in Washington have been bringing in U.S. crudes by rail since 2012 to displace more expensive imports and declining Alaskan oil output. Shell was the last to seek oil-by-rail permits in late 2013, but by then opponents had taken notice of train crashes and safety concerns.

The rail issue is not Shell’s only concern in the state. The company also faces opponents to its plan to use the port city of Seattle to ready rigs before they travel to the Chukchi Sea off the north coast of Alaska.

(Reporting By Kristen Hays. Editing by Andre Grenon)

Valero Benicia environmental report delayed again – not likely to withstand further scrutiny

By Roger Straw, Editor, The Benicia Independent

Valero Benicia Crude By Rail environmental report delayed for review of new federal regulations

Valero_Crude_by_Rail-Project_Description_March_2013_(cover_page)The City of Benicia issued an announcement on May 21, 2015 delaying its release of a revised draft environmental impact report on Valero Benicia Refinery’s proposal to construct an offloading facility for delivery of crude by rail.

With this delay, The City will now have spent more than two and a half years processing Valero’s proposal and responding to the objections of concerned residents, experts and nearby officials.

Valero’s application for a use permit came to City staff in December, 2012.  In May of 2013, Benicia’s Community Development Director issued a Notice of Intent and a Mitigated Negative Declaration, concluding that the proposal with mitigations was so benign as to not even need environmental review.

Following outcries and organized opposition, the City commenced a full environmental review in August, 2013.  The Draft EIR was released after several delays in June, 2014.   That review received an avalanche of critiques, including expert local analyses, professional review and letters from residents and area governing bodies and a highly critical letter from the California Attorney General.

After yet another lengthy delay, the City announced in February 2015 that, in response to the magnitude of public criticisms, project consultants would revise the DEIR and release it by June 30, 2015 for recirculation and another 45-day public comment period.

According to the City of Benicia’s Thursday announcement, the new 2-month delay (until August 31, 2015) will give consultants “time to include additional analysis of the new regulations announced on May 1, 2015 by the Department of Transportation to strengthen safe transportation of flammable liquids by rail.”

The City consultant’s analysis, seemingly favoring Valero’s proposal from the outset, will likely make the case that new federal safety standards strengthen environmental protections for this project and improve Valero’s chances for landing a use permit.  This analysis, of course, will come under heavy fire due to the inadequacy of the new federal rules, and likely will not withstand the scrutiny of Benicia citizens, officials and regional authorities and stakeholders.

All along, leaders of Benicians For a Safe and Healthy Community (BSHC) have stressed that Valero’s proposal is fatally flawed as shown in a list of significant DEIR failures, including the longstanding lack of adequate federal safety regulations governing rail transport of high hazard flammable liquids (see especially Section 2, #3, pp. 13-15).

More recently, BSHC has joined a chorus of national and international environmentalists and elected officials who are dismissive of the new (May 1) rules issued by the Department of Transportation.  (See NYTimes article.)  The new rules fail to adequately govern oil train routing, speed, braking systems and public notification, and leave entirely too many years for retirement and retrofitting of unsafe tank cars and the design and manufacture of tank cars to newer, safer standards.

BSHC and others have called for an immediate moratorium on all shipment of crude oil by rail, and a speedy transition to clean and renewable energy sources that will “leave the oil in the soil.”

The City’s announcement:

“The anticipated release of the Recirculated Draft Environmental Impact Report (RDEIR) on the Valero Crude by Rail project has been postponed to August 31, 2015.  The delay will provide the City with the necessary time to include additional analysis of the new regulations announced on May 1, 2015 by the Department of Transportation to strengthen safe transportation of flammable liquids by rail. The RDEIR will have a 45-day comment period, beginning August 31, 2015, which will include public hearings where the community may comment on the RDEIR. After the comment period closes, the City will complete the Final EIR which will include responses to all comments on the original Draft EIR and the RDEIR. The Final EIR and the project will then be discussed at subsequent public hearings.”