Category Archives: Crude By Rail

Cleanup funding, Crude By Rail, Derailment, Emergency Readiness & Response, Explosion, Fire, Insurance and liability, Spill prevention and response, State regulation

Green Groups press New York state for $100 million Oil Spill Fund

Repost from the Press-Republican, Plattsburgh NY

Green Groups press for $100 million state Oil Spill Fund

Claim $40M proposed in state budget won’t cover cost of derailments

By Kim Smith Dedam, March 23, 2015

ELIZABETHTOWN — Environmental groups are pushing state lawmakers to bulk up the state’s Oil Spill Fund.

They see a need for $100 million set aside, not $40 million as is currently proposed in the executive and legislative budgets.

And they have asked Gov. Andrew Cuomo and legislators to leave the money within the purview of the State Comptroller’s Office and not move the fund to State Department of Environmental Conservation coffers.

“This is a backup fund, mainly because in other cases, where a spill has led to significant cleanup costs, some companies go out of business, including the company whose accident resulted in the explosion at Lac-Megantic in Quebec,” Adirondack Council spokesman John Sheehan said in an interview this week.

“At that point, there is little the state can do to get the money from the company other than to go to court.”

‘DOESN’T TAKE MUCH’

Total liabilities for the Lac-Mégantic, Quebec, rail disaster in July 2013 could easily reach $2.7 billion over the next decade, the coalition said in a news release.

The Adirondack Council joined forces with Environmental Advocates, the Sierra Club and Riverkeeper to press the Oil Spill Fund issue.

“Typically, the requirement for (accident) insurance has not been high enough to cover the cost of an accident that could take place as the result of an explosion,” Sheehan told the Press-Republican.

“And it doesn’t take much oil to contaminate thousands of gallons of water, especially when we’re talking about a drinking water supply for 188,000 people, which Lake Champlain is.”

The Canadian Pacific Railroad line runs the entire length of Lake Champlain’s western shore, and oil train trips have increased in recent months.

Many places where oil cars have spilled and exploded sustained permanent environmental damage, Sheehan said.

$60 MILLION MORE

The coalition is not trying to force funding contributions from oil transport companies or the railroads to bolster state Oil Spill Funds.

They do believe lawmakers in Albany are on the right track in looking to increase funding for next year.

“However, the $15 million increase to $40 million proposed by (Cuomo) and Assembly budgets could and should be increased.

“In today’s dollars, the $25 million fund created in 1977 would be a $96.4 million fund today,” the coalition said in a news release.

“Thus, we urge that the fund cap be increased to $100 million to bring it back to parity with the monetary protection it afforded nearly four decades ago.”

They also charge that the Oil Spill Fund should be indexed to keep pace with inflation.

10 WRECKS YEARLY

“Federal regulators have told us to expect at least 10 major derailments of crude oil trains a year. There have already been four in the last three weeks,” Kate Hudson, Riverkeeper’s Special Projects director, said in a news release.

“It’s no longer a matter of if, but when, a catastrophe will happen in a New York community. If we are without a robust spill fund, New York citizens could be left to shoulder the cost of the cleanup and damages, just as the citizens of Canada were a year and a half ago.”

SEPARATE ACCOUNTS

Environmental advocates also asked Albany to fund emergency response separately from oil spill response and environmental cleanup.

“We welcome proposed funding for emergency response equipment, supplies and training for state and local emergency services personnel,” the coalition said in a news release.

“We strongly support the Assembly’s proposed legislation, which would keep that funding separate from the account that pays for remediation costs, as well as the damages associated with loss of life and property damage and economic losses suffered by individuals and businesses in the event of a spill.”

If response and spill monies are kept in a joint account, they contend, emergency cleanup costs could deplete the response fund, leaving the state without resources to remediate a spill.

‘TREMENDOUS RISK’

Roger Downs, conservation director for the Sierra Club’s Atlantic Chapter, said New Yorkers assume “tremendous risk and little economic benefit” from the millions of gallons of explosive crude oil that “rumble through our cities and along our precious waterways every day.”

Inaction on the part of the federal government to adequately address the risks or improve oil-tank-car safety should not prevent state lawmakers from building the most robust spill fund possible, he said.

The joint call for heightened oil-spill resources came within a day of the release of reports from state inspections done at railroad yards in Albany and Buffalo.

State inspectors found 93 defects in tracks and crude oil cars, including seven critical safety defects that had to be fixed before cars could continue operation.

Inspections were done on tankers at a CSX rail yard in Buffalo and at the Canadian Pacific yard in Albany.

Air Quality, Bakken Crude, California Energy Commission, Crude By Rail, Derailment, Emergency Readiness & Response, Explosion, Federal Regulation (U.S.), Insurance and liability, Moratorium on oil trains, Rail inspection, Risk Assessment, Tank car design

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.”

Bakken Crude, California, Crude By Rail, Massive increase in crude-by-rail, Oil prices

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?

By Gabriel Collins
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
Bakken Crude, CPC-1232, Crude By Rail, Derailment, DOT-111, Explosion, Federal Regulation (U.S.), Fire, Funding for emergency response, Tank car retirement, Volatility

‘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.

For safe and healthy communities…