Repost from Bloomberg [Editor: Note 3 mentions of crude by rail, and in the final paragraph a reference to local opposition to CBR in Santa Maria, Pittsburg and Benicia. – RS]
California Isn’t Feeling U.S. Oil Boom as OPEC Dependence Grows
By Robert Tuttle, May 4, 2016 9:01 PM PDT
• State sourced a record 52% of its crude from overseas in 2015
• Falling in-state and Alaska production is driving imports
The shale oil boom that cut U.S. crude imports by 32 percent in a decade isn’t being felt out west as California grows increasingly dependent on Middle East supplies.
California brought in a record 52 percent of its crude from abroad last year, up from just 9 percent 20 years earlier, according to California Energy Commission data. The state hasn’t yet released the specific countries that supplied that oil in 2015, but in 2014, about 58 percent came from Saudi Arabia and Iraq, the most recent data show.
Foreign dependence is only expected to grow as supplies from within the state and Alaska diminish and efforts to bring U.S. crude from the Midwest by rail face local opposition.
“Regulatory impediments have kept California isolated from the growing sources of domestic crude production,” John Auers, executive vice president at Turner Mason & Co., said by phone from Dallas. “California refiners won’t be able to take advantage”’ of lower-priced domestic crude.
Growing imports mean that California refiners have some of the highest crude costs in the U.S., which are passed onto consumers in the form of higher gasoline prices, David Hackett, president of Irving, California-based Stillwater Associates, said in a phone interview.
Imported crude is priced off Brent, which was selling at less than a $1 premium to U.S. West Texas Intermediate Wednesday. While the lifting of restrictions on U.S. oil exports has narrowed the gap from as high as $15 a barrel in 2014, the spread between the grades could widen again when oil rises and U.S. shale oil production picks up, Hackett said.
Drivers in Los Angeles paid the highest pump prices in the U.S. for much of last year, exceeding $4 a gallon last summer, according to AAA.
Domestic Supply
Alaska supplied the state with 73,000 barrels a day of crude in 2015, about 12 percent of California’s total supply, state data show. That’s down from as high as 46 percent in the early 1990s and may fall further as Alaska’s production is forecast to drop to 319,100 barrels a day in 2023, down from almost 500,000 barrels a day this year, official datashow.
California itself produced about 225,000 barrels a day in 2015, supplying about 36 percent of its own needs, according to state data. That’s a drop from 240,000 barrels a day in 2014. The decline in the state’s own production came as producers cut output amid falling oil prices and following the shutdown of the Plains All American pipeline near Santa Barbara after a spill curtailed about 38,000 barrels a day of offshore production, Stillwater’s Hackett said.
California could benefit from cheaper Midwestern oil if crude by rail terminals were built. New terminals planned for Santa Maria, Pittsburg and Benicia have been stymied by local opposition and regulatory holdups, Hackett said. In February, for example, Valero Energy Corp’s planned crude-by-rail project was rejected by a city commission.
I have a great deal of respect and gratitude toward municipal politicians, particularly those who toil on the city council and commission level. The hours are long, the decisions tough, and the pay bad to non-existent. Heaven knows that without good folks looking after the stuff that keeps a social contract intact, Thomas Hobbes’s “natural state” of chaos, violence, and potholes would be the norm.
This goes for the folks who lead our fair city. Benicia’s mayor and members of the council seem like fine people. They attend the meetings, do the horrific amount of homework required to be conversant with the issues, and overall appear to be decent folks with a sincere believe that they are doing the collective good by serving their fellow citizens. I’m grateful for their service; but I just wish that three of them—Alan Schwartzman, Christina Strawbridge and Mark Hughes—would resign.
Their collective efforts to secure Valero’s delay of the crude-by-rail decision against overwhelming community disapproval, the unanimous rejection of the project by the Planning Commission, the concerns of every major city along the proposed rail path, and the thousands of letters and statements against the project by informed and credible experts raises the bar of small town political shamefulness.
That it was clear from the start that the three council members were going to side with Valero verges on chicanery. Why put the town’s citizens through the hope of believing that their concerns of health and wellbeing are being heard and matter, if you support a volatile project that has a blast zone that includes an elementary school?
Since none of the three has stepped forward with a clear and convincing argument about why they sided with Valero—after all Valero would still bring the oil in by existing means and really doesn’t need the continuous line of daily rail tankers to stay in business and pay its taxes—we are left with the impression that once again, a small American town is at the mercy of a major oil company.
The history of the US oil industry is a trail of tears going back to the early days of ruthless land grabs, the mendacity and murder of Standard Oil’s oligarchy, the tragic violence of the Middle East, and the rise of climate change and environmental pollution. And to think, all this could, and still can, be avoided by shifting from carbon-based to renewable energy.
(As an aside, look at Denton Texas. This small Texas oil town, home to many of Dallas’s oil executives, banned fracking and drilling in the city limits. Evidently, they didn’t want to run the risk of an accident close to parks and schools. There’s a lesson here for Benicia. As a state, New York stood tall against the oil industry, but Denton is the only US small town I know of to have the self-respect required to say enough.)
So, the question before the citizens of Benicia is now what? What good is Benicia’s formal planning process if corporate power can bludgeon a thorough and lengthy review and rejection of the crude-by-rail proposal? Why put the residents through all the work and hope of participating in the democratic process if there is no intention by the council to understand their concerns or follow their wishes?
I grew up in rural America and know what a “company town” is. In some ways, it was simple and easy, letting the company bosses tell you where to work, what and who to like, what to believe in and who to vote for.
But it lacked fulfillment and self-determination, and I moved to the Bay Area to be part of the epicenter of the world’s intellectual and scientific renaissance where freedom of thought, action, and the ideals of local democracy are so highly acclaimed. Yet, ironically, I end up in a “company town”, where a huge carbon polluter can seemly send three decent council members scurrying to service its greed.
The problems of 21st century cities, big and small, are complex and can no longer be inclusive of one economic driver or administered by one major corporate power. For Benicia to move forward and join the extraordinary Bay Area knowledge-based economy we need to say goodbye to those three council members who lack the wherewithal to help the city past its company-town era.
Other once-rural Bay Area cities have thrown of the oppressive yoke of being run by a single company, exchanging “easy” for self-determination. Cities like Sunnyvale and Mountain View long ago threw off the yoke of the defense industry and learned to reinvent themselves and flourish. Walnut Creek, Livermore, and now Richmond are joining the prosperity of a sophisticated diverse economy. Vallejo and the other cities along I-80 are showing signs of change as the robust modern Bay Area economy moves outward from Silicon Valley.
If Benicia hopes to continue as a fully functioning city with a compliment of services and a healthy and vigorous citizenry, it has to look forward, shed its dependence on Valero, and embrace a 21st century reality.
The U.S. oil and gas boom is having global atmospheric consequences, scientists suggest
By Chelsea Harvey, April 28, 2016
Advances in hydraulic fracturing and directional drilling have unlocked huge amounts of petroleum in the Badlands of Montana. (AP/Charles Rex Arbogast)
Scientists say they have made a startling discovery about the link between domestic oil and gas development and the world’s levels of atmospheric ethane — a carbon compound that can both damage air quality and contribute to climate change. A new study in the journal Geophysical Research Letters has revealed that the Bakken Shale formation, a region of intensely increasing recent oil production centered in North Dakota and Montana, accounts for about 2 percent of the entire world’s ethane output — and, in fact, may be partly responsible for reversing a decades-long decline in global ethane emissions.
The findings are important for several reasons. First, ethane output can play a big role in local air quality — when it is released into the atmosphere, it interacts with hydrogen and carbon and can cause ozone to form close to the Earth, where it is considered a pollutant that can irritate or damage the lungs.
Ethane is also technically a greenhouse gas, although its lifetime is so short that it is not considered a primary threat to the climate. That said, its presence can help extend the lifespan of methane — a more potent greenhouse gas — in the atmosphere. This, coupled with ethane’s role in the formation of ozone, makes it a significant environmental concern.
From 1987 until about 2009, scientists observed a decreasing trend in global ethane emissions, from 14.3 million metric tons per year to 11.3 million metric tons. But starting in 2009 or 2010, ethane emissions starting rising again — and scientists began to suspect that an increase in shale oil and gas production in the United States was at least partly to blame. The new study’s findings suggest that this may be the case.
The study took place during May 2014. A National Oceanic and Atmospheric Administration (NOAA) aircraft flew over the Bakken Shale and collected data on airborne ethane and methane, as well as ozone, carbon dioxide and other gases.
“We were interested in understanding the atmospheric impacts of some of these oil and gas fields in the U.S. — particularly oil and gas fields that had a lot of expansion of activities in the last decade,” said Eric Kort, the study’s lead author and an atmospheric science professor at the University of Michigan.
The findings were jarring.
“We found that in order to produce the signals we saw on the plane, it would require emissions in the Bakken to be very large for ethane … equivalent to 2 percent of global emissions, which is a very big number for one small region in the U.S.,” Kort said.
Notably, he said, the team’s observations in the Bakken Shale helped shed some light on the mysterious uptick in global ethane emissions observed over the past few years.
“The Bakken on its own cannot explain the complete turn, but it plays a really large role in the change in the global growth rate,” Kort said.
On a regional level, the researchers pointed out that a deeper investigation into the Bakken emissions impact on ozone formation may be warranted — not only for the purpose of analyzing local air quality but also because current models of the atmosphere have not included the jump in ethane output.
Because the researchers were also measuring other gases during the flyovers — including ozone, carbon dioxide and methane — they were able to make another major discovery. They found that the ratio of ethane to methane produced by the Bakken was much higher than what has been observed in many other shale oil and gas fields in the United States — an observation that could have big implications for future methane assessments, which are important for climate scientists.
In many oil and gas fields, methane is often the primary natural gas present — sometimes accounting for up to 90 percent or more of the gas that is released during extraction. Ethane often tends to be present in smaller proportions. In the Bakken, however, the researchers found that ethane accounted for nearly 50 percent of all the natural gas composition, while methane was closer to 20 percent.
This is important because researchers sometimes use trends in global ethane emissions to make assumptions about the amount of methane that’s being released by fossil fuel-related activities. While it’s possible to measure the total methane concentration in the atmosphere, it’s difficult to say exactly where that methane came from, because there are so many possibilities: thawing permafrost in the Arctic, emissions from landfills and agriculture are just a few examples. But because ethane is primarily emitted as a byproduct of fossil fuel development — and because methane and ethane tend to be emitted together in those cases — researchers sometimes use trends in global ethane emissions to make assumptions about how much of the Earth’s methane output can be attributed to oil and gas development.
When global ethane emissions were declining, for instance, many researchers assumed that overall losses of natural gas during fossil fuel extraction were declining, Kort noted. And when ethane emissions began rising again, it was logical to assume that methane emissions — from oil and gas development, specifically — were also likely on the rise. But as the Bakken study points out, this is not necessarily the case. The new study suggests that the Bakken formation has accounted for much of the global increase in ethane emissions while emitting comparatively low levels of methane simultaneously. And the researchers believe that there are other locations in the United States — the Eagle Ford shale in Texas, for example — where conditions are similar.
“They’ve basically shown here that a single shale can account for most of the ethane increase that you’ve seen in the past year,” said Christian Frankenberg, an environmental science and engineering professor at the California Institute of Technology and a researcher at NASA’s Jet Propulsion Laboratory. (Frankenberg was not involved with this study, although he has collaborated with Kort in the past.)
“This is not to say that there’s no enhanced methane in these areas,” he added. But he pointed out that making an incorrect assumption about the ratio of methane escaping compared to ethane “might easily overestimate the methane increases in these areas.”
And making incorrect assumptions about the methane that’s entering the atmosphere alongside ethane can skew climate scientists’ understanding of where the Earth’s methane emissions are coming from and which sources are the biggest priorities when it comes to managing greenhouse gas emissions.
Thus, while the new study contains striking findings about ethane emissions, it perhaps only deepens the already large and contentious mystery over just how much the U.S. oil and gas boom is contributing to emissions of methane, which is widely regarded to be the second most important greenhouse gas after carbon dioxide.
More broadly, the paper also highlights the immense impact that fossil fuel development in the United States can have on the atmosphere — and how important it is from both an air quality and a climate perspective to closely monitor these activities. As the paper points out, domestic production is already being felt on a global level.
“Ethane globally had been declining from the 80s until about 2009, 2010 … and nobody was really sure why it was increasing in the atmosphere again,” Kort said. “Our measurements showed this one region could explain much of the change in global ethane levels and kind of illustrate the roles these shale plains could play.”
City Manager Brad Kilger oversaw Valero Crude By Rail proposal, not sticking around for outcome
Brad Kilger, City Manager of Benicia, 2010-2016
In Benicia’s Council/Manager form of government, there is no more powerful person than the City Manager. The Mayor and City Council supposedly run the city, and they do make the final decisions. Some decisions are also made by Commissions, but the real power in Benicia is the city manager.
The CM presides over staff, and staff guides every decision of our elected and appointed officials, making recommendations and consulting with officials outside of public meetings. For instance, the city manager works with the mayor in setting the agenda for every Council meeting.
Brad Kilger was hired as Benicia’s city manager in 2010, and has overseen the Valero Crude By Rail (CBR) proposal from the start. Outwardly, CBR has been routed through the City’s Community Development Department and its Planning Division. Those offices have undergone personnel changes during the lengthy 3½ year Valero process, but Mr. Kilger has remained in charge throughout.
Kilger is due to begin work in Martinez on June 13, leaving only 6 weeks to finish up here in Benicia. As of this writing, no word has been released as to Kilger’s final day in Benicia. Nor have details been given about his rather sudden departure.
Getting out of dodge before a decision on CBR may very well be a smart career move. Everyone expects litigation, which would be any manager’s nightmare, and a loss either way could be expected to leave a blemish on his professional profile.
Kilger was welcomed to Benicia by Council members and citizens in 2010 as a promising new presence, bringing credentials and commitments that offered hope in the area of environmental sustainability. Indeed, his tenure has seen numerous advances on that front. But many of those advances can be credited primarily to the leadership of Mayor Elizabeth Patterson and the Community Sustainability Commission.
City Council during Kilger’s time in Benicia has often been contentious. Collegiality has often been wanting among Council members, and the public has come into fierce conflict with staff over staff’s seemingly blind support for Valero’s CBR proposal.
The City will no doubt bring in an interim. No telling how long the interim will be in charge, but it seems highly likely a permanent replacement would not be in place until January 2017, after elections, and under the authority of a new City Council.
It seems likely the City Council will face a decision on Valero CBR in September with a new and possibly untested interim city manager. If the delay for review by the federal Surface Transportation Board results in a re-write and recirculation of the environmental report with attendant written comments and lengthy public hearings, it could be a real handful for whoever is in charge.
It may be a real challenge locating a qualified candidate who is willing to step in at this critical moment in Benicia’s history.
The shale oil boom that cut U.S. crude imports by 32 percent in a decade isn’t being felt out west as California grows increasingly dependent on Middle East supplies.
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