In a finding that should resonate strongly for Canadian decision-makers charged with meeting the country’s climate targets, new research reveals that the carbon footprint of a litre of synthetic crude extracted from tar sands/oil sands bitumen is more than 23% greater than previously estimated.
The elevated figure, reported by InsideClimate News, is based on an assessment conducted by the U.S. State Department in the course of its consideration of a still-pending application by Calgary’s Enbridge Inc. to expand its Alberta Clipper pipeline to deliver synthetic tar sands/oil sands crude to Wisconsin. It updates an earlier finding produced by the same agency in 2014, during its consideration of TransCanada Corporation’s Keystone XL pipeline.
That assessment, ICN recalls, determined that “compared to other sources of oil that American refineries might use, the tar sands would be about 17% more polluting on average.” The calculation contributed to then-President Barack Obama’s decision to reject the Keystone XL proposal, a decision recently reversed by his pro-fossil successor.
A more recent review of Enbridge’s proposed line, however, produced “a gloomier picture of emissions.”
Employing “the most up-to-date studies and tools, including a model known as GREET, developed by the federal Argonne National Laboratory, which calls it the ‘gold standard’ for this kind of calculation,” the latest assay found that on a comprehensive “well-to-wheels” basis, “tar sands crude would have a carbon footprint of 632 kilograms per barrel, compared to an average U.S. refinery mix of 521 kilograms per barrel of carbon dioxide emissions. The difference is 111 kilograms per barrel—21 percent dirtier, not 17 percent.”
The four percentage-point difference in the new calculation means the full carbon footprint of tar sands/oil sands production, distribution, and use is 23.5% heavier than previously thought.
Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?
By Joe Romm, March 11, 2016 8:00 AM
BNSF oil train derailment in 2013. CREDIT: BRUCE CRUMMY, AP
Billionaire Warren Buffett has bet the future of his company Berkshire Hathaway on dirty energy. In recent years he has been building a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and burns the most climate-destroying fuels.
The final part of this series on Buffett looks at how BNSF Railways is the engine of his carbon-intensive conglomerate, creating a massive risk for shareholders in this increasingly carbon-constrained world — a risk the “Oracle of Omaha” needs to be far more upfront about.
Is Warren Buffett “The Profiteer” of “Climate Killers”?
When Rolling Stone named Warren Buffett one of its 17 “Climate Killers” in 2010, they called him “The Profiteer.” They zeroed in on his recent purchase of “Burlington Northern Santa Fe railroad for $26 billion — the largest acquisition of Buffett’s storied career.”
Why? BNSF is “the nation’s top hauler of coal, shipping some 300 million tons a year.” That is especially convenient for Buffett because, as noted in Part 2, Berkshire Hathaway Energy has four major utilities that still rely on coal for over half their electricity generation.
CREDIT: BNSF
But BNSF is so much more than just the top hauler of coal. As their website proudly attests “BNSF is the largest transporter of crude oil in North America” — and we all know how well the whole crude-by-rail thing has been going.
2015 “has already been the costliest by far for crude train explosions,” BloombergBusiness reported in December. A “BNSF train that derailed and exploded in Illinois” last March “carrying highly explosive crude from North Dakota” created some $5.5 million in damage.
From 2010 through mid-2014, oil shipped by rail in the United States increased from about one million barrels of oil every month to 25 million! At the same time, Canadian imports increased 50-fold, as we’ve reported. BNSF was a driving force behind that explosion.
CREDIT: EIA DATA
Also, last October we learned about “what is believed to be the largest frac sand unit train to date in North America.” You guessed it: “The 150-car unit train, operated by BNSF, carried 16,500 tons of frac sand used in hydraulic fracturing.”
Warren Buffett Bets Big On The Tar Sands
But wait, there’s more. You may recall from Part 1 that last year, the billionaire spent $240 million buying another chunk of Canadian tar sands giant Suncor, upping his overall bet on the climate-destroying liquid fuel to $1.1 billion — a fact Buffett does not share with shareholders in his list of Berkshire Hathaway’s climate risks.
On top of that, as BNSF’s website also proudly attests, the railroad “is positioned to act as a gateway to the Canadian oil sands.” Seriously.
Indeed several years ago, a BNSF employee magazine explained how invested the railway was in all aspects of tar sands (aka bitumen) development. The key point is that “Before bitumen can move through a pipeline to its destination, it must be blended with diluents (diluting agents),” lighter weight hydrocarbons like natural gasoline or butane:
BNSF has been moving single carloads of diluents from U.S. refineries to the Canadian border…. The inbounds are then interchanged with Canadian railroads, then moved to Edmonton, with the final move to the oil sands’ processing center via pipeline.
Last year, BNSF moved about 9,000 carloads of diluents for the project, with the majority of loads originating from the Gulf Coast, California, and Kansas. This year, about 12,000 carloads are anticipated to move.
There’s more: Beyond shipping diluents, “BNSF has also transported turbines, other large machinery and pipes for use at the drilling sites.”
There’s still more to this empire. In 2015, Buffett “nearly doubled Berkshire’s position in Phillips 66,” one of the country’s leading oil (and gas) refiners and processors. The company has 15 refineries which can refine a total of 2.2 million barrels of crude per day.
In January of this year alone, Buffett spent a staggering $832 million to buy yet more Phillips 66 stock. At more than $5 billion, it is his sixth-largest holding. He now owns 14 percent of the “Number 7” company on the Fortune 500 list.
Phillips 66 is a major co-owner of the Wood River Refinery in Illinois, which in recent years made investments “to expand the capacity to handle the bitumen from the Alberta oil sands by nearly 700%.” Also not coincidentally, for the last year, Phillips 66 has been trying to get California planning commissioners to let it build a 1.3-mile rail spur to its Santa Maria refinery. Why? As the Sierra Club explained last month, “The oil giant seeks to transport tar sands crude from Canada in mile-long trains — each laden with over 2 million gallons of dirty crude.”
Both A Livable Climate And Buffett’s Empire Cannot Thrive
Yes, the Oracle of Omaha has a thing for the Canadian tar sands. But more than that, over the last several years he has built a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and even burns the most carbon-intensive fossil fuels. It would be a brilliant strategy except for two small details.
First, climate science makes clear we have to leave most fossil fuels — and virtually all of the most carbon-intensive — in the ground to avoid global catastrophic warming. Second, over the past 18 months, the leading nations of the world unanimously agreed on a plan whose goal is to do just that, and the overwhelming majority of them made detailed pledges to slow or reverse carbon-intensive growth and replace it with carbon-free growth.
The domestic and international coal market has already collapsed as a result of growing environmental concerns and low-cost alternatives including renewables. If the world follows through on its plans to keep total warming below 2°C — a big “if,” for sure — then coal is going to continue to be squeezed out of the market in the coming decades and oil will almost certainly follow the same fate, peaking in demand by 2030, as I discussed last month.
Now whether or not you believe the world is going to achieve the plan it unanimously embraced in Paris in December, surely Buffett ought to at least mention to his shareholders the risks to Berkshire Hathaway if the world does. Yet, his latest annual letter to shareholders dismisses the risk of climate change.
Here is all Buffett says about the coal risk: “To begin with an obvious threat, BNSF, along with other railroads, is certain to lose significant coal volume over the next decade.” But he quickly dismisses this as a problem that is not “crucial to Berkshire’s long-term well-being.”
Last summer, BNSF executive chairman Matthew K. Rose noted the decline in U.S. coal transport and consumption. He said of his company’s major investment to upgrade its rail service to and from the coal-rich Powder River Basin, “That leaves us with millions of dollars in investment in what will eventually be stranded assets.”
Certainly, from a short-term business perspective, investing in oil-by-rail and tar-sands-by-rail to replace coal-by-rail appears to make sense. But what are the risks those investments will eventually become stranded assets, too? Low oil prices aren’t good for crude-by-rail, as BloombergBusiness explained in December. And aggressive climate action, which could well give us peak demand within 15 years, is not bullish for oil prices.
CREDIT: BLOOMBERG
Rather than informing shareholders about any of these risks, Buffett asserts the reverse: “Both BHE [Berkshire Hathaway energy] and BNSF have been leaders in pursuing planet-friendly technology.” Seriously?
I discussed in Part 2 how, despite BHE’s own investments in renewables, BHE is working to crush solar energy in Nevada and around the western United States. And it remains a huge user of coal. And as we’ve seen BNSF is a major deliverer of coal….
But here is how Buffett defends the fairly ludicrous claim that BNSF is somehow one of the “leaders in pursuing planet-friendly technology”:
BNSF, like other Class I railroads, uses only a single gallon of diesel fuel to move a ton of freight almost 500 miles. That makes the railroads four times as fuel-efficient as trucks!
Yes, BNSF is a very fuel-efficient way of delivering vast amounts of climate-destroying fuels to market.
Finally, is it only a coincidence that after outperforming the market for decades, the stock of Berkshire Hathaway has actually underperformed the S&P 500 over the last five years?
Again, if serious global climate action ultimately keeps oil prices low and renders much of the tar sands uneconomic, then Buffett’s carefully constructed fossil fuel empire is going to keep suffering — and deservedly so. After all, leading climate activists have been urging major investors to disinvest in fossil fuels for years. Buffett is doing the exact reverse!
BOTTOM LINE: Between Berkshire Hathaway and a livable climate, only one can thrive. That’s not a tough choice, is it?
Valero Crude By Rail: Extreme Crude as Extreme Threat
By Charles Davidson, Hercules CA, February 20, 2016
Lynne Nittler of Davis, CA
Like many other fossil fuel infrastructure expansions in the Bay Area, the Valero Crude by Rail project is a key part of the transition to greater processing of extreme crudes. Yet another project poses significant, yet unnecessary public health hazards—this time to Benicia, the Bay Area, the Delta ecosystem and all communities up-rail from Benicia.
Valero’s recently completed Valero Improvement Project, or VIP, was designed to facilitate the processing of much higher sulfur and heavier crudes than the refinery’s former crude oil slate. The VIP permitted the Refinery to process heavier, high sulfur feedstocks as 60% of total supply, up from only 30% prior to the VIP. The project also raised the average sulfur content of the imported raw materials from past levels of about 1 – 1.5% up to new levels of about 2 – 2.5% sulfur.
Now, Valero’s proposed Crude by Rail Project is specifically designed for the importation into Valero of so-called “mid-continent, North American” crudes, which would be either very lightweight, highly flammable shale oil from Bakken ND or extra heavy tar sands from Alberta Canada. However, because the Valero Crude by Rail Project combined with the VIP are related parts of a single expanded heavy oil project, the Crude by Rail Project is most likely for the delivery of tar sands (bitumen).
Tar sands is open pit mined as a solid; it does not start out as a liquid. The Bitumen mined in Northern Canada needs to be heated to several hundred degrees before it can be diluted with chemical solvents and made to flow into railroad tank cars. According to the recent Carnegie Endowment study, Know Your Oil: Towards a Global Climate-Oil Index, tar sands refining produces three times the climate-changing greenhouse gases in order to make gasoline, compared to traditional lighter crudes.
Worse, in a 2007 US Geological Service study, it was reported that tar sands bitumen contains 102 times more copper, 21 times more vanadium, 11 times more sulfur, six times more nitrogen, 11 times more nickel, and 5 times more lead than conventional heavy crude oil. Sulfur and nitrogen oxide pollutants contribute to smog, soot, acid rain and odors that affect nearby residents. Because of these considerations, Benicia could likely experience an increase in local air pollution, and the refinery’s equipment could suffer enhanced sulfur corrosion, leading to potential accidents, such as documented for the 2012 Richmond Chevron fire.
The tar sand diluent itself adds significant risk: it is a highly flammable solvent that tends to separate from the heavier mixture during travel. In a derailment this could cause an explosive fire with a uniquely hazardous tar sands smoke plume. The diluted tar sands mixture would tend to rapidly sink very deep into the soil, with the diluent eventually evaporating and then leaving the tar sands bitumen deep underground.
A significant tar sands spill, in places like the environmentally sensitive Feather River Canyon, the Delta or the Suisun Marsh would be impossible to clean up. This was proven in Michigan’s 2010 Kalamazoo River Enbridge pipeline rupture, which will never be remediated, despite the spending of over 1 billion dollars to date. Nearby public infrastructure needs to be considered from a public health perspective; for example, East Bay MUD and others are doing a brackish delta water desalination pilot study near Pittsburg.
We must deny Valero the CBR permit and help keep the world’s absolutely dirtiest oil in the ground. To do so would comply with the expressed wishes of the Sacramento Area Council of Governments composed of six counties and 22 municipalities up-rail from Valero who have also asked that this project be denied. Our massive turnout at the Planning Commission hearings achieved our first step in this goal with a unanimous vote of the Planning Commission to deny the land use permit. Now we must continue our opposition to insure the full Benicia City Council follows this path.
U.S. Not Prepared for Tar Sands Oil Spills, National Study Finds
By Codi Kozacek, Circle of Blue, 10 December, 2015 16:07
Report urges new regulations, research, and technology to respond to spills of diluted bitumen.
Oil gathers in a sheen near the banks of the Kalamazoo River more than a week after a spill of crude oil, including tar sands oil, from Enbridge Inc.’s Line 6B pipeline in 2010. It was the largest inland oil spill in U.S. history. Click image to enlarge. Photo courtesy Sam LaSusa
Spills of heavy crude oil from western Canada’s tar sands are more difficult to clean up than other types of conventional oil, particularly if the spill occurs in water, a new study by a high-level committee of experts found. Moreover, current regulations governing emergency response plans for oil spills in the United States are inadequate to address spills of tar sands oil.
The study by the U.S. National Academies of Sciences, Engineering, and Medicine confirmed what scientists, emergency responders, and conservationists knew anecdotally from a major oil spill that contaminated Michigan’s Kalamazoo River in 2010 and another spill in Mayflower, Arkansas in 2013. Tar sands crude, called diluted bitumen, becomes denser and stickier than other types of oil after it spills from a pipeline, sinking to the bottom of rivers, lakes, and estuaries and coating vegetation instead of floating on top of the water.
“[Diluted bitumen] weathers to a denser material, and it’s stickier, and that’s a problem. It’s a distinct problem that makes it different from other crude.”
–Diane McKnight, Chair Committee on the Effects of Diluted Bitumen on the Environment
“The long-term risk associated with the weathered bitumen is the potential for that [oil] becoming submerged and sinking into water bodies where it gets into the sediments,” Diane McKnight, chair of the committee that produced the study and a professor of engineering at the University of Colorado Boulder, told Circle of Blue. “And then those sediments can become resuspended and move further downstream and have consequences not only at the ecosystem level but also in terms of water supply.”
“It weathers to a denser material, and it’s stickier, and that’s a problem. It’s a distinct problem that makes it different from other crude.” McKnight added. Weathering is what happens after oil is spilled and exposed to sunlight, water, and other elements. In order to flow through pipelines, tar sands crude oil is mixed with lighter oils, which evaporate during the weathering process. In a matter of days, what is left of the diluted bitumen can sink.
The study’s findings come amid an expansion in unconventional fuels development and transport in North America. Over the past decade, Canada became the world’s fifth largest crude oil producer by developing the Alberta tar sands. U.S. imports of Canadian crude, much of it from tar sands, increased 58 percent over the past decade, according to the U.S. Energy Information Administration.
Though oil prices are at a seven-year low, and market turbulence is expected to persist for several more years, tar sands developers are working to double the current tar sands oil production — around 2.2 million barrels per day — by 2030. Pipelines to transport all of the new oil are expanding too, producing a greater risk of spills.
A sign held by a protester at a 2013 climate rally in Washington, D.C. notes the lingering difficulties associated with spills of diluted bitumen –namely that the oil can become submerged in the water. Click image to enlarge. Photo courtesy DCErica via Flickr Creative Commons
Whether tar sands producers achieve that level of oil supply is not assured. Public pressure is mounting in Canada and the United States to rein in tar sands development due to considerable environmental damage and heavy carbon emissions. U.S. President Barack Obama last month scrapped the Keystone XL pipeline, an 800,000-barrel-per-day project to move crude oil from Canada’s tar sands to Gulf of Mexico refineries. An international movement to divest from fossil fuels and a legally binding global deal to cut carbon emissions –if it is signed in Paris– could curb demand for tar sands oil.
The National Academies of Sciences, Engineering, and Medicine study adds new data to arguments made by critics of tar sands development.
“The study really confirms a lot of the information that has been out there, there are no real surprises,” Jim Murphy, senior counsel for the National Wildlife Federation, told Circle of Blue. “You don’t want these things to be affirmed because it’s bad news for communities. But the good part about a study like this is hopefully it will prompt some action. Some folks were hiding behind the lack of a study like this, saying we don’t really know. Those excuses have gone away.”
“The chief takeaway is that this is a different oil, it presents different challenges, and responders and regulators simply don’t have the structures in place to deal with the challenges,” he added.
Nonetheless, energy companies are pursuing pipeline expansions, most notably in the Midwest and Great Lakes regions. Enbridge, Canada’s largest transporter of crude oil, operates a 3,000-kilometer (1,900-mile) pipeline network, known as the Lakehead System, that carries crude oil from Canada to refineries on the Great Lakes. The Lakehead system, in concert with Enbridge’s Canadian main line, is capable of transporting 2.62 million barrels of oil per day. The pipeline responsible for the 2010 oil spill in Kalamazoo was part of the Lakehead system. A link in the Lakehead system ruptured in 2010 and spilled more than 3 million liters (843,000 gallons) of tar sands oil into southern Michigan’s Kalamazoo River. It was the largest inland oil spill in U.S. history and its effects still linger because of oil that sank and is embedded in the river’s sediments.
“The chief takeaway is that this is a different oil, it presents different challenges, and responders and regulators simply don’t have the structures in place to deal with the challenges.”
–Jim Murphy, Senior Counsel
National Wildlife Federation
Enbridge is currently pursuing upgrades to its Alberta Clipper pipeline, which runs through Minnesota and Wisconsin, in order to boost the line’s capacity to 800,000 barrels per day from 450,000 barrels per day. A second project aims to increase the capacity of Line 61, a pipeline that runs from Wisconsin to Illinois, from 560,000 barrels per day to 1.2 million barrels per day. Opposition to the company’s operation of a pipeline that runs beneath the Straits of Mackinac, where Lake Michigan and Lake Huron join, has been especially fierce, though the line does not currently carry tar sands oil.
“I think at the very least we should be saying no to more tar sands through the [Great Lakes] region until we get a firm handle on how to deal with the unique challenges that tar sands spills present,” Murphy said. “We should also be taking a hard look, as the president did with the Keystone XL decision, about the other negative impacts of more tar sands oil, like the consequences in Alberta with the habitat destruction there, and also the higher carbon pollution content of the fuel.”
The National Academies study concluded that the characteristics of diluted bitumen are “highly problematic for spill response because 1) there are few effective techniques for detection, containment, and recovery of oil that is submerged in the water column, and 2) available techniques for responding to oil that has sunken to the bottom have variable effectiveness depending on the spill conditions.”
“Broadly, regulations and agency practices do not take the unique properties of diluted bitumen into account, nor do they encourage effective planning for spills of diluted bitumen,” it continued.
A tar ball recovered on the edge of a cove in Mayflower, Arkansas, after tar sands crude spilled from ExxonMobil’s Pegasus pipeline in 2013. Click image to enlarge.
The study’s authors made a series of recommendations to help reduce the damage from future tar sands spills, including:
Update regulations that would require pipeline operators to identify and provide safety sheets for each crude oil transported by the pipeline, catalogue the areas and water bodies that would be most sensitive to a diluted bitumen spill, describe how they would detect and recover sunken oil, provide samples and information about the type of oil spilled to emergency officials, and publicly report the annual volumes and types of crude oil that pass through each pipeline.
Require the Pipeline and Hazardous Materials Safety Administration (PHMSA), the federal agency that regulates pipelines in the United States, to review spill response plans in coordination with the U.S. Environmental Protection Agency and U.S. Coast Guard to determine if the plans are capable of responding to diluted bitumen spills.
Develop methods to detect, contain, and recover oil that sinks to the bottom of water bodies.
Require government agencies at the federal, state, and local level to use industry-standard names for crude oils when planning spill responses.
Revise oil classifications used by the U.S. Coast Guard to indicate that diluted bitumen can sink in water.
Collect data to improve modeling of diluted bitumen oil spills.
Improve coordination between federal agencies and state and local governments when planning and practicing oil spill response exercises.
Develop a standard method for determining the adhesion –a measure of how sticky the oil is–of diluted bitumen in the event of a spill.
After the study’s release, PHMSA said it would develop a bulletin advising pipeline operators about the recommendations and urge voluntary improvements to their spill response plans. The agency also plans to hold a workshop next spring to hear public input on how to implement the recommendations, coordinate with other federal organizations to “advance the recommendations”, and work with industry representatives to improve spill response planning.
“We appreciate the work the National Academy of Sciences has done over the last few years in analyzing the risks of transporting diluted bitumen, including its effects on transmission pipelines, the environment and oil spill response activities,” Artealia Gilliard, PHMSA spokesperson and director for governmental, international and public affairs, said in a statement. “All pipelines transporting crude oil or any other hazardous liquid are required to meet strict federal safety regulations that work to prevent pipeline failures and to mitigate the consequences of pipeline failures when they occur.”
Codi Yeager-Kozacek is a news correspondent for Circle of Blue based out of Hawaii. She co-writes The Stream, Circle of Blue’s daily digest of international water news trends. Her interests include food security, ecology and the Great Lakes.
