Growth in Canadian crude oil production has outpaced expansions in pipeline takeaway capacity and, along with past pipeline outages, has driven Canadian crude oil prices lower and increased Canadian crude oil exports by rail to the United States. However, the outlook for increased volumes of Canadian crude oil shipped by rail to the United States is highly uncertain despite significant U.S. demand for Canadian crude oil, specifically on the U.S. Gulf Coast.
Crude oil production in Canada increased to 3.9 million barrels per day (b/d) in 2017, up approximately 300,000 b/d from 2016. However, crude oil pipeline capacity out of Canada has failed to keep pace with growing production. Consequently, volumes of Canadian crude oil exported to the United States by rail increased in 2017. In December 2017, U.S. imports of Canadian crude oil by rail set a monthly record of 205,000 b/d, nearly matching the amount of crude oil shipped by rail within the United States that month (246,000 b/d).
Changes in the relative prices of two crude oils—Western Canada Select (WCS) in Hardisty, Alberta, and West Texas Intermediate (WTI) in Cushing, Oklahoma—demonstrate the effects of transportation constraints. Until late 2017, WCS prices averaged $10 to $15 per barrel (b) lower than WTI, largely reflecting differences in the quality of the two crudes. In late 2017 and early 2018, as crude oil production began to exceed pipeline capacity and demand to transport crude oil by rail increased, WCS priced about $25/b lower than WTI.
The price spread between WCS and WTI has since narrowed to an average of $16/b in early April, suggesting some demand for transporting Canadian crude oil by rail has lessened. Low WCS prices may have led some Canadian crude oil producers to reduce output and advance schedules for planned maintenance, likely reducing the need to move crude oil by rail.
Source: U.S. Energy Information Administration, based on Bloomberg, L.P.
Of the 144,000 b/d of Canadian crude oil imported by rail in 2017, about half (70,000 b/d) went to the U.S. Gulf Coast, or Petroleum Administration for Defense District (PADD) 3. Imports by rail made up 18% of total Canadian crude oil imports to the Gulf Coast, and 2% of the 3.1 million b/d of total crude oil imported by the Gulf Coast in 2017.
With an API gravity of approximately 20 degrees, WCS crude oil is a heavy crude oil that is attractive to Gulf Coast refiners that process heavier crude oil. Traditional suppliers of heavy crude oil into the Gulf Coast region, such as Venezuela and Mexico, have experienced production declines that resulted in lower crude oil exports, making Canada an increasingly important source of U.S. imports of heavy crude oil.
In January 2018, the U.S. Gulf Coast imported more crude oil from Canada (448,000 b/d) than from Venezuela (438,000 b/d) for the first time on record and imported more crude oil from Canada (379,000 b/d) than from Mexico (309,000 b/d) in September 2017. Another outlet for Canadian crude oil on the Gulf Coast may be re-exports. Since the removal of restrictions on crude oil exports from the United States, Canadian crude oil can be re-exported from the Gulf Coast without having to be segregated.
Large-scale and sustained increases in crude oil by rail volumes from Canada face several obstacles from the Canadian rail industry and competing pipeline projects. Trade press reports indicate that before investing, Canadian rail companies are requiring that crude oil producers enter long-term commitments for crude oil-by-rail capacity. Canadian crude oil producers have been reluctant to agree to long-term rail commitments because pipeline capacity could increase in the short to medium term as new pipeline projects come online and some currently operating pipelines begin to ease volume restrictions.
Principal contributors: Arup Mallik, Mason Hamilton
Derailment in Martinez: the nightmare no one wants
By Roger Straw, The Benicia Independent – 05/01/2018
LPG tank car derailment Martinez 2018-05-01 (KTVU Fox 2 News)
Early this morning, at least two tank cars carrying liquid petroleum gas (LPG) derailed while backing into the Shell Refinery in Martinez, CA. (See brief KTVU News coverage.)
Thank our lucky stars that those tank cars backing into the refinery did not tip over or leak! Had they done so, and a spark ignited a fire, the accident might’ve resulted in a Boiling Liquid Expanding Vapor Explosion, or “BLEVE” (blɛviː/ BLEV-ee).
Sharon Kelly described a BLEVE this way on DeSmogBlog: “As liquids in a metal tank boil, gasses build up, pressurizing the tank even despite relief valves designed to vent fumes. Tanks finally explode, throwing shrapnel great distances, and spitting out burning liquids that can start secondary blazes.”
BLEVEs were responsible for the massive degree of destruction and loss of life in Lac Magantic, Canada. If those Martinez tank cars had caught fire and erupted, the whole Shell Refinery might’ve blown up! Downtown Martinez, the AMTRAK station, and the 680 freeway might’ve been threatened.
LPG tank car derailment Martinez 2018-05-01 (KTVU News)
Photos of the derailed cars show the 4-digit Hazardous Material Identification Placard: 1075. The Emergency Response Guidebook, published by the U.S. Dept. of Transportation Pipeline & Hazardous Materials Safety Administration identifies the code for 1075 on p. 31 as one of the following flammable materials:
In fires involving Liquefied Petroleum Gases (LPG) (UN1075); Butane, (UN1011); Butylene, (UN1012); Isobutylene, (UN1055); Propylene, (UN1077); Isobutane, (UN1969); and Propane, (UN1978), also refer to BLEVE – SAFETY PRECAUTIONS (Page 368).
BLEVE is defined : “A boiling liquid expanding vapor explosion (BLEVE, /ˈblɛviː/ BLEV-ee) is an explosion caused by the rupture of a vessel containing a pressurized liquid that has reached temperatures above its boiling point.”
Page 368-369 of the Emergency Response Guidebook reads as follows:
BLEVE (Boiling Liquid Expanding Vapor Explosion)
The following section presents, in a two-page format, background information on BLEVEs and includes a chart that provides important safety-related information to consider when confronted with this type of situation involving Liquefied Petroleum Gases (LPG), UN1075. LPGs include the following flammable gases: Butane, UN1011; Butylene, UN1012; Isobutylene, UN1055; Propylene, UN1077; Isobutane, UN1969; and Propane, UN1978.
What are the main hazards from a BLEVE?
The main hazards from a propane or LPG BLEVE are:
– fire
– thermal radiation from the fire
– blast
– projectiles
The danger from these decreases as you move away from the BLEVE centre. The furthest reaching hazard is projectiles.
Repost from KTVU.com Fox News 2, Oakland, CA [Editor: This derailment of tank cars carrying Liquid Petroleum Gas (LPG) could have resulted in extreme hazardous consequences. See my analysis here. – RS]
Freight train derails near Shell refinery in Martinez
[Editor: apologies for the advertisement at start of this video… – RS]
By: Leigh Martinez, MAY 01 2018 05:22AM PDT, VIDEO POSTED: MAY 01 2018 05:13AM PDT, UPDATED: MAY 01 2018 06:55AM PDT
MARTINEZ, Calif. – A freight train derailed in Martinez early Tuesday causing two tankers to lean off the tracks. It is believed the train was backing into the Shell refinery when it went off the tracks at Shell and Marina Vista avenues.
Two cars have their wheels off the tracks and were leaning into other rail lines.
This was not a hazmat situation because there is no sign of leakage and no injuries were reported.
The rail line runs next to Amtrak and Union Pacific lines. There was no immediate word if those commuter trains are affected.
No effort to fight Superior refinery fire; evacuations could last days
By News Tribune 26 April, 2018, 4:40 p.m.
A series of explosions and fires rocked the Husky Energy oil refinery in Superior on Thursday, sending a black plume of acrid smoke across the city, forcing massive evacuations and sending several people to local hospitals.
At least 11 people were confirmed injured in hospitals in Duluth and Superior, one with a serious blast injury, Essentia Health and St. Luke’s hospital officials said.
No fatalities were reported.
Essentia Health announced it was closing all of its Superior locations including evacuating everyone from its Superior hospital with all patients going to its Duluth facilities.
No details were available on the extent of refinery damage or what caused the initial explosion which occurred just after 10 a.m., apparently in a tower near an asphalt tank. The tank punctured and asphalt spewed onto the ground.
A second, larger fire erupted just after noon with multiple explosions, sending another thick, black cloud for miles.
Collin Schade, refinery manager for Husky, told reporters that the facility was preparing for a May shutdown for servicing and inspection and that most of the smoke and fire was from asphalt burning at the scene. He said it may be some time before any cause is determined.
Because of the intensity of the fire Superior Fire Department officials said firefighters were standing by but not attempting to extinguish the main blaze. Firefighters were working to put out grass fires and other small fires caused by the major blaze, and were preparing for a potential attack on the fire with foam and water – but it was unclear how soon that could occur.
Nick Alexander, Superior police chief, said the fire could continue to burn for days.
Evacuation orderedBy early afternoon a north wind gusting to 20 mph appeared to be fanning the flames and pushing the smoke mostly south, with National Weather Service in Duluth radar showing the plume wafting as far as Solon Springs, nearly 20 miles away .
At a 3 p.m. press conference, Mayor Jim Paine said everyone within a 3-mile radius of the refinery should evacuate. Alexander said those who leave should plan to be gone a few days.
City and county officials also said that everyone who lived or worked within 10 miles south of the fire also should evacuate due to the toxic nature of the spreading smoke plume.
“If in doubt… just leave. Find a place to go,” Paine said.
Many of Superior’s main roads were clogged to gridlock with traffic at early afternoon as residents tried to move away from the smoke plume.
Residents who evacuate and need shelter are suggested to gather at The Duluth Entertainment Convention Center, Miller Hill Mall or the Hermantown Public Safety building which were opening doors to any evacuees who need a place to stay.
Superior school officials said public school students in the city were evacuated to Amsoil headquarters at 1101 Susquehanna Ave. where parents waited in traffic jams to pick up their children. All school events for the day are canceled.
The Duluth Transit Authority was sending busses to help move evacuees to safety. Officials at Duluth’s Marshall School said any Superior students were welcome to remain there into the evening.
The University of Wisconsin Superior and the Superior and Maple school districts are canceling schools again on Friday as a precaution.
Many businesses also closed and evacuated, including Superior Water, Light and Power and the Superior Family YMCA, gas stations and grocery stores. Wisconsin Indianhead Technical College closed, cancelling all scheduled classes and events for the remainder of the day.
Superior Mayor Jim Paine said he reached out to Duluth Mayor Emily Larson to take in evacuees if needed.
A second wave of employees and contractors were rapidly leaving the scene after 12:30 p.m. as a series of seven or eight more explosions occurred at 12:40 p.m. when fire trucks were seen moving away from the fire.
Earlier in the morning witnesses said they saw at least seven ambulances enter the facility, with helicopter ambulances also shuttling to and from the refinery and the Richard I. Bong Airport in Superior. Douglas County Deputy Medical Examiner Paul Stein told the News Tribune at noon that he heard there are 20 total injuries but no fatalities.
Contractors at scene of blastEric Mathews, a boilermaker for Wales, Wis.-based CTS Inc. contractors working inside the refinery, said he was about 200 yards away on break when the blast occurred.
It was like “a big sonic boom and rattled your brain,” Mathews told the News Tribune. “I was running and then the debris started falling out of the air … I stopped under a pipe rack then waited for the debris to stop falling.”
Mathews said most or all of his fellow contractors were on break, in blast-proof shelters at the scene, when the first explosion occurred.
“The really lucky part is that it happened during our break so all of our people were in blast shacks,” Mathews said.
Another contractor walking out of the scene said he thought he was “going to die.”
News Tribune photographer Bob King, who flew over the site in an airplane on two different occasions, said one of the large, white storage tanks at the refinery was fractured and that a thick black liquid was pouring out onto the ground.
King said the smoke plume “smelled like burning rubber” and that the intense heat from the fire tossed the small plane in different directions.
Passersby and people nearby said they felt the first explosion rock buildings up to a mile away.
“It felt like a bomb,” said Katey Geistfeld, who works at the Challenge Center at the nearby Mariner Mall. “Everything kind of shook.”
Employees of the refinery and multiple contractors working in the facility were evacuated nearby at first and then further away as the fire rekindled and expanded.
“It shook the houses all over. They felt it at Belknap Plaza. … Tons of people were trying to get down there. They should be staying out,” said Mark Androsky, owner of Stadium Towing who was watching from just outside the refinery. Androsky was using his wrecker to block traffic at one point to allow emergency vehicles to enter.
Superior police have asked people to stay away from the area.
Mayor says city preparedThe mayor said city agencies and refinery crews have trained jointly for disasters at the facility.
“This community is aware we have an oil refinery. We’re prepared for this. We’ve done extensive training,” Paine said. “We’ve invested in equipment and infrastructure. We probably have the best fire department in the country to respond to an event like this.”
State Rep. Rick Milroy issued a statement that today’s “disaster at the refinery in Superior has left everyone with a deep sense of worry and heavy hearts for all of the workers and families involved. Like most Superiorites, I have a lot close friends who work at the pant. Injuries have been reported, but thank God that no fatalities have been reported. I ask that everyone keep all of the workers, first responders, and their families in their prayers as they secure the facility and get the injured medical attention.”
Mel Duvall, manager of media and issues for Calgary-based Husky Energy, said he had no information on where inside the refinery the initial explosion occurred. The company was planning a five-week turnaround starting in May, meaning parts or all of the plant would be shut down.
Officials at Enbridge Energy, which own a massive oil pipeline terminal and storage facility with millions of gallons of petroleum products stored just across the street form the refinery fire, said their facility has not been impacted.
“The Husky Terminal is across the street from Enbridge’s Superior Terminal. This incident has not impacted Enbridge’s Superior Terminal operations. Most Enbridge terminal employees have been evacuated except for a small crew who continue to monitor the situation,’’ said Jennifer Smith, an Enbridge spokeswoman. “Our thoughts and prayers are with the Husky employees and their families.”
Refinery had past violationsIn 2015 the federal Occupational Safety and Health Administration fined Calumet $21,000 over emergency response and flammable liquids violations. Those violations were marked as settled and the problems solved by the end of that year.
It was the only OSHA enforcement action taken against the refinery in the past 20 years, according to a search of the agency’s database.
In 2012 and 2013 there were four reports of hydrogen sulfide releases due to power outages, according to the National Response Center.
The refinery has not been fined over hazardous waste since 1999, according to the Environmental Protection Agency
The refinery’s most recent Risk Management Plan was submitted in 2012 and states: “In the unlikely event of a catastrophic release, the refinery, working in conjunction with local emergency management staff, is well prepared to respond and mitigate adverse consequences to the community or the environment.”
Husky took over in 2017Husky Energy concluded its purchase of the refinery in November, spending $492 million to acquire the refinery from Calumet. Husky said there were no changes planned for the facility but was planning to continue a $30 million upgrade started by Calumet.
About 180 people are employed at Wisconsin’s sole refinery, which provides the Northland with gasoline, asphalt and other specialty petroleum products. About 50,000 barrels — or 2.3 million gallons — of oil per day can be processed at the refinery, located at 2407 Stinson Ave.
Along with the refinery, Husky took control of two asphalt terminals and two product terminals, a marine terminal, 3.6 million barrels in storage and a marketing business.
The Superior refinery was built in 1950, acquired by Murphy Oil in 1958 and sold to Indianapolis-based Calumet for $475 million in 2011.
Husky Energy said Wisconsin’s lone refinery had averaged 37,000 barrels per day of production in the first three months of this year, according to an earnings statement released Thursday morning.
Check back for updates.
News Tribune reporters Brooks Johnson, Jimmy Lovrien, Jana Hollingsworth and Peter Passi and Superior Telegram reporter Maria Lockwood contributed to this story.
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