Category Archives: Massive increase in crude-by-rail

Bakken Crude, Crude By Rail, Lake Champlain, Massive increase in crude-by-rail

The risk to Lake Champlain

Repost from The Burlington Free Press
[Editor: What do pristine California waters and Lake Champlain (in upstate New York) have in common?  Would you believe oil trains?  – RS]

The risk to Lake Champlain

 Mike Winslow, August 15, 2014

The sound of trains clacking along the rails that abut Lake Champlain has become more common with the dramatic increase in freight traffic attributed to fossil fuel extraction.

Each week approximately 60 million gallons of oil travel along the lake carried by 20 trains with up to 100 cars each. Nearly half of these shipments carry the volatile Bakken crude.

The U.S. meets 66 percent of its crude oil demand from production in North America with tremendous growth in outputs from Canada and the Bakken oil fields of North Dakota. In October 2013, U.S. crude production exceeded imports for the first time since February 1995.

Oil produced from the Bakken fields is light. That means it flows easily, but it also means it is more volatile and flammable.

As a result, the potential property damage and loss of life associated with rail accidents involving Bakken oil is higher than oil from other sources.

In January, two federal agencies issued a safety alert warning of these risks.

The alert was triggered by a series of devastating accidents. Federal Railroad Administration statistics suggest that on average, at least one car slips off the tracks every day. There have been six major derailments since the beginning of 2013.

The most infamous occurred July 5, 2013, in Lac Megantic, Quebéc. An improperly secured train rolled on its own, and 63 cars derailed near the center of town, leading to multiple explosions and fires, evacuation of 2,000 people and 47 deaths.

There have been unsettling precedents:

• October 19, 2013: 13 tank cars derailed in Alberta leading to evacuation of 100 residents. Three cars carrying propane burned following an explosion.

• November 8, 2013: 30 cars derailed in a wetland near Aliceville, Alabama and about a dozen were decimated by fire.

• December 30, 2013: two trains, one carrying grain and one oil, collided in Casselton, North Dakota. Twenty of the oil train cars derailed and exploded leading to evacuation of 1,400 people.

• January 7, 2014: 17 cars derailed in New Brunswick and five exploded leading to evacuation of 45 people.

• January 20, 2014: Seven cars derailed on a bridge over the Schuylkill River in Philadelphia, though no oil leaked.

• More recently, 15-17 cars derailed in Lynchburg, Va., on April 30. Three fell into the James River and one burst into flames. There were no injuries, but 300-350 people had to be evacuated, and oil leaked into the James River. The state estimated 20,000 to 25,000 gallons escaped during the wreck.

Our region is no stranger to train derailments. In 2007, a northbound Vermont Railways freight train derailed in Middlebury, spilling gasoline into Otter Creek and leading to the evacuation of 30 streets in the vicinity.

Trains have also derailed along the Lake Champlain route. In 2007, 12 cars derailed near Route 22 in Essex, N.Y., the same stretch of tracks now carrying volatile oil.

Concern over the state of North American freight rail safety predates the increase in oil shipments.

In 2006 the Toronto Star ran a five-part series on rail safety. The newspaper noted, “Canadian freight trains are running off the rails in near record numbers and spilling toxic fluids at an alarming rate, but only a tiny fraction of the accidents are ever investigated.”

The greatly increased traffic in oil has further strained railroad infrastructure. According to an article in Pacific Standard Magazine, 85 percent of the 92,000 tank cars that haul flammable liquids around the nation are standard issue DOT-111s. They have been referred to as “Pepsi cans on wheels.”

These cars are built to carry liquids but lack specialized safety features found in pressurized tanks used for hauling explosive liquids. The industry has agreed to include additional safety features in any new cars put on the tracks, but since rail cars have an economic life of 30-40 years, conversion to the newer cars has been slow.

One relatively new risk is the predominance of “unit trains.” These are long series of cars all shipped from the same originating point to the same destination.

Often the cars will all carry the same product. It used to be that oil cars were mixed in with other freight cars bound for different locations. Unit trains are a greater risk in part because safety standards are based on the carrying capacity of a single car and don’t account for the greater volumes that unit trains can transport.

The National Transportation Safety Board, an independent federal agency charged with investigating accidents, has called on the Federal Railroad Administration to change this standard.

Recently, an oil company submitted plans to build an oil heating facility in Albany, N.Y. The facility would be used to heat oil shipped via rail. The oil would then be transferred to barges and floated to refineries.

If permitted, a heating facility would draw increased transport of Canadian tar sands, which needs to be diluted or heated for loading or unloading, through the Lake Champlain region.

In contrast to Bakken field oil, tar sands oil is heavy. Cleanup of tar sands oil following accidents is extremely challenging. The oil sinks rather than floating, making containment difficult.

When a pipeline carrying tar sands oil broke near Kalamazoo, Mich., 850,000 gallons spilled. The resulting cleanup cost more than $1 billion (yes, $1 billion), and costs were “substantially higher than the average cost of cleaning up a similar amount of conventional oil,” according to a report prepared by the Congressional Research Service.

In November 2013, the New York Department of Environmental Conservation declared the proposed facility would have no significant environmental impacts.

However, public outrage led the department to reconsider that declaration, expand the public comment period and seek additional information from the proponents.

Still, the additional requested information touches only the tip of the facility’s impacts on the region. The facility should undergo a full environmental impact review that includes potential impacts on freight shipping throughout the region including along Lake Champlain.

In July, the Department of Transportation proposed new rules on rail safety. They include a phase-out of DOT-111s during the next few years, tightened speed limits, improved brakes and permanent requirements for railroads to share data with state emergency managers.

The federal department is accepting comments on the proposed rules until Sept. 30 and hopes to finalize them by the end of the year.

It’s a step in the right direction, but way too slow on getting rid of these risky cars. Delays in updating standards puts people, communities, Lake Champlain and other waterways at risk. The administration needs to act before another disaster like what occurred in Lac Megantic occurs here or elsewhere.

Train whistles echoing off the waters of the lake should elicit wistful thoughts of faraway places, not shudders of dread.

Mike Winslow is the staff scientist at Burlington-based nonprofit Lake Champlain Committee.

Rail concerns

A forum on rail transportation of crude oil along the western shore of Lake Champlain is planned for 7 p.m. – 9 p.m. on Aug. 24 at Plattsburgh City Hall.

For more information, contact the Lake Champlain Committee at lcc@lakechamplaincommittee.org or (802) 658-1414.
Farming, Massive increase in crude-by-rail, Rail industry

Rail Logjams Are Putting The Whole US Economic Recovery At Risk

Repost from Business Insider
[Editor: Significant quote: “Many experts blame an incomplete recovery from last winter’s freight backlogs, coupled with record crops and rising competition with crude oil tankers for track space amid an economic recovery.”  – RS] 

Rail Logjams Are Putting The Whole US Economic Recovery At Risk

Susan Taylor and Solarina Ho, Reuters, Aug. 15, 2014

TORONTO (Reuters) – More than eight months after an extreme winter began snarling North American rail traffic, a Reuters analysis of industry data shows delays lingering, raising the risk of a second winter of chaos on the rails.

Across the continent’s seven largest operators, trains ran almost 8 percent slower on average and sat idle at key terminals for nearly three hours longer in the second quarter than a year earlier, data from the main railroads, known as Class 1, show.

While Canada’s rail operators have nearly recovered, many U.S. operators lag far behind.

The concerns are sharpest in the U.S. Farm Belt, with lawmakers fearful that the biggest crops on record may be slow to reach markets or could even rot.

Rail logjams contributed to the economic slowdown early in the year, rippling across corporate America and affecting everything from car makers to ethanol producers.

Many experts blame an incomplete recovery from last winter’s freight backlogs, coupled with record crops and rising competition with crude oil tankers for track space amid an economic recovery.

“It’s like a sinking ship – you’re bailing out at one end, but it’s coming in the other end just as fast, if not faster,” said Citigroup Global Markets transportation analyst Christian Wetherbee.

Performance fell behind as loads grew: between April and June, U.S. rail carload volumes grew 5.4 percent and intermodal traffic, which include shipments partly by rail, rose 8 percent, Association of American Railroads (AAR) data shows.

At the same time, the industry is producing “tremendous” margins, profit and cash flow, with some companies setting records, said rail analyst Tony Hatch.

The largest operators plan to spend about 18 to 20 percent of annual revenue this year on new terminals, track, sidings and equipment to help boost capacity and efficiency, according to Thomson Reuters data. That is slightly higher than recent average annual spending.

Some shippers complain that spending hasn’t been sufficient to meet demand, especially in bad weather. Still, many investment projects are multi-year improvements that can’t quickly fix traffic jams.

“We’re criticized … because we haven’t put infrastructure in to handle the growth. But then when you try to put infrastructure in, the not-in-my-backyard lobby kicks in and says: We don’t want you here,” Canadian Pacific Railway Ltd Chief Executive Hunter Harrison said on a recent earnings conference call.

Over the four decades to 2000, the nation’s major track system shrank by about half, in terms of miles of rails, according to the U.S. Federal Highway Administration.

Although Berkshire Hathaway’s BNSF Railway Co is spending a record $5 billion this year, its performance lagged those of competitors last quarter.  BNSF trains traveled 11 percent slower than year-ago speeds, and stayed at terminals for 18 percent longer.

Fadi Chamoun, an analyst at BMO Capital Markets, said BNSF is unlikely to recover until mid- to late-2015 due to the amount of work it must do.

In recent years, BNSF accounted for some 50 percent of the entire rail industry’s volume growth, analysts said. The company says it handles up to 15 percent of U.S. intercity freight.

BNSF declined to respond to Reuters’ questions about its performance metrics. The Fort Worth, Texas-based railway has said it is working closely with shippers to clear backlogs and adding track, locomotives and crews.

The other four U.S. Class 1 railroads are CSX Corp, Kansas City Southern, Norfolk Southern Corp and Union Pacific Corp.

Kansas City Southern and Norfolk Southern did not respond to requests for comment. CSX said it was investing in strategic capacity additions and was adding train crews and locomotives to restore performance and support growth. Union Pacific CEO Jack Koraleski told Reuters that the railroad’s performance has been improving even as volumes have been increasing, adding that it has worked hard to address disruptions and customer issues.

Cowen & Co analyst Jason Seidl said winter exacerbated problems for the industry. “As they were trying to dig out, the volumes took off,” he said.

ECONOMIC FALLOUT

In the United States, more than 40 percent of goods, valued at more than $550 billion, are shipped by railroad each year on some 140,000 miles of track. Canada’s 30,100 miles of track carry half of the country’s export goods.

Frozen transportation links contributed to a nearly 3 percent contraction in the U.S. economy during the first quarter, the New York Federal Reserve said last week.

Lawmakers and the $395 billion agricultural industry fear that trains may fail to clear last year’s record-breaking crops in the Midwestern U.S. Farm Belt, which could strand part of this summer’s grain harvest.

“We’re sounding the alarms right now,” North Dakota Senator Heidi Heitkamp told Reuters. “We believe the 2014 crop could be taken off the fields and there won’t be any place to store it, because of the lack of ability to move product by rail.”

BNSF and Canada’s CP Rail operate the main rail networks in North Dakota, where farmers vie for space with some 700,000 barrels per day of crude oil shipped by rail from the state’s Bakken Shale.

“You can’t see these massive increases in crude-by-rail and not appreciate that they are creating problems for moving agricultural products,” Heitkamp said.

Members of Congress, utility companies, the United States Department of Agriculture and others are asking the U.S. rail regulator, the Surface Transportation Board, for help.

“With remaining grain in storage due to the backlog, grain elevators in some locations, such as South Dakota and Minnesota, could run out of storage capacity during the upcoming harvest, requiring grain be stored on the ground and running the risk of spoiling. The projected size of the upcoming harvest creates a high potential for loss,” USDA Under Secretary Edward Avalos wrote to the regulator this month.

Utility Xcel Energy said coal deliveries to a key Midwest facility were behind schedule.

“When we run out of coal, the plant can’t produce electricity. We are right in the middle of summer when air-conditioning load creates our highest levels of electric demand,” Xcel Chief Executive Ben Fowke wrote in a letter to the STB at the end of July.

Since an April 10 hearing on rail service, the STB has issued several orders, primarily involving CP and BNSF. The most recent directive, issued in June, required the two railways to publicly file their plans to resolve their backlog on grain orders and provide a weekly update on grain car service. It declined to comment on complaints or its plans.

Earlier this month, the Canadian government ordered Canadian National Railway Co and CP to further boost regulated grain shipments, in an effort to prevent a repeat of last season’s backlog.

Recent University of Minnesota data showed that transportation bottlenecks cost the state’s soybean, corn and spring wheat farmers nearly $100 million between March and May.

United Parcel Service Inc, the world’s largest courier company, said that “very poor” railroad performance last quarter raised its costs. Even passenger service Amtrak has been affected, with some of the trains it runs on Class 1 tracks falling far behind schedule.

Canada’s biggest rails, CN and CP, operated their trains at speeds 4.7 percent and 3 percent slower in the second quarter than year-ago levels respectively, better than most U.S. rivals.

CN said its ability to avoid Chicago, a hub notorious for bottlenecks, helped its sector-leading recovery. In 2009, CN bought a rail network that encircles Chicago, the Elgin, Joliet and Eastern Railway Co.

CHICAGO BLUES

Chicago’s third-snowiest winter on record severely tangled traffic at a hub that handles one quarter of the nation’s freight-by-rail and has recently become a major conduit for Bakken crude.

Data from Union Pacific shows its trains idled in Chicago for an average 65 hours in February, around double the typical time for much of 2013.

Following a severe 1999 blizzard that paralyzed trains for days, government and railroads launched a $3.8 billion plan to improve the Chicago system.

That’s not a quick solution for the industry’s woes.

“It takes a long time for new lines and new terminals to get built, and additional locomotives to be delivered and additional crews to be trained,” said Steve Ditmeyer, an adjunct professor at Michigan State University’s Railway Management Program.

“There’s a time lag that the railroads cannot snap their finger and, all of a sudden, get out of the current problem.”

(With additional reporting by Joshua Schneyer and Jonathan Leff in New York, and Sagarika Jaisinghani in Bangalore; editing by Joshua Schneyer and Peter Henderson)
Fracking, Massive increase in crude-by-rail, Oil Industry

Blame the Environmentalists – a script in four despicable acts

Repost from The Post Carbon Institute

Blame the Environmentalists

Posted Aug 11, 2014 by Richard Heinberg
Confidential image via shutterstock.

Here’s The Script, in four despicable acts:

Act 1. Fracking boom goes bust as production from shale gas and tight oil wells stalls out and lurches into decline.
Act 2. Oil and gas industry loudly blames anti-fracking environmentalists and restrictive regulations.
Act 3. Congress rolls back environmental laws.
Act 4. Loosened regulations do little to boost actual oil and gas production, which continues to tank, but the industry wins the right to exploit marginal resources a little more cheaply than would otherwise have been the case.

You can bet The Script is being written in operational detail right now at corporate headquarters in Oklahoma City and Houston, and in the offices of PR firms in New York and Boston. Each of its elements has the inevitability of events in a Shakespearean tragedy.

It’s fairly clear that the fracking bubble will burst soon—almost certainly within the decade. Our ongoing analysis at Post Carbon Institute documents the high per-well decline rates (a typical well’s production drops 70% during the first year), the high variability of production potential within geological formations being tapped, and the dwindling number of remaining drilling sites in the few “sweet spots” that offer vaguely profitable drilling potential. Meanwhile, as the Energy Information Administration (EIA) has recently documented, the balance sheets of fracking companies are loaded with debt while surprisingly short on profits from sales of product—with real profits coming mostly from sales of assets (drilling leases).

The industry continues to claim that tight oil and shale gas are “game changers” and that these resources will last many decades if not centuries. Though the CEOs of companies engaged in shale gas and tight oil drilling are undoubtedly aware of what’s going on in their own balance sheets, hype is an essential part of their business model—which can be summarized as follows:

Step 1. Borrow money and use it to lease thousands of acres for drilling.
Step 2. Borrow more money and drill as many wells as you can, as quickly as you can.
Step 3. Tell everyone within shouting distance that this is just the beginning of a production boom that will continue for the remainder of our lives and the lives of our children, and that everyone who invests will get rich.
Step 4. Sell drilling leases to other (gullible) companies at a profit, raise funds through Initial Public Offerings or bond sales, and use the proceeds to hide financial losses from your drilling and production operations.

In the financial industry this would be recognized as a variation on the old “pump and dump” scam, yet the US government’s own EIA has just quietly confirmed that this is standard practice in the companies responsible for the “miraculous” US oil and gas renaissance that other departments of government are relying on for job creation projections, future tax revenues, and (reputed) energy export clout in the new cold war against Russia.

The bursting of the fracking bubble will have almost nothing to do with environmentalists, but they have deliberately and courageously put themselves in harm’s way. Fracking has terrible impacts on water, air, soil, human health, the welfare of livestock and wildlife, and the climate.

Hundreds of local anti-fracking groups have sprung up across the country in recent years, often started by ordinary citizens who suddenly found their wells fouled, their livestock sickened, or their children suffering from headaches and nosebleeds as a result of nearby fracking operations. Yet it has often been difficult for environmental scientists to document such impacts, due to deliberate efforts on the part of industry to impede studies and publications (for example, requiring non-disclosure agreements where complaints are met with cash settlements); indeed, industry spokespeople continue to deny that fracking is responsible for any environmental or human health problems. The industry despises environmentalists. But the real motivation for The Script is not petulance or revenge.

No, this is all business. Environmentalists will merely be handy scapegoats. Blaming environmentalists for the bursting of the fracking bubble will divert public attention from the industry’s own bad business practices. But even more usefully, telling receptive members of Congress that falling oil and gas production rates are due to anti-fracking, fear-mongering, business-hating enviros will set the stage for new and powerful calls to roll back local, state, and national regulations. Congress’s likely response: “Poor you! What can we do to help? How about some further exemptions to the Clean Air and Clean Water acts? Maybe a preemption of local fracking ordinances with a new industry-friendly national rule? Would you care for some drilling leases on millions of acres of federal land as an appetizer, while you’re waiting? They’re on the house.”

The industry has a lot to gain by portraying itself as the victim of powerful environmental interests. But will this gambit actually initiate a new round of oil and gas production growth? That’s remotely possible, since there are still billions of tons of low-grade hydrocarbon resources trapped beneath American soil. But don’t count on it. It takes money to drill, even if it’s other people’s money. As the quality of available resources declines, the amount of money needed to yield each new increment of energy from those resources grows. The industry will have to find and persuade a new flock of investors, which is likely to be difficult once shale gas and tight oil production is clearly headed south with an accelerating trend. Carrying loads of debt has been relatively easy due to ultra-low interest rates; if the Federal Reserve decides to let rates drift back upward, this alone could be a stake through the industry’s heart.

One way or another, the current fracking bubble is likely to constitute the last gasp of production growth for US oil and gas. The Script can’t solve all the industry’s problems. But it might yield a few consolation prizes.

What could keep The Script from succeeding? The industry’s PR offensive will be much less effective if mainstream media prominently and repeatedly publish good analyses of what’s going on in the geology of the fracking fields and the balance sheets of the drilling companies; and if public officials understand and talk about the real reasons for the coming stall and drop in US oil and gas production.

Both of these developments could in turn be facilitated by EIA doing its job. The Agency’s recent report was an excellent first step. The EIA works for the American people, not the oil and gas industry. Where the interests of the people and those of the industry diverge, it’s clear where the Agency’s loyalties should lie. Here’s an open plea to Agency officials: Please follow the evidence and tell public officials and the American people the real story of what’s happening as the national fracking boom turns to bust. You’re the authority everyone looks to.