Category Archives: Oil Industry

DEIR, Oil Industry, Valero Crude By Rail, Valero Energy Corporation

Investor journal takes notice: Valero DEIR cites significant & unavoidable increase in emissions

Repost from Market News Call
[Editor: Market News call is “a daily market news monitor providing insight, briefs earnings and market news.”  I find it interesting and somewhat encouraging that investors are highly interested in Valero’s Crude By Rail Draft EIR.  – RS]

Just In: Valero Energy Corporation (NYSE:VLO)

By Michael Aragon • June 25, 2014

Valero Energy Corporation(NYSE:VLO)’s plan to unload as many as 70,000 barrels of oil a day from trains at its Benicia refinery will increase emissions across California in a “significant and unavoidable” way, a city report shows.

Valero has applied to build a rail-offloading rack at the plant northeast of San Francisco that would take oil from as many as 100 tanker cars a day. The San Antonio-based company delayed the project’s completion by a year to early 2015 as it awaits approval from the city.

“Project-related trains would generate locomotive emissions in the Bay Area Basin, the Sacramento Basin, and other locations in North America,” the city of Benicia said in an environmental assessment posted on its website today. “The city has no jurisdiction to impose any emission controls on the tanker car locomotives; therefore, there is no feasible mitigation available to reduce this significant impact to a less-than-significant level.”

Valero is proposing the rail spur as record volumes of oil are extracted from North American shale formations that the U.S. West Coast has little pipeline access to. California’s refiners are already bringing in the biggest-ever volumes of oil by rail as they seek to displace shrinking supplies of crude within the state and from Alaska.

Federal Regulation (U.S.), Oil Industry, Rail industry, State regulation

California Energy Commission workshop on trends in sources of crude oil (Wed. 6/25/14)

Repost from California Energy Commission
[Editor: this 9am-5pm workshop will have a broad range of knowledgeable presenters.  Agenda here.  Sorry for short notice.  – RS]

Lead Commissioner Workshop on Trends in Sources of Crude Oil

Wednesday, June 25, 2014, 9:00 AM

The California Energy Commission Lead Commissioner on the Integrated Energy Policy Report will conduct a workshop to highlight changing trends in California’s sources of crude oil with emphasis on the potential growth of crude oil transport to California by rail, and the impacts of these trends on the transportation energy market and existing government policies. The discussions will focus on existing and possible new roles of federal, state, and local government to address market changes.

Commissioner Janea A. Scott, Chair Robert Weisenmiller, and Commissioner Karen Douglas will be in attendance. CPUC President Michael R. Peevey will also be in attendance. Commissioner Scott is the Lead Commissioner for the 2014 IEPR Update and the Lead Commissioner on Transportation. Other Commissioners of the California Energy Commission and the California Public Utilities Commission may attend and participate in the workshop. The workshop will be held:

June 25, 2014 9:00 AM
Berkeley City College Auditorium
2050 Center Street
Berkeley, California 94704
(Wheelchair Accessible)

Remote Access Available by Computer or Phone via WebEx
Presentations and audio from the meeting will be broadcast via our WebEx web meeting service. For additional details on how to participate via WebEx, please see the notice at: http://www.energy.ca.gov/2014_energypolicy/documents/#06252014

Computer Log on with a Direct Phone Number:
– Please go to https://energy.webex.com/ec/ and enter the unique meeting number 924 482 257
– When prompted, enter your information and the following meeting password meeting@9 . (Please note that password is case sensitive.)

For More Information:
http://www.energy.ca.gov/2014_energypolicy/documents/index.html#06252014

Agenda  (Go here for the detailed timed agenda.)
This workshop will address current and anticipated trends in petroleum, crude oil distribution logistics, safety requirements and oversight of crude oil by rail transport, and California policies and activities designed to diversify the mix of future transportation fuels. Staff will facilitate discussions on these topics from industry, government agency, and academic perspectives. Participants will be asked to present information and insights on crude oil trends, the need for changes in government oversight responsibilities and regulatory requirements, and the potential options to reduce the need for petroleum as a transportation fuel.

Background

California obtains crude oil from foreign imports, Alaska, and in-state production. Since 2003, crude oil production from Alaska and California has declined while foreign imports have increased to over 50 percent of the state’s supply. Imports from Alaska and foreign sources are delivered to California by marine vessel. However, California’s crude oil sources appear to be shifting to new supplies, spurred by hydraulic fracturing and other extraction technology advances in North Dakota and other states and development of Canadian oil sands. Shipments of these new resources by rail or by barge from the state of Washington are increasing and could represent over 25 percent of California’s crude oil within a few years, depending on the economics of the extraction, transport, and development and approval of receiving/storage terminals in California. The development of the Monterey shale formation in California, while offering significant production potential, has not progressed primarily because the complex geology of the formation makes it expensive to develop.

California’s gasoline demand is expected to decline from 14.6 billion gallons in 2013 to 12.7 billion gallons in 2020 as the result of improvements in corporate average fuel economy standards (CAFE), requiring automakers to achieve 35.5 miles per gallon in 2016 and 54.5 mpg by 2025. Diesel and jet fuel are expected to grow at a rate of 1 – 2 percent per year, spurred by increased freight movement and other factors. California’s net crude oil demand to produce refined petroleum products is expected to decline in this period. California refineries also produce petroleum products for Arizona and Nevada and may be exporting the refined products to international markets.

Federal and California laws, regulations, and incentives designed to reduce greenhouse gas emissions, reduce transportation demand, and increase the development and use of alternative fuels as a petroleum displacement have begun to show modest changes in the transportation energy market and could be poised for significant growth and displacement of petroleum fuels. The federal government provides the primary oversight of rail safety with additional roles by state agencies. California local governments review the environmental impacts of modifications and new construction of crude oil storage and delivery terminals under the California Environmental Quality Act regulations.

Public Comment

Oral Comments. The IEPR Lead Commissioner will accept oral comments during the

workshop. Comments may be limited to three minutes per speaker. Any comments will

become part of the public record in this proceeding.

Written Comments. Written comments should be submitted to the Dockets Unit by

July 10, 2014. Written comments will also be accepted at the workshop, however, the

Energy Commission may not have time to review them before the conclusion of the

workshop. All written comments will become part of the public record of this proceeding.

Additionally, written comments may be posted to the Energy Commission’s website for

this proceeding.

The Energy Commission encourages comments by e-mail. Please include your name

and any organization name. Comments should be in a downloadable, searchable format

such as Microsoft® Word (.doc) or Adobe® Acrobat® (.pdf). Please include the docket

number 14-IEP-1F and indicate Trends in Sources of Crude Oil in the subject line. Send

comments to docket@energy.ca.gov and copy the technical lead staff at

Gordon.Schremp@energy.ca.gov.

If you prefer, you may send a paper copy of your comments to:

California Energy Commission

Dockets Office, MS-4

Re: Docket No. 14-IEP-1F

1516 Ninth Street

Sacramento, CA 95814-5512

Public Adviser and Other Commission Contacts

The Energy Commission’s Public Adviser’s Office provides the public assistance in

participating in Energy Commission proceedings. If you want information on how to

participate in this forum, please contact Alana Mathews, Public Advisor, at

(916) 654-4489 or toll free at (800) 822-6228, or by e-mail at

PublicAdviser@energy.ca.gov.

If you have a disability and require assistance to participate, please contact Lou Quiroz

at LQuiroz@energy.ca.gov or (916) 654-5146 at least five days in advance.

Media inquiries should be sent to the Media and Public Communications Office at

(916) 654-4989, or by e-mail at mediaoffice@energy.ca.gov.

If you have questions on the technical subject matter of this meeting, please call Gordon

Schremp, Senior Fuels Specialist, at (916) 654-4887 or e-mail at

Gordon.Schremp@energy.ca.gov. For general questions regarding the IEPR

proceeding, please contact Lynette Green, IEPR project manager, at (916) 653-2728 or

by e-mail at Lynette.Green@energy.ca.gov.

The service list for the 2014 IEPR Update is handled electronically. Notices and

documents for this proceeding are posted to the Energy Commission website at

www.energy.ca.gov/2014_energypolicy/index.html. When new information is posted, an

e-mail will be sent to those on the energy policy e-mail list server. We encourage those

who are interested in receiving these notices to sign up for the list server through the

website at www.energy.ca.gov/listservers/index.html.

Remote Attendance

You may participate in this meeting through WebEx, the Energy Commission’s online

meeting service. Presentations will appear on your computer screen, and you may listen

to the audio via your computer or telephone. Please be aware that the meeting may be

recorded.

To join a meeting:

VIA COMPUTER: Go to

https://energy.webex.com/energy/onstage/g.php?d=924482257&t=a and enter the

unique meeting number: 924 482 257. When prompted, enter your information and the

following meeting password: meeting@9

The “Join Conference” menu will offer you a choice of audio connections:

1. To call into the meeting: Select “I will call in” and follow the on-screen directions.

2. International Attendees: Click on the “Global call-in number” link.

3. To have WebEx call you: Enter your phone number and click “Call Me.”

4. To listen over the computer: If you have a broadband connection, and a headset

or a computer microphone and speakers, you may use VolP (Internet audio) by

going to the Audio menu, clicking on “Use Computer Headset,” then “Call Using

Computer.”

VIA TELEPHONE ONLY (no visual presentation): Call 1-866-469-3239 (toll-free in the

U.S. and Canada). When prompted, enter the unique meeting number: 924 482 257.

International callers may select their number from

https://energy.webex.com/energy/globalcallin.php.

VIA MOBILE ACCESS: Access to WebEx meetings is now available from your mobile

device. To download an app, go to www.webex.com/overview/mobile-meetings.html.

If you have difficulty joining the meeting, please call the WebEx Technical Support

number at 1-866-229-3239

Availability of Documents

Documents, agenda and presentations for this meeting will be available online at

www.energy.ca.gov/2014_energypolicy/documents/index.html by June 20.

Date: June 16, 2014

JANEA A. SCOTT

Lead Commissioner

2014 Integrated Energy Policy Report Update

Mail Lists: energy policy, transportation, altfuels

 

 

 

Crude By Rail, Diluted bitumen (Dilbit), Oil Industry, Oil prices, Rail industry, Railbit, Tar sands crude

Tar Sands on the Tracks: Railbit, Dilbit and U.S. Export Terminals

Repost from DESMOGBLOG

Tar Sands on the Tracks: Railbit, Dilbit and U.S. Export Terminals

2014-06-17  |  Ben Jervey

Last December, the first full train carrying tar sands crude left the Canexus Bruderheim terminal outside of Edmonton, Alberta, bound for an unloading terminal somewhere in the United States.

Canadian heavy crude, as the tar sands is labeled for market purposes, had ridden the rails in very limited capacity in years previous — loaded into tank cars and bundled with other products as part of so-called “manifest” shipments. But to the best of industry analysts’ knowledge, never before had a full 100-plus car train (called a “unit train”) been shipped entirely full of tar sands crude.

Because unit trains travel more quickly, carry higher volumes of crude and cost the shipper less per barrel to operate than the manifest alternative, this first shipment from the Canexus Bruderheim terminal signaled the start of yet another crude-by-rail era — an echo of the sudden rise of oil train transport ushered in by the Bakken boom, on a much smaller scale (for now).

This overall spike in North American crude-by-rail over the past few years has been well documented, and last month Oil Change International released a comprehensive report about the trend. As explained in Runaway Train: The Reckless Expansion of Crude-by-Rail in North America (and in past coverage in DeSmogBlog), much of the oil train growth has been driven by the Bakken shale oil boom. Without sufficient pipeline capacity in the area, drillers have been loading up much more versatile trains to cart the light, sweet tight crude to refineries in the Gulf, and on both coasts.

Unfortunately, some of these “bomb trains” never make it to their destination, derailing, spilling, exploding and taking lives.

While shale oil, predominantly from the Bakken, has driven the trend, Canadian tar sands producers are increasingly turning their attention to rail. Hobbled by limited pipeline capacity out of Alberta, and frustrated by their inability (so far) to ram the Keystone XL pipeline through the American heartland, tar sands producers are signing contracts with Canadian rail operators. Canadian National Railway is getting the lionshare of the business.

Canadian National not only has the infrastructure in place near Alberta’s tar sands developments, but also operates 19 subsidiary railways in the United States under the Grand Trunk Corporation. Strung together, Canadian National network stretches 2,800 miles from Western Canada down to the Gulf Coast, the only company that can offer straight-through shipping from the tar sands to Gulf Coast refineries.

Of the upstream infrastructure — or the loading terminals up near the tar sands, the Oil Change International report explains:

At the time of writing there were 31 terminals in operation that load tar sands or heavy crude, with six of these expanding and an additional eight planned or under construction…

The first terminal designed to load unit trains with Canadian tar sands crude, the Canexus terminal in Bruderheim, northeast of Edmonton, Alberta, started operations in December 2013. It has a capacity of 70,000 bpd and loads tar sands bitumen from MEG’s Christina Lake SAGD project, among others.

Downstream, rail terminals are similarly adapting to handle shipments of tar sands crude. From the Runaway Train report:

Terminals designed to unload tar sands crude are currently concentrated in the Gulf Coast region, where the biggest concentration of heavy oil refining capacity is located…

The Gulf Coast terminals have about one million bpd of unloading capacity today, set to grow to over two million bpd in 2016. Some of this capacity is at refineries such as those operated by Valero in Port Arthur, Texas, and St. Charles, Louisiana. Valero has ordered 1,600 insulated and coiled tank cars specifically for hauling tar sands crude to its refineries.

The Gulf Coast also has significant midstream capacity on the Mississippi River, where crude oil, including tar sands crude, is unloaded from trains and pumped from storage tanks into local pipelines or loaded onto barges that deliver to coastal refineries via the Intracoastal Waterway.

Meanwhile, refineries on the Atlantic and Pacific coasts are angling to get in on the action, hoping that their shipping advantages to Europe and Asia respectively will prove appealing to tar sands producers.

As described in Runaway Train, terminals on the West Coast are particularly well positioned to serve as a “fast-track out of North America for Canada’s tar sands.”

There are currently 13 crude-by-rail unloading terminals in California, Oregon and Washington, of which four are currently expanding their capacity. There are also 11 terminals planned or under construction.

Many of these are at refineries that, like their counterparts on the East Coast, are looking to take advantage of discounted domestic or Canadian crudes that they have little hope of ever gaining access to via pipeline. With a larger proportion of refining capacity geared up for heavy tar sands processing than exists on the East Coast, West Coast refineries such as the Valero facility in Wilmington, Calif., and the Phillips 66 refineries in California and Washington, are keen to rail in tar sands crude.

Accessing these West Coast refineries by rail, as well as the prospect of export terminals in Washington and Oregon, are potentially the tar sands industry’s best bet for major market expansion in the face of delays and possible cancellation of the Keystone XL pipeline and pipelines to the Canadian west coast such as the Northern Gateway and Trans Mountain expansion.

These latter projects, which are primarily focused on exporting tar sands crude to Asia, face particularly stiff opposition from coastal communities, which fear the destruction of fisheries and coastal environments from the increased tanker traffic that would ensue.

Given the relative proximity particularly of Washington State refineries and ports to Alberta’s tar sands fields, these terminals offer oil companies a potential solution to the transportation bottlenecks that are threatening the viability of tar sands production growth. At least three proposals in southern Washington State have the potential to unload tar sands crude from trains and load it onto tankers for export to Asia or transport to refineries along the California coast.

Tar sands producers are particularly motivated to get their crude to coastal terminals and refineries for export. As we’ve covered in the past on DeSmogBlog, tar sands companies want to export their product, because the low-grade crude is more easily refined into diesel, which has a much larger market in Europe and Asia. This is the core reason that the Keystone XL, if built, would be little more than an export pipeline, and wouldn’t actually provide more oil to American markets, nor lower American gas and heating oil prices.

The Oil Change International report also shines a light on the fact that though crude exports are banned from the U.S., domestic refineries can legally export crude from Canada.

While crude oil of U.S. origin is subject to export restrictions, no such restriction applies to exports of Canadian oil through the U.S., as long as it can be shown that no U.S. oil was blended.

Shippers wishing to export Canadian oil from U.S. ports still have to apply for export licenses from the Department of Commerce, but these can and have been granted. Given the lack of pipeline capacity to Canadian ports, it is attractive for tar sands producers to find ways to get their product to a U.S. port where it can be exported. Crude-by-rail terminals on the West and East Coasts are strategically important as they are closer to Alberta than those on the Gulf Coast and it is therefore cheaper to reach these ports by rail.

Railbit vs. Dilbit

As this still-nascent segment of crude-by-rail develops, it’s worthwhile to take a moment to understand the distinction between a couple of different tar sands products that are being shipped by train. The vast majority of tar sand crude-by-rail shipments thus far have been diluted bitumen, or dilbit. Dilbit, which you have heard of as the tar sands crude that is already funneling through North American pipelines, is composed of the sticky, viscous tar sands bitumen, which is then mixed with about 30 percent diluent, allowing it to flow through pipelines. This mixture of dilbit is particularly volatile and abrasive, and reports have pointed to it being more likely to cause leaks and spills and explosions during transport.

Railbit is a relatively new designation for crude, and is defined as bitumen that has been mix with roughly 17 percent diluent. Moving railbit, rather than dilbit, saves tar sands shippers about half of the so-called “diluent penalty,” or the cost of adding the diluent to the mix.

So why are most trains still loaded with dilbit? Because to this point, most loading terminals are still being fed by feeder pipelines or trucks that can only handle this more watered down blend. That and the fact that special loading and unloading facilities are necessary to handle railbit, which is more viscous and needs to be heated in special tank cars to be unloaded. Some downstream terminals are making these investments, seeing railbit as a viable alternative going forward, but today dilbit is still dominant.

Either way, it’s dirty and dangerous, and tar sands bitumen in any form does nothing to lower American energy bills. Bitumen, by rail or pipeline or barge, is bound to wind up on a tanker to Europe or Asia.

Bakken Crude, Massive increase in crude-by-rail, Oil Industry, Oil prices

US “Not Immune” to Oil Price Hike

Repost from Oil Change International
[Editor: Significant quote: “Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.”  – RS]

US “Not Immune” to Oil Price Hike

Andy Rowell, June 16, 2014

Crisis_in_Iraq_leading_to_higher_gas_pricesFor years the American oil industry has argued that the ongoing U.S. oil boom will bring about “energy independence” and drive gasoline prices  down. Americans are supposed to be enjoying an era of cheap, plentiful energy.

As the oil industry has set about fracking America, decades of declining production has been reversed in just a handful of years. The US is now the world’s largest producer of oil and gas.

The oil industry has persuaded or forced communities across North America to compromise their water supplies and their health to allow the fracking revolution with the promise of lower prices and energy security.

So American consumers should apparently be appreciating the impact of the country’s shale revolution as crude oil and condensates production has just surpassed its previous peak, reached way back in 1970. A 44-year old record has just been broken.

Not so. As the Energy Policy Information Centre pointed out, at the end of last month. “Despite all the promise of the oil boom, for most Americans, its economic benefits remain an abstract concept in the absence of relief at the gas station.”

The sad truth is that despite the US economy being half as “oil intense” compared to the 1970s – as measured by barrels of oil consumed per $1,000 of GDP –  American households and businesses still spend a staggering 900 billion dollars annually on petroleum.  The average American household dedicates around 5.3% of its spending to petroleum, with the burden felt much more heavily by low income households.

And here comes the real irony. Despite the US reaching a record production peak, last week the price of Brent crude rose 4 per cent, its biggest one-week rise since July last year. Wholesale US gasoline rose with it and thus US consumers will notice higher pump prices probably as soon as this week (see chart).

FT RBOB Gasoline 10 days to June 16Source: Financial Times

And the reason is the ongoing turmoil in Iraq. The escalating violence there is threatening supplies from OPEC’s second largest producer, which produces in excess of 3 million barrels of oil a day.

Bloomberg is quoting Societe Generale saying that if the violence escalates and production is affected, Brent crude may jump from its current position of $113 to $120 or even $125. It may go even higher.

“This is a serious situation in terms of the global oil market,” Victor Shum, a vice president at IHS Energy Insight in Singapore, told Bloomberg. “This situation in Iraq really threatens potential supply growth going forward.”

So far the fighting has not spread to the south, where the US Energy Information Administration estimates that three-quarters of Iraq’s crude output is produced. But if the Southern oil fields fall, the global oil price could skyrocket to unprecedented levels.

What this shows, as Ed Crooks, points out in today’s Financial Times is that, despite its own fracking revolution, “the US is not immune to the effects of disruption in world markets.”

Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.

The boom that is needed in order to truly insulate the American economy from the relentless turmoil in oil producing countries is a boom in efficiency, public transit, smart growth and electric vehicles. These technologies and policy initiatives are here now and ready to go, but the political and financial weight behind them has been overshadowed by the lure of oil boom riches.

Instead of “All of the Above“, we need energy policies that will help American’s reduce the amount of oil they need to buy, at any price.