U.S. railroads push against oil industry demands for storage in rail cars
Reuters, by Devika Krishna Kumar, Laura Sanicola, April 9, 2020
NEW YORK (Reuters) – Railroads are clamping down on rising demand from oil companies to store crude in rail cars due to safety concerns, sources said, even as the number of places available to stockpile oil is rapidly dwindling.
Oil demand is expected to drop by roughly 30% this month worldwide due to the worsening coronavirus pandemic, and supplies are increasing even as Saudi Arabia and Russia hammer out an agreement to cut worldwide output. Storage is filling rapidly as refiners reduce processing and U.S. exports fall.
Globally, storage space for crude could run out by mid-2020, according to IHS Markit, and most U.S. onshore storage capacity is expected to fill by May, traders and analysts said.
However, railroads including Union Pacific and BNSF, owned by billionaire Warren Buffett, are telling oil shippers that they do not want them to move loaded crude trains to private rail car storage facilities on their tracks due to safety concerns, three sources in the crude-by-rail industry said.
The railroads are telling clients that tank cars are not a prudent long-term storage mechanism for a hazardous commodity such as crude, and do not want to put a loaded crude oil unit train in a private facility and potentially create a safety hazard, they said.
Federal rules typically only allow crude in rail cars to be stored on private tracks. There is no federal data on how much oil is regularly put in rail storage, but analysts said it is very little.
“Most federal regulations require rail cars loaded with … crude oil to be moved promptly within 48 hours. Therefore, federal regulations discourage shippers and railroads from leaving crude oil in transportation for an extended time,” transportation lawyers at Clark Hill LLC wrote in an article Thursday.
BNSF did not respond to several requests for comment. Union Pacific declined to comment.
Nearly 142 million barrels of crude moved via rail in the U.S. in 2019, representing about 10% of what is transported via pipelines, according to the U.S. Energy Department. Unit trains, made up entirely of tank cars, can carry around 60,000-75,000 barrels.
Even on smaller or mid-sized railroads, known as shortlines, there may be capacity constraints or insurance coverage may not be adequate, the railroads have said, advising rail companies not to store oil.
“It is arbitrary, and is happening at a time when it (storage) is an option being heavily considered by all companies that have access to crude by rail right now,” one of the sources said.
As of September, there was enough crude storage capacity in the U.S. for about 391 million barrels of out of about 700 million working capacity, excluding the strategic reserve, according to the U.S. Energy Department. However, U.S. stocks have risen by 32.5 million barrels in just the last 4 weeks, including a 15-million-barrel gain in the latest week, the most ever.
Crude-by-rail shipments were not economic when oil prices were high but are expected to rise as prices have plunged. Loadings out of the Permian basin, the biggest in the country, slumped to about 12,500 barrels per day (bpd) in January, the lowest in at least a year, before rising to about 13,200 bpd in February, according to data from Genscape.
Demand is falling so swiftly that rail cars loaded with crude may not be accepted by the time they reach their destination three-to-five days later, leaving barrels orphaned without a storage option, one trader said.
Rates to lease rail cars have dropped sharply due to the crash in oil prices, making them more attractive for storage. Lease rates for rail cars have fallen from about $800 per month to about $500, said Ernie Barsamian, founder and CEO of The Tank Tiger, a terminal storage clearinghouse.
Reporting by Devika Krishna Kumar, Laura Sanicola and Laila Kearney in New York; Editing by Chris Reese
My U.S. readers might wonder why I cover oil train news from Canada. Answer: Our Canada neighbors are important – we are of course, a global people. AND… what happens in production and transport of Canadian tar-sands oil is newsworthy “uprail” news for our west coast states. Canadian and US ports are lined up for export, and our refineries would love to receive the icky substance by rail.
My Benicia readers might wonder why I continue to cover oil train news at all – didn’t we successfully defeat Valero’s dirty and dangerous proposal in 2016? Answer: well, Valero is poised to buy our 2020 mayor and council elections. Who’s to say they won’t try for crude by rail again? Back in 2014-2016, Valero expected to win approval, and invested heavily in the necessary infrastructure for offloading oil trains. Last I knew, they stored the heavy equipment offsite here in Benicia’s Industrial Park. Has it been sold or moved?
IMPORTANT IN TODAY’S INTERNATIONAL NEWS…
Rail Lines Shut Down, Royal Canadian Mounted Police (RCMP) Still on Gidimt’en Land as Miller Meets Tyendinaga Blockaders
The Energy Mix, February 18, 2020, Primary Author Mitchell Beer
Rail lines across most of Canada remained shut down this week, RCMP were still a threatening presence on Gidimt’en land in British Columbia, Indigenous Services Minister Marc Miller met with Tyendinaga Mohawk protesters, and a flurry of news coverage traced the widening impacts of a blockade triggered by a pipeline company pushing an unwanted natural gas pipeline through unceded Indigenous territory.
Over the weekend, the Tyendinaga blockade of the CN Rail track near Belleville, Ontario continued after the community concluded a day-long meeting with Miller. Blockades or demonstrations were under way near Rivière-du-Loup, Quebec, at the Rainbow Bridge in Niagara Falls, and on the Prince Edward Island side of the Confederation Bridge, and shut down the Thousand Islands Bridge between Ontario and New York State for 2½ hours. Days earlier, a court injunction barred Wet’suwet’en supporters from continuing their blockade of the B.C. legislature in Victoria.
And in Toronto, a massive march snaked through downtown to the provincial legislature Monday, with Toronto police tweeting that drivers should consider alternate routes after protesters stopped for a time at the busy corner of Bay and College. “When justice fails, block the rails,” demonstrators chanted. “How do you spell racist? R-C-M-P,” they added.
Prime Minister Justin Trudeau said the federal government was committed to “resolving the situation quickly and peacefully,” while maintaining that the rail disruptions must be settled through dialogue, not police intervention.
“We are not the kind of country where politicians get to tell the police what to do in operational matters,” he told media Friday, while attending a global security conference in Munich. “We are a country that recognizes the right to protest, but we are a country of the rule of law. And we will ensure that everything is done to resolve this through dialogue and constructive outcomes.”
Before his meeting at Tyendinaga began Saturday, Miller said he wasn’t sure he could convince anyone to shut down the blockade, but he was there to open a dialogue.
“This is a situation that is very tense, very volatile, there are some people that have been standing out there for days, so today is a chance to talk and have a real discussion,” he said. “All of Canada is hurting, the economy is slowing down,” and “everyone knows the reports about supply shortages, but we can’t move forward without dialogue, and that’s we’re going to do today.”
Afterwards, based on a recording provided by a meeting participant, CBC reported that Miller had asked the community to suspend the blockade. But that request was undercut by a call from Wet’suwet’en hereditary chief Woos (Frank Alec), who told the room the RCMP was still on his community’s territory. “I would suggest to you loud and clear that we want the RCMP out of Gidimt’en territory,” he said.
While the RCMP operation to clear several Indigenous checkpoints was over, the chief said the police were still on the scene and “continued to pose a threat”, CBC said.
“We want them out of there. We don’t want them there. They have a detachment right in the middle of nowhere, in their eyes. But in our eyes, it’s our territory,” he said. “We do our traditions out there. We do our trapping and hunting. They are out there with guns, threatening us.”
“Get the red coats out first, get the blue coats out…then we can maybe have some common discussions,” responded Tyendinaga community member Mario Baptiste.
“Obviously dealing with the context of the issue…it absolutely needs to be widened,” Miller replied.
“Tonight, we made some modest progress by opening up a dialogue with the people standing out there in the cold and doing so for eight or nine days,” Miller told media afterwards. “We talked openly, frankly, painfully at times, and sometimes with humour. There’s a lot more work to be done.”
Miller added that he would share the results of the discussion with Trudeau and the rest of the federal cabinet. “The underlying issues did not arise yesterday,” he said. “They’ve been present in this community for hundreds of years.”
Political scientists Gina Starblanket of the University of Calgary and Joyce Green of the University of Regina underscored that history last Thursday, in a Globe and Mail op ed that declared the death of the reconciliation process between Canada and Indigenous peoples.
“February has seen an explosion of Indigenous and non-Indigenous support for the current political struggle by the Wet’suwet’en hereditary chiefs and their supporters,” they wrote. “Again, we are seeing a ham-handed response of both orders of government, delivered in justificatory talking points to the media and enforced by the RCMP. Once again, we have the police dragging Indigenous peoples off of their lands, in Canada, in the service of the settler state, which is as usual attending to virtually every relevant political interest—except Indigenous ones.”
All of that “despite the rhetoric from federal and some provincial politicians about the need to transform their relationship with Indigenous people—even though that little matter of land theft continues,” they add. “And Canada—in all its structural manifestations—continues its perpetual drive to eliminate Indigenous rights to land and self-determination, treating them as impediments to the national interest.”
News coverage over the last week combined front-line reports on the blockade with stories on the businesses and supply chains disrupted by the national rail shutdown. On Thursday, CBC reported that protests in Belleville and New Hazelton, B.C. had “prompted CN Rail to temporarily shut down parts of its network” as of Tuesday, with the lack of any train movement “crippling the ability to move goods and facilitate trade.” That same day, CN said it was “initiating a progressive and orderly shutdown of its Eastern Canadian network”, a decision that could lead to 6,000 temporary layoffs, according to Teamsters Canada.
“With over 400 trains cancelled during the last week and new protests that emerged at strategic locations on our mainline, we have decided that a progressive shutdown of our Eastern Canadian operations is the responsible approach to take for the safety of our employees and the protesters,” said CN President and CEO J.J. Ruest. “This situation is regrettable…these protests are unrelated to CN’s activities and beyond our control.”
On Wednesday, VIA Rail said it had cancelled 256 passenger trains along its Montreal-Toronto and Toronto-Ottawa routes, affecting 42,100 passengers. A day later, it shut down most operations. “Via Rail has no other option but to cancel all of its services on the network, with the exception of Sudbury-White River (CP Rail) and Churchill-The Pas (Hudson Bay Railway), until further notice,” the company said in a media statement.
The lack of rail access quickly cascaded across the economy, with business leaders raising alarms about the economic impact.
“Every day that it goes on, the damage compounds,” said Perrin Beatty, CEO of the Canadian Chamber of Commerce. “It is damaging our international reputation as a reliable supplier. It is affecting our supply chains around the world.”
Beatty told CBC the blockades had “severely limited the movement of perishable foods and other consumer items, grain, construction materials, and propane for Quebec and Atlantic Canada,” the national broadcaster said. “The stoppage has also affected the movement of natural resources like timber, aluminum, coal, and oil, while factories and mines may soon face difficult decisions about their ability to continue operations.”
“Every day we hear more and more from companies that either can’t get their parts or ingredients or components to market, or can’t get their products out. It’s beginning to pile up,” added Dennis Darby, president of Canadian Manufacturers and Exporters, whose members typically load about 4,500 rail cars a day. “In today’s modern industrial economy, there aren’t as many big warehouses of stuff as people tend to think. It’s kind of in, out, and sell.”
Derek Nighbor, president and CEO of the Forest Products Association of Canada, said the disruptions had cost his members “millions and millions of dollars” in lost sales, with mills unable to get raw materials or schedule freight cars to ship finished products. Wade Sobkowich, executive director of the Western Grain Elevator Association, traced a similar impact.
“If the blockade were to lift today, it would have cost the grain industry over $10 million just over the last few days,” he said. “We have farmers who are needing to deliver product. They’re needing to sell it into the handling system so that they can get paid, so that they can pay bills and keep cash flow going on their farms.”
Karl Littler, senior vice president, public affairs at the Retail Council of Canada, listed personal hygiene products, infant formula, cleaning and sanitary products, and fresh food as items that will be in short supply if the blockades continue. “There is an inability to move goods cross country through the various choke points,” he told CBC. “It’s of major concern to retail merchants. It both interrupts the flow of retail-ready goods and hampers the manufacturing process for Canadian manufacturing.”
“Obviously, there are some issues if nothing is being transported by rail,” said Nathalie St-Pierre, president and CEO of the Canadian Propane Association. “They are talking about continuing the dialogue. But at the same time, and from probably everyone’s perspective, you have to lift the blockades. You can have the dialogue, but at this time, I think the point was made.”
But for campaigners supporting the Wet’suwet’en, there is historic irony but no coincidence in a nation-wide protest that targets Canada’s railways.
“It’s very historically significant because the project of colonization, as well as the extinction of the buffalo, was facilitated by the laying down of the Trans Canada railway,” said Nikki Sanchez, a member of the Pipil Maya Nation who was involved with a six-day encampment at the B.C. legislature.
Climate Justice Edmonton organizer Emma Jackson tweeted that this might be the only time she celebrates cancelled trains, noting that the railway was first built to “enable settlers to go and build their lives on Indigenous lands”, making it a fair target for pushback against a pipeline being built without the consent of hereditary chiefs.
“It’s also probably the best tool that a lot of folks have at our disposal, in order to really put pressure on the decision-makers,” Jackson told the Toronto Star, adding that it’s “mind-boggling” that politicians are focusing on the inconvenience resulting from the blockades. “If you’re going to talk about inconvenience, it is very inconvenient that you’re going to be removed from your own land, forcefully at the barrel of a gun.”
Sanchez added that Indigenous communities don’t take the blockades lightly, and they wouldn’t be possible without the support of non-Indigenous Canadian allies. “We have no interest in impacting individuals’ livelihoods,” she said. “We want a Canada that is upheld to justice.”
The Star documents the support for the Wet’suwet’en from many of the passengers affected by the rail shutdown in Ontario.
OTTAWA, Feb. 16, 2020 /CNW/ – To protect Canadians who live along our rail corridors, it is critical that the movement of dangerous goods by rail is done in a safe way.
Today, the Minister of Transport, the Honourable Marc Garneau, announced specific measures through an amended Ministerial Order, to help prevent further derailment of trains carrying large quantities of dangerous goods, like petroleum crude oil, liquefied petroleum gas, gasoline and ethanol.Following the derailment of a key train on February 6th, 2020, in Guernsey Saskatchewan, a Ministerial Order was issued for the immediate slowdown of key trains. A key train is one carrying 20 or more cars containing dangerous goods; or a train carrying one or more cars of toxic inhalation gas.
Since then, Transport Canada officials have worked diligently with large railway companies to further assess the causes of recent derailments, and to develop plans to address the areas of greatest concern. As a result of this work, new measures are being implemented effective immediately to reduce the speed of the higher risk key trains traveling through areas of greatest concern.
Accordingly, the Ministerial Order has been updated to provide a more targeted risk-based approach.
Key trains
The speed limit for key trains is now limited to 35 mph in metropolitan areas. Outside of metropolitan areas where there are no track signals, the speed is limited to 40 mph.
New measures for high risk key trains.
Higher risk key trains are unit trains where tank cars are loaded with a single dangerous goods commodity moving to the same point of destination; or trains that include any combination of 80 or more tank cars containing dangerous goods.
The speed limit for higher risk key trains is now limited to 25 mph where there are no track signals. For metropolitan areas, the speed limit is 30 mph unless the metropolitan area is in a non-signal territory where the speed limit will be maintain at a maximum 25 mph.
Type of train
Speed limit of train in metropolitan areas
Speed limit of train in areas where there are track signals
Speed limit of train in areas where there are no track signals
Higher risk key trains
(unit trains where tank cars are loaded with a single dangerous goods commodity moving to the same point of destination; or trains that include any combination of 80 or more tank cars containing dangerous goods)
30 mph (and 25 mph for non-signaled territory).
50 mph
25 mph
Key trains
(Key trains include one or more tank cars of dangerous goods that are toxic by inhalation; or trains that include 20 or more tank cars containing dangerous goods)
35 mph
50 mph
40 mph
The new Ministerial Order will enter into effect immediately and will remain in place until April 1, 2020.
Transport Canada is working with the railways to develop a more comprehensive set of safety measures, which will include permanent measures. These will target track infrastructure maintenance and renewal, winter operations, safety practices of the railway companies, and any other actions necessary to keep Canadians safe.
Rail safety is the Minister of Transport’s top priority, and the Government of Canada is continuously looking for ways to make our railway system even safer for Canadians.
Quotes
“The safety of Canadians is a top priority for myself and the Government of Canada. The series of derailments like the one that occurred in Guernsey, Saskatchewan, and the impacts of these accidents are concerning. It is for this reason that I put immediate speed restrictions to reduce the risk of derailments until more permanent measures are put into place to address this situation. A safe and efficient railway system is critical to the well-being of our country and its citizens.”
The Honourable Marc Garneau
Minister of Transport
Quick Facts
A Ministerial Order is binding instrument that is put in place to address a safety issue.
Minister Garneau issued a Ministerial Order on February 6, 2020, that required key trains to slow down, as a precaution to prevent further derailment of trains transporting dangerous goods.
These tank cars were touted as safer than those in the 2013 Lac-Mégantic rail disaster
CBC News, by Guy Quenneville, Feb 14, 2020 12:15 PM CT
The Transportation Safety Board of Canada says it has not found any mechanical defects that could account for the derailment of a CP Rail oil train last week near the small Saskatchewan hamlet of Guerney — but it’s taking a close look at the tank cars involved in the incident.
The TSB issued a preliminary report on the Feb. 6 crash on Friday morning. None of the findings are final.
“A review of the locomotive event recorder download determined that the train was handled in accordance with regulatory and company requirements,” the TSB said in its preliminary update.
The finding about a lack of mechanical defects referred only to the train and did not refer to the track, a TSB spokesperson confirmed.
It also found that of the 32 tank cars that derailed, 19 were involved in the blaze that shut down the nearby highway and prompted the voluntary evacuation of about 85 people. It’s not clear how many, or if any, tanks lost their entire loads.
Transport Canada has touted the newly-built cars involved in last week’s crash, dubbed TC-117s, as being safer than the tanks used in the explosive Lac-Mégantic rail disaster of 2013.
Questions about ‘containment integrity and fire resistance’
Last week’s derailment was the second to happen near Guernsey in less than two months. A CP oil train crashed on the other side of Guernsey on Dec. 9, 2019, with 19 of the 33 derailed tank cars losing their entire loads of oil.
The tanks involved in that crash were retrofitted cars — TC-117Rs — which have a slightly less thick hull than the new TC-117s.
CP does not own the tank cars but rather leases them from a provider.
In its release about the most recent derailment, the TSB said there is “significant industry interest in documenting the performance of the [new TC-117] tank cars,” particularly in terms of “containment integrity and fire resistance.”
The fire from last week’s train crash burned for at least a day and a half.
The eastbound train, which was carrying diluted bitumen owned by ConocoPhillips, had left Rosyth, Alberta, and was headed for Stroud, Oklahoma. It derailed about 2.4 km west of Guernsey.
A Texas-based company called Trinity Rail previously confirmed to CBC News that it manufactured the tank cars involved in last Thursday’s crash and is “proactively monitoring the situation.”
While the TSB said the amount of oil released remains undetermined, the Saskatchewan government has said an estimated 1.2 million litres of oil spilled, citing CP as its source. That’s just short of the amount spilled in the December derailment.
Slower speed in 2nd crash
According to the TSB, the train that derailed in December was travelling at about 75 kilometres an hour, which is the speed limit on that section of CP’s line.
But last Thursday’s train was travelling more slowly, at around 67 kilometres an hour.
Three TSB investigators are probing the causes of the crash.
“Each tank car must be cleaned, purged, and staged prior to inspection,” the TSB said. “As of [Wednesday], about 17 of the derailed cars have been examined, with several cars exhibiting breaches.”
In a news conference Friday about school bus safety and the blockades that have crippled Canada’s rail service, Saskatchewan’s minister of highways and infrastructure, Greg Ottenbreit, made a brief comment that touched on the topic of pipelines and railway safety.
“Saskatchewan is a landlocked province but Saskatchewan is also a gateway to the world,” he said. “And I think a lot of my fellow ministers can connect with those comments. We will continue to advocate for an uninhibited tidewater access, also pipeline access, which will lead to rail safety and capacity.”
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