Repost from National Farmers Union [Editor: This media alert does not name the massive expansion of crude by rail shipments in the upper Midwest as the cause for lack of rail cars for shipping farm commodities, but there is little doubt this is the problem. – RS]
August 6, 2014
Contact: David Thews, 202-554-1600, dthews@nfudc.org
NFU Calls Ability to Deliver Grain Shipments by Rail at Harvest ‘Substantially Inadequate’
Warns Surface Transportation Board Farmers May Be Forced to Dump Grain
WASHINGTON (August 6, 2014) – National Farmers Union (NFU) President Roger Johnson warned the Surface Transportation Board (STB) that BNSF Railway (BNSF) and Canadian Pacific (CP)’s ability to deliver grain and ethanol at harvest are “substantially inadequate” and are resulting in farmers piling grain on the ground because of lack of transportation options.
“We are especially concerned regarding wheat, since harvest has already started and grain remains in the bin from last year’s harvest,” noted Johnson in a letter today to the STB chairman and vice chairman. “While BNSF claims that the total number of late shipments of wheat has declined nationwide, 95.42 percent of all past due cars are concentrated in Montana, North Dakota, South Dakota and Minnesota. BNSF has promised to improve their performance, but we are still subject to delays and Average Train Speed at year-long lows,” the letter notes.
“Grain shipments in North Dakota are critical,” said Johnson. BNSF reported in its latest weekly update that there have been 2,399 delayed rail cars with an average delay of 23.6 days. CP reported 22,457 open requests with an average of 11.71 weeks. The letter cites anecdotal evidence from four different grain elevators indicating that their oldest orders are from early March and shuttle orders are up to 2,000 cars behind. “These numbers are staggering and simply unacceptable,” he said.
Johnson notes that in South Dakota, NFU members are hearing about significant delays directly from local grain elevators across the state. At one particular elevator that handles 15 million bushels of grain per year, 3 million of those bushels will not move before this year’s harvest. “Due to the backlog, farmers are now dumping wheat on the ground because the elevators will not take on the increased liability,” he said.
Johnson also voiced his concern about the ethanol industry, which relies heavily on rail for transportation. “While the June 20 decision rightfully addressed grain shipments, we encourage STB to consider shipments of ethanol as a priority as well,” he said. “Failure to bring ethanol to market will hurt consumers because of higher gasoline prices, and will work against our efforts to offset imports of foreign oil.”
National Farmers Union has been working since 1902 to protect and enhance the economic well-being and quality of life for family farmers, ranchers and rural communities through advocating grassroots-driven policy positions adopted by its membership.
Repost from Politico [Editor: Significant quote: “For ‘higher-consequence events’ — such as the one in Lac-Mégantic — ‘it appears that no amount of coverage is adequate,’ the analysis says. That’s because the maximum amount of coverage available on the market is $1 billion per carrier, per incident….’You should know the railroads are used to running bare — without adequate insurance,’ said Fred Millar, an independent rail consultant who has criticized the government’s oversight of oil trains.” – RS]
DOT: Rail insurance inadequate for oil train accidents
By Kathryn A. Wolfe | 8/6/14
The maximum amount of coverage available is $1 billion per carrier, per incident. | AP Photo
Most freight railroad insurance policies couldn’t begin to cover damage from a moderate oil train accident, much less a major disaster. And the Department of Transportation’s own database of oil train incidents is flawed because some railroads and shippers provide incomplete information that far understates property damage.
Those conclusions come from a DOT analysis of its own rule proposed to address the series of troubling derailments across North America as shipments of oil by rail surge.
The department issued the analysis Aug. 1, the same day it published its proposed oil train safety rule that is meant to create what Transportation Secretary Anthony Foxx calls a “New World Order” in oil trains regulations, including by requiring sturdier tank cars, tightened speed limits and improved brakes for the trains carrying an ever-greater amount of crude oil through communities from Southern California to Albany, N.Y.
The rule would not expressly address the insurance issue, except to cite the general liability landscape as part of the need for the rule, which seeks to prevent the worst disasters from happening and mitigate damages from those that do.
Gaps in insurance coverage became an issue after the July 2013 disaster in Lac-Mégantic, Quebec, which occurred when a train that had been left unattended careened down an incline, derailed and charred much of the downtown area, killing 47 people. The damages from that wreck could stretch into the billions of dollars, but the railroad responsible for the derailment carried only $25 million of insurance and wound up declaring bankruptcy.
DOT’s analysis says most of the largest railroads commonly carry around $25 million in insurance, though that can rise to as much as $50 million for trains hauling certain kinds of hazardous chemicals. Smaller railroads — such as the one in the Lac-Mégantic disaster — often carry much less than that.
But the agency’s Pipeline and Hazardous Materials Safety Administration estimated that the average derailment that spills crude oil will mean $25 million in total costs — bumping up against most of even the largest railroads’ current insurance limits.
For “higher-consequence events” — such as the one in Lac-Mégantic — “it appears that no amount of coverage is adequate,” the analysis says. That’s because the maximum amount of coverage available on the market is $1 billion per carrier, per incident.
“You should know the railroads are used to running bare — without adequate insurance,” said Fred Millar, an independent rail consultant who has criticized the government’s oversight of oil trains. “And the situation that is described in the [analysis] from Lac-Mégantic is only just the tip of the iceberg. The railroads basically know that they have cargoes that can cause massive, enormously greater death and destruction than what happened in Lac-Mégantic.”
Devorah Ancel, an attorney for the Sierra Club, said insurance coverage “needs to catch up with the heightened risk that is part of this industry now,” because otherwise “taxpayers end up covering it.”
The Association of American Railroads declined to comment, saying the group is still reviewing the pending rule and its supporting documents, including the regulatory analysis, and the American Petroleum Institute said it would file its comments as part of the public comment period.
“We are working closely with regulators and the rail industry in a comprehensive effort to enhance safety through accident prevention, mitigation and response,” API said.
But railroads know they’re underinsured and have groused about the status quo, particularly considering the fact that energy companies that ship oil and ethanol largely do not bear any liability for an incident once their product is loaded onto a train. And under “common carrier” regulations, railroads cannot refuse a shipment any kind of material assuming it meets proper regulations.
Warren Buffett’s BNSF railroad, the pioneer in the oil train industry, has been requesting that railroads get some of the same protections now afforded to the nuclear power industry, using the Price-Anderson Act as a model. That law requires power companies to contribute to an insurance fund that would be used in the event of an accident, and it also partially indemnifies the nuclear power industry.
The DOT analysis also points to a systemic weakness in the way the federal government collects data on derailments of crude oil and ethanol trains. In the section dealing with the probability of major rail accidents, the analysis observes that it’s “impossible to isolate the derailment rate of only crude oil and ethanol trains” due to “limitations in the reported data.”
That’s because PHMSA requires an incident report to be filed only if the incident led to the release of a hazardous material — so derailments that did not result in a spill aren’t included. As a result, even some dramatic accidents aren’t included in the database — for instance, one earlier this year that resulted in a crude oil train dangling over Philadelphia’s Schuylkill River.
Separately, DOT’s Federal Railroad Administration maintains data on derailments, including how much hazardous material was released — but doesn’t identify what type of substance it was. “As a result, it is impossible to use FRA data to identify crude and ethanol derailments,” the department said.
And the data that is reported, particularly to PHMSA, is often inaccurate, largely because it is self-reported by railroads or shippers, according to the analysis. And these self-reports often underestimate the damages done in spill incidents.
According to the analysis, damage information reported to PHMSA is typically “only the most basic costs” such as the value of spilled petroleum and damage to tracks and cars.
“PHMSA believes that response costs and basic cleanup costs, when they are reported, do not represent the full costs of an accident of the response,” the report said.
Underreporting damages, particularly for environmental cleanup costs, ends up hiding the true impact of a spill from policymakers, Sierra Club’s Ancel said. She hopes the pending rule will address the issue.
“It is extremely important that the industry is required to adequately report — and there should be some sort of mechanism in the rule where the agency has inspectors that are ensuring that they are,” she said. “So not only should the industry be on the hook for reporting, but the agency needs to be able to have the resources to ensure that they are.”
Repost from Progressive Railroading [Editor: Skim through this one to see how Union Pacific is touting its safety record and buying the confidence of first responders and the public. There is, in fact, nothing that will make crude by rail a safe enterprise, and every reason on earth to abandon all investment in fossil fuels – sooner rather than later. – RS]
UP matches first-half safety ratio record, continues crude emergency response training at TTCI
7/31/2014 | Rail News: Union Pacific Railroad
Union Pacific Railroad employees achieved a 1.01 reportable safety incident rate in the first half, matching the best-ever rate achieved in first-half 2011, the Class I announced yesterday.
The injury rate is calculated using the number of injuries per 200,000 manhours, which is equivalent to the number of hours worked by 100 full-time employees in a year.
“The safety of our employees, customers and communities is our No. 1 priority, and each day Union Pacific employees embrace a safety mindset to keep themselves and others safe,” said UP Vice President of Safety, Security and Environment Bob Grimaila in a press release, adding that the Class I continues to work toward a commitment to zero injuries.
Bolstering crude-by-rail safety is part of that commitment, including proper emergency response techniques. During two three-day courses held earlier this month at the Transportation Technology Center Inc. (TTCI) in Pueblo, Colo., UP conducted training for 80 emergency response personnel from Arkansas, Arizona, California, Illinois, Iowa, Kansas, Missouri and Nebraska.
The training focused on sharpening the responders’ skills to better prepare them for any crude-by-rail incidents that might occur in or near their respective communities. The training covered a variety of safety subjects, including identification of tank-car types that transport crude, tank-car fittings and construction, chemical and physical properties of the different types of crude, and response precautions.
Hands-on exercises focused on assessing tank-car damage, ensuring on-site repairs, controlling oil releases from damaged cars and fire suppression techniques. Class members also participated in a simulated oil fire, which helped them understand how to work with railroad personnel in an emergency and how to work safely on railroad property.
UP also plans to conduct four additional crude emergency response courses in August, one in November and one in December at TTCI. The Class I annually trains about 2,500 local, state and federal first responders. Since 2003, the railroad has trained nearly 38,000 public responders and 7,500 private responders, such as shippers and contractors.
Repost from Energy Global [Editor: This article refers to “Brent crude oil.” Wikipedia: “Brent Crude is a major trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide. Brent Crude is extracted from the North Sea, and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation)….Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to price two thirds of the world’s internationally traded crude oil supplies.” – RS]
Valero Energy reports second quarter 2014 results
31/07/2014
Valero Energy Corporation has reported financial results for the second quarter of 2014 (Q2). Net income from continuing operations attributable to Valero stockholders was US$ 651 million, US$ 1.22/share, compared to US$ 463 million, US$ 0.84/share, for the second quarter of last year.
Operating income for Q2 was approximately US$ 1.1 billion compared to US$ 805 million in the second quarter of 2013. The US$ 280 million increase in operating income was due primarily to higher refining throughput volumes and wider discounts relative to Brent crude oil for sour and certain North American light crude oils. These positive drivers were partially offset by weaker gasoline and distillate margins relative to Brent crude oil in most regions and higher natural gas costs in the second quarter of 2014 versus the second quarter of 2013.
Valero CEO and President Joe Gorder commented: “Valero delivered solid financial results for the quarter despite generally weaker product margins relative to Brent crude oil. We continued to execute our strategy to reduce feedstock costs by processing additional volumes of cost advantaged North American crude oil and investing in logistics assets to deliver those feedstocks to our refineries”.
Refining throughput volumes averaged 2.7 million bpd for Q2, an increase of 115 000 bpd from the second quarter of 2013. According to Valero, the increase in volumes was due primarily to less turnaround activity and higher utilisation rates spurred by the availability of discounted North American light crude oil on the US Gulf Coast.
“We increased North American crude oil consumption at our Quebec City refinery to 83% in the second quarter of 2014 from 8% in the second quarter of 2013, so we are progressing well toward our previously stated goal of reaching 100% by year-end. We also began processing Canadian bitumen through our new crude-by-rail unloading facility at our St Charles refinery”, Gorder said.
Ethanol operating income for Q2 was US$ 187 million compared to US$ 95 million in the second quarter of 2013. The US$ 92 million increase in operating income was mainly due to higher gross margin per gallon driven by lower corn costs as a result of abundant corn crop and lower industry ethanol inventories at the start of the quarter.
Gorder said: “Our ethanol investments have continued to be strong performers, delivering a total of US$ 430 million in operating income for the first half of 2014. We expect our eleventh ethanol plant, the Mount Vernon facility acquired in March of this year, to begin operating and contributing to the segment’s earnings in the third quarter”.
Capital expenditures for Q2 were US$ 806 million, of which US$ 240 million was for turnarounds and catalyst. Valero paid US$ 133 million in dividends on its common stock and US$ 228 million to purchase 4.0 million shares of its common stock. The company repaid US$ 200 million of debt that matured in April and ended the quarter with US$ 6.4 billion in total debt and US$ 3.5 billion of cash and temporary cash investments, of which US$ 382 million was held by Valero Energy Partners LP.
Valero expects 2014 capital expenditures, including turnaround and catalyst, to be US$ 3 billion, including approximately US$ 870 million allocated to logistics investments, most of which are expected to be eligible for drop-down into Valero Energy Partners LP in the future.
“Given the strong North American crude oil production growth, we continue to focus the majority of our strategic capital on light crude oil processing capability and logistics”, Gorder said. “We expect our refineries to benefit from access to lower cost crude oil and higher netback product export markets.”
