Category Archives: Tar sands crude

Alberta Canada, Canadian regulation, Crude By Rail, Electoral politics, Oil prices, Pipeline transport, Tar sands crude

Alberta election could send tremors through Montana economy

Repost from The Missoulian
[Editor:  Pay attention to Alberta!  Changes there will send ripples all along the rails in the U.S., from the Upper Midwest to the East Coast, West Coast and Gulf Coast.  Congratulations to Rachel Notley and the New Democratic Party!  – RS]

Alberta election could send tremors through Montana economy

By Rob Chaney, May 09, 2015 5:30 pm
Rachel Notley
Alberta New Democratic Party leader Rachel Notley speaks on stage Tuesday night in Edmonton after being elected Alberta’s new premier. The NDP won a majority in the provincial Legislative Assembly by toppling the Progressive Conservative colossus that has dominated the province for more than four decades. Photo: NATHAN DENETTE, Canadian Press

Montana’s political seismograph didn’t rattle much last Tuesday when its neighbor to the north underwent a governmental earthquake.

But that could change in the coming weeks, as the citizens of Alberta absorb the magnitude of their replacement of Canada’s longest-standing political party rulers with a left-wing opposition pledged to look hard at its energy economy.

“The Progressive Conservative Party has been in power two years longer than I’ve been alive,” said University of Montana biology professor Mark Hebblewhite, a 42-year-old Alberta native. “I think this is a real response to the ongoing mismanagement of Alberta’s bounty. One thing that hit the nail on the head was how the province went from being overrun with money to crashing in another bust. People get really tired of it.”

The New Democratic Party took 53 seats in the Alberta Parliament in Tuesday’s election. Another traditional minority group, the Wildrose Party, surprisingly found itself in second place with 21 seats. The Progressive Conservatives held onto just 10 seats.

NDP party leader Rachel Notley was credited for a remarkable political ground game that unseated Progressive Conservative Party leader Jim Prentice – a man widely considered a future leader of all Canada. Prentice resigned from his post on election night and said he was at least temporarily leaving politics.

Alberta’s entire United States border runs along Montana, from the western edge of Waterton-Glacier International Peace Park to the 110th Meridian north of Havre. The province and state share the spine of the Rocky Mountains and the beginnings of the great mid-continental prairies.

They also share a relatively recent surge in energy development. Over the past decade while Montana has exploited its Bakken oil and gas fields along the border with North Dakota, Alberta has been opening massive production in tar sands petroleum near Fort McMurray.

Oil from the tar sands has become both a political and social controversy.

New Democratic Party officials have questioned the need for the Keystone XL pipeline that would run south from Alberta, through a corner of Montana and down to refineries in Oklahoma and Texas. The Obama administration has stalled permitting of the international border crossing, while Montana’s bipartisan congressional delegation has supported it.

“If the Keystone XL doesn’t happen, the amount of rail traffic leaving Alberta would be impacted significantly from that decision,” said Bentek Energy senior analyst Jenna Delaney. “Currently, taking the Keystone XL out would increase petroleum unit trains by five a day out of Alberta. And Transport Canada officials say residents in Canada are very concerned with rail traveling through their communities.”

Moving petroleum by rail has become an issue in both Canada and the United States, signposted most recently by last week’s explosion of a group of oil tank cars near Heimdal, North Dakota.

Caryn Miske of the Flathead Basin Commission said the prospect of moving more oil trains along the southern border of Glacier National Park is under close scrutiny.

“We’re already seeing impacts from the amount of oil that’s moving around,” Miske said. “The number of trains and cars carrying oil has increased, and that’s really concerning, considering how many near-misses we’ve had.”

Burlington Northern Santa Fe has a freight line that runs out of Alberta into Montana at Sweet Grass, although there’s not much cross-border oil traffic there yet.

***

Delaney said another factor of the government change could be the NDP’s campaign pledge to revamp the province’s tax structure on energy development.

“They’re looking at increasing income taxes and royalty rates to corporations, which the oil companies aren’t happy about,” Delaney said. “The last time I was in Calgary, the atmosphere was already a little bleak. If taxes are raised on corporations, I don’t know how they might respond. Companies with offices in other places might shift people away from Calgary.”

Much of the province’s energy economy has extremely expensive initial start-up costs. Energy analysts have already been forecasting a drop in Albertan oil production as new projects slip below their break-even points with falling oil prices.

Delaney said that could have an impact on Montana’s economy, as the demand for megaloads of oil field equipment transported across the state stalls.

Longtime conservation activist Stephen Legault said the provincial government’s failure to manage its oil wealth led to great voter frustration.

“We’re drilling 20,000 wells a year in Alberta, and we’re $7 billion in the hole economically,” Legault said. “That’s largely because when oil goes below $75 a barrel, provincial coffers take a massive hit.”

The result has been a government unable to fix damage from the floods that ravaged Calgary in 2013, or even to send land management officials to cross-border conferences in Montana.

While the new government has majority control of Alberta’s Parliament, its influence over the provincial agencies could be a murkier matter. Those departments have had decades of one-party control appointing their directors and staffs.

“If I was south of the border looking north, I wouldn’t expect to see anything dramatic right away,” Legault said. “We’ve had five changes of government since 1905. The bureaucracy is so deeply entrenched after 45 years of one-party rule, it’s going to take years for a new government to put in place the people it wants to create change.”

Crude By Rail, Diluted bitumen (Dilbit), Raw bitumen (undiluted tar sands heavy crude), Rawbit-By-Rail, Tar sands crude, Volatility

Canadian oil trains carrying more undiluted raw bitumen

Repost from Reuters
[Editor:  How, you ask?  Quote: ” …raw bitumen can be shipped on heated and coiled rail cars without diluent.”  Less volatile, and therefore supposedly safer, unless you consider the overall safety of the planet.  Cheaper for Canadian oil companies, though, so surely a hot ticket.  They’re actually planning to DILUTE the stuff to send it down pipelines to a rail facility, then REMOVING some or all the diluent before loading it as “raw” bitumen – onto oil train tank cars.  All for you and me – gee, no thanks.  – RS]

Canadian oil trains shift to carry less-volatile crude

CALGARY, Alberta | By Nia Williams, May 5, 2015 1:00am EDT

May 5 (Reuters) – A growing share of Canadian oil-by-rail traffic is made up of tough-to-ignite undiluted heavy crude and raw bitumen, say industry executives, as companies scramble to cut expenditures with the price of crude down more than 40 percent since June.

By eliminating the cost of diluting with ultra-light condensate, heavy oil offers rail shippers an opportunity to claw back a few dollars per barrel in transportation costs.

Official data does not break down the different Canadian crudes shipped by rail but interviews with industry executives suggest undiluted heavy and raw bitumen shipments now make up roughly a quarter of the estimated 200,000 barrel per day (bpd) oil-by-rail market.

An added bonus is that heavy crude and bitumen are far less combustible than the Bakken and Canadian synthetic crudes involved in fiery crashes that spurred the Canadian and U.S. governments on Friday to tighten safety rules for trains carrying oil.

With very high boiling and flashpoints they fall outside Packing Groups 1 and 2, used to classify the more volatile types of crude oil for transport, and are already shipped in double-hulled cars, meaning they should be unaffected by last week’s tank car phase-out rules.

Oil-by-rail shipments have come under increased scrutiny and public outrage following 10 oil-train derailments involving fires in less than two years.

“The business is moving back to where it started, which is as a vehicle to move undiluted heavy oil,” said John Zahary, chief executive of Altex Energy, which operates crude-by-rail terminals.

Normally, rail is more expensive than shipping by pipeline, but undiluted rail shipments offer better returns because shippers do not need to add between 15 and 30 percent condensate per barrel, which often trades at a premium to U.S. benchmark crude.

Overall rail volumes have dipped in recent months, as the shrinking gap between U.S. and cheaper Canadian crude prices has eroded arbitrage opportunities. Total crude-by-rail export volumes, not including shipments within Canada, dipped 5 percent quarter-on-quarter in the final three months of 2014 to 173,000 bpd, according to the National Energy Board.

Still, Jarrett Zielinksi, chief executive officer of TORQ Transloading, said the proportion of heavy undiluted crude shipped is growing.

TORQ’s overall volumes fell to approximately 25,000 bpd this year, but it is now moving essentially 100 percent undiluted conventional heavy, up from around 85 percent last year.

Meanwhile, Altex moved around 35,000 bpd of conventional heavy last month and has just finalized plans for a 100,000 bpd unit train facility in Lashburn, Saskatchewan.

RAWBIT-BY-RAIL

Like heavy crude, raw bitumen can be shipped on heated and coiled rail cars without diluent. But it is a much smaller segment of the market due to the infrastructure needed at both loading and unloading facilities.

Canadian National Railway is pushing hard towards shipping more of this so-called neat bitumen to improve both economics and safety.

“It’s the wave of the future,” James Cairns, CN vice-president of petroleum and chemicals, told a recent conference. “When we move bitumen it doesn’t even move as a dangerous commodity. The safest crude you can move by rail is a heavy, neat bitumen crude.”

MEG Energy Corp and Keyera Corp have looked at building diluent recovery units. This would enable them to receive diluted bitumen by pipeline at rail terminals, remove all or some of the diluent and then load the raw bitumen onto railcars.

Both companies have put those plans on hold due to low oil prices but said they could be developed in future.

(Additional reporting by Allison Martell in Toronto; Editing by Jeffrey Hodgson and Alan Crosby)
Bakken Crude, Canadian regulation, CPC-1232, Crude By Rail, Derailment, DOT-111, Explosion, Federal Regulation (U.S.), Fire, Hazmat notification, Oil industry lobby, Rail industry lobby, Rail Safety, Tank car design, Tank car maintenance, Tank car retirement, Tar sands crude, Train braking systems, Train speed

ForestEthics: Oil Trains Too Fast, New Safety Rules Too Slow

Repost from ForestEthics (Also appearing in the Huffington Post)

Oil Trains Too Fast, New Safety Rules Too Slow

By Todd Paglia, Executive Director, May 1, 2015
New Oil Train Rules (Photo/NOAA)
New Oil Train Rules (Photo/NOAA)

In the first three months of 2015 four oil train accidents sent emergency responders scrambling, crude oil spilling into drinking water supplies, and fireballs blasting into the sky. The string of accidents in February and March demonstrate the severe threat from Bakken crude and Alberta tar sands moving on mile-long oil trains. These derailments and explosions set a bar we can use to measure the new oil train standards announced today by the US and Canadian governments.

Would the new rules have prevented any of the 2015 accidents and, ultimately, will they reduce the threat of oil train catastrophes like the 2013 Lac Megantic, Quebec, explosion that killed 47 people? The answer is no, and the reason is speed: the regulations move too slow and the trains continue to move too fast.

The rules announced at a joint press conference today by US and Canadian officials arrive decades late and with the sticky fingerprints of the oil and rail industry all over them. The administration has slowed down and narrowed the scope of the rules so the most dangerous tank cars stay on the rails for at least two and a half years. Other unsafe tank cars have five or seven years before they must meet new higher standards.

Not that the new standards will help much: All four 2015 accidents involved CPC-1232 cars, the newer tank cars that are supposedly safer than the dangerous DOT-111s. But to be clear, neither the upgraded cars or new cars built to the new standard will prevent an explosion if the train is moving at normal speeds.

So we can begin to look for new and upgraded cars (like the ones that exploded in recent months) in the years to come, but those living along the tracks can still expect to see the worst cars continue to roll by their homes for a very long time. The administration effectively allows rail companies to keep antiquated tank cars on the rails in trains with fewer than 35 crude oil tank cars (or 20 in a row.) That means oil trains hauling up to a million gallons of explosive crude oil in the most dangerous tank cars will keep rolling through a downtown near you FOREVER.

The administration trumpets new electronically controlled pneumatic brakes for oil trains. While it’s good news that oil and rail companies will use state-of-the-art technology, the administration is giving them until 2021 to install the new better brakes. That’s six years too long to require what should be a basic minimum safety requirement.

And while these upgrades to the tank car fleet creep slowly into place, the trains will continue flying down the tracks at reckless speeds. The new rule allows oil trains to travel at more than twice the rated “puncture velocity” of even the new tank cars that they will (in some cases) eventually require. That means that oil trains carrying three million gallons of explosive crude will continue to travel at 50 mph across North America, except in a small number of “high threat” urban areas where they must go 40. The new speed limits offer little comfort because three of the four of the explosive accidents in 2015 occurred at speeds below 35 mph. (The accident in Gogama, ON, occurred at 43 mph, just three mph over the “high-priority” speed limit.) The Galena, Illinois, derailment occurred at only 23 mph, proving that the speed limits in the rule are inadequate to protect anyone.

In the final insult to injury, the administration walked too quickly away from notification standards in an earlier draft of the rule, leaving citizens and emergency responders in the dark about where these trains are running and when.

The Obama Administration took its time developing new rules for hazardous materials on trains that run through the heart of America: they looked at the threat of exploding oil trains, but heavy industry lobbying made them flinch. The administration failed to learn the lessons of Lac Megantic or the four explosive oil train accidents we’ve seen so far in 2015 alone. They have given public safety the cold shoulder, instead embracing the oil and rail industry lobbyists peddling this dangerous cargo.

We were fortunate that none of the 2015 accidents caused fatalities. ForestEthics and our many partners will continue pushing the administration to do a lot better and hope that our luck holds while we stop these dangerous trains from crisscrossing North America.  But it shouldn’t be a matter of luck. Secretary Foxx and President Obama have chosen to roll the dice instead of writing strong rules that protect the 25 million of us living in the blast zone.

More by Todd Paglia:
Alberta Canada, Canadian regulation, Electoral politics, Natural gas, Oil Industry, Oil prices, Pipeline transport, Tar sands crude

Alberta’s possible pivot to the left alarms Canadian oil sector

Repost from Reuters

Alberta’s possible pivot to the left alarms Canadian oil sector

By Scott Haggett and Nia Williams, May 4, 2015 7:07am EDT
Alberta NDP Leader Rachel Notley meets with Mayor Naheed Nenshi in his office in Calgary, Alberta, April 30, 2015. REUTERS/Todd Korol

(Reuters: CALGARY, Alberta) – Canada’s oil-rich province of Alberta is on the cusp of electing a left-wing government that can make life harder for the energy industry with its plans to raise taxes, end support for key pipeline projects and seek a bigger cut of oil revenues.

Polls suggest Tuesday’s election is set to end the Conservative’s 44-year reign in the province that boasts the world’s third-largest proven oil reserves and now faces recession because of the slide in crude prices.

Surveys have proven wrong in Canadian provincial elections before and voters may end up merely downgrading the Conservatives’ grip on power to a minority government.

Yet the meteoric rise of the New Democratic Party and the way it already challenges the status-quo of close ties between the industry and the ruling establishment has alarmed oil executives. The proposed review of royalties oil and gas companies pay the government for using natural resources and which could lead to higher levies, is a matter of particular concern.

“Now is not the time for a review of oil and natural gas royalties,” Tim McMillan, president of the Canadian Association of Petroleum Producers, the country’s top oil lobby, said in a statement.

A 2007 increase in the levy was rolled back when the global financial crisis struck and oil executives say today the time is equally bad to try it again.

Yet the left’s leader Rachel Notley, a former union activist and law school graduate, has shot up in popularity ratings in the past months advocating policies that have been anathema for many conservative administrations.

She says she would not lobby on behalf of TransCanada Corp’s controversial Keystone XL pipeline or support building of Enbridge Inc’s Northern Gateway pipeline to link the province’s oil sands with a Pacific port in British Columbia. Citing heavy resistance from aboriginal groups to the Enbridge line, Notley says Alberta should back those that are more realistic such as TransCanada’s Energy East pipeline to the Atlantic ocean.

PACKING UP?

Notley also advocates a 2 percentage point rise in Alberta’s corporate tax rate to 12 percent to shore up its budget that is expected to swing from a surplus to a C$5 billion deficit in 2015/2016 as energy-related royalty payments and tax revenues shrink.

Even with the proposed corporate tax hike Alberta’s overall taxes would remain the lowest nationally. Oil executives warn, however, that any new burdens at a time when the industry is in a downturn, shedding jobs and cutting spending, could prompt firms to move corporate head offices out of the province.

“Business is mobile,” said Adam Legge, president of the Chamber of Commerce in Calgary where most of Canada’s oil industry is based. “Capital, people and companies move.”

Ironically, the challenge the oil industry and the Conservatives face is in part a by-product of Alberta’s rapid growth fueled by the oil-sands boom.

The influx of immigrants from other parts of Canada and overseas has changed the once overwhelmingly white and rural province. Today Alberta is one of the youngest provinces and polls show younger and more diverse population is more likely to support left-wing causes such as environment and education and more critical of big business. The New Democratic Party still only got 10 percent of the votes in the 2012 vote, but an election of a Muslim politician as a mayor of Calgary in 2010 served as an early sign of the changing political landscape.

The Conservatives themselves and their gaffe-prone leader Premier Jim Prentice also share the blame for the reversal of fortunes with one poll showing them trailing the left by 21 percent to 44 percent.

Prentice angered voters when he told Albertans to “look in the mirror” to find reasons for the province’s fiscal woes and then passed a budget in March that raised individual taxes and fees for government services but spared corporations.

Scandals – Prentice’ s predecessor left last year because of a controversy over lavish spending – and blunders added to the party’s woes.

The NDP vaulted to the top of the polls after Notley’s strong performance in an April 23 televised debate, when Prentice, former investment banker, drew fire for suggesting his rival struggled with math.

Then there is voter fatigue with a party seen as too comfortable and scandal-prone after decades in power.

“It’s still the same gang, the same policy, same procedures, the same concept of entitlement,” said one executive at a large oil and gas producer who declined to be named because he is not authorized to talk to the media. “I know some extremely neo-conservative guys who have said enough is enough.”

(Additional reporting by Julie Gordon in Vancouver and Mike De Souza in Ottawa; Editing by Amran Abocar and Tomasz Janowski)