Bakersfield, California Rail Terminal

http://online.wsj.com/articles/california-finally-to-reap-frackings-riches-1412700677?KEYWORDS=California+Fracking+Riches&cb=logged0.7322692016605288

Kern County officials last month gave Alon USA Energy Inc. ALJ +3.63% permission to build the state’s biggest oil-train terminal. That project, which the company hopes to finish next year, is designed to receive 150,000 barrels of oil a day in Bakersfield, Calif., 110 miles north of Los Angeles.
The site was home to an asphalt refinery until 2012 when Alon shut it down because it struggled to turn a profit. Alon plans to reconfigure and restart the plant, but much of the oil transported there by train will move by pipeline to other companies’ refineries in California.
Plains All American Pipeline PAA +0.23% LP says it plans to open a 70,000-barrel-a-day oil-train terminal in Bakersfield this month.
And in northern California, a judge last month dismissed a lawsuit brought by environmental groups that challenged Kinder Morgan Inc. KMI +0.03% ’s rail permits. The company is now receiving oil trains at a Richmond, Calif., terminal near San Francisco that was built to handle ethanol.
Opposition over safety has drawn out the permitting process in some cases, making some companies rethink their strategies. Valero Energy Corp. VLO +3.79% in March canceled plans to build an oil-train terminal near its Los Angeles refinery. But Valero still hopes to add a terminal to the company’s Benicia, Calif., plant, 35 miles northeast of San Francisco.
“Every day that goes by that we’re not able to bring in lower cost North American oil, is another day that the Benicia refinery suffers competitively,” says spokesman Bill Day. The state last month asked Benicia for another safety review to better forecast the potential for derailments and other accidents.

Delays and Oil Trains

http://www.nytimes.com/2014/10/09/us/as-trains-move-oil-bonanza-delays-mount-for-other-goods-and-passengers.html?hp&action=click&pgtype=Homepage&module=photo-spot-region&region=top-news&WT.nav=top-news&_r=0

There isn’t enough capacity to move oil by train and continue traditional service so the railroad companies are considering expanding. But, they don’t know whether it will be worth it. The oil production isn’t assured. When it ends, there could be overcapacity.

California Oil Train Legislation

http://www.sacbee.com/2014/10/08/6770151/railroads-sue-california-over.html

By Tony Bizjak
tbizjak@sacbee.com
Published: Wednesday, Oct. 8, 2014 – 1:58 pm
California’s two major railroad companies have filed suit in federal court challenging a state law requiring railroads to come up with an oil spill prevention and response plan.

The lawsuit, filed Tuesday in the U.S. District Court in Sacramento, contends federal laws largely prohibit states from imposing safety rules on railroads such as the ones California began imposing July 1 of this year. The plaintiffs in the matter are the Union Pacific Railroad, the BNSF and the Association of American Railroads.

The lawsuit targets sections of a law, SB 861, that require railroads transporting crude oil to participate in a state program that assures financing to clean up crude oil spills. It also requires the railroads to obtain a “certificate of financial responsibility” from the state as proof they have enough money to cover oil spill damages.

“Federal law exempts this entire regime,” the railroads wrote in the lawsuit. The lawsuit argues the federal government already has numerous safety measures in place governing hazardous materials transport.

The main portion of the bill imposes a 6.5-cent fee on oil companies for every barrel of crude that arrives in California on rail, or that is piped to refineries from inside the state. The resulting funds, estimated at $11 million in the first full year, will be allocated for oil spill prevention and preparation work, and for emergency cleanup costs. The efforts will be focused on spills that threaten waterways and will allow officials to conduct response drills.

The railroads do not appear to be challenging the fee, which is directed at oil companies, not railroads. Attorneys for the railroads could not immediately be reached for comment.

Officials with the state Office of Spill Prevention and Response, the state agency listed as defendant, could not immediately be reached for comment.

Call The Bee’s Tony Bizjak, (916) 321-1059.

• Read more articles by Tony Bizjak

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Environmental Impact Report for Oil Train

http://www.sacbee.com/2014/10/08/6770306/california-attorney-general-kamala.html?sp=/99/749/

Benicia is conducting an environmental review of a plan by Valero Refining Company to build a crude oil transfer station on its Benicia plant site, so it can transport two 50-car crude oil trains a day through Northern California to the refinery for processing.

In the report, Benicia officials conclude the project’s oil spill risk along the rail line is insignificant. The state Office of Spill Prevention and Response and state Public Utilities Commission already have challenged the report, calling it inadequate. The Sacramento Area Council of Governments has challenged Benicia’s analysis, as well. All three criticize the Benicia report for only looking at the spill risks between Roseville and Benicia, failing to study rail lines all the way to the state border.

California Rail Bridge Inspections

http://www.sacbee.com/2014/10/06/6763001/concerned-about-safety-california.html?sp=/99/749/

For more than a century, California has relied on assurances from railroad companies that thousands of rail bridges across the state, from spindly trestles in remote canyons to iron workhorses in urban areas, are safe and well-maintained to handle heavy freight traffic.

That era of trust is over. Concerned about the growing number of trains traversing the state filled with crude oil and other hazardous materials, the California Public Utilities Commission is launching its first railroad bridge inspection program this fall. Federal officials say it will be the first state-run review of privately owned rail bridges in the country.

Too Much LIght Crude Oil Means More Oil Trains by Bloomberg

http://www.bloomberg.com/news/2014-10-02/orphaned-russian-oil-heads-to-u-s-west-on-asia-overflow.html?cmpid=yhoo

One of Russia’s prized oils, facing increased competition in Asia, is traveling to a rather unlikely destination: the U.S. West Coast.

As the U.S. threatens PresidentVladimir Putin with further economic sanctions over the conflict in Ukraine, light Sokol oil from Russia’s Far East is showing up in California for the first time in six years. Tankers have been carrying the crude to western states from Korea since May as Asia cherry-picks supplies from a growing pool of sources, including West Africa and Latin America, shipping data compiled by Bloomberg show.

Sokol’s emergence underscores how oversupplied markets have become with light crude as the U.S. produces record volumes from shale formations and reduces imports. The surplus has grown so large that slowing demand in China and other Asian countries mean it won’t be absorbed, according to Barclays Plc. (BARC)

“With China’s economic weakness, they may actually be turning away cargoes,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone yesterday. “That’s leaving a few orphan cargoes, and it looks like some of them found their way to the West Coast.”

While U.S. companies have been barred from helping drill in Russia’s oil plays, sanctions have so far spared exports of the country’s oil, leaving the door open for Western states.

The region has benefited the least from the U.S. shale boom because it lacks pipeline connections to oil-producing regions like North Dakota. Imports to the U.S. Gulf Coast have fallen by 1.53 million barrels a day in the last five years. Those to the West are up 75,000, government data show.

Tesoro Refineries

The U.S. had stopped importing Russian oil before the May shipment. All of the Sokol, which the U.S. Energy Information Administration describes as prized by Asian refiners for its high yield of jet fuel and kerosene, has been delivered to Tesoro Corp. (TSO) refineries, U.S. Customs data show.

While the crude had been regularly shipped to Hawaii and Alaska because of their proximity to Asia, it’s now showing up in Long Beach, California, as well as Anacortes, Washington. Tesoro declined by e-mail to comment Sept. 30.

“It’s basically light, sweet oil getting translated from North Dakota to California in a real roundabout way,” David Hackett, president of energy markets consulting company Stillwater Associates in Irvine, California, said by telephone Sept. 30.

Sokol is arriving even as the U.S. weighs further sanctions against Russia because of its involvement in separatist violence in Ukraine. European Union and U.S. companies are prohibited from helping drill in Russian deepwater, Arctic offshore and shale plays, and the U.S. Treasury has restricted financing to some Russian companies.

Maximizing Value

“The U.S. has not done any sanctions on flows of Russian crude,” Ed Morse, head of commodities research at Citigroup Inc. (C), said by telephone Oct. 1. “There really is no irony in Russian exporters trying to maximize value by selling crude into the highest-value market.”

The global glut of light oil is depressing prices in Asia, where Arab Light is selling at the biggest discount to benchmark Dubai crude since 2008. Russia’s ESPO, a grade slightly heavier than Sokol, is at a record low. Basrah Light to Asia is the cheapest in four years, and West African differentials were the weakest in about five years in August amid “slack demand,” the Organization of Petroleum Exporting Countries said in a Sept. 10 report.

Adjusting Supply

Even a recovery in demand expected later this year in the Pacific market won’t be enough to absorb the oversupply, Barclays analysts including Michael Cohen in New York said in a research note Sept. 26. “Supply will have to adjust to balance the market,” they said.

Both Iraqi and Iranian oil shipments to China reached records in April, according to China’s customs data. Asia accounted for 68 percent of Saudi Arabia’s oil exports last year, EIA datashow.

The U.S. received the least amount of foreign oil in June since 1996. Net imports will fall below 6 million barrels a day next year as domestic output reaches a 45-year high, EIA forecasts show. Shipments from Nigeria have dropped to zero.

U.S.-bound Sokol cargoes will slow as companies boost the output of oil from Alaska’s North Slope, known as ANS, after seasonal maintenance and more domestic supply makes its way to the region by rail, Barclays’s Cohen said.

Rail Terminals

Alon USA Energy Inc. (ALJ) and Tesoro are among the companies building terminals along the West Coast capable of unloading rail cars of Canadian and U.S. oil. California received 16,373 barrels of crude a day by train in July, a seasonal record, state data show.

“All of that means the portfolio of options for West Coast refiners is, on average, a portfolio that’s getting closer to home,” Cohen said.

The West may be gaining access to so much supply that even demand for its mainstay ANS, a medium-sour oil, is weakening. ConocoPhillips (COP) loaded a cargo of the crude on Sept. 26 for export to South Korea, marking the first of what Morse said will be many bound for Asia to fetch higher prices.

“It’s an interesting parallel that Russia oil is going east and ANS is going west,” he said. “It’s rail and sour crudes coming to the West in greater quantities to escape the glut in the Gulf. If you think about it in terms of all the flows in the world, the West Coast has for the first time seen the spillover.”

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net; Dan Stets at dstets@bloomberg.net Dan Stets