Recent Oil Train Wrecks

http://www.reuters.com/article/2015/03/19/canada-railways-volatility-idUSL2N0WK32U20150319

Ontario oil-train wrecks ignite worry over Canada crude flammability

CALGARY, Alberta, March 19 Thu Mar 19, 2015 7:56pm ED

(Reuters) – Two recent oil-train derailments in Canada have opened a new front on the debate over safety, highlighting how even shipments of Alberta’s oil sands crude can contain components just as volatile as North Dakota’s Bakken.

Although Canada is best known for producing viscous bitumen that is not prone to ignite on its own, it is often blended with as much as one-third super-light oil – known as condensate – before it is shipped in rail cars, injecting the same kind of volatile gases that can explode in derailments, industry experts say.

In the case of two fiery incidents in northern Ontario in recent weeks, the oil involved was synthetic crude from the Alberta oil sands, which is upgraded from raw bitumen, making it less stable.

Both Canadian National Railway trains were heading to a Valero Energy Corp’s refinery in Quebec before they came off the tracks and burst into flames.

Ever since the Lac-Megantic disaster in Quebec, where a runaway train carrying Bakken crude erupted in a fireball in 2013, killing 47 people, worries about safety have been largely centred around light crude. In particular, Bakken has been the focus since its so-called “light ends,” volatile gases with higher vapor pressure and low flashpoints, occur naturally.

But light ends are also present in the condensate used to dilute raw bitumen and some heavy crude. Even though the concentration in diluted bitumen, known as dilbit, is far less than in Bakken, the low flashpoint remains.

“Basically all the materials we are talking about – Bakken, West Texas Intermediate, some of the diluted bitumen blends coming out of Alberta – all have light boiling components that are flammable,” said Dennis Sutton, executive director of the Crude Oil Quality Association.

(See related graphic on oil by rail incidents: here)

BUT DOES IT BURN

For Canada, the issue is not only the point at which diluted or synthetic oil sands crude might ignite, known as the flash point, but whether it would continue to burn once ignited, potentially setting off a series of blasts in adjacent tank cars.

Bakken crude is naturally rich in light ends so its flash point and fire point are roughly the same, says Andre Lemieux, secretary of the Canadian Crude Quality Testing Association (CCQTA), meaning if it ignites it will continue to burn.

However, the same is not necessarily true for crude being produced in and shipped from Alberta.

To complicate matters, there is no such thing as a typical Canadian crude. Different grades have different properties with light sweet crude streams tending to have lower flash points than undiluted heavy grades.

The concentration of light ends in dilbit vary depending on the quantity and quality of condensate added. Some shippers use semi-refined synthetic crude instead of condensate, to make a product called “synbit”.

Synthetic crude presents a different challenge because as an upgraded product its flash and fire points may be quite different from crude oil.

One of the safer substances to transport by rail is raw bitumen from the oil sands, which in its undiluted state is the consistency of peanut butter and extremely difficult to ignite.

However, raw bitumen shipments require coiled and heated rail cars and additional infrastructure at rail loading and off-loading terminals, which not all shippers have access to.

Industry bodies including CCQTA and Transport Canada are now studying the flammability of various types of crude, and their results may have implications for how certain kinds of oil is shipped and how emergency services deal with crude train derailments.

Progress is likely to be slow, however. Researchers are developing new testing methods, since the existing United Nations methods for classifying dangerous goods transported by rail were originally developed for natural gas liquids like ethane and propane rather than mixed cargoes like crude oil.

“Ultimately the specific properties of crude oil and types of crude oil will become much more important as it relates to how material is transported,” the CCQTA’s Lemieux said. “But it will take a while.” (Editing by Jonathan Leff and Diane Craft)

Crude Oil Transportation Costs

http://www.reuters.com/article/2015/03/16/us-railway-crude-bnsf-railway-idUSKBN0MC21O20150316

Crude oil joins rail industry staples as key revenue producer

(Reuters) – U.S. railroads generated almost as much money last year hauling crude oil and sand, largely used in hydraulic fracturing, as they did moving industry staples like field crops and motor vehicles, according to a Reuters’ analysis of newly released federal data.

The previously unreported company data submitted to the U.S. Department of Transportation provides the latest piece of evidence of the blossoming marriage between the energy and rail industries, forged on the back of the U.S. shale oil boom.

Led by Berkshire Hathaway-owned BNSF Railways, the seven largest railroads operating in the United States generated $2.8 billion in gross revenue from hauling crude oil in 2014, up nearly 30 percent from 2013, according to company data filed with the federal government and released earlier this month.

The $2.8 billion figure puts crude oil in sixth place among similarly classified products, trailing industry standards like coal, field crops and motor vehicles, the analysis shows. Sand and gravel, an often overlooked winner in the shale boom, generated $2.7 billion last year in gross revenue.

Crude oil provides the biggest return on a per-carload basis, drawing $5,700 in gross revenue for each car that originated on the network, more than double than what coal brings.

The continuing financial success comes as the industry faces threats from a massive drop in oil prices and impending new U.S. regulations aimed at public safety that could impose additional costs.

“Will the major carriers go belly up? No,” said Barton Jennings, a professor of supply chain management at Western Illinois University. However, short-line cariers that rely upon crude for the bulk of their business may be exposed, he said.

Overall, the seven major carriers reported U.S. profits of $14.4 billion last year, led by Union Pacific and BNSF, which combined accounted for 67 percent of the industry’s U.S. profits, the analysis shows.

KING CRUDE

The biggest player in the U.S. crude rail business is BNSF, which dominates North Dakota, home to the Bakken shale.

BNSF’s gross revenue from crude oil rose to $1.48 billion from $63 million in 2010. Gross revenue from hauling sand and gravel climbed to $651 million last year, a more than 300 percent jump from 2010.

The growth in crude and sand hauling helped BNSF boost profits, which climbed from $2.6 billion in 2010 to $4.4 billion last year.

(Reporting By Jarrett Renshaw; Editing by Jessica Resnick-Ault and Jonathan Oatis)

Bloomberg on Free-Market Solutions to Oil Trains

http://www.bloomberg.com/news/articles/2015-03-03/the-best-way-to-prevent-exploding-trains-higher-oil-prices
Wreckage from the latest oil train explosion hadn’t yet been cleared from the crash site in West Virginia last week when President Obama vetoed legislation that would have approved construction of the Keystone XL pipeline. The timing of the two events crystallizes one of the puzzles at the heart of the U.S. oil boom: How do we move all this new crude around the country?
As production in the U.S. has soared to more than 9 million barrels a day—up from just 5 million back in 2008—the pipeline industry has scrambled to reorient itself around new oilfields in North Dakota and Texas. But railroads have proven more nimble and in many cases beat pipelines to the punch. The amount of crude being moved by trains jumped by almost 5,000 percent since 2009, even though trains are less efficient and typically more expensive than pipelines. Trains offer traders and energy companies something that pipelines don’t: flexibility.
With about 80 percent of the oil trains in the U.S. originating from North Dakota, that flexibility has come in handy in freely distributing Bakken crude across the country. Energy companies can choose whether to send a crude train to a refinery in Philadelphia or to one in Port Arthur Texas, depending on which location offers higher prices. That’s great for markets—and it’s terrible for public safety. Oil trains often travel through densely-populated urban areas on tracks designed to move grain or machinery, not super-volatile crude oil. Yes, pipelines leak and spill, too, but they are widely seen as safer and more reliable than trains.
The only thing standing in the way of a new pipeline boom is the free market
This brings us to one of the more common and unfortunate reactions to the increasing number of oil train explosions: The incorrect argument that these mishaps wouldn’t be happening with such frequency if only Obama would simply approve Keystone XL. But Keystone, whatever its merits, is primarily intended to move crude from Canada. At most, Keystone would move about 65,000 barrels a day out of the Bakken in North Dakota; the other 765,000 barrels of its capacity would be filled with thick Canadian crude coming down from Alberta.
Sixty-five thousand barrels sound like a lot. But North Dakota pumps more than 1 million barrels a day—and about 60 percent leaves by train. Energy companies are free to propose and build any number of new pipelines up to North Dakota so that crude could flow south more safely. As long as the pipelines don’t cross the Canadian border, and there would be no reason for new pipelines to do so, there’s not much the White House could do to stop them.
The only thing standing in the way of a new pipeline boom is the free market. Right now, with oil prices down more than 50 percent from highs reached last summer, companies are understandably wary about investing in a big pipeline projects up to the Bakken. In December, for example, Enterprise Products Partners canceled a proposed pipeline to move oil from North Dakota down to Oklahoma. A similar line was canceled back in 2012 by the Tulsa-based energy company Oneok, at a time when oil prices were about $40 per barrel higher than today.
Not only are investors hesitant to build future pipelines into the Bakken, oil companies aren’t even using all the pipeline capacity that already exists. Only about 45 percent of the total pipeline capacity is being used right now, according to David Vernon, a transportation analyst at Sanford C. Bernstein. “Basically, the reason is that those pipelines don’t go anywhere people want to go,” says Vernon.
The amount of pipeline capacity available to the Bakken has increased from 230,000 barrels per day in 2007 to about 723,000 today. Most of those pipes end up into Oklahoma or Illinois. At the moment, however, traders are most eager to send their crude to the coasts where refiners are keen to get their hands on cheaper domestic oil so they can cut back on more expensive imports from West Africa and the Middle East. And the best way to get American crude to the coasts remains rail. It’s amazing how well the market has responded to that demand: The amount of oil that can be loaded onto trains heading out of North Dakota has jumped from roughly zero in 2007 to more than 1.3 million barrels a day.
Texas, the only state that produces more oil than North Dakota, had a century to build out its oil infrastructure before the shale boom hit. The Bakken, by contrast, basically went from nothing to a gusher. That left a whole lot of oil without a lot of pipes to move it. Since no one was quite sure how long it would last, no one wanted to take the risk of building a big pipeline system to service the area.
Cheap oil only weakens the incentives to build pipelines into North Dakota. At current prices, a lot of wells in North Dakota are no longer profitable. Drilling activity has already declined. Production will likely follow in the next 12 months. That’s hardly a recipe for wanting to build a big expensive capital project. New rules governing the safety of oil trains proposed by federal transportation regulators will likely make crude-by-rail more expensive, once they take effect in the next couple years. Until then, however, the best way to keep trains from exploding is to put that oil into pipelines—and that isn’t likely to happen without higher oil prices.

California is Inspecting Rail Bridges Used by Oil Trains

http://www.uniongazette.com/breaking/editorial-california-tends-to-make-progress-on-train-safety-by-inspecting-railroad-bridges-h11394.html

It’s encouraging that essential actions are becoming taken to make positive oil trains rumbling by means of California don’t derail, but the job is not practically performed yet.

For the initial time, the California Public Utilities Commission plans to check behind security inspections by private railroad providers of rail bridges across the state, focusing on these traversed by trains carrying crude oil.

The commission is deploying two new bridge inspectors – among seven new rail inspectors hired with revenue allocated by Gov. Jerry Brown and the Legislature in response to rising concerns about extra oil trains in California. The two inspectors will probably operate as a group, visiting 4 bridges a week. They will not be doing complete inspections, but rather reviewing that the railroads’ security checks are in proper order.

At that rate, it would take 50 years to check all five,000 rail bridges, as The Sacramento Bee’s Tony Bizjak reported this week. That clearly is not speedy adequate.

So the commission is compiling a priority list of the initial 30 bridges for visits in 2015. Right here are two attainable ones that should really be strongly viewed as: the heavily made use of, 103-year-old I Street Bridge in downtown Sacramento and the Clear Creek Trestle in Feather River Canyon. Each are expected to be on major routes for oil trains.

It’s also significant that state and local officials are pushing for a extra comprehensive threat assessment of Valero’s proposal to run oil trains via Northern California to its Benicia refinery.

Late last month, the utilities commission and the state Office of Spill Prevention and Response joined the Sacramento Location Council of Governments and the cities of Davis and Sacramento in raising issues that the city of Benicia’s draft environmental influence report underestimated the prospective of explosion and fire from two 50-car trains going every day through Roseville, Sacramento, West Sacramento, Davis and other cities. Attorney Common Kamala Harris has jumped on the bandwagon, as well.

For one particular issue, state officials say they want more detail on how Benicia officials came up with a projection that a train derailment would spill 100 gallons or additional of oil only as soon as every 111 years along the 69 miles of track in between Roseville and Benicia.

At the same time, California’s two U.S. senators are pressing federal transportation officials to expand their specifications for railroads to notify first responders of oil shipments. The U.S. Department of Transportation’s emergency order, issued in May possibly, covers only shipments of at least 1 million gallons (about 35 rail automobiles) of crude from the Bakken oil field in North Dakota.

Sens. Barbara Boxer and Dianne Feinstein say that notification ought to be required for any quantity of Bakken, or any sort of crude oil or other flammable liquid, for that matter.

They’re correct. If security is the goal, there’s no logical reason that smaller sized shipments and other kinds of crude aren’t covered. The notification mandate is among proposed rules on oil trains that federal officials strategy to impose by year’s end. They also contain phasing out older rail cars, decrease speed limits and much more extensive response plans for spills.

These federal regulations will come to be even extra vital if California’s two big railroad firms – BNSF and Union Pacific – win their federal lawsuit filed Tuesday that challenges a new state law requiring them to come up with oil spill prevention and response plans. The corporations argue that federal law prevents states from imposing such safety rules.

This is typically how important safety improvements get created – step by step, at different levels of government, with advocates possessing to maintain pushing for stronger protections against market resistance. Every person involved should have a single priority – placing public safety very first and foremost.

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