Oil Trains Rumble Into Philly, Bringing Dakota Crude, Jobs And Safety Concerns

Oil Trains Rumble Into Philly, Bringing Dakota Crude, Jobs And Safety Concerns

SEPTEMBER 19, 2013 | 5:52 PM
BY 

CSX K040 Robert King

COURTESY OF ROBERT KING

Robert King remembers the very first time he saw an oil train.

“It was April 14, 2013.”

King, a 17-year-old Philadelphian, is a “railfan,” the name for members of a worldwide community of passionate, or some might say obsessive, train buffs.

On that day, King and railfans from the Midwest to the East Coast were busily tracking the inaugural run of a brand new train: the CSX K040, an oil train more than one-mile long hauling raw crude from the Bakken Shale in North Dakota bound for South Philadelphia.

With his camera bag slung over his shoulder, King pedaled his blue-and-white mountain bike to Schuylkill River Park in Center City and up the ramp to a foot bridge overlooking the CSX tracks. Then he settled in to wait. As he stood there, he recalls, “There’s some worry on my mind.”

King fretted that another train slated to use the tracks at the same time might ruin his dream photo. But he got lucky that day, snapping the photo of Philly’s first oil train that you can see on this page.

That’s because Philadelphia is at the center of a new industrial boom. Oil trains are becoming a common sight on tracks between North Dakota and Philadelphia. To get here, they travel through some densely populated areas – Chicago, Albany and New Jersey – which is raising some safety concerns.

Why? These shipments are coming on the same type of train that derailed in Lac-Mégantic, Quebec, last July, leaving 47 people dead and reducing the downtown to smoldering rubble.

Seen in another light, this rail traffic is very good news for America’s energy economy. Rail shipments are booming as fracking in the Bakken Shale continues to yield a glut of light, sweet crude oil.

More traffic, more accidents, more independence

Without enough pipelines to move it all underground, rail shipments have doubled since this time last year, according to the Energy Information Administration.

Fadel Gheit, a senior analyst with the investment bank Oppenheimer, has followed the oil and gas industry for more than 30 years. It  has been decades since Gheit has seen this kind of rail traffic.

“Two or three years ago, very seldom you heard that companies were using rail cars. Everybody now is,” he says. “Also the sheer number went from a few hundred rail cars to tens of thousands of rail cars. We have not, to my knowledge, expanded the rail line too much. We have not really spent a lot of money on infrastructure.”

Gheit wonders whether our rail lines can handle all this new activity and whether increasing traffic on the rails will lead to more accidents.

Pennsylvania’s governor, Tom Corbett, prefers to focus on the good news part of the equation. In his own way, the governor is also a rail fan.

Earlier this summer, Corbett paid a visit to ACF Industries – a rail car manufacturing plant in Milton, Northumberland County. The 114-year-old company closed in 2009. But the growing demand for rail tanker cars has pushed its doors wide open again.

“You are part of the piece of the puzzle of how we make this country energy independent of the Mid East,” Corbett told workers that day.

Bakken crude is also a direct cause for the revival of the 140-year-old Sunoco refinery in South Philadelphia. It was set to close when it got new life thanks to a joint venture between a private equity firm and a natural gas company.

In July, the refinery complex now known as Philadelphia Energy Solutions hit a milestone: ramping up shipments to five trains of Bakken crude a week.

July is also when the derailment in Lac-Mégantic happened.

A Quebec Provincial Policeman crosses the railway tracks inside the exclusion zone in the town of Lac Megantic, Quebec.  Hundreds of residents were evacuated from their homes when a runaway train loaded with crude oil exploded on July 6.

EPA/STEPHEN MORRISON /LANDOV

A Quebec Provincial Policeman crosses the railway tracks inside the exclusion zone in the town of Lac Megantic, Quebec. Hundreds of residents were evacuated from their homes when a runaway train loaded with crude oil exploded on July 6.

Learning from Lac-Mégantic

Inspectors have since concluded that the tankers on that derailed train were mislabeled. Samples from cars that didn’t ignite show the oil inside was actually more flammable than shipping documents reported.

Last week, Canadian transportation officials sent a letter to U.S. regulators warning them that emergency responders may not be getting the right information about these shipments.

But federal regulators have been asking questions about the safety of this boom in rail traffic even before the Lac-Mégantic derailment.

In March, the Federal Rail Administration started planning unannounced spot inspections of crude suppliers and transporters.

Nancy Kinner is director of the Coastal Response Research Center at the University of New Hampshire. She says rail has a fairly good safety record and most incidents are caused by human error “where humans override a system that is designed for protection or don’t believe the data that’s being given to them or simply make a bad judgment.”

Kinner says mislabeled shipments are a prime example of that.

Being prepared

The growing rail shipments pose challenges for local emergency planners trying to prevent accidents or ensure swift, safe clean up.

In Pennsylvania, the Public Utility Commission does spot inspections of tracks, rail cars and shipping documents to make sure transporters are complying with federal rules.

Emergency planning is left to counties.

Immediately after the accident in Canada, Philadelphia’s Office of Emergency Management told StateImpact Pennsylvania it does not get detailed information about rail shipments. Two months later, the agency won’t say whether or not it has gotten any new information or updated its emergency plans.

Federal law does not require railroads to share information about hazardous shipments with them, but Philadelphia Fire Commissioner Lloyd Ayers says CSX regularly communicates with his department about these shipments.

“It’s well before the shipment so we’ll know the chemical or the hazard that’s coming through,” Ayers says. “Where its destination is, where it originated from and what the quantities are so we can be prepared.”

A spokeswoman for the railroad told StateImpact that CSX shares information with local fire departments “upon request.” The railroad also holds training sessions with the Philadelphia fire department every year.

But CSX would not confirm what or even if it’s shipping to Philadelphia Energy Solutions.

The refinery denied a request for an interview about rail safety in the wake of the Canadian accident. But StateImpact did get an invitation to the grand opening of its permanent rail facility and an e-mail from a spokeswoman saying Philadelphia Energy Solutions “enthusiastically supports” safety inspections.

Meanwhile, Energy Solutions CEO Philip Rinaldi says the company is on the verge of becoming the single largest consumer of Bakken oil. Next month, it’ll be welcoming two trains a day, each carrying 70,000 gallons of crude.

Rail fans like Robert King will be out there watching it all unfold and capturing it on film.

BOOM IN NATURAL GAS PRODUCTION SENDS U.S. SHIPYARDS INTO OVERDRIVE

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AP

Boom In Natural Gas Production Sends U.S. Shipyards Into Overdrive

The Great American Energy Boom is having a major ripple effect on the shipbuilding industry, which thanks to a 1920s maritime law, is busier than it has been in decades.

Some ten supertankers are currently under construction at U.S. shipyards, with orders for another 15 in the pipeline. That may not seem like a huge number, but considering there are only about 75 such tankers plying American ports now, it represents a genuine boat-building boom.

“We haven’t seen something like this since the 1970s,” Matthew Paxton, president of the Shipbuilders Council of America said to FoxNews.com. “The movement of more oil has built up a real commercial shipbuilding renaissance.”

The renaissance comes despite an economy that continues to struggle. It’s because of a specific sector of the U.S. economy that is also booming: natural gas production. The fuel must be transported, even within the country, either by rail, pipeline or ship. And if it is by ship, the ship must be American-made and American-manned, according to the 1920s Merchant Marine Act, also known as the Jones Act.

Paxton said that it is projected that up to 3.3 million barrels will be shipped out daily from the Gulf Coast by 2020, destined for ports along the east and west coasts, causing huge demand for tanker ships.

“It could be higher as more and more tankers are built,” he said.

With record amounts of gas and oil being extracted from shale by the process of fracking, the U.S. has seen an energy boom in recent years that has proponents calling it the Saudi Arabia of natural gas. Much of the fuel is being exported, but most is staying here, being distributed around the nation for domestic use.

Oil-by-rail feeding East Coast Refineries Displacing Imported Crude

Oil-by-rail feeding PADD 1

Published: Sept. 19, 2013 at 7:27 AM

WASHINGTON, Sept. 19 (UPI) –WASHINGTON, Sept. 19 (UPI) — The increase in the amount of oil reaching refineries on the eastern U.S. coast is likely coming from rail deliveries, the U.S. energy department said.

Most of the crude oil reaching refineries in the Petroleum Administration for Defense District 1, which represents the East Coast market, is typically imported.

The Energy Information Administration, the Energy Department’s analytical division, said crude oil volumes at PADD 1 refineries increased steadily during spring and summer 2013. At the same time, there’s been a decline in net crude oil imports because of higher domestic production.

EIA said there’s a growing supply of crude oil delivered to PADD 1 that can’t be accounted for by production, imports or other forms of transport.

“Crude oil delivered via rail to East Coast refineries is likely contributing to the increase in unaccounted-for crude oil supply above historical levels,” the administration said in a report published Wednesday.

EIA in its short-term market report, published last week, said U.S. crude oil production in August averaged 7.6 million barrels per day, the highest monthly level since 1989.

The Association of American Railroads said last week petroleum and petroleum products were totaled 11,950 carloads, representing approximately 8.3 million barrels, for the week ending Sept. 7. That’s a 4.8 percent increase from the same time last year.

© 2013 United Press International, Inc. All Rights Reserved.

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Is Keystone Doomed To Be a Historical Footnote?

Is Keystone Doomed To Be a Historical Footnote?

By Ben Winkley Wall Street Journal

WHO NEEDS KEYSTONE, ANYWAY?

As 2013 rolls on from summer into fall there is still no end in sight to one of the great energy impasses of the year—will the Keystone XL pipeline ever be approved, or is it fated to become a historical footnote?

The pipe, in case you have forgotten, is planned to allow 830,000 barrels a day of heavy crude to move from Canada’s oil sands development all the way to refineries on America’s Gulf Coast.

Keystone needs approval from the State Department because it crosses the Canadian-U.S. border. The debate on whether it is a good idea or not has seemingly been endless and a decision may not now be made until 2014.

U.S. refiners increasingly doubt that Keystone will ever be built, The Wall Street Journal’s Ben Lefebvre reports. Only now, thanks to the expansion of other pipelines, the record amount of oil being produced in the U.S. and the rapid expansion of crude-by-rail, they don’t particularly care.

Which is all well and good for American refiners—and probably for these seven adorable species threatened by Keystone—but potentially ruinous for Canadian drillers.

Extracting Canada’s huge deposits of oil sands in the next few years might not be economically viable without Keystone XL. Oil-sands production capacity is predicted to more than double by 2030, to more than 5 million barrels a day—if Keystone doesn’t happen, output could exceed shipping capacity as soon as 2016.

This will mean that Canadian heavy crude will continue to trade at a steep discount to other grades of oil for the next few years, which could weigh on the economics of developing the oil sands.

So Canada hopes to build some pipes of its own—one all the way from Alberta to the Atlantic coast, and one to the Pacific. The former faces the challenge of scale; the latter of local opposition.

If Canada gets one or both of these off the ground, however, it could mean that Keystone turns out to be a lot of fuss over nothing. A lifeline could be thrown its way, though. The U.S. Federal Railroad Administration has begun an investigation into the business of moving hazardous materials—read: crude oil—on the tracks in light of the fatal accident in Quebec earlier in the year.

Any new safety measures or restrictions (say, on moving crude through residential areas) could increase the cost of moving oil-by-rail, and make that pipeline look a more attractive option once more.

INDIA BETWEEN A ROCK AND A HARD PLACE

India is considering a plan to reduce its ballooning current-account deficit that includes holding its oil imports from Iran steady, potentially putting the country in jeopardy of losing an exemption from U.S. sanctions against countries that do business with Iran.

The subcontinent is stuck between a rock and a hard place. Its currency, the rupee, has recently hit record lows against the U.S. dollar, making crude-oil imports much more expensive.

India imports more than three-quarters of the crude oil it requires, and the depreciating local currency would make those imports more expensive in rupee terms and add to the costs of government fuel subsidies.

India is turning to the Middle East, looking for deals. Oil exporters are eager to boost supplies to India to compensate for shrinking U.S. demand.

India and Iraq are working toward a 10-year oil-supply deal and the former may offer a stake in state-run India Oil Corp.’s planned refinery in the east of the country, the Journal’s Saurabh Chaturvedi and Biman Mukherji report.

Dealing with Iran will prove more contentious. India buys oil from the Islamic Republic by depositing rupees into a bank account, and then Iran imports Indian goods, potentially including food, drugs, consumer products and auto parts, debiting rupee amounts from the same account.

A bizarre ongoing dispute over an Indian oil tanker that was detained by Iran’s navy threatens to stall negotiations, but India may feel its need for fuel is greater than America’s need to squeeze Iran.