TRANSPORT

Environmentalists 'get real creative' to combat oil by rail

Along the ice-filled Hudson River in Albany, N.Y., Global Companies LLC's plans to alter a rail yard have hit a snag.

Local officials are demanding that the company take a closer look at the mile-long oil trains bringing thousands of barrels of oil through the city daily. Several recent derailments and fires -- such as those in Casselton, N.D., and New Brunswick, Canada -- have stoked unease along North America's spiderwebbing freight rail lines.

Midstream companies and refiners are facing more organized resistance as environmentalists wake up to the oil-by-rail movements driving much of the U.S. shale energy boom.

"Communities feel like they've been caught sleeping on this," said Fred Millar, a hazardous materials transportation consultant who has worked with the environmentalist group Friends of the Earth.

Activists and concerned citizens "are trying to get real creative here because the first [crude-by-rail projects] sneaked in under the radar," he said.

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In Albany, the latest controversy boils down to an obscure boiler room Global proposed for an existing rail terminal last fall. The add-on would allow the Global Partners subsidiary to heat certain types of oil before transferring them to barges en route to East Coast refineries.

Though small in the context of the bustling Port of Albany, the project still needed an air quality permit from the New York Department of Environmental Conservation to move forward. The DEC issued a draft approval in November, when the regulator concluded Global's "potential to emit will not change as a result of this modification." The company is already cleared to transload as much as 120,000 barrels of oil per day.

But by then, activists were on the lookout for any new oil projects linked to railways.

Kate Hudson, watershed program director for the environmental advocacy group Riverkeeper, accused the DEC of leading a "flawed process" by failing to consult with city leaders in Albany's Common Council before issuing Global's permit.

"I think one of the challenges of crude oil transport by rail and by barge is this inconsistent, overlapping regulatory authority," she said, noting that Riverkeeper is "pressing those regulators to take action within whatever narrow field of authority they have."

That meant lobbying the DEC to extend the public comment period for Global's air permit. The agency agreed, pushing the due date back to Jan. 31 based on "requests from the public."

Regional DEC spokesman Rick Georgeson said his office has received about 30 public submissions on the air permit application so far.

Local activists also helped bring the crude-by-rail project to the Albany Common Council's attention, according to Councilwoman Leah Golby.

"It has really only recently come to light that all of this crude has been passing through Albany in increasing amounts over the past couple of years," she said.

Last Monday, Golby introduced a resolution calling for the DEC to conduct a more thorough environmental justice review of Global's project. The measure passed the 15-member council unanimously.

Global Partners did not respond to a request for comment. The company is also advancing another rail-to-tanker oil operation about 90 miles south of Albany along the Hudson River (EnergyWire, Dec. 20, 2013).

Proponents say Global's boiler facility will help keep jobs in the area by keeping its oil storage and transfer operation competitive.

Councilman Ronald Bailey voted for the environmental justice review but thinks Global can "calm some of the fears" by meeting with local officials and being more transparent about the new project.

"Global did not come in here to be against the community," he said, noting that the company had pledged to hire local workers to run the project at the port.

"I used to work at the port; that's something that we need," Bailey said. "But people need to find out more about the safety."

Echoes of deadly crash

The deadly July 6, 2013, oil train derailment and explosion in Lac-Mégantic, Quebec, put the North American crude-by-rail surge on the map in much the same way the 2010 Deepwater Horizon disaster in the Gulf of Mexico drew attention to offshore drilling.

The two accidents occurred in separate regulatory arenas and on radically different scales. BP PLC's Macondo well blowout in the Gulf killed 11 workers and resulted in the largest oil spill in U.S. history, while the Montreal, Maine and Atlantic Railway's crash in Quebec leaked about 1.5 million gallons of crude.

But the human toll of the Lac-Mégantic derailment -- 47 bystanders were killed in the resulting explosion -- struck a nerve with community leaders across North America.

Subsequent oil train explosions in Alabama and North Dakota galvanized the public, though they injured no one. The federal Pipeline and Hazardous Materials Safety Administration has pledged to fast-track an investigation of North Dakota crude's volatility and is also considering adopting tougher standards for the type DOT-111 tank cars used to haul oil.

The Association of American Railroads points out that more than 99.9 percent of all hazardous materials shipments reach their destination safely. Regulators at the Federal Railroad Administration also note that freight train accident rates have steadily declined over the past decade and a half.

The statistics haven't stopped environmentalists from making crude-by-rail transport a focal point for 2014. They worry about railed oil's rise from fewer than 5,000 annual rail carloads in 2006 to an estimated 400,000 carloads last year, according to AAR data.

The last time railways played that big a role in North American crude logistics, Texas held more sway over global oil markets than Saudi Arabia. (The state's oil regulator, the Texas Railroad Commission, traces its confusing name back to those days in the first half of the 20th century.)

Michael Marx, director of the Sierra Club's Beyond Oil campaign, said combating crude by rail is a top priority, second only to stopping TransCanada Corp.'s Keystone XL pipeline. He said he sees a clear link between crude by rail and the current debate over whether to allow the United States to restart oil exports, which have been largely banned since the fuel shortages of the 1970s.

"These rail cars are destined for refineries or for export terminals, many of which are being proposed, and we're going to fight those every step of the way, with every legal means available to us," Marx said. "If we can block the approval and construction of new terminals that are intended to facilitate the exports of raw or refined crude, we can create a disincentive to actually produce this oil in the first place."

Terminals in the crosshairs

Environmentalists have made countering oil offloading terminals a core part of their approach to CBR.

"When you need a permit, there's regulatory oversight and there's at least an opportunity for us to eke a public conversation around whether this is a good idea or not," said Jan Hasselman, an attorney with Earthjustice in Washington state, where about 10 oil-by-rail terminals were proposed last year.

The Houston-based consultancy RBN Energy LLC estimates that since 2011, about 171 rail loading and offloading terminals have been built or are under development throughout North America.

Three offloading terminals or capacity expansions are planned for the Port of Grays Harbor in Washington state, where Hasselman's colleague Kristen Boyles led a successful legal effort to revoke two of the companies' development permits.

Boyles, who represented the Quinault Indian Nation in a broader case against the developers, said the endpoint terminals provide the best "opportunity for public involvement," marking where companies transporting oil have had to adjust their former message of "full steam ahead."

"You will hear from some of the oil companies that oil has been moved by rail for years," she said. "But that statement is misleading because we haven't had these unit trains, with one product and 100 to 120 tanks cars of crude oil, from the Bakken area."

The two expansion projects now facing re-evaluation, planned by Westway Terminal Co. LLC and Imperium Terminal Services LLC, would boost existing oil-by-rail capacity by about 50,000 barrels of oil per day.

In rolling back the "clearly erroneous" decision to issue the permits, the Washington State Shorelines Hearings Board said the city of Hoquiam and the Department of Ecology had failed to consider the "cumulative impact" of a third crude-by-rail project planned for the area.

That proposed facility, dubbed Grays Harbor Rail Terminal LLC, would add an additional 50,000 barrels per day of capacity to the port. Charla Skaggs, a local spokeswoman for the project's parent company, U.S. Development Group, said the logistics firm expects to submit its environmental permitting application by the end of March.

Skaggs challenged the notion that the crude-by-rail boom sneaked up on local leaders.

"U.S. Development and Grays Harbor Rail Terminal began meeting with the community immediately upon proposing the project" in 2012, she said, adding that "we will address any concerns or appeals as they arise."

Industry headaches

Part of railways' allure for refiners and oil traders is its speed and flexibility. With track infrastructure already in place, there is no need to go through the onerous, multi-state permitting process that has gummed up many major pipeline projects.

If they get the green light, rail offloading terminals can be built in six months or less.

In Benicia, Calif., Valero Energy Corp. hoped it could prop up an underperforming coastal refinery with 70,000 barrels per day of cheaper railed-in crude (EnergyWire, March 20).

According to a March 2013 project description, Valero figured it could get the facility up and running by the end of 2013.

The city of Benicia said in an initial May 31 declaration that enough "mitigation measures" had been added to "reduce all [environmental] impacts to a less-than-significant level."

The refining giant's $30 million receiving terminal seemed poised for the fast track.

But then the Natural Resources Defense Council urged Benicia officials to require a more thorough environmental impact report for Valero's rail facility, citing unexamined air quality and health impacts.

Facing pressure from green groups and a few concerned citizens, the city opted to take a second look at Valero's rail facility. The company agreed with plans to conduct another review despite the expected yearlong delay.

"Valero's California refineries have, by far, the highest operating costs in Valero's refining system, partly because of their inability to access large volumes of lower-cost North American crude," Valero spokesman Bill Day said in an email. "The Benicia rail facility would alleviate that, and any delay is very costly."

Delays don't always work

Environmentalists' tactics have not always gained traction.

On the East Coast, the Delaware Audubon Society and a regional Sierra Club chapter fought a planned crude-by-rail expansion at PBF Energy Inc.'s Delaware City refinery in July.

The environmentalists claimed the company was playing a game of "Russian roulette" with tanker cars moving through populated areas (EnergyWire, July 19, 2013). They pegged their legal argument on Delaware's Coastal Zone Act, which has blocked new industrial projects along the Delaware River since the 1970s.

The state industrial board swiftly threw out the challenge, noting that the act had never applied to rail facilities. PBF got the go-ahead to transfer and barge 45,000 additional barrels per day of railed-in heavy crude from Delaware City to its Paulsboro, N.J., refinery.

PBF is also adding 20,000 barrels per day of light oil unloading capacity to its East Coast terminals. Both projects are slated for completion by the second half of the year.

In Vancouver, Wash., the sprawling 360,000-barrel-per-day Tesoro Savage Petroleum Terminal recently secured a partial victory over green groups that had challenged the permit behind the company's 42-acre lease in the Port of Vancouver. On Friday, a Clark County judge threw out environmentalists' claims that the port violated the state's Environmental Policy Act in issuing its permits to refiner Tesoro Corp. and Savage Cos.

Environmentalist organizations including Columbia Riverkeeper are still pressuring Washington Gov. Jay Inslee (D) to reject the Tesoro/Savage project.

'Here to stay'

Riverkeeper's Kate Hudson in New York said the group would continue to monitor the cases in Washington state to see which legal strategies succeed.

She noted that the goal is not to stop every drop of oil from moving around the country but rather to make sure adequate emergency response measures are in place.

"We are very realistic that this transport is going on right now, and the focus is on what levers to governments and regulatory agencies have to make this transport safer and to make sure that the communities are protected," she said.

For now, few analysts think environmentalists' efforts can slow the crude-by-rail boom that has offered an economic lifeline to struggling coastal refiners.

Analysts at RBN Energy concluded Thursday that "crude-by-rail is here to stay although the build out of terminals in the U.S. is slowing down."

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