The Eagle Ford Shale formation is remarkable because it contains both natural gas (in the southern part of the formation) and NGLs and oil (in the northern part of the trend).
ROCKMAN wrote: I've seen some stabilizer plant estimates as high as $200 million. I'm pretty sure it wouldn't fit in the back of a pick up. Or even a few acres. LOL.
As shale fields scattered across the Midwest and West Texas produce millions of barrels of crude oil, energy companies are finding the national pipeline network insufficient to transport their output. Railroads are increasingly picking up the slack, and Jefferson Energy Companies, based in The Woodlands, is one of several companies investing millions of dollars to help transport crude by rail, a business that was nearly nonexistent just five years ago.
“We never thought we competed with pipeline until four years ago when we moved our first unit train of crude by rail,” Dean Wise, a vice president for BNSF Railway, based in Fort Worth, said at a rail conference in January. “Now BNSF is moving eight trains a day.” (BNSF is a corporate sponsor of The Texas Tribune.)
Yet more crude oil was spilled in American rail incidents in 2013 than in the previous four decades, according to a McClatchy Newspapers analysis of federal data. The data for Texas shows 62 crude oil spills from trains over the last decade. Forty-two, or 68 percent, have occurred since 2012.
The Department of Transportation is also looking at new safety standards for tank cars carrying crude oil or other combustible materials, a move that could require companies to upgrade or replace thousands of cars.
In Episode 1 of this series we reviewed crude prices and takeaway capacity in the booming Permian Basin. At the moment, production exceeds local demand and takeaway capacity so that producers are experiencing price discounts at Midland, TX for West Texas Intermediate (WTI) and West Texas Sour (WTS) crudes versus the Cushing, OK trading hub of around $7/Bbl. The spread between Midland WTI and the Gulf Coast benchmark light sweet crude Light Louisiana Sweet (LLS) is about $9/Bbl. As soon as the new 300 Mb/d BridgeTex pipeline – a joint venture between Magellan Midstream and Occidental – comes online (now expected in June/July of this year) we believe that the Midland/LLS spread will narrow. In the meantime, the price spreads are generally too low to justify more expensive rail transport out of the Permian.
Under federal common carrier rules, railroads can’t refuse to transport dangerous cargo if it’s in a legal container.
“How did it get missed for the last ten years?”
That was the question Deborah Hersman, chair of the National Transportation Safety Board (NTSB), posed to a panel of industry representatives back in April about how the rail industry had missed the fact that Bakken oil is more explosive than traditional crude oil.
“How do we move to an environment where commodities are classified in the right containers from the get go and not just put in until we figure out that there’s a problem,” Hersman asked during the two-day forum on transportation of crude oil and ethanol. “Is there a process for that?”
The first panelist to respond was Robert Fronczak, assistant vice president of environmental and hazardous materials for the Association of American Railroads (AAR). His response was telling.
“We’ve know about this long before Lac-Megantic and that is why we initiated the tank car committee activity and passed CPC-1232 in 2011,” Fronczak replied, “To ask why the standards are the way they are, you’d have to ask DOT that.”
So, now as the new oil-by-rail safety regulations have been sent from the Department of Transportation (DOT) to the White House’s Office of Information and Regulatory Affairs, it seems like a good time to review Hersman’s questions.
How did we miss this? Is there a process to properly classify commodities for the right container before they are ever shipped?
A Fundamental Question Goes Unanswered
So, on the eve of new regulations, the fundamental question of how to properly sample and test Bakken crude oil for appropriate classification has not been answered. And the only group currently working on an “industry standard” for this is the American Petroleum Institute, which has already concluded that Bakken crude is no different from other crude oils — at the same time API is having private meetings at the White House regarding the new regulations.
Chair Hersman resigned shortly after the forum in April, ending her 10-year career with the NTSB. At the time she told the AP she had, “seen a lot of difficulty when it comes to safety rules being implemented if we don't have a high enough body count. That is a tombstone mentality. We know the steps that will prevent or mitigate these accidents. What is missing is the will to require people to do so.”
If the current process regarding new oil-by-rail regulations in the U.S. is any indication, apparently we haven’t achieved a high enough body count yet.
The push to make oil train shipments safer could end up setting back efforts to win the Obama administration’s approval for the Keystone XL pipeline. The rail industry says tighter safety rules could choke off their shipments of Canadian oil — a scenario that Keystone opponents say would make TransCanada’s proposed pipeline a crucial artery for the crude, undermining the State Department’s view that the pipeline would cause only modest environmental damage.
New York will soon disclose the routes and schedules of freight trains hauling tanker cars filled with Bakken crude oil as they pass through New York on their way to coastal refineries.
New York State announced Friday it has denied a request by CSX Transportation and the Canadian Pacific Railway Company to sign a non-disclosure agreement.
The railroads began providing the information to the State Emergency Response Commission on June 7 under an emergency order signed by U.S. Transportation Secretary Anthony Foxx.
The decision to release the data was announced by Jerome Hauer, state Commissioner of the Division of Homeland Security and Emergency Services, who also informed the railroads in a letter.
“The state’s review concluded that the information is not sensitive security information,” Hauer said, indicating it will be released to local emergency planners and to the public through Freedom of Information requests.
The Pipeline and Hazardous Materials Safety Administration is drafting regulations to improve the safety of rail shipments of crude oil following a series derailments, explosions and fires. With billions of dollars at stake, the railroad, oil, ethanol and chemical industries have been trying to shape the rules to their advantage in a series of meetings with the White House and PHMSA. A key issue is tougher standards for tank cars used to ship oil. The public has weighed in primarily through letters, emails and phone calls to the agency.
Some comments:
“Our work on this rule is a work that is organized around what is the safest approach to the movement of this crude oil, particularly given the volumes in which it is moving around the country. ... There is the tank car itself, but as we have said for many months there is also speed, there is also track quality, there are also any number of things.” — Transportation Secretary Anthony Foxx, speaking to reporters, July 1, 2014
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“By and large we are critical of the process. It appears to be one in which industry and regulators are negotiating behind closed doors with very little public participation. ... This is not because the public hasn’t been concerned and engaged.” — Anthony Swift, attorney, Natural Resources Defense Council, in an interview
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“The older cars must go, or simply be illegal on U.S. rails. That will get the attention and action from all the oil companies transporting petroleum products in the U.S. If not, who dies the next time a derailment happens? We all know that’s when and not if.” — Russell Pesko of Plainfield, Illinois, in comments filed with PHMSA.
The Obama administration will unveil on Wednesday new rules proposing stricter safety standards on trains carrying flammable fuels, including oil and ethanol, according to a Capitol Hill source familiar with the pending regulation.
The rules, to be announced Wednesday morning by U.S. Transportation Secretary Anthony Foxx, will include standards for tank cars, speed limits for trains carrying flammable fuels, brake standards, and required testing for oil and other volatile liquids.
Railroads, oil companies and railcar owners have been expecting new federal regulations meant to improve the safety of oil shipments in the wake of several fiery train accidents. Details of the proposed regulation could impact several industries.
The railroads have been worried that slower speed limits could cause major gridlock, while oil companies have fretted that new rules about tank car volumes might prevent them from shipping all the crude they wanted.
toolpush wrote:Graeme,
Are there any oil shipments by rail from the EF? I think you will find it all goes by pipeline. Maybe truck then pipe, but there are plenty of pipes running to the coast from the EF, and they are expanding fast. BTW, if the oil is pipelined all the way, then it can have a high vapour pressure and still be safe, as in the pipe line the oil is always under pressure, and the volatiles can not come out of solution. Unlike a tank car where the oil is at atmospheric pressure.
The speed of rail tank cars used in crude-by-rail shipments “is an issue” that the Transportation Department may address in an upcoming safety rule, Secretary Anthony Foxx said.
“It has to be dealt with comprehensively,” Foxx said July 21 of the rule, which is still being crafted, during remarks at the National Press Club. New standards for tank cars are “one piece of it, but speed is an issue.”
In response to the explosion in the number of derailments of oil-carrying tank cars in the past two years, the U.S. Department of Transportation (DOT) today proposed upgraded safety standards for tank cars, but it would allow old tank cars, which are prone to puncture upon impact, spilling oil, and sparking devastating fires and explosions, to continue carrying explosive Bakken crude for years. The proposal would phase out the use of these hazardous DOT-111 tank cars for shipping highly flammable fuels, but not until 2017–2020 depending on the fuel and only for trains with 20 or more cars filled with the fuels.
The proposed rule projects that there will be as many as 15 derailments of these cars each year of the partial phase out, and that there may be an additional 10 devastating accidents, nine of which would cost more than $1 billion in damages, and one of which would cause more than $5 billion in damages.
Earthjustice, on behalf of ForestEthics and the Sierra Club, filed a petition last week calling for an emergency ban of these dangerous and outdated rail cars to get them off the tracks.
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