By LYNN DOAN
Just as Global Partners gained approval to unload more oil
from rail cars at a marine terminal in Oregon, Tesoro Corp.
learned its plans for a similar project in neighboring
Washington will have to wait.
The projects are among several oil-by-rail proposals facing
rising opposition after a series of derailments added to
questions about the safety of carrying crude by train.
Terminals are being developed across the western US as
refiners, lacking pipeline access, turn to rail to move crude
from shale formations where output is booming.
California has arguably the highest crude prices in
North America, and there are all these barrels in the middle
of North America yearning to be free to go to the
coast, said David Hackett, president of energy
consulting company Stillwater Associates. How will
crude costs come down without those rail project
Oil from North Dakotas Bakken shale formation was up
$1.47/bbl at $87.95 while crude from Alaskas North
Slope, which meets about 12% of Californias demand,
gained $1.97 to $103.20, data compiled today by
Global Partners received an air permit yesterday from Oregon
regulators allowing it to take 120,000 bpd of oil off trains
at a terminal on the coast. From there it will go to
refineries via the Columbia River. In Washington, a state
energy siting council extended its deadline to March to
consider a 360,000-bpd terminal proposed by Tesoro and Savage
A decision on Tesoros project
probably wont meet
the March deadline, Andrew Hayes, a member of the Washington
siting council, said yesterday during a meeting of the panel
in Olympia, the capital. He cited the complexity of the plan.
Tesoro is committed to the state regulatory process and
expects to start service at the terminal next year, said
Jennifer Minx, a spokeswoman at the companys
headquarters in San Antonio.
Global Partners terminal in Clatskanie has been
unloading rail cars since 2012. The Waltham,
Massachusetts-based fuel distributor was ordered by the state
Department of Environment
al Quality to apply for
a new air permit after the agency discovered the complex was
handling more than the roughly 3,000 bpd that its permit
Tesoro and Global Partners are setting up rail operations as
hydraulic fracturing and horizontal drilling unleash a flood
of oil from shale formations across the US that the West has
little pipeline access to. The shale boom has boosted the
nations crude production to the highest level in 27
years and helped cut US imports of oil to the lowest seasonal
level since 1993.
The rail-to-marine terminal proposed by Tesoro and Savage at
the Port of Vancouver, Washington, would become the biggest
of its kind to operate in the Pacific Northwest.
Mark Smith, Tesoros vice president of development,
supply and logistics, said at a conference in February that
the Vancouver site would establish the cheapest
route for oil from North Dakotas Bakken and
Colorados Niobrara shale formations as West Coast
refiners seek to displace crude from Alaskas North
Slope. Tesoro applied for the project in August 2013 and
expected to start operations this year.
Other oil-by-rail project
s facing regulatory delays
in the West include a complex at Valero Energys Benicia refinery
in Northern California
and a terminal that Alon USA Energy has been planning at its
California, since 2012. Benicias planning commission
voted to extend a public comment period on Valeros
proposal by three months to Sept. 15. Alon is waiting on
Plains All American Pipeline plans to start unloading crude
from rail cars at a terminal in Bakersfield by the end of
October, the company said in a conference call with analysts
Aug. 7. The oil will travel by pipeline to refineries in the
San Francisco and Los Angeles areas.
The West Coast is bringing in about 100,000 bpd of oil by
rail, less than 5% of the regions refining
demand, Hackett said.
Thats not anywhere near enough to help make the
refineries here more competitive, Hackett said.
Its not even going to move the needle on their