Report: Nearly a dozen oil-by-rail projects operating, planned in Northwest

The second workshop will feature a presentation by Tesoro and Savage.

Since April, when the companies announced a joint venture to build a crude-oil facility in Vancouver, port commissioners have already held two workshops addressing the proposal, including the handling of hazardous material over water and by rail.

Thursday’s workshops will follow the commissioners’ regular public hearing, which begins at 9:30 a.m. at 3103 N.W. Lower River Road. Commissioners may decide on a proposed lease agreement on July 23. The review by the Energy Facility Site Evaluation Council could take up to a year or more. The companies hope to launch an oil terminal at the port in 2014.

A ‘sudden’ oil boom

A U.S. oil boom is spurring companies to haul oil by rail to the Northwest from the Bakken shale formation in North Dakota, where oil is extracted by hydraulic fracturing.

“So sudden was the region’s oil boom that companies found themselves with scant infrastructure to move the crude to market,” according to Sightline’s report. “Railways seized the opportunity to play a role traditionally reserved for pipelines: moving large volumes of crude oil.”

Ten of the 11 oil-by-rail projects studied by Sightline are in Washington state, including three at the Port of Grays Harbor in Hoquiam, two in Tacoma, two in Anacortes and two in Ferndale. “Ironically,” the report says, “two of the facilities that would handle oil by rail were originally built to supply renewable fuels.”

Imperium Renewables at the Port of Grays Harbor “was promoted to handle biodiesel,” according to the report, “but the firm is now planning to expand its facilities to become the region’s second largest player in shipping crude oil by rail.”

At Port Westward, near Clatskanie, Ore., “a troubled ethanol facility that was supported by state renewable energy subsidies is already transferring crude oil from trains to vessels on the Columbia River.”

If all of the oil-by-rail projects get built, they would be capable of moving 720,000 barrels of oil per day, the report says. That represents “more oil capacity than either of the controversial pipelines planned in British Columbia” — the Enbridge Northern Gateway pipeline proposal and Kinder Morgan’s planned expansion of its Trans Mountain pipeline system.

And if all of the projects get built — and operated at full capacity — “they would put an estimated 20 mile-long trains per day on the Northwest’s railway system,” according to the report.

The oil-by-rail projects raise concerns about the increased risk of oil spills and about increased train traffic on a rail network “already overburdened in many locations,” the report says.

‘Most ambitious’

Under the plan by Tesoro and Savage, Bakken crude oil would be shipped to the port by rail. Eventually, the oil would be transferred from the port to ships bound for refineries in Washington, California and Alaska, where the oil would be processed for domestic purposes, including gasoline for cars and trucks.

The companies would spend up to $100 million on new facilities at the port. Construction work would generate an estimated 250 temporary jobs. The operation would create up to 80 permanent jobs.

A city of Vancouver pre-application document filed June 6 by Tesoro and Savage shows the crude oil facility would be built to handle up to 380,000 barrels of oil per day. Theresa Wagner, communications manager for the Port of Vancouver, said the companies still plan to start with 120,000 barrels per day “and then look at near-term expansion” to 280,000 barrels per day.

The Sightline report calls the Tesoro-Savage proposal the largest and “most ambitious” among the 11 projects it examined. The second-largest is the Imperium proposal at the Port of Grays Harbor. If it gets built, Sightline estimates the facility would have the capacity to handle at least 75,000 barrels of oil per day.

The Sightline report says it’s not clear where the oil hauled by rail to the Northwest is headed. In some cases, oil delivered to West Coast refineries “may displace existing supplies of crude such as those from Alaska’s North Slope” that now arrive in tanker vessels, the report says. In other cases, the oil may be exported to Asia.

“Under current law, U.S. crude oil cannot be exported overseas, but many in the oil industry are calling for Congress to lift the ban, enabling oil producers to sell American crude oil to China and other countries,” according to the report. “Oil from Canada, however, is not subject to the ban, so it is conceivable that Oregon and Washington could become a transshipment hub for tar sands oil headed to Asia.”

Aaron Corvin: http://twitter.com/col_econ; http://on.fb.me/AaronCorvin; 360-735-4518; aaron.corvin@columbian.com