November 20, 2013

Keystone foes seek to thwart Northwest rail outlet for oil sands

The use of trains to carry crude is increasing in both the U.S. and Canada as production outstrips the capacity of pipelines to transport the bounty.

By Jim Snyder
Bloomberg News

WASHINGTON — Environmentalists opposing the Keystone XL pipeline are expanding their fight against imports of Canadian heavy crude oil by trying to block rail projects that offer another way for it to enter the U.S.

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Tank cars transport crude oil from North Dakota to a refinery in Anacortes, Wash., recently. Hundreds of rail cars carrying crude oil could soon be chugging across the Northwest, bringing potential jobs and revenues but raising concerns about potential oil spills, increased train traffic and other issues.

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“Debating rail or pipelines is like debating which kind of poison you want,” Daniel Kessler, a spokesman for, an environmental group, said in an interview. “There is a substantive effort under way in many places to block rail.”

Environmental groups including oppose Keystone because they say it would promote development of oil sands, a type of crude that releases more greenhouse gases in its production and refining than other forms of oil. Canada, the biggest foreign supplier of oil to the U.S., has lobbied hard for the pipeline to promote growth of its energy industry.

The use of trains to carry crude is increasing in both the U.S. and Canada as production outstrips the capacity of pipelines to transport the bounty. In Canada, producers are rushing to secure rail cars while U.S. President Barack Obama reviews Keystone, a $5.4 billion pipeline TransCanada Corp. wants to build to link the oil sands in Alberta with refineries on the U.S. Gulf of Mexico.

Shipping the Alberta oil by rail benefits lines including Canadian National Railway Company, the Canadian Pacific Railway Ltd. and Burlington Northern Santa Fe Corp., a unit of Warren Buffett’s Berkshire Hathaway Inc.

Opponents of oil sands are targeting rail terminal projects in California, Washington state and elsewhere and pushing federal regulators to mandate expensive retrofits to tanker cars that could impede efforts by producers to expand their fleets. The campaign represents a threat to Canadian oil, which together with natural gas is Canada’s largest export to the U.S.

Oil sands critics are already having some success. The Shorelines Hearings Board, which oversees construction along Washington state’s coast, last week blocked permits for two crude terminal projects at Grays Harbor and called for additional study of the environmental risks of increasing ship and train traffic.

Kristen Boyles, a spokeswoman for Earthjustice, said one concern voiced by critics was that the terminals would receive oil sands products, which can be harder to clean up in a spill than conventional crude.

Valero Energy Corp.’s plan to build a terminal at its Benicia, Calif., refinery to off-load crude has been delayed as city officials seek an environmental review.

While the company isn’t saying what type, groups including and the Natural Resources Defense Council say it will probably include some fuel from the oil sands.

Bill Day, a spokesman for San Antonio-based Valero, said the project would make the refinery more competitive by giving it access to cheaper fuel. Its two California refineries lost $78 million in the last quarter, the weakest performers among the company’s 13 plants in the U.S., he said.

Day said the project wouldn’t increase emissions, as some critics have claimed. By displacing the need to ship oil into the refinery, the plan may improve area air quality, he said.

The campaign against the plan is “misguided,” Day said.

In Washington state, the San Francisco-based Sierra Club is urging Gov. Jay Inslee, D, to block a joint proposal from Tesoro Corp., a San Antonio-based refiner, and Savage Companies, a Salt Lake City-based logistics company, to build a rail terminal in Vancouver, Washington.

That proposed facility is expected to mostly unload light sweet crude from North Dakota, though it also may handle some tar sands fuel, said Kate Colarulli, deputy director of the Sierra Club’s Beyond Oil campaign.

Kelly Flint, Savage’s general counsel, said the company was confident it would convince regulators the facility “can be built safely and in an environmentally responsible manner.”

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