Oil train plans hit roadblocks in California

Link to article: https://stillwaterassociates.com/oil-train-plans-hit-roadblocks-in-california/

February 12, 2016

Tony Bizjak, The Sacramento Bee

Two years ago, it appeared that milelong trains carrying crude oil to refineries would soon be a regular feature on the California landscape – including several a day rumbling through Sacramento.

Now, amid safety concerns, the state’s two highest-profile crude-by-rail project proposals, one in the north and one in the south, have run into roadblocks, throwing into question the future of rail oil transport in California.

The Benicia Planning Commission voted unanimously Thursday night to reject a proposal by that city’s major employer, Valero Refining Co., to make changes at its local refinery so it can receive twice daily deliveries from 50-car tanker trains.

The trains would run through Roseville, downtown Sacramento, West Sacramento, downtown Davis, Dixon and other cities. East of Roseville, the route is uncertain. Trains could arrive via Donner Summit, Feather River Canyon, or through the Shasta and Redding areas.

San Luis Obispo County planning officials meanwhile have recommended their county commission reject a similar proposal by Phillips 66 to transport oil to its Santa Maria refinery on trains from both the north and south state, including some through Sacramento. That county’s Planning Commission is expected to rule on the proposal in late March or April.

Both projects have become the centers of growing protests from environmentalists, residents near rail lines, and officials in communities bisected by likely oil-train tracks. The city of Benicia commission’s 6-0 ruling came after an estimated 70 to 80 people spoke, most against the project, during four successive nights of sometimes emotional public testimony.

City officials strongly recommended approving the project, which involved constructing a rail spur and unloading station inside the refinery. But commissioners balked, pointing out that a city environmental review found that the project’s significant and unavoidable environmental impacts actually outweigh the project’s benefit to the community.

Several said they were moved by testimony from residents of Davis and Sacramento who live near the rail lines.

“I don’t want to be the planning commissioner in the one city that said ‘screw you’ to up-rail cities,” said Commissioner Susan Cohen Grossman.

City officials said they expect Valero to appeal to the Benicia City Council. A Valero spokesman said his company is disappointed and is discussing next steps.

“Most disappointing was the commissioners’ disregard for the opinions of a multitude of environmental and legal experts who spent over three years to evaluate this project,” said Valero spokesman Chris Howe.

Valero officials say the train shipments would help the company remain competitive by allowing access to less expensive oil from new North American crude fields, and provide more operational flexibility. The refinery currently gets most of its oil via marine shipments, and some by pipeline.

The commission decision, if upheld by the City Council, would represent a victory for up-rail cities that complained Benicia had not addressed their concerns about risks of oil spills, fires and explosions.

It also represents a success for environmental activists, who were among the first to argue the project has ramifications beyond Benicia, helping force the city to redo its environmental review to include impacts farther up the rail line.

Some proponents said the oil spill fears are overstated. Freight rail shipments are almost always safe, rail industry officials point out. Only a tiny fraction of freight trains run into any trouble, data show.

But several dozen major oil spills, some resulting in fiery explosions, have occurred nationally in the last two years, prompted by increased train shipments from new oil fields in the Western United States. The worst crude oil train incident occurred in July 2013 in Lac-Mégantic, Canada, where a runaway train derailed, sending fire through city streets that killed 47 residents.

U.S. transportation officials have responded by stiffening rail safety regulations. But cities around the country on rail lines, including in Sacramento and Yolo counties, continue to call for more federal safety measures.

Yolo County Supervisor Don Saylor thanked the Benicia commission Friday. He said its decision, coupled with the San Luis Obispo staff recommendation, suggest a trend: The few cities or counties who have a small say on oil train projects are taking a harder look than they were just a few years ago.

“I’m impressed and grateful,” Saylor said. “I think this is significant nationally.”

California Energy Commission oil consumption analyst Gordon Schremp said only 1 percent of the state’s oil comes from train shipments, far less than the 20 percent some estimated might be the case by now. Part of that is because international oil prices have dropped, reducing the savings margin for American crude arriving by train, he said. But another reason is the increased scrutiny projects like those from Valero and Phillips 66 are getting.

“That lengthens the time required to develop and revise your environmental impact reports,” Schremp said. “The whole process has gotten a lot longer and lot more involved.”

Despite falling crude oil prices, and increased opposition, oil industry analyst David Hackett of Stillwater Associates says it makes sense for Valero and Phillips 66 to continue their efforts to win approval to receive rail shipments. “They are fighting to do that because if maybe it doesn’t work today, the economics might very well work tomorrow.”

The two California projects have sparked debate over just how much say local jurisdictions have over crude oil deliveries via rail.

Cities have substantial say over local projects, such as Valero’s plans to build a loading station on its property in Benicia. But federal interstate commerce regulations pre-empt states, cities and counties from placing local requirements on the railroads and the rail transports that would serve those facilities.

Benicia city officials and attorneys say that federal pre-emption statutes are so broad that Benicia is prohibited from even considering rail-related risks when deciding whether to approve the Valero project. Several Benicia planning commissioners bristled at that notion.

“That doesn’t make sense from a human point of view,” commission chair Donald Dean said.

He and other commissioners pointed out that other attorneys disagreed in letters and testimony about whether the city can consider train transport safety concerns when deciding on the project. The Sacramento Area Council of Governments, which represents six local counties and 22 cities, was among those who challenged the city’s actions. SACOG sent Benicia a letter saying its environmental review is flawed, in part because it does not explore possible rail transport risk mitigation measures.

Commissioners ultimately voted not to certify the project’s environmental report, calling it inadequate, citing concerns they had about environmental impacts specifically on the Valero plant site. That vote also included a denial of Valero’s request for a permit to build the train-receiving facility at the refinery.

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