Braking on crude in Washington state

Washington state was once seen as a key market for crude-by-rail, but local, state and federal actions are threatening to derail those efforts.

Environmental groups and Indian tribes filed suit against BNSF Railway this month to prevent over Bakken crude traversing their lands. 

A state appeals board has Invalidated permits issued to two companies proposing to build crude-by-rail and marine capacity at the state’s Port of Grays Harbor, a move that could delay the startup of those facilities.

And Shell is suing Washington’s Skagit county over a finding that it must prepare an environmental impact statement for a planned 102-car crude-by-rail facility at its 147,000 b/d refinery in Anacortes.

Tesoro and Savage Companies are also facing headwinds over their effort to build a 360,000 b/d terminal in Vancouver.

Railroads have become a popular mode for moving stranded crude from North Dakota in particular, but also Canada, Colorado, Wyoming and Texas. Shippers moved just 55,000 b/d in 2010, but that has skyrocketed to more than 1mn b/d in 2014.

At one time it appeared that Washington was one of the best places to send it, with three refineries hungry to wean themselves of Alaskan North Slope crude and easy access to the water to ship oil to California refiners. Developers began building out terminals, but resistance has been steadily building in the state – and nationwide – ever since the 13 July, 2013 Lac-Megantic, Quebec, derailment and explosion that killed 47 people.

On the federal level the US Department of Transportation is weighing new rules on train speeds and tank car sturdiness, and is expected to issue new standards in May. Washington Senator Maria Cantwell is also proposing legislation on crude-by-rail that would enforce stricter rules than the ones the DOT is considering. The new law, if passed, would require a thicker tank car hull and quicker phase-out of older cars than what is currently proposed.

Even those projects in Washington state that aren’t blocked will still become a bit more expensive. Last week the state passed a crude-by-rail tax, assessing 5¢/bl on all crude moved by rail and marine through Washington to cover the cost of preparing for possible spills.

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