Justin Mikulka's blog

Wed, 2015-02-18 10:58Justin Mikulka
Justin Mikulka's picture

Exploding Trains, No New Regulations, Record Industry Profits: The Oil-by-Rail Story

A month ago there was a close call for the oil-by-rail industry. As part of the Cromnibus bill that President Obama signed in December, new oil-by-rail regulations were supposed to be finalized and implemented by regulators by January 15th.

Two days before that deadline, the Pipeline and Hazardous Materials Safety Administration (PHMSA), the agency responsible for new regulations, posted new documents on their website related to recent meetings between PHMSA and various oil and rail industry lobbyists.

They did not issue a press release about these meetings, unlike the meetings a year ago when the industry volunteered to try improving its safety record and there was plenty of publicity.

And then it was announced that new regulations would once again be delayed, this time until May 2015.

Since that delay an ethanol train has derailed resulting in burning rail cars and ethanol spilling into the Mississippi River. An oil train derailed and caught fire in Gogama, Canada. And another oil train of Bakken crude oil derailed, exploded, and leaked oil into the Kanawha River near Mount Carbon, West Virginia.

Fri, 2015-02-13 05:58Justin Mikulka
Justin Mikulka's picture

Singing Industry’s Tune: How Rep. Jeff Denham Plans to Delay Oil-by-Rail Safety Improvements

Vintage effect applied to fast moving freight train

I just want to make sure that we are all singing the same tune that we have a very safe industry and we want to work together on improving that industry.”

Those were the words of Rep. Jeff Denham (R-CA), chairman of the House Subcommittee on Railroads, Pipelines, and Hazardous Materials on February 3rd at a hearing titled “How the Changing Energy Markets Will Affect U.S. Transportation.” He was directing this advice to Greg Saxton, chief engineer for rail tank car manufacturer Greenbrier.

Denham obviously had a bone to pick with Saxton because prior to the hearing the Modesto Bee, a newspaper in Denham’s home district, ran an editorial making a strong case that the existing tank cars used to transport crude oil are unsafe. The editorial, “Delays on safer rail cars are unacceptable,” didn’t mince words. It was clear on what should happen: “The DOT [Department of Transportation] should adopt rules for those cars then set deadlines to replace every single tank car in America. Our elected representatives should insist on it.”

In Modesto, the elected representative who should be insisting on that is Jeff Denham.

Modesto is also home to Greenbrier’s manufacturing facilities and the editorial quoted Saxton for its conclusion noting his position on the lack of new regulations. “We just need a decision. Twenty years is too long.”

This is not the tune that Chairman Denham wants everyone to be singing. In his comments to Saxton at the hearing he explained his intent.

Thu, 2015-02-12 04:58Justin Mikulka
Justin Mikulka's picture

South Dakota Sen. John Thune Stumps For Oil-by-Rail Industry

Sen. John Thune (R-SD), chairman of the Senate Committee on Commerce, Science, and Transportation, recently got a bit overzealous in stumping for the oil and rail industries at a Jan. 28 hearing on freight rail challenges.

Thune stated that he believes the timeline in the proposed rule to retrofit and replace the dangerous DOT-111 tank cars used to carry oil by rail is “unattainable.” These are the same DOT-111 tank cars that were first called unsafe by the National Transportation Safety Board (NTSB) over 20 years ago.

But simply giving the industry decades to respond to safety concerns wasn’t enough for Thune. Apparently Thune failed to read the proposed regulations he was criticizing when he made the following statement, “The DOT [Department of Transportation] issued this proposed rule without analyzing the potential tank car shop capacity needed to retrofit or replace over 100,000 DOT-111 tank cars.”

Here are some excerpts from those proposed regulations.

Tue, 2015-01-20 11:11Justin Mikulka
Justin Mikulka's picture

Low Prices Driving Record U.S. Crude Oil Exports Despite Crude Oil Export Ban

Are you more desperate to get a better deal when you’re poor? I guess you are.”

That was John Auers, executive vice president of oil industry consulting firm Turner Mason & Company, describing the oil industry as being “poor” and “desperate” to Bloomberg.

As the oil industry cries poverty due to low oil prices in an effort to justify its attempts to lift all restrictions on exporting crude oil produced in the U.S., it is helpful to remember that this is an industry that was demanding tax breaks for oil production even when, in 2013, the top 5 companies made a combined $93 billion in profits. In just the second quarter of 2014 alone, a year of poverty and desperation, as the industry tells it, ExxonMobil made $8.8 billion in profit.

The “better deals” that John Auers was talking about are to be found on the global market, which technically isn’t open to those “poor” U.S. crude oil producers due to the crude oil export ban. Crude oil that is produced in the U.S. is worth more if it is sold on the world market than if it is sold in the United States.

So, it should come as no surprise that in November, as oil prices began falling, U.S. producers went about finding ways to export oil using some existing exemptions from the Reagan era as well as some new approaches. Their efforts resulted in the U.S. breaking the all-time monthly export record in November 2014. The previous record was set in 1957, a time when there was no export ban.

Thu, 2015-01-15 12:03Justin Mikulka
Justin Mikulka's picture

Oil-by-Rail Reality: Watch What Industry Does, Not What They Say

In the past month, there have been numerous public relations efforts suggesting that much is being done to improve oil by rail safety. Unfortunately, it seems these efforts will not involve much more than press releases and hollow promises.”

Those words were first published on DeSmogBlog in March of last year in an article titled Why Nothing Will Happen On Oil by Rail Safety.

In that article, one particular public relations effort was highlighted:

“One of the more popular talking points in the recent PR effort was that BNSF, the railroad that is the largest transporter of oil by rail, had volunteered to buy 5,000 new rail tank cars that exceed any existing safety standard.”

This statement was referring to articles such as the one in the Wall Street Journal last February stating, “BNSF Railway said it plans to buy as many as 5,000 new tank cars to transport crude oil, an unusual move that marks the latest effort by the rail industry to improve safety after a spate of accidents.” Similar articles appeared in Reuters (“Exclusive: BNSF to move into tank car ownership with safer oil fleet”) and CNBC.

It was a clear message. The rail industry was not waiting on new regulations to improve safety and would take steps immediately to make the movement of oil by rail safer. Tough to argue with that, right?

Except it was nothing more than a public relations campaign.

Fri, 2015-01-09 04:00Justin Mikulka
Justin Mikulka's picture

Obama Admin's Year-End Gift to the Oil Industry Quietly Allows Light Oil Exports

In a quiet move in the last days of 2014 that involved zero public debate, the Obama administration gave a big gift to the oil industry by allowing the export of light crude oil. This change by the administration stands to make the industry a few extra billion dollars per year by allowing them to sell crude oil on the international market where it gets a higher price than if it is sold to U.S. refineries.

So what bill was passed at the last minute of 2014 overturning the 40-year-old crude oil export ban and allowing companies to now export fracked crude oil? None.

As The Hill reported, sources “familiar with the matter” don’t even consider this a “change in policy” and thus no legislation is required. 

No policy change, no legislation needed. The only thing that has changed is that the oil industry can now export unlimited amounts of crude oil, much of it currently procured via hydraulic fracturing.

So how does an industry overturn longstanding legislation that was designed to protect the U.S. economy from fluctuations in the global oil market? First, there are the normal industry channels of lobbying and advertising over the past year to influence public opinion and get the politicians to do their bidding. But that process is expected to take significantly more time and money to result in officially ending the crude oil export ban.

So if you are the oil industry, you innovate. You call the oil you are producing condensate, get the regulators at the little known Bureau of Industry and Security to agree to not define what condensate actually is and then have them tell you that you as an industry are free to “self classify” your oil as condensate and export it.

Problem solved. Billions in profits made. Politicians provided with cover. And then you let sources “familiar with the matter” tell Reuters that this has been “carefully couched” as an “informal suggestion.” 

Pages

Subscribe to RSS - Justin Mikulka's blog