Regulators Helped Oil-by-Rail Company Avoid Environmental Review, California Court Rules

Oil train cars

This week, a court in California overturned a permit allowing the expansion of an oil-by-rail terminal near Bakersfield, California. The opinion from that court ruling reads like a case study for corporations looking to avoid the two biggest hurdles to getting such a project approved: environmental review and public notice and comment. 

In 2012 Bakersfield Crude Terminal LLC (BCT) applied to the local air district for permission to build a facility that would allow up to two unit trains of oil per day to offload at its existing terminal in Taft, California. According to this week's court document, the “Air District is a public agency formed by eight counties and has jurisdiction over the San Joaquin Valley Air Basin, where it 'ensures that proposed pollution sources comply with state [and federal] air quality regulations.'”

So, it was the job of the air district to review the proposed oil-by-rail project. In California, if a project or “stationary source” has a potential to emit 20,000 pounds or more of Volatile Organic Compounds (VOCs) per year, it qualifies as a major source of that pollutant. Once it passes that threshold, a project then requires the public be notified and triggers the need for an environmental impact report. 

According to the court documents, an engineer for the air district calculated that BCT's entire facility would have total emissions of 20,820 pounds per year, thus qualifying as a “major source.” However, the engineer then emailed a project manager at BCT and asked him to look for any “discrepancies” in the calculations. However, the air district engineer also “suggested ways to keep the proposal under the 20,000-pound per year threshold.” 

Not surprisingly, the project manager for BCT also had some ideas on how to do this and included the following in his response email: 

“Please rerun your numbers and let me know if those two things get us under the 20,000 lb threshold. We are trying to avoid Title V [major source permitting] at this time because [Bakersfield Crude Terminal LLC] feels the need to get the terminal built and establish themselves in the market ASAP.” 

The engineer did indeed rerun the numbers, and the new estimate came in under the 20,000 pound threshold. The project was then approved without further environmental review. 

The court documents also note that when Kern County, as the lead agency on the project, filed a notice of exemption from the California Environmental Quality Act (CEQA), “The only information in the notice possibly alerting the public that the proposed project involved the construction of a rail-to-pipeline transfer terminal handling crude oil was the name listed for the person carrying out the project, Bakersfield Crude Terminal LLC.” 

On that filing the project title was “Ministerial Permit No. 2, Map No. 158.” And the court documents also note that the filing failed to even provide a “brief description of the project.” With so little information provided, there was little possibility for potential public outcry about “Ministerial Permit No. 2, Map No. 158” when it was proposed. 

And thanks to the engineer brainstorming with the corporate project manager on ways to make the numbers work, the project was listed as below the 20,000 pound pollutant threshold. As a result, BCT was able to “establish themselves in the market” as the largest oil-by-rail facility in California with no environmental review.

At the same time this was happening in Bakersfield, two major oil-by-rail facilities were approved in Albany, New York, with no public opposition. While there was a public comment period, zero comments were made because the public was unaware of the proposals. Also around the same time in Washington state, three oil-by-rail terminals were approved with no public opposition, because as Terry Wechsler, an environmental attorney, explained to Reuters, “There was no opposition to the other three proposals only because we weren’t aware they were in formal permitting.” 

Air District Makes the Math Work

The recent court decision did not overturn the initial approval for the operation of the oil-by-rail facility in Bakersfield.

Rather, the decision only covers the planned expansion of the facility with the addition of a “sewer system” that essentially was a way to capture oil and water runoff at the facility. The initial engineering review estimated the sewer system would create an additional 8,000 pounds of VOCs for the facility. When combined with the existing VOCs (that had been recalculated as just below 20,000 pounds), the facility comes in well over the 20,000 pound threshold, and “public notification was required for the project.” The court document explained what happened next. 

In May 2014, Air District issued a public notice soliciting comments on the proposed issuance of authority to construct permits to Bakersfield Crude Terminal LLC for the sewer system. Comments from plaintiffs asserted Air District was required to prepare an environmental impact report on the terminal before permitting the sewer system because no prior CEQA review had been conducted.”

In August 2014, BCT withdrew its application for the project. Less than a month later, it reapplied with a proposal to have “carbon canister filters” on each of the four pumping stations. This would reduce the potential VOCs from 8,000 pounds to only 500 pounds. An air district engineer reviewed the second application and determined that no environmental review would be required, even though the 500 pounds of VOCs still put the total project over the 20,000 pound threshold. 

There are another 30 pages of details in the court opinion, but essentially this is what happened next. First, the air district decided to split up the 500 pounds of VOCs across the system and round down the smaller numbers to zero. The court opinion explains: 

Then Air District applied the rounding policy to those daily figures, which rounded them down to zero and thereby treated the 509 pounds of annual VOC emissions as though it did not exist.”

And if they didn’t exist (in theory, at least), then “the facility would remain a nonmajor source of VOC emissions,” and as a result, “the public notification requirements were not triggered.” 

Rerun the numbers. Round down to zero. Get in the market ASAP and keep the public in the dark. 

Court Overturns Decision

But the court wasn’t buying the math and, in short, made the following decisions: 

Air District's assertion that it could be compelled to round down the emissions from each unit comprising the sewer system is clearly erroneous … We have determined that Air District's decision that the proposed project is exempt from CEQA was wrong and must be vacated.” 

Elizabeth Forsyth, the Earthjustice attorney who has been working on this lawsuit since it was filed in 2015, was quite happy with the ruling. 

We are pleased that the court recognized this blatant attempt to circumvent the environmental law California passed to protect communities,” Forsyth said in a statement. “And to allow them a voice in public decision-making.”

Main image: Oil trains Credit: Kurt Haubrich , CC BY-ND 2.0