More oil moves by rail, and it moves here

Philadelphia Inquirer | April 12, 2015 | Column by Andrew Maykuth

About half the crude oil that now moves by rail in America is bound for Mid-Atlantic states, mostly refineries near Philadelphia, data from the U.S. Energy Department show.

Oil train passes through Philadelphia, Pa., on November 6, 2013. ( Jon Snyder / Philadelphia Daily News )  Read more at http://www.philly.com/philly/business/20150412_More_oil_moves_by_rail__and_it_moves_here.html#WsoiMPbjsWfPWEk8.99

More than 33.7 million barrels of crude were shipped by rail in January, a fiftyfold increase from 630,000 barrels in January 2010, according to the U.S. Energy Information Administration (EIA).

That tremendous growth in crude-by-rail shipments - which already has triggered safety concerns after a series of fiery oil-train derailments - has broader implications for regional transportation systems and foreign trade.

Shale oil, whose production has boomed in the upper Midwest, the Rocky Mountains, and Texas, has displaced imported oil mostly delivered by ships. That oil trade has sailed on to other ports.

"This whole marketplace is changing," said Dennis Rochford, president of the Maritime Exchange for the Delaware River and Bay, which has documented a 37 percent decline in oil-tanker traffic since 2009. "Whatever anybody thought about the energy marketplace 10 or 20 years ago, it has changed."

Imports of crude oil to the United States fell 21 percent from 2009 to 2014, a decline offset by big increases in rail-borne imports of Canadian heavy crude from oil sands, according to the EIA.

On the East Coast, where refiners were formerly tethered to overseas suppliers, oil imports dropped 47 percent from 2009 through 2014. According to the EIA, most of the regional decline has come at the expense of African oil producers - Nigeria, Angola, Gabon, and Equatorial Guinea.

In Pennsylvania and New Jersey, oil imports fell 61 percent and 31 percent, respectively. The decline was caused in part by the 2010 shutdown of the Sunoco Eagle Point refinery in Westville, Gloucester County, and the 2011 closure of Sunoco's Marcus Hook refinery in Delaware County.

The surviving refineries shifted to cheaper domestic crude delivered by rail, further cutting demand for imports. The refiners say the cheaper domestic oil has improved their ability to compete.

Philadelphia Energy Solutions, the former Sunoco property in South Philadelphia, cut imports from 99 million barrels in 2009 to 40 million barrels last year, according to the EIA. Monroe Energy L.L.C., the Delta Air Lines subsidiary that acquired the former ConocoPhillips refinery in Trainer, cut imports from 59 million barrels in 2009 to 26 million last year.

The reduction in imports means less ship traffic - and less work for businesses that service ships, said Rochford, of the Maritime Exchange, a trade group.

Oil-tanker traffic declined from 1,453 vessels in 2009 to 890 last year, according to the association's data. The vessels carried all types of petroleum, not just imported crude oil, so it is only a broad measure of softness in the energy sector.

Rochford said the decline in oil shipments was partly offset by increases in traffic of steel and South American fruit. Overall, maritime traffic in Delaware Bay is off about 14 percent from pre-recession levels, he said.

A new export trade is developing to replace oil imports, Rochford said. Sunoco Logistics Partners, which is converting the former Marcus Hook refinery into a hub for Marcellus Shale natural gas liquids, last year began exporting propane from docks that formerly received crude deliveries.

Sunoco is expanding its Mariner East pipeline to deliver 345,000 barrels a day of propane, ethane, and butane to Marcus Hook by 2016's end. Most will be exported.

"My belief is when they're fully operational there, we could see upwards of 100 export tankers arriving and leaving that facility on an annual basis," Rochford said.

The maritime industry's loss is the railroad industry's gain, though the oil-train boom has raised safety issues after a spate of fiery accidents.

The National Transportation Safety Board last week issued four urgent recommendations to upgrade standards for cars hauling oil, ethanol, and other flammable liquids. The recommendations come as the Department of Transportation considers new rules to bolster tank-car safety.

The federal government data on oil-train traffic are similar to numbers reported by the American Association of Railroads, which tracks crude by carloads rather than by the barrel.

According to the AAR, 493,126 carloads of crude moved by rail last year. At about 700 barrels per tank car, that amounts to about 345 million barrels.

Oil-train traffic in March fell 7 percent from last year, which analysts attributed partly to impediments on rail routes. Several cross-country lines were undergoing repairs after recent oil-train accidents, and barge traffic on the Hudson River, where some oil moves after it has been delivered by rail to Albany, was slowed by ice.

But low international oil prices also reduced the cost advantage of domestic oil, said Tom Kloza, chief analyst for the Oil Price Information Service.

The Energy Department's oil-train data identify only regions as the destination. But most of the oil heading east ends up along the Delaware River, where four of the East Coast's five large refineries are located. In addition to Philadelphia Energy Solutions and the Monroe Energy facilities, PBF Energy operates refineries in Paulsboro and Delaware City, Del.

Some trains deliver their cargo to Albany, or Yorktown, Va., where the oil is transferred to barges. Much of that ends up in Philadelphia, too. 


amaykuth@phillynews.com

215-854-2947 @maykuth

EIA data on oil-train traffic are available online: http://www.eia.gov/petroleum/transportation/

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More oil moves by rail, and it moves here
PAUSE, People of Albany United for Safe Energy
PAUSE is a grassroots group of individuals who have come together to promote safe, sustainable energy and fight for environmental justice. We engage the greater public to stop the fossil fuel industry’s assault on the people of Albany and our environment.