Could Albany be the next crude futures trading hub? It's possible

Environment & Energy News | April 10, 2014 | Column by Colin Sullivan

NEW YORK -- The owners of the New York Mercantile Exchange are eyeing Albany as a potential trading hub for crude oil futures, in the latest sign that the Empire State's capital has emerged as a center of energy commerce in the Northeast.

Train cars loaded with crude pass through Adirondack Park near Port Kent, N.Y. Photo courtesy of the Adirondack Council.

A spokesman for Chicago-based CME Group Inc., which owns NYMEX, confirmed that the company may be looking to establish new oil futures trading posts in addition to the traditional Cushing, Okla., price point.

CME's Damon Leavell said the group has no immediate plans to set up a physical point of sale in Albany to guide wholesale trading and thus futures prices, but it is possible.

"We are continuing to analyze crude oil logistics as new markets and delivery points develop domestically," he said. "Albany is one market that is developing, and we're watching."

The change would come about because so much oil is now bypassing Cushing's extensive storage capacity by rail from North Dakota to Albany, where it then continues by train or by barge down the Hudson River to refiners in New Jersey. Also possible is increased oil sands traffic from Canada on the way to U.S. refiners.

The developments may be forcing commodities traders to change how they do business, with new trading hubs in the East or on the Gulf Coast part of that equation. At the same time, the buzz of activity at the Port of Albany, where two companies are currently unloading oil and sending it forward, has caught the attention of New York regulators and environmental groups that fear the Hudson has become a much busier industrial waterway with little oversight after decades of trying to clean it up.

Just last month, the New York Department of Environmental Conservation put the skids on Global Companies LLC's plans to expand crude-by-rail and oil-heating operations at two sites along the Hudson, demanding more information before the state proceeds with permits.

The DEC both extended a public comment deadline on the expansion plans and asked the company to reveal what type of oil it intends to heat, whether it has enough liability insurance and more details on its emergency spill plans (EnergyWire, March 27).

The Adirondack Council, which seeks to protect the largest state park in the country in the Adirondack Mountains, is one of the groups increasingly concerned about all the activity in New York. Deputy Director Diane Fish said hundreds of rail cars are traveling Canadian Pacific Railway Ltd. tracks through the park and through small upstate villages like Port Kent, Port Douglas, Willsboro, Westport, Port Henry, Crown Point and Putnam Station.

"All of these small communities are assuming a substantial increased risk, without any hope of financial benefit from taking on that liability," she said.

In a letter sent last month, the group asked the DEC to examine industrial activity in the park and update plans for how the state would cope with a major spill. The group has also urged the federal Transportation Department to outlaw use of rail oil-tank cars known as model DOT-111, which caused an explosion and fire that killed 47 people in Lac Mégantic, Quebec, last year.

"They are being phased-out of use, but many are still in service," the letter stated, noting that crude oil traffic by rail has spiked from 9,500 rail cars per year to more than 400,000 in 2013. "USDOT has the authority to ban their use but has not acted."

The group is also concerned about Waltham, Mass.-based Global's plans to build an oil-heating facility along the Hudson. Fish said conversion of oil sands in New York "will only add to our worsening climate instability problems" and place the Adirondack's boreal forests in jeopardy.

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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.