Posted in: Infrastructure,
by Gregg Laskoski on Nov 26, 2013 06:00 AM
The U.S. Energy Information Administration (EIA) says 17 of the nation’s 100 largest oil fields are located in California, including the Belridge South oil field, the third largest oil field in the contiguous United States.
And now, despite California's deep-seeded dislike of petroleum and gasoline, the state's energy infrastructure is likely to see changes that may help lower the cost of gasoline for California motorists...
Separate projects by Plains All American Pipeline LP and Alon USA Energy Inc. would offload a combined 220,000 barrels per day — providing 13 percent of the state’s current oil consumption compared to the less than 1 percent California now gets by rail — and redirect most of that into pipelines leading to Los Angeles County and Bay Area refineries.
RefineryNews.com reports that the plans would be California’s first train-to-pipeline facilities and among the West Coast’s largest terminals for receiving crude by rail. The facilities are part of a broader push to both solve and capitalize on the logistical bottleneck created by the Midwestern fracking boom.
Both California and Bakersfield have been bringing in more crude by train from North Dakota and other midcontinent oil producers for the past several years.
That pace would greatly increase if Plains and Alon win approval for their plans. It could mean less expensive gasoline for California consumers. For local oil producers, it could mean somewhat lower barrel prices.
There is some concern, however, that increasing oil shipments on Kern’s already busy rail system would raise the risk of an accident. Last summer, an oil shipment derailed in Quebec, killing more than three dozen people and prompting new rules for hauling hazardous materials by rail. Changes were proposed to make tank cars more resistant to punctures.
The Bakersfield area is considered a good location for rail-to-pipeline terminals, and not only because of its existing oil infrastructure. Getting permits to begin construction is seen as easier here than in large, densely populated cities less accustomed to the energy business.
“Bakersfield is the best place for the rail terminals because there is real estate available and far less (railroad) congestion than LA or San Fran,” California oil marketer Bob Devine said. “Also, there is pipeline access to both the Bay Area refiners and to the LA Basin refiners from the Bakersfield area.”
The rail projects would help address a bottleneck that, starting in 2011, created an unprecedented price disparity between Kern’s heavy oil producers and the nation’s lighter benchmark, West Texas Intermediate.
The logistical problem developed when oil produced by hydraulic fracturing, or “fracking,” in North Dakota’s Bakken shale formation created a bonanza that overwhelmed the Midwest’s pipeline network. The resulting glut lowered prices in the midcontinent, but not on the West Coast.
The Bakersfield projects would be unique on the West Coast in that they wouldn’t just accept oil shipments by rail for processing nearby, but also transfer it to pipelines for delivery to refineries far away.
Orange County industry consultant Dave Hackett said the changing environment means refiners must act fast “so that by the time the (pipeline builders) finally catch up, the guys here will have paid for their project.”
Shipping crude through pipelines is considerably cheaper, and less polluting, than sending it by rail. But no pipelines connect California with oilfields east of the Rockies.
One such pipeline idea was floated recently by a major pipeline company, Houston-based Kinder Morgan. It considered investing an estimated $2 billion to build an underground link between Midland, Texas and Barstow, with branches leading to Bakersfield and the Los Angeles area. But the company announced in May that it was “shelving” the 277,000-barrel-per-day project because West Coast refineries “weren’t interested enough.”