Whatcom refineries gear up for crude oil via rail

THE BELLINGHAM HERALDJune 28, 2013 

rail loop BP Cherry Point

Work continues in June 2013 on a rail loop, foreground, that BP Cherry Point is constructing to serve the refinery.

LARRY MCCARTER — COURTESY TO THE BELLINGHAM HERALD

BP Cherry Point refinery is building a huge rail loop south of Grandview Road to handle crude oil shipments from North Dakota, and the Phillips 66 Ferndale refinery hopes to start building its own crude oil rail terminal later this year.

In regulatory filings with Whatcom County, the oil companies say the projects will help them diversify their sources of supply. Phillips notes that Alaskan oil production is declining, and there are no pipelines capable of bringing large volumes of North American crude to this area.

BP's project includes a 10,200-foot-long rail loop - almost two miles. BP told county regulators the refinery expects to handle a maximum of one trainload of crude oil per day. In an email, BP spokesman Bill Kidd said the project would be complete late 2013 or early 2014.

BP once planned to build a large natural gas-fired generating plant on the same site, and obtained permits to build it. Corporate officials eventually decided not to proceed with that project, but some of the environmental groundwork done for the generating plant helped to clear the way for the rail loop: New wetlands had been installed north of Grandview Road to make up for wetlands that would have been filled for the generating plant, so no new wetlands had to be created for the rail loop.

The Phillips 66 project would be located north of Slater Road and west of Lake Terrell Road, at the end of the existing BNSF Railway Co. spur that serves the two Whatcom County refineries as well as the Alcoa Intalco Works aluminum smelter. Among other things, Phillips 66 plans to build a 7,000-foot siding to park empty oil trains waiting to be dispatched back to the oilfields.

Phillips reported to Whatcom County that it expects to handle one oil train every two days, on average.

The trains are made up of 100 or more tank cars, Phillips reports, with total train lengths of more than one mile. Those trains will travel to and from the refineries on the BNSF line through Bellingham and Ferndale.

Phillips spokesman Jeff Callender said his company is still completing the permitting process with local, state and federal agencies, but hopes to begin construction by the end of this summer. Once the rail terminal is done, Phillips could meet as much as 30 percent of its 100,000-barrel per day demand with rail shipments.

That would eliminate the need for one tanker per week on Puget Sound, Callender said.

Frank Holmes, spokesman for Western States Petroleum Association, noted that oil production from Alaska has been the traditional mainstay for Washington refineries, but that production is falling. At its peak, Alaska produced about 2 million barrels a day, but that has declined to about 500,000 barrels a day. At the same time, the use of fracking technology has generated a boom in North Dakota's Bakken formation, with production there now estimated at 790,000 barrels a day.

But there are no pipelines to move that oil west.

"Getting that crude to our refineries here in Washington state necessitates rail," Holmes said.

To the south, the Tesoro refinery in Anacortes is already taking delivery of Bakken crude, and the Shell refinery in Anacortes has announced plans to do so.

RISKS, BENEFITS

While trainloads of crude oil pose some spill hazards, Holmes observed that every form of oil transport proposes risks.

Eric de Place, policy director at Sightline Institute in Seattle, said that is true.

"I don't want to be alarmist, because oil spills happen on vessels and they happen on pipelines also," de Place said.

But de Place said environmentalists and public officials should pay more attention to the sudden boom in crude oil shipments by rail.

In a recent report he authored, de Place said that if all existing and planned petroleum rail terminals were built and operated at full capacity, they would put an estimated 20 mile-long trainloads of crude oil per day on the Northwest's railway system. De Place argues that regulators should be looking at the combined impact those trains would have.

He is also concerned that Northwest ports could eventually be used to export North Dakota crude that would be carried to the coast by rail. Under current law, U.S. crude oil cannot be exported, but the law could be changed. And current law would not prohibit using U.S. ports to ship out Canadian crude oil that also could be sent south by rail.

"I don't think people understand that it represents a pretty fundamental transition in the region's energy economy," de Place said.

The Bakken oil boom is having other local reverberations: Some Whatcom County people have moved to North Dakota to get their share of the boom.

Kelly Pugh, a Lynden High School graduate, made a living on local construction projects before the real estate boom collapsed. Now he lives in Williston, N.D., making good money working for Baker Hughes Inc., a major oilfield services company.

Pugh said he knows a number of Whatcom Countians willing to put up with the long winters and hot, sometimes stormy summers in exchange for a steady income.

"I don't honestly know that anybody wants to be here," he said. "We'd all rather be home, but we can't say no to the money."

Reach JOHN STARK at john.stark@bellinghamherald.com or call 715-2274.

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