Crude oil loading facilities and the price of gas

The debate in Washington over transporting oil by railroad could have big impacts on other states. In the course of writing about the expanded SEPA process last month, we mentioned the Tesoro Savage Petroleum proposed crude oil loading facility at the Port of Vancouver. A Reuters story today puts the delays in permitting for this project in national perspective:

While the proposed Keystone XL pipeline is the marquee battle between pump prices and environmentalist concerns, crude-by-rail is a growing issue and has a more immediate effect on domestic consumers and refiners. The cost of delays from the crude-by-oil fight may be steepest in California, an isolated market increasingly dependent on foreign oil.

Tesoro’s project aims by mid-2015 to start sending up to 360,000 barrels per day of North American crude, including North Dakota Bakken and Canadian heavy, to the rail port, where all or most of the oil would ship out on tankers and barges to California refineries.

That oil costs up to 25 percent less than some foreign barrels, and the Tesoro project could replace about a fifth of California’s crude — around 40 percent of its imports.

Other states have slashed costs by using railroads to tap cheap crudes from the booming fields of North Dakota and Canada, but California refineries still depend on arguably the country’s most expensive crude, because there are few pipelines connecting it to the rest of the country.

California’s consumers (paying $4.09 per gallon compared to $3.47 in Texas) are bearing the brunt of their state’s permitting and regulatory process, which has kept out projects like Tesoro’s:

Tesoro’s rail-to-ship option is, in essence, a continental-scale workaround to sending crude directly to California. Obtaining permits to build crude offloading facilities in the Golden State has proven tough for companies including Alon USA Energy and Valero Energy Corp, which in March withdrew an application for a project in the Wilmington area of Los Angeles.

Kinder Morgan Energy Partners started moving crude in February to a former ethanol rail terminal in Richmond, California. Planned volumes are a fraction of what Tesoro aims to bring through Washington, but in any case opponents are suing to halt operations pending an environmental review.

Here in Washington,

The project has been delayed about six months to mid-2015 as Tesoro awaits word from the state on what the company needs to provide for an environmental impact study. That delay pushed costs to a range of $150 million to $190 million from $100 million. . . .

In the meantime, much of the Tesoro project is ready to go. The Vancouver port beefed up its rail infrastructure, including a huge loop track now earmarked for Tesoro, in the mid-2000s to handle mile-long trains carrying grains and iron ore, said Todd Coleman, the port’s executive director.

Tesoro said the project will bring about 120 permanent jobs.

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