Baltimore's position in crude oil market grows as U.S. confronts concerns

Local shift comes amid oil boom, heightened focus on volatility after rail accidents

June 12, 2014|By Kevin Rector, The Baltimore Sun

A Houston-based company asked Maryland for a permit to ship millions of gallons of crude oil through its South Baltimore marine terminal as the nation's oil industry surges.

Another company in the Fairfield industrial area began moving crude oil in recent years from tank cars hauled by locomotives onto barges for shipment to refineries or asphalt plants.

While the boom in U.S. crude oil production is helping to reduce the nation's dependence on imports, the rapidly expanding domestic transport of crude by rail and barge is raising concerns after several derailments and explosions and a barge accident that spilled crude into the Mississippi River.

Worried by the threat to the Chesapeake Bay, environmental groups are calling on government regulators to carefully review existing operations and any new proposals as the industry turns to barges to supplement rail and pipeline capacity.

"The Chesapeake is extremely shallow, enclosed, with thousands of miles of very sensitive and productive shoreline," wrote Chesapeake Bay Foundation President William Baker in a letter to the Coast Guard, urging the establishment of a work group to study the transport of oil on the bay. "Oil released in the Chesapeake is guaranteed to affect the most vulnerable elements of the estuary — bottom sediment, underwater grasses, fringe wetlands, and certainly juvenile species of crabs, oysters and fin fish."

Already, Axeon Specialty Products, a San Antonio-based asphalt refining company, brings crude to the Patapsco River terminal of NuStar Energy, another San Antonio firm, where it is loaded on barges adjacent to the Harbor Tunnel Thruway on Interstate 895.

Houston-based Targa Resources has requested an air emissions permit to start another barge operation and permission to add storage capacity for at least 12.6 million gallons of crude to start a similar rail-to-barge operation at its Fairfield terminal.

"Fairfield is going through a transformation right now," said Mark Wagner, the Fire Department's assistant chief of operations and Baltimore's former hazardous-materials coordinator.

The city has conducted drills for regional emergency personnel responding to petroleum disasters, including a mock barge fire at NuStar Energy, Wagner said. The Fire Department is acquiring a $600,000 foam pumper used in smothering petroleum fires, he said.

The transport of crude oil and other petroleum products in the state is highly regulated by agencies that include the Maryland Department of the Environment, the U.S. Coast Guard and the Federal Railroad Administration.

The MDE maintains an oil spill cleanup fund with transfer fees on the shipment of oil through the state. The Oil Control Program collected $5.7 million in fiscal year 2013, said Jay Apperson, a department spokesman. The bulk of that came from NuStar Marketing LLC — a name Axeon previously used under a former partnership with NuStar Energy — for transferring nearly 53.5 million gallons of crude through the state by rail that year.

Through the third quarter of fiscal year 2014, which ends June 30, the company has moved nearly 40.5 million gallons through the state by rail. Apperson said the state program did not license any movements by the company in 2011 or 2012.

Concerned about the dangers, federal regulators are moving to better regulate the growing shipments of crude oil through populated areas, especially the highly volatile crude coming out of the booming Bakken fields in North Dakota.

The growth in Canadian oil sands production and shale oil production in the Bakken fields and in Texas are "fundamentally changing the U.S. oil supply-demand balance," according to a May report by the Congressional Research Service. It found that North American crude production now meets 66 percent of U.S. demand.

Accidents involving Bakken crude, which is nearly as volatile as gasoline, have caused several violent explosions along rail lines in recent months, including in Lynchburg, Va., in April. A Canadian crude oil train derailed and exploded last July in a small Quebec town near the Maine border, killing 47 people.

In February, the railroad industry agreed with U.S. and Canadian regulators to reduce speeds on trains carrying crude, inspect tracks more frequently and improve braking. The U.S. Department of Transportation launched efforts to tighten restrictions on trains hauling crude for long distances, which are becoming more common.

"According to rail industry officials, U.S. freight railroads are estimated to have carried 434,000 carloads of crude oil in 2013 (roughly equivalent to 300 million barrels), compared to 9,500 carloads in 2008," the congressional report found. "In 2014, 650,000 carloads of crude oil are expected to be carried."

Rob Doolittle, a spokesman for CSX Transportation, the region's dominant railroad, said the company handles deliveries to refineries and has seen an increase in the amount of crude it is transporting from the Midwest to the East Coast.

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