Crude by rail (CBR) shipments to California oil refineries have dwindled to a trickle, compared to their December 2013 peak, according to RBN Energy LLC analyst Sandy Fielden.
“Although California refineries initially met the criteria that spurred development of CBR shipments to other coastal regions (lack of pipeline infrastructure and wide crude price differentials between stranded inland supplies and coastal alternatives), neither rail shipments or terminal build outs have made much of a dent in the Golden States’ crude supply,” writes Fielden in Slow Train Coming: Crude By Rail Shipments to California Drying Up. “At their height in December 2013, CBR shipments into California reached 36 Mb/d (thousand barrels per day), just 2% of the State's 1.9 MMb/d (million barrels per day) refining capacity and they have since dwindled to a trickle.”
“Looking at CBR traffic to California, the first thing to note is that the volumes shipped to the Golden State are tiny compared to those shipped to the Pacific Northwest. [The figure above] shows the contrast with Washington State CBR receipts in red and California in blue,” says Fielden. “California is a net importer of crude and no crude pipelines supply the State from East of the Rockies or from the Northwest. That makes the Golden State a good prospect for CBR shipments that have tended to thrive when no pipeline alternatives exist (certainly this is the case on the East Coast). But as we have seen, CBR shipments into California have not materialized to the same degree as they have to refineries in the Pacific Northwest or on the East Coast. Part of the reason for this is that California refineries largely process medium grade and heavier crudes vs. the light shale crudes produced in North Dakota or West Texas. That accounts for the greater volumes of heavy Canadian crude moved by rail to California and the volumes of crude from Utah, which is heavy and ‘waxy’ in composition.
“The principal reason that CBR volumes delivered to California have only been a fraction of those shipped to other Coastal refineries in the U.S. is the painfully slow buildout of rail unload terminals in the State. This slow build out was caused initially by greater red tape requirements for permits to build rail unload terminals and later by higher levels of objection to building such terminals from environmental groups. These environmental objections were heightened generally by an increased incident of accidents involving CBR trains and in particular by the July 2013 Lac-Mégantic tragedy in Quebec. The net result is that CBR unload terminal development in California that was slow to start with has now virtually ground to a halt. . . . CBR terminals are not welcome in California and getting a permit is akin to finding a needle in a haystack. Together with the worsening economics of CBR caused by narrowing crude price differentials, the net impact is that CBR to California is going to be negligible at best for the foreseeable future.”
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