The US Gulf Coast also offers opportunities for exporting Canadian crude to a variety of foreign markets, possibly even Asia, via the expanded Panama Canal. Canadian heavy sour barrels help Gulf Coast refiners balance plant operations in the face of light sweet supplies flooding in from domestic shale plays. Canadian producers will continue to face severe political obstacles to building pipelines such as the Keystone XL, the Energy East project, or a pipeline through British Columbia to the Pacific Ocean.Īnti-oil sands and anti-emissions activism actually stand to drive more Canadian heavy sour onto the rails and toward the one marketplace where it is welcome: the US Gulf Coast.Light sweet, mid-Continent crude oils will remain at a competitive disadvantage in the US Gulf Coast market due to strong production growth of local light sweet grades from the Eagle Ford and Permian, and widely available waterborne light sweet crudes from abroad.
CBR outlookĭespite a slowdown caused in part by low oil prices, two core factors will support continued use and growth of crude-by-rail in the US: Our analysis and suggestions are particularly tailored to California, Washington, and Oregon, which present large market opportunities for railborne crudes and are also among the jurisdictions with the highest levels of opposition to CBR project development. This article outlines the emerging legal and regulatory risks CBR projects face and outlines strategies to help industry better shield against them. Rail transport will remain crucial to the crude oil supply chain, creating business opportunities while also inflaming opposition.
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rail, but rather how to best integrate the two delivery modes to maximize efficiency and optionality of crude supplies to end users.ĬBR activity is likely to increase nationwide, particularly if there are no reforms made to the Jones Act to lower the costs of coastal shipping between US ports. Among major midstream operators the debate is increasingly not about pipe vs. Political opposition and oil price volatility, meanwhile, are likely to sharply reduce companies' ability and willingness to invest in pipelines, meaning California and the East Coast will remain heavily reliant on railborne and waterborne crude oil.
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A Washington state judge in May 2015 affirmed the county's decision to undertake full environmental review. 2 But the county reversed course in the face of environmental protests and ruled that the terminal must undergo full environmental review.
Skagit County (Wash.) Planning and Development Services in 2014 concluded that a proposed CBR offloading terminal at Shell's Puget Sound refinery did not require full environmental review under the Washington State Environmental Policy Act. Similar legal hurdles confront CBR projects in other West Coast states. InterState Oil Co., for example, was pressured into halting operations at its crude offloading terminal near Sacramento in November 2014 after the Sacramento Metropolitan Air Quality District said it had mistakenly sidestepped California environmental rules by issuing a permit without conducting a full environmental impact review. Opposition groups are honing their legal strategies for delaying CBR projects and are beginning to effectively apply these strategies to stop or delay projects in key markets such as California.
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