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Shell Suspends Bakken Crude-by-Rail Project For Puget Sound Refinery

A subsidiary of Royal Dutch Shell plc said a proposed rail spur to deliver crude oil from the Bakken Shale to a refinery in Washington state is currently uneconomical. It has suspended the project.

Shell Oil Products USA said its Puget Sound Refinery -- located on March Point, near the town of Anacortes -- would continue to receive crude oil via tankers at its dock and through a pipeline connected to Canadian oil fields. Shell had planned to tap into new crude supplies from the Bakken (see Shale Daily, Aug. 19, 2014), but the company said low commodity prices and abundant production elsewhere made other sources of crude more attractive.

"When we look at current crude oil supplies, prices and markets globally, and the cost of the project, it just doesn't make economic sense to move forward at this time," Shirley Yap, the refinery's general manager, said in a statement Thursday. "We are committed to investing in this facility and there will be other ways to do that."

The Puget Sound Refinery has 145,000 b/d of processing capacity and produces about 25% of the Pacific Northwest's fuel. It is one of the largest employers in Skagit County, WA.

Shell's announcement came just two days after officials with the Washington State Department of Ecology and Skagit County Planning and Development Services released a draft environmental impact statement (DEIS) for the proposed oil-by-rail project. The company said it "remains confident that the project could be built and operated in a way that protects our employees, our community and the environment."

According to county records, the project called for the construction of a rail spur from an existing BNSF rail line to the refinery, and the installation of equipment to pump oil from rail cars into the facility. Unit trains serving the refinery would have had four locomotives and approximately 102 oil tank cars. The rail spur was designed to receive six unit trains per week, for a total of approximately 612 oil tank cars per week.

About 8,000 feet of unloading tracks, with a concrete unloading pad, also would have been built for the project. It was also to include about 1,300 feet of track for temporary storage of rail cars taken out of service for repair and maintenance, and about 7,200 feet of train-staging track.

In February 2015, after concluding that the rail spur could have a major impact on the environment, a Skagit County hearing examiner ordered the county to prepare an environmental impact statement (EIS) for the project and held key permits in abeyance. Shell immediately appealed the decision to the Skagit County Board of Commissioners.

Environmental groups were pleased by the news.

In a Facebook post Thursday, the group Friends of the San Juans, based in Friday Harbor, WA, said it and others "have been working toward this victory for the past two years to require Skagit County to complete an EIS for this controversial project. We did so out of concern for public health and safety on land and sea. This is a huge victory for our environment and preserving the economy of the Salish Sea.”

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