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California Moves on Oil Rail Shipments

State lawmakers and the governor in California are continuing to raise concerns about the steep increase in rail crude oil shipments into the state (see Shale Daily, May 6). They each are pushing for beefed-up safety programs that the industry thinks are unnecessary.

California's state senate late last month passed a measure (SB 1319) 23-11 to strengthen safety of rail oil transport in the state. The legislation is sponsored by Sen. Fran Pavley, who has authored several bills on hydraulic fracturing in the past two years. In the lower house Assembly, another bill (AB 380) was unanimously passed  on Wednesday in the Senate Environmental Quality Committee.

Since his state-of-the-state address in January (see Shale Daily, Jan. 10), Gov. Jerry Brown has proposed in the state's annual budget to extend California's current  "prevention-and-response" programs for offshore oil spills to onshore rail shipments. This move would be funded by imposing a 6.5 cents/bbl fee on all rail crude oil deliveries into the state, similar to what is now imposed on marine oil deliveries.

The two major railroads delivering crude to the state -- Union Pacific and BNSF -- have expressed opposition to both Brown's and the lawmakers' proposals, cautioning that federal rules may preempt the state. The railroads also expressed some skepticism about how much growth there has actually been in rail oil shipments to California.

Oil industry representatives have opposed the proposed legislative remedies as "excessive" and too broadly directed. However, advocates said they are not so much worried about the increase of oil itself but the increased numbers of tank cars traveling on an aging rail infrastructure in the state.

The Western States Petroleum Association (WSPA) takes no position on AB 380, but has opposed SB 1319 because of what a spokesperson told NGI's Shale Daily are "significant policy implications." WSPA is supporting alternative funding approaches. It is joined in its opposition by the California Independent Petroleum Association, California Manufacturers and Technology Association, and the state Chamber of Commerce.

"The bill is overly broad and is not narrowly focused on areas where there may be a real risk from potential oil spills by rail," an alert to state senators from the coalition said. "SB 1319 is excessive and goes well beyond what's needed to address emerging issues associated with crude-by-rail transport."

Aside from the two bills, focus also is on Brown's budget proposal to create a statewide program to address crude rail shipments as part of expanding California's oil spill program to cover both marine and onshore activity. The Office of Oil Spill Response (OSPR) and who should pay for the expanded responsibilities have become a focal point of this debate.

In that context, WSPA has offered an alternative funding plan, supporting increases in the current marine fee of 6.5 to 8 cents/bbl, along with establishing a 3 cents/bbl fee on crude rail deliveries.

"We have had discussions with the governor's office and legislators about it," said the WSPA spokesperson. "We are waiting for a response from the governor's office."

Last year, the railroads brought in 6.3 million bbl of crude into California, the bulk coming from western Canada and North Dakota, according to statistics kept by the California Energy Commission (CEC). In May, the CEC forecast a big increase in crude shipped by rail in 2016 if all six crude-rail refinery receiving projects now being pursued get constructed (see Shale Daily, April 15).

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