Oil trains supplied a record share of the crude oil delivered to East Coast refineries in February, the federal government reported Tuesday.
The U.S. Energy Information Administration (EIA) said 52 percent of crude oil to Eastern refiners arrived by rail, the most since it began collecting data in 2010. In December and January, oil trains delivered 43 percent of the East Coast’s crude.
This happened as U.S. crude-by-rail shipments dropped slightly, indicating that oil trains are displacing imports on ships that historically have supplied refiners in New Jersey, Pennsylvania and eastern Canada.
“Those refineries are configured for a light, sweet crude, and a barrel like the Bakken’s run well in them,” said Justin Kringstad, director of the North Dakota Pipeline Authority, whose data shows that 55 percent of that state’s crude oil reached market via railroads in February.
The crude-by-rail industry operates on the marginal pricing between imported East Coast crude, known as Brent, and the price set at Oklahoma called West Texas Intermediate (WTI). If the midcontinent price is a sizable discount to the Brent price, it can be worth the extra cost to ship crude oil in tank cars.
The federal data showed that nearly all of the oil train shipments to the East came from the Midwest. Much of the crude came from the Bakken shale region of North Dakota and eastern Montana.
Although the agency doesn’t break out the shipments by state, Minnesota is a major crossroads for Bakken oil. The two major North Dakota crude-by-rail haulers, BNSF Railway and Canadian Pacific Railway, have major routes across Minnesota and through the Twin Cities.
Kringstad said pipelines from the Midwest don’t go to East Coast refineries. “Historically, it has always been waterborne, foreign oil,” he said. The uptick in February may be related to the wider margin between the Brent and WTI prices, he added.
On the East Coast, the EIA said, 10 terminals now can unload crude oil unit trains, which consist of 80 to 120 tank cars that carry oil from its origin point. Crude oil that previously was transferred from vessels now is railed directly to refineries in New York Harbor, the Philadelphia area and Canada, the agency reported.
Rail-delivered crude also is coming from Canada, supplying 13 percent of the East Coast refineries’ needs in February. Exact routes of Canadian oil trains were not disclosed, but northern Minnesota is a major entry point for Canadian National.
In Minnesota, these trends don’t necessarily translate to more oil trains passing through the state. On average, at least six oil trains pass through the state each day, according to railroad disclosure reports.
Rep. Frank Hornstein, DFL-Minneapolis, who advocates rail safety, said the EIA report shows that oil trains represent a persistent risk. “Nobody should be under any illusion that they are going away anytime soon,” he said.
Last Friday, the U.S. Transportation Department issued rules for stronger tank cars, slower oil train speeds and advanced brake systems. But upgrading and replacing tank cars will take years, and the brake rules won’t apply until the next decade.
Hornstein said he was disappointed with the regulations, saying the strengthening program is too slow, while the oil train speeds remain too fast, even at 40 miles per hour. Some concerns, such as Bakken oil volatility, were not addressed in the rules, he said.
Minnesota legislators are considering measures to reduce traffic delays and risks at rail crossings. Although Gov. Mark Dayton proposed a $330 million, 10-year rail crossing upgrade program funded largely by assessments on railroads, Hornstein said the version that passed the House contains limited funding for such projects.