Each week, more and more mile-and-a-half long tanker trains filled with oil travel into the Pacific Northwest.
The sweet crude — sucked from deep under North Dakota — brings opportunity for business and jobs in the Lower Columbia region and stirs fears the river will become a fossil fuel highway.
Meanwhile, analysts warn the historically volatile market for oil makes building new oil terminals in the Pacific Northwest a risky investment.
Last year, oil cars began leaving the Bakken shale region centered around Williston, N.D., en route 1,200 miles to Columbia County to be unloaded at Port Westward near Clatskanie — just one of a handful of destinations in the Northwest.
Earlier this year, Tesoro proposed to build a $100 million terminal at the Port of Vancouver that would create 80 jobs. And similar proposals are being considered in Tacoma and Grays Harbor County. The oil would be loaded onto barges and sent to West Coast refineries.
While no plans to store or refine oil have emerged in Cowlitz County, area business leaders say they are keeping an eye out for clients who want to haul oil by train to the West Coast.
“We will develop those opportunities based on what is best for port growth and future job growth,” Lauri Nelson-Cooley, the Port of Longview’s manager of business development, wrote in an email last week.
Environmentalists — already spending time and money opposing proposed coal export docks in the Pacific Northwest — say they worry about oil polluting the Columbia River. One major spill could cost millions of dollars to clean up and damage drinking water and salmon habitats, they say.
“We’re pretty concerned that you’re creating a mobile pipeline down the Columbia River carrying this dirty fuel,” Dan Serres, conservation director of Columbia RiverKeeper, said last week.
Big potential, big risk
The Bakken region, which also extends into Montana and South Dakota, is home to one of the largest untapped oil reservoirs in the United States. In April, the U.S. Geological Survey updated its estimate to 7.4 billion barrels of available sweet crude oil in the Bakken and nearby Three Fork formations, more than double its estimate five years earlier.
The boom is due to new technology called hydraulic fracturing, or fracking. The process pumps highly pressurized fresh water, sand and chemicals into wells drilled into deep layers of shale. This creates cracks through which bubbles of trapped oil and natural gas escape into a well.
While pipelines are the cheapest way to transport oil, the North Dakota fracking boom has flooded pipeline capacity. Building more pipelines is expensive and involves hefty regulatory burdens, according to the U.S. Energy Administration.
So oil companies turned to the rails.
Now, five years after the first rail shipments left North Dakota, about three-quarters of the region’s oil is hauled in mile-and-a-half-long trains headed to East, West and Gulf coasts, said Justin Kringstad, director of the North Dakota Pipeline Authority.
Before oil hit the rails in August 2008, North Dakota exported all its crude via pipelines to other inland states, and Alaska supplied almost all of the West Coast’s oil.
By December 2012, trains were hauling more than 660,000 barrels per day — more than double from December 2011 — out of the region, the Energy Administration reported. About 500,000 barrels per day were exported via pipelines.
Oil companies do not disclose how much oil they send via trains to each region, but Kringstad said the Pipeline Authority is working on a model to track rail shipments. The agency already tracks the destination of oil in pipelines and on ships.
“Going forward, it’s really difficult to put numbers on it because it’s going to be completely market-driven,” Kringstad said.
Analysts say oil prices tend to bounce around — and since companies try to send their oil to markets where they get the most profit, making predictions of a destination for North Dakota crude is a moving target.
“The prices are all over the place. There were months when it was a no-brainer to move that stuff to the West Coast to make jet fuel or diesel. More recently, last week, it almost didn’t appear to make sense. It made more sense to go offshore, or look to Alaska,” Tom Kloza, chief oil analyst of New Jersey-based Oil Price Information Service, said Thursday.
Analysts also are divided on how long rail shipments of oil will continue to grow, which could make terminal investors nervous, he said.
“You’re taking a risk,” Kloza said.
Oil on the Columbia River
Nevertheless, oil companies are testing the West Coast markets.
In November, Longview contractor JH Kelly began storing crude oil at its ethanol plant in Port Westward near Clatskanie. JH Kelly built the Columbia Pacific Bio-Refinery in 2008 for Cascade Grain, which had secured a $20 million renewable energy grant from the state of Oregon. But no ethanol was ever produced once the market crashed.
JH Kelly bought the plant after Cascade Grain declared bankruptcy in 2009. The Longview-based contractor abruptly put its newly aquired plant on the market. In January, Global Partners of Waltham, Mass., paid $95 million for JH Kelly’s plant. Global officials said they hope the investment will boost West Coast sales from their Bakken hub.
The oil from the Clatskanie plant — which employs 50 — is unloaded onto barges and sent to West Coast refineries in California and Anacortes, Wash.
Rainier residents report seeing one train about every other day roll through town heading for the facility.
The terminal can store 200,000 barrels of oil and features a deepwater marine terminal and a 1,200-foot dock. Global officials have not said whether they plan to restart ethanol production.
A Global spokesman said officials were not available last week to discuss the company’s plans for the terminal.
Port of Longview eyes opportunities
While the Port of Longview has no immediate plans to pursue an oil terminal, rail access, barge access and land is available. Port officials are studying the best use for their vacant 275-acre Barlow Point property and are planning to redevelop a shuttered grain elevator at Berth 2.
Nelson-Cooley said Longview is in a good geographic location to handle oil from North Dakota and Canada.
“Every opportunity that presents itself to the port is thoroughly reviewed to see viability for port revenue growth, job creation and impact to community,” she wrote.
Additionally, the Port of Longview is looking to capitalize on growing demand for imported refinery equipment to process Bakken oil. Last month, port commissioners approved $3.9 million to buy an additional mobile harbor crane.
Together, these cranes will better position Longview to compete with other ports, which already have two cranes, for refinery-equipment import business, Nelson-Cooley said. More longshore workers are typically needed to handle larger-scale equipment than other commodities, according to the port.
“The port is ready and willing to receive and handle the equipment needed to continue production,” Nelson-Cooley wrote.
Kloza, the oil industry analyst, said he doesn’t expect any new refineries will be built, but that refineries in operation will likely need upgrades to process light sweet crude from the Bakkens.
Talk of oil industry expansion onto the Columbia River makes environmentalists nervous, especially as they’re battling three proposed coal export terminals near Longview, Clatskanie and Bellingham in Whatcom County.
Serres, the Hood River-based Columbia RiverKeeper conservation director, said he’s closely watching the Tesoro proposal at the Port of Vancouver. If the terminal is built, four more trains would pass in and out of the port daily.
Serres said he worries about congestion at crossings in towns along the Columbia Gorge. More importantly, he said, leaders in the Pacific Northwest should focus on developing renewable energy instead of supporting the oil industry.
“The stakes are really high. One major derailment of an oil train, or a spill, could have an enormous impact on our area,” Serres said.