Shell Oil-by-rail Plan Faces Extra Scrutiny

When Tesoro Corp pioneered moving crude by rail to its Washington state refinery in 2012, it encountered little community opposition. The same goes for early adopters BP Plc and Phillips 66 .

But Royal Dutch Shell (RYDAF) may have a tougher go at it. Shell is seeking permits, from the same regional air quality control agency that approved the others, to transport by rail up to 70,000 bpd of Bakken crude to its 145,000 bpd Puget Sound refinery, at a time when a spate of fiery crude train crashes nationwide have stoked opposition to crude-by-rail.

Indeed, there wasn't a community push back in 2012 when Tesoro began receiving up to six BNSF Railway Co mile-long crude trains a week - until another railroad's runaway crude train crashed into a Quebec town in July 2013, killing 47 people.

BP and Phillips 66 also won approval for offloading projects at their Washington refineries in 2013, ahead of even more fiery, if not deadly, derailments.

As officials review Shell's proposal, those who oppose the transporting of volatile oil from North Dakota by rail now say they want a comprehensive environmental review by the state.

"There was no opposition to the other three proposals only because we weren't aware they were in formal permitting," said Terry Wechsler, an environmental attorney in northwest Washington who seeks more scrutiny.

Shell declined to comment.

Lifeline
Those already operating say transporting oil by rail is a lifeline to cheaper crudes as no oil pipelines cross the Cascade Range. Without rail, Washington refineries are stuck with more expensive imports and declining Alaskan North Slope oil.

"It was really starting to hurt our business out here," Bill Kidd, senior director of government affairs for BP Plc's U.S. arm, said at the rail offloading operation next to the company's 225,000 bpd Cherry Point refinery near Blaine, Washington.

BP started taking 70,000 bpd of Bakken in December, while Tesoro began receiving 50,000 bpd at its 120,000 bpd Anacortes refinery in September 2012.

Tesoro says incoming crude via rail reduced by a third what used to be nearly 450 ships that once delivered crude to its docks annually.

Phillips 66 is building infrastructure to take 30,000 bpd at its 101,000 bpd Ferndale refinery by year-end.

Tesoro and BP say they took extra steps for safety with closed systems. Thick hoses hook to the bottom of rail cars to drain crude into a pipeline that pumps it to storage tanks. While unloading, a smaller hose hooks into a vapor recovery system at the top, ensuring no gases escape.

Savage Companies handles unloading for both once BNSF trains arrive.

BP and Tesoro also removed tons of dirt from hillsides to ensure trains sit on flat surfaces.

"We wanted to make sure it was flat enough so the rail cars can't move on their own," said Jason James, operations superintendent at Cherry Point.

(Reporting by Kristen Hays; Editing by Terry Wade and Bernadette Baum)