One Pacific Northwest crude rail terminal shelved as another refiles

Royal Dutch Shell PLC’s US division cited depressed prices and lower Bakken crude-oil production as it suspended its request for state permits on Oct. 6 to construct a terminal to receive crude by rail at its Puget Sound refinery at Anacortes, Wash. The Vancouver Energy joint venture submitted an updated application to the state the same day, with several important safety and operating changes, for a similar project farther south.

“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,” said Shirley Yap, the Shell refinery’s general manager. “We are committed to investing in this facility and there will be other ways to do that.”

She said the refinery receives its crude now from tankers that unload at its dock and through a pipeline from Canadian oil fields. “We are confident with current crudes now available that we can continue supplying the refinery,” Yap said. The plant, which has operated since 1958, processes as much as 145,000 b/d and supplies roughly 25% of the Pacific Northwest’s motor fuel.

Skagit County and the state’s Department of Ecology issued a draft environmental impact statement on Oct. 4 that laid out proposed conditions for building what Shell called the East Gate Rail Project. Following a preliminary assessment of the draft EIS’s proposed conditions, the company said it was confident that they were feasible and could be achieved.

Meanwhile, Vancouver Energy, a joint venture of Tesoro Refining & Marketing Co. LLC and Utah-based Savage Cos., said it offered significant changes, including staking the proposed Port of Vancouver USA facility’s throughput growth on the safety performance of the proposed terminal across the Columbia River from Portland, Ore., and its rail and marine partners.

“We heard the concerns about safety and environmental protection raised through the Energy Facility Site Evaluation Council (EFSEC) process,” said Vancouver Energy General Manager Jared Larrabee. “We are proposing being judged by our actual performance. We offered to begin operations at 50% of the optimal throughput, and significantly, only allowing this throughput to increase after demonstrating the facility operates safely.”

Larrabee said the JV made commitments above and beyond regulatory requirements, to help enhance safety and improve the performance at the crude-by-rail terminal. Measures now include a marine tug escort for all loaded vessels from the terminal, rail cars meeting or exceeding DOT-117 standards, commitments to supply Washington state refiners, supporting the Department of Ecology to apply the barrel tax to crude-by-rail terminals, financial assurances, and emergency training exercises for area responders.

Under the revised application which Vancouver Energy submitted to EFSEC on Oct. 6, the terminal’s throughput could increase over two periods to the original proposed amount of up to an average 360,000 b/d, subject to public safety or environmental performance, Larrabee said.

Contact Nick Snow at

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