With production on the rise, oil-by-barge traffic sets off greater safety concerns
Athabasca on the Mississippi
Up to five times a week, a train 100 cars long and brimming with heavy oil slows to a halt in the yard of Gateway Terminals, a rail-to-barge transfer station located on the edge of the Mississippi River in St. Louis, Missouri. Each train can carry up to 60,000 barrels of the viscous product, which needs to be heated before it is piped into one of four 98,000-barrel storage tanks located on site. From there the oil is loaded into the shallow hauls of river barges, each destined for heavy oil refineries in Texas and Louisiana. In a good week, the terminal can transfer 350,000 barrels of oil into the slow-moving, flat-bottomed vessels.
It’s a fairly straightforward business. The throughput at Gateway Terminals, in terms of volume, hasn’t changed much in six years of operation. But there has been one subtle adjustment. Up until mid-2013, the company transferred ethanol onto barges, but the terminal has since been converted to accept a more lucrative commodity: oil sands bitumen.
“We are targeting the Canadian barrel. That’s the business that we’re looking at,” says Marshall Bockman, the vice-president of Gateway Terminals LLC, the operator of the terminal. On March 24, 2014, the company announced it had sent out its second-ever barge shipment of bitumen since converting from ethanol to heavy crude. Gateway, says Bockman, is now purchasing a fifth 98,000-barrel tank to expand its storage capacity.
Similar Development is taking place elsewhere. Tesoro Corp., a refiner, is building a $100-million rail-to-barge terminal in Vancouver, Washington, to supply Canadian oil to refining facilities along the U.S. west coast. Valero Corp., a company that owns and operates 16 oil refineries, can shuttle 35,000 barrels per day (bpd) down the Mississippi from a terminal in Hartford, Illinois, to facilities on the Gulf Coast, though it has been tight-lipped about precise volumes of its day-to-day shipments.
The Energy Information Administration recently reported Canada-sourced oil imports in 2013 reached an average of 2.5 million bpd, up 3.9 per cent from 2012, despite a highly publicized pipeline capacity shortage. At least a portion of this is due to higher volumes of oil being shipped by railcar. And, because the rail business is so interconnected with inland river ports, increased railcar activity has led to increased opportunities for barge shipments.
For companies like Gateway Terminals, converting to oil was a welcome alternative. “The ethanol business went through some difficult times with the drought a couple years ago,” Bockman says. “Because of that drought, the ethanol market was very difficult.” For producers such as Calgary-based MEG Energy Corp., which ships a portion of its oil by barge, the method offers better trade optionality, the company has said. It is also a fairly economic mode of transportation. But is it wise to ship large volumes of oil via water-borne vessels? After all, pipelines by design avoid waterways and cities; rail lines, less ideally and also by design, cut through cities and along waterways. It might seem logical that the practice of transporting crude oil over water is an accident waiting to happen. Convincing the public this is a viable, safe option could be more work than transporting the oil itself.
When two freight-carrying waterborne vessels collide, it happens in slow motion. In the Houston Ship Channel in Galveston, Texas, where a barge delivering bunker fuel crashed into a bulk carrier in March 2014, radio recordings of the incident reveal that the two pilots spent five minutes attempting to clear out of one another’s path. The barge, owned by Kirby Corp., the largest supplier of commercial barges in the United States, spilled 636,000 liters of fuel oil and caused irreversible ecological damage, according to some experts.
Some believe the spill exposed the risk of shipping oil by barge, particularly in one of the country’s busiest ports. But the trend isn’t solely taking place in the Gulf Coast region. Excess heavy Canadian oil destined for refineries in the U.S. Midwest via pipeline may soon be transported by barge across various sections of the Great Lakes. While no producers have yet expressed interest publicly, a proposed terminal in Superior, Wisconsin, is mulling the idea of converting its dock to accept crude oil shipments from inland water vessels.
Lyman Welch, a member of the conservation group Alliance for the Great Lakes, argues that regional, cross-border spill response policies are inadequate to handle the risks associated with barge shipments of oil sands bitumen. “Both countries have a joint responsibility to work together and protect the Great Lakes from oil spills,” he says. So far, he wrote in a recent report on the matter, the methods used by the U.S. Coast Guard don’t adequately prepare crews for heavy oil spills, especially oil sands bitumen. The report cited three cleanup methods proposed by the U.S. Coast Guard for so-called “submersive” oil spills, or spills that involve heavy oil which sinks rather than floats atop the water, making cleanup all the more troublesome. Deciding which country has the responsibility to lead the cleanup is also unclear: in a typical journey from north to south, a barge might cross the Canada-U.S. border 19 times.
What makes regulation challenging is defining what makes a barge a barge. So-called “commercial barges,” for instance, are really just old tankers; companies will hack off the back end “machinery” of the tanker – the fuel tanks, the engine, the crew sleeping quarters – and weld a metal plating over the exposed area so tug boats can push or pull them along. Barges can range from about 150 tonnes to roughly 5,000 tonnes, the latter being a vessel with 25,000 barrel capacity.
In accordance with Transport Canada’s regulations, all barges above 150 tonnes will need to be double-hulled by January 2015, whereas earlier regulations stipulated that only much heavier barges needed to be double-hulled. It is therefore unlikely, says Paul Topping, a regulator with Transport Canada, that crude oil will ever be tugged across the Great Lakes in a single-hulled barge. Rather, the main concern, as made evident by the Galveston spill, tends to be human error. And at that point, the question becomes more complicated: Can people’spropensity for error really be eliminated?
By nature, barge traffic doesn’t have set routes or intersections as railroads do, meaning traffic needs to be controlled partly by remote dispatchers. Many in the business, including sources at the U.S. Coast Guard in Galveston, seem to believe there’s simply not a safer way to bring a water vessel in and out of terminals.
“Barge traffic is safe,” Topping says. “Barge traffic has not had a catastrophic accident in decades upon decades [in Canada]. It moves oil quite safely, even in the smallest barges.”
North America’s history of transporting oil by barge stretches back quite a ways. Barges have been used to traverse the St. Lawrence Seaway and the Great Lakes ever since refineries in Eastern Canada began taking feedstock from the West. Small vessels have for years journeyed up and down the B.C. coast and the Mackenzie River delivering diesel fuel and supplies to remote northern communities and mines.
In the U.S., the Mississippi River has had regular barge traffic carrying crude oil for decades. According to a report from BB&T Capital Markets, an investment house, the Mississippi and other inland and coastal routes have become far busier as a result of increased oil production in the Bakken. Barge utilization rates have been holding steady at around 90 per cent, compared to 70 per cent years earlier. In March 2013 roughly 50,000 barrels of U.S. Midwest crude were being shipped to the Gulf Coast via barge, compared to around 10,000 bpd in 2011.
Despite their chugging, cumbersome appearance, inland barges are relatively speedy, faster on average than pipelines – yet markedly slower than railcars. At the Gateway Terminals, for example, trains deliver crude on a Canadian National Railway Co. line in 10-day loops, from Bruderheim, near Edmonton, to St. Louis and back, a 3,000-kilometer trip one-way. By contrast, barges from the terminal travel to the Gulf Coast (1,400 kilometers) and back in about 15 days. Crude oil takes roughly 40 days to travel from the U.S. Midwest to the Gulf Coast via pipeline.
Barges are also comparatively fuel-efficient: They cost an average $0.72 per tonne mile, says the BB&T report, compared to $2.24 per ton mile for equal rail capacity – roughly a third of the cost. Truck transportation, when adjusted for capacity, is 37 times more expensive.
Bockman, of Gateway Terminals, hopes those economics portend a coming windfall. So far, that hasn’t been the case: only two unit trains were unloaded at the terminal in the first four months of 2013. But a new rail terminal under construction in Hardisty, Alberta, which will load roughly 100 cars per day, could see that number rise.
More posts by Jesse Snyder
- Tiny Surmont Energy enters the oil sands
- Five aboriginal firms find success in the oil sands
- Alberta Oil in China: Checking in
- Of Politics and Pipelines
- New trade certification unveiled for compressor techs