Daily Blog

Coast Bound Train – The Future of Crude By Rail to the West Coast Part 2

The West Coast crude-by-rail terminal build out has been slower to develop than elsewhere in the US. But there are still over 1 MMb/d of unload capacity built or in the planning stages to come online by the end of 2014. Terminals are split between dedicated facilities to serve refineries and merchant terminals that hope to feed multiple refiners. In the absence of pipeline alternatives,,, rail may become the pipeline-on-wheels delivering domestic and Canadian crude to West Coast refineries. Today we conclude our two part review of West Coast crude by rail prospects.

Check out Kyle Cooper’s weekly view of natural gas markets at



A recent unexpected cancellation of a rail terminal project in Washington State by Targa led to concern that West Coast crude by rail was “over”. This two part series looks at current developments to understand if that conclusion is valid. The first episode looked at the economics of moving crude from the Bakken and Western Canada to the West Coast (see Coast Bound Train – The Future of Crude By Rail to the West Coast). The prices that producers in North Dakota and Alberta get for their crude near the wellhead are considerably lower than the West Coast Alaska North Slope (ANS) benchmark. And even though those spreads have fallen from where they were a year ago, they still offer producers the possibility of a higher netback value at the West Coast than sending their crude to the Midwest Cushing trading hub. In this episode we update our survey of the rail unload terminals built or being planned on the West Coast and review future prospects for these facilities.

Two types of rail unload facility are being developed on the West Coast and we will look at each in turn. The first are those being built by individual refiners – usually adjacent to their refineries. Such facilities represent an investment by refiners giving them the option to purchase crude supplies from any location where producers can load crude onto rail cars. When that option is combined with owning rail tank cars, refiners are in an even better position because they don’t have to pay monthly lease charges for their rail car fleet. The only drawback to a rail unload facility for refiners is that they may not be able to accommodate enough rail tank cars to meet their crude needs. The typical rail facility developed to handle unit trains with 100 rail cars will be able to unload between 60 and 70 Mb/d of crude. If the refinery capacity is 200 Mb/d of crude – that is not enough. Even a smaller 60 Mb/d refinery would need a lot of storage capacity to avoid disruption to their supply if they depended on one train delivery each day (7 days a week). This is normally not a challenge as long as refiners have alternative supply routes (pipelines, barges etc).

The table below lists the West Coast refinery terminals that our research indicates have been built or are in the process of being built.

There are 9 refineries in the table --  5 in Washington State and 4 in California. Only three of these facilities are currently up and running – the other 6 expect to be operating by the end of next year (2014). Current total capacity is 130 Mb/d that will increase to 495 Mb/d if all the projects get built. The first to build unloading facilities was Tesoro – the largest refiner on the West Coast. They built out the Anacortes, WA rail unload terminal in 2012 and it is currently reported to be receiving up to 50 Mb/d of Bakken crude – allowing Tesoro to back out ANS crude from their processing slate. The Tesoro refinery at Martinez, CA has recently been upgraded. Tesoro told analysts at the 2Q earnings call that they ran the first unit train of Bakken crude into Martinez this month (September 2013). The other refinery with an unload facility up and running is independent United Refining that is understood to be shipping 40 Mb/d of Bakken crude to their refinery in Tacoma, WA.

Three other large refiners in Washington have rail unload terminal projects underway. The BP Cherry Point refinery has received permits and is building out a 60 Mb/d terminal that will be ready by the end of 2013 or early 2014. The Phillips 66 40 Mb/d facility has applied for permits and will be in service by the end of 2014 if approved. The Shell Anacortes facility is in the planning phase and expected to be 65 Mb/d. In California Alon USA Energy LLC is expecting permits to proceed with its 70 Mb/d facility by the end of 2013. If approved the Alon terminal at Bakersfield, CA will be built in 2014. Valero plans to build terminals at two refineries in California that process heavy crude. Both projects at Wilmington and Benecia are currently delayed by permitting issues and not expected online until the end of 2014. Both the Valero facilities are designed to receive heavy crude oil from Canada in insulated and coiled rail tank cars. They will require special steam heating equipment and heated tanks to handle the crude on arrival.

The second type of rail unload facility is the merchant terminal. Midstream logistics companies operate these – typically to supply crude to multiple refineries. The table below lists the terminals our research identified as built or planned. On the first row is the project at the Port of Tacoma that Targa has cancelled recently as we discussed in episode 1 of this blog series. Interestingly, Targa is continuing with its proposed project to build a marine terminal at the Port of Stockton, CA. That terminal will have unload capacity of 70 Mb/d and allow crude delivered by rail to be transferred to barges or tankers as well as to be delivered to San Francisco Bay area refineries via a Kinder Morgan Partners (KMP) pipeline.  Of the four merchant terminals that are already operating, three are small facilities that can only handle manifest rail shipments. These are existing terminals belonging to Alon and NuStar that handle other liquids and have been adapted to receive crude. The Kinder Morgan facility at Richmond, CA is the largest currently operating rail unload terminal that is primarily used for ethanol. It is not clear to what extent this 60 Mb/d facility is being used to ship crude by rail to the nearby Chevron refinery.

Join Backstage Pass to Read Full Article

Learn More