HOUSTON — While the debate intensifies over whether TransCanada’s Keystone XL pipeline should be approved, traders are quietly setting up alternative routes to ship Canadian oil from U.S. ports.
At least five rail-to-marine projects have been proposed in the state of Washington that would allow the export or domestic shipment of more than 500,000 barrels a day of oil. A terminal in Oregon is operational already and is being upgraded to handle vessels that carry more than 300,000 barrels of crude.
The proposed depots haven’t received the national attention of Keystone XL because they are in obscure places like Grays Harbor County, perhaps best known as the birthplace of the late Nirvana lead singer Kurt Cobain. While U.S. demand for imported light oil has slowed amid the shale boom — leaving Canada desperate to reach global markets — the terminals might also be used to ship domestic oil overseas if a ban on U.S. exports is lifted.
“If the economics work out, Washington state in particular could become a depot for large scale Canadian crude exports,” said Eric de Place, a policy director at Sightline Institute, a Seattle-based nonprofit. “If the U.S. export ban gets lifted, then you could see the Northwest become a major throughput route for oil exports to South Korea, Japan and northeast China.”
Canada, the world’s fifth-largest oil producer, is already shipping record amounts of crude into the U.S. by pipeline, train and tanker. The new terminals could be the country’s gateway to becoming a global energy broker.
Most U.S. oil exports are restricted and Canadian producers have had limited access to ports as pipeline projects stalled amid environmental and political opposition. While the Republican-controlled U.S. Senate passed a bill last month to approve the Keystone XL, some Democrats oppose the project, saying a portion of the crude will be sent to overseas markets from the U.S. Gulf Coast. President Barack Obama has promised a veto.
U.S. Secretary John Kerry said Jan. 31 that the State Department will get results of a Keystone XL review in the next few days and that at some point in the future, he will make a recommendation on whether to approve the border-crossing pipeline. The U.S. Environmental Protection Agency said Tuesday that developing Canadian oil sands would significantly increase greenhouse gases.
Producers would like to export their oil to take advantage of foreign oil prices.
Tethys Partners, a Chicago-based energy company, has teamed with Global Partners to use the latter’s rail-to-marine terminal in Clatskanie, Oregon, about 69 miles northwest of Portland along the Columbia River. The site has 200,000 barrels of storage capacity and will likely double that within about six months and can accept about a train a day of oil, Tethys Chief Executive Officer Ruchir Kadakia said.
“By opening up the West Coast with this facility it creates an outlet for trapped North American oils to find a home in domestic or international markets,” said Kadakia. “We would like to get Canadian barrels to Japan, that is our long-term vision.”
Tesoro Corp. and Savage Companies have proposed a 360,000 barrel a day rail-to-marine terminal at the Port of Vancouver, Washington. The site “creates more competitive crude oil environment on West Coast,” Tesoro said in a Dec. 9 filing.
The focus of the project is to supply domestic crude to West Coast refineries, according to Abbi Russell, a spokeswoman for the Port of Vancouver.
NuStar Energy LP has also submitted plans for a rail-to- marine transloading terminal at the Port of Vancouver.
Three rail-to-marine projects have been proposed at the Port of Grays Harbor along the Washington state coast at the mouth of the Columbia River. The projects are awaiting environmental reviews by the state, Gary Nelson, an executive director at the port, said in an e-mail.
The terminals may face public opposition in an area of the country where environmental resistance and litigation halted or slowed plans for coal export operations, according to de Place.
“This is not a region that has been deeply enmeshed in the fossil energy markets for a long time and it’s a center for environmental progressivism,” said de Place. “You’ve got a fierce tug-of-war happening in little towns about, ‘Are we going to become a major oil hub, are we going to become Louisiana?’”
Trains carrying oil through Washington state may surge to seven times last year’s volume, reaching 137 a week by 2035, if proposed facilities are built, according to a Dec. 1 report from Washington state’s Department of Ecology.
West Coast terminals may also be used to export U.S. crude if a 40-year-old ban on most shipments is lifted. Kinder Morgan Inc. is considering a pipeline that would carry condensate, an ultra-light crude that can be exported if processed, from Texas to California for delivery abroad.
“The prize at the end of the game is not just about the West Coast,” said Kadakia. “It’s about opening up opportunities for countries like Japan to have access to the growing North American production.”
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