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Shipping oil by rail lowers energy costs

A tanker truck is filled from rail cars containing crude oil at McClellan Park in March. Following a lawsuit, the oil company is ending transfer operations there this week.
A tanker truck is filled from rail cars containing crude oil at McClellan Park in March. Following a lawsuit, the oil company is ending transfer operations there this week. Sacramento Bee file

Chalk up a hollow victory for EarthJustice and the Sierra Club. The two environmental groups sued over InterState Oil Co.’s permit to unload oil trains at the former McClellan Air Force Base in Sacramento County.

The company plans to end operations there on Friday, after the regional air quality district said it issued the permit in error without doing a full environmental review. The groups are ecstatic, trumpeting the first California “crude transport project that has been stopped dead in its tracks.”

But before attempting to use the same legal tactics to halt oil trains elsewhere, the activists should examine the ramifications of their actions. Chances are they are hurting the very people and the environment they seek to protect.

Americans rely on fuels and countless other goods produced from crude oil in the nation’s refineries. Blocking oil trains will result in the market finding other ways to transport oil from wells to refineries, whether through new pipelines, on barges, by tanker or by truck. Environmentalist-created bottlenecks could artificially raise prices for consumers.

Shipping oil by rail was encouraged by President Barack Obama – the environmentalist-in-chief – when he delayed the Keystone XL pipeline. Railroads became the next-best method of transporting oil from the Upper Midwest to Gulf Coast refineries, making oil trains a permanent fixture on America’s landscape. Now, an alternative pipeline through Canada has emerged.

According to the federal Surface Transportation Board, nearly 1 million barrels of crude per day is being shipped by rail, 10 percent of all oil produced in the United States. In Canada, oil-train shipments have increased fourfold since 2012 and are continuing to grow.

Railroad revenues also have risen sharply. Federal statistics show major railroads earned $2.2 billion in 2013 from hauling crude oil, up from $26 million in 2008. With financial results like these, railroads are building new terminals to handle more oil. Although terminals are not cheap – a large one built by independent oil company EOG Resources in North Dakota cost $50 million – they are far less expensive than pipelines.

Trains have a strong safety record, and efforts are underway to make them even safer. The American Association of Railroads has volunteered to update its operating practices, called for tank car improvements and is ensuring that local officials and first responders are aware of the materials being shipped through their communities.

Likewise, the American Petroleum Institute has issued a new standard for rail shipments and is working with the railroads and the government on safety. The goal is to reduce the likelihood of accidents to zero.

“North America’s rail network moves hazardous materials without incident 99.998 percent of the time. The challenge for both industry and regulators is to address and eliminate the remaining .002 percent,” API President and CEO Jack Gerard recently told reporters.

Consumers are benefiting from oil trains, especially in the West. Because there are no major pipelines from oil fields in the heartland through the Rockies, West Coast refiners have been relying largely on imports and Alaskan oil. Even with the added expense of shipping oil by train from North Dakota – where crude oil costs about $15 a barrel less – refiners are able to lower their costs, which helps to lower or stabilize consumer prices.

Producing domestic oil is creating thousands of jobs, improving our energy security and enhancing our economic prospects. As U.S. oil production rises, it will find a way to the marketplace. The American dream needs some help from oil being transported by the safest means possible, not shortsighted environmental lawsuits.

Our market-driven economy has no incentive to spill oil or harm people and the environment. Lawsuits filed by anti-fossil fuel groups might disrupt some train traffic, but they are not going to prevent oil from being drilled, transported and consumed. To truly help the environment, these groups would be better served by working on real environmental problems.

Robert L. Bradley Jr. is CEO of the Institute for Energy Research, a Washington, D.C., advocacy group whose funders include oil companies.

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