17 News Special Report: Crude by rail a game changer?

17 News Special Report: Crude by rail a game changer?

Half of California's crude comes from overseas but two proposed projects plan to lessen the state's dependence on foreign sources possibly lowering gas prices statewide.
You may not know it living in the oil fields of Kern County but half of California's crude comes from overseas. But two proposed projects plan to lessen the state's dependence on foreign sources possibly lowering gas prices statewide.

Most of the oil that goes to our refineries comes through the ports of Los Angeles, Long Beach, and the Bay Area by ship. This foreign oil comes from Saudi Arabia, Iraq, Russia and Ecuador.

If these projects become operational, we'll still need some of that foreign oil but far less than before.

If you sit and watch the trains through Kern County you'll find, it's uncommon to see a crude oil train.

In fact according to our research only two companies in Bakersfield get oil by way of rail but that's about to change because of increased oil production in the midwest.

"All of these crude oil is trapped in the center of America and there aren't enough pipelines to get it out," said David Hackett, energy consultant of Stillwater and Associates.

But there are railroads, which is why two proposed projects aim to bring about up to 290,000 barrels of oil into Kern County a day, 29 times the amount currently coming into the entire state by rail.

"At the sorts of numbers that you hear about these would be significant facilities for the state for the state's refiners," said Hackett.

The oil would come in up to four trains a day to two locations. Companies would offload the barrels and ship the cheap light oil through pipelines to California's refiners in L.A. or the Bay area.

"Well you are seeing refiners do what rather any business would do, we reduce costs," said Gordon Schremp, Sr. Fuels Specialist for the California Energy Commission.

Schremp said these projects are a game changer. Currently California gets most of its oil for refineries from overseas, not domestic sources but these projects could cut back on that dependence.

"The projects in Bakersfield are 3 to 4 trains transporting crude oil that could be 15 to 25 percent of the total refineries needs in California, rather significant," said Schremp.

This is up from the 1 percent coming in by rail now, a change no one saw coming.

"Five years ago would we think we would be working on crude by rail projects? The answer is no," said Hackett.

Hackett also said the two local projects could affect prices at the pump statewide.

"At the worst gas prices won't go up because you've got all this inexpensive crude here that will help keep a lid on the upward movement," said Hackett.

That's because the oil coming from North Dakota and Texas, about $75 a barrel, is cheaper than the foreign oil, about $106 a barrel according to Hackett.

As for more projects like these, the California Energy Commission said that's not a possibility right now.

"There would need to be more pipeline capacity to allow more of these crude by rail projects to be considered," said Schremp.

But that's a consideration that may take place as these oil locomotives pick up steam.

The project near Taft hoping to become partially operational later this year.

The proposed Alon Refinery expansion in northwest Bakersfield is still waiting for a yay or nay from the County Planning Department. That decision is supposed come out in the next couple months.
 
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