Oil Terminal Faces More Controversy Following Export Legalization

File photo (courtesy Port of Vancouver)

By The Maritime Executive 12-23-2015 05:36:21

The Port of Vancouver, Washington is no stranger to controversy over its proposed oil terminal. But the intensity of opposition has increased sharply since Friday's repeal of the federal ban on crude exports. Activists suggest that the terminal's rail shipments are too risky, and that the repeal will mean even more of them. The terminal's backers say that export has never been their intention.

The port signed a lease in 2013 with Tesoro and Savage Co. for the development of an oil-by-rail terminal on 40 acres on the Columbia River. Its environmental impact assessment suggests the arrival of four to five hundred rail cars of crude (about 360,000 barrels) every day, and its lease with the port permits expansion if that capacity is exceeded.

Tesoro is a refiner, and has suggested that it wants the facility only to give its refineries access to cheap domestic oil as an alternative to buying imports. West Coast refineries purchase around one million barrels a day from foreign producers and about 200,000 barrels a day by rail from the U.S.  

But with the federal permission for crude exports signed into law Friday, opponents say that the Vancouver terminal – with five times the daily capacity Tesoro plans to reserve for itself – could ramp up into high gear for export volumes.

For the moment, exports from the port look unlikely. As of December 21 the spread between foreign and domestic crude benchmark prices was about $0.80 a barrel, suggesting little profitability for an oil-by-rail export pathway. And “while Tesoro is supportive of free and open markets, recent Congressional action has not changed our business case and intended purpose for the proposed terminal," said Tina Barbee, a Tesoro spokesperson.

Whether for export or for coastwise shipments, the plan has several hurdles yet to go. Its opponents, including environmental watchdog Columbia Riverkeeper and local business association Vancouver 101, have asked the state's governor to deny permission to build and the Port of Vancouver to cancel Tesoro's lease agreement. They cite the risk of derailment, fires and spills, invoking the image of the Lac Megantic rail accident in Quebec, which killed nearly fifty and destroyed half the town's center.

Larger opponents have also weighed in. The City of Portland has passed a resloution opposing the project. The International Longshore Worker's Union (ILWU) recently backed the election of a new port commissioner, Eric LaBrant, who ran in large part to fight the terminal. LaBrant, who outraised his opponent by a factor of four and won with 5,000 votes, will be sworn in December 28.

Only time will tell whether the terminal will be built; other proposals on the West Coast have also faced controversy, like the cancelled WesPac terminal in San Francisco or the coal terminal in Oakland. And while the Port of Vancouver and opposition groups debate the project’s fate, the port of departure for the first crude cargo to leave the U.S. in 40 years will not be on the Pacific seaboard. The Wall Street Journal reported Wednesday that the first post-ban export tanker will sail out the Houston Ship Channel in January.